1. BUSINESS MANAGEMENT
SYMPOSIUM 2016, 26TH AUGUST
at
School of Petroleum Management
Pandit Deendayal Petroleum University (PDPU)
SONJAI KUMAR,
Vice President- Business Risk
Aviva India Life Insurance
Disclaimer: Views expressed in this presentation are mine and not
necessarily of my employer
1

2. WHAT IS THE EXAM QUESTION ?
 In the current growth in the domestic market how does
the Insurance sector is going to influence the
trajectories of Indian Economy in future.
 We shall see that how does the insurance sector
influences the economy and vice versa
 How does the current statistics indicates immense
potential in the insurance sector compared to the
developed market which in turn will impact the economic
growth positively
 What are the current and future challenges to watch
out
2

3. SOME LATEST INDICATORS
 Total insurance players in India are 53 insurance
companies of which 24 are in life insurance
business and 29 are non-life insurers
 Life insurance market is expected to grow over the
next 10 years from its current size of US$ 60 billion
to US$ 160 billion.
 Between April 2015 to March 2016 the life insurance industry
wrote new premium income of Rs 1.38 trillion (US$ 21 billion), @
growth rate of 22.5%
 The general insurance industry recorded a 12 per cent growth in
Gross Direct Premium underwritten in April 2016 at Rs 105.25
billion (US$ 1.55 billion).
 The general insurance business currently at Rs 78,000 crore
(US$ 11.44 billion) premium p.a. likely to grow @ 17 per cent.
3
US, UK

4. INSURANCE PENETRATION
Insurance penetration measured as a percentage of insurance premium to GDP rose from 2.71%
in 2001 to 5.20% in 2009, then declined to 3.3% in 2013-14, indicating the growth in insurance
premium is lower than the growth in national GDP
World average of
6.3%,
4

5. INSURANCE DENSITY DEVELOPING COUNTRIES
Insurance density which is measured as a ratio of premium to total
population. It was 11.5 in 2001
Low ID in India is due to Insurance
business largely skewed towards
Urban area whereas total population
accounts for rural which is largely
uninsured
What about China?
This indicates the potential India
presents to insurance business
and particularly “Rural India”
5

6. INSURANCE DENSITY - DEVELOPED COUNTRIES
Impact of low population, high income and awareness
towards protection
6

7. IMPORTANCE OF LIFE AND HEALTH
INSURANCE SECTOR
 Financial Protection against death earlier than
expected- Term Insurance
 Financial Protection to meet the cost of health care –
Health Insurance Products
 Longevity protection- Living Longer than expected-
Annuity Products
 Savings- To meet long term guaranteed liability such
as Education, marriage, build up pension corpus,
Inheritance transfer – Endowment and Whole Life
Products
7

8. POTENTIAL IN THE INSURANCE SECTOR
-
10
20
30
40
50
60
0-14 15-24 25-54 55-64 65+
36 Cr, 29%
23 Cr, 18%
51 Cr, 41%
9 Cr, 7% 7 Cr, 6%
Population Profile as on 2014
Child Products
Term Insurance
Term Insurance
Endowment Insurance
Whole Insurance
Term Insurance
Annuity
Annuity
8

9. RELATIONSHIP OF ECONOMIC PARAMETER
AND INSURANCE SECTOR
Macro
Economic
Parameters
Insurance
Sector
Improves
Employment
Generates income
Growth in GDP
Increase
Domestic Savings
Increase
Disposable
Income
Capacity
to pay
Premium
Customer
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10. RELATIONSHIP OF ECONOMIC ACTIVITY AND
INSURANCE SECTOR
Macro Economic
Parameters
Insurance
Sector
Growth in GDPIncrease
Disposable
Income
Capacity
to pay
Premium
Support
Capital
Market
FDI increases more
insurance players
and so more money
into capital market
Generate long
term investible
fund and improve
GDP
Customer
10

11. RELATIONSHIP OF ECONOMIC ACTIVITY AND
INSURANCE SECTOR
Macro Economic
Parameters
Insurance
Sector
Premium
Customer
Interest
Rate
Inflation Increase in interest rate
negatively correlated
with increase in Premium
income
Increase in inflation rate
negatively correlated with
increase in Premium
income
11

12. IMPACT OF ECONOMIC AND DEMOGRAPHIC
FACTORS ON INSURANCE SECTOR
Macro Economic
Factors
Insurance
Sector
Demographic
Factors
Interest
Rate
Inflation
Equity
Market
Longevity
of Life
Willingness
to pay
Premium
New
Business
Profit
Impacts savings products
Impacts cost of products
Moves customers to and away from
Insurance
Impact
on
Econo
my
Impacts cost of products
Impacts cost of products
Customer
12

13. HOW DO WE SEE THE FUTURE ?
Insurance
Sector
Capital
Regulatory
Regime
Taxes
Digital
Rural Market
Distribution
FDI- 49%, IPO,
Capital intensive, Long pay back Period ,
Risk Based Capital
GST, Tax Benefits
New Regulations Challenge
IT investment, cost saving by 15% to 20%
Expensive Agency Model, Bancassurance is limited,
New Opportunities- Online, NBFC,
Types of Products,
Pension
Large untapped market – key to the future success
Right Products for such market
13
Risk Based Capital will induce more
application of risk management

14. RISK MANAGEMENT & INSURANCE
Insurance
Sector
Internal Risks
Economic
Risk
Demographic
Risk
Regulatory
Risk
Global Risks
Operational
Risk
Lapse Risk
Mortality Risk
Interest Rate
Risk
Inflation RiskEquity Risk
Expense Risk
14

15. CONCLUSION
 The insurance industry has contributed in the increasing the
employment both directly and indirectly
 Private Sector has contributed towards increase in
premium by around 10%; this also catalyst LIC to increase
its productivity
 Insurance industry has contributed in the GDP over the last
10 years to peak at around 5%; however compared to the
developed market, we have long way to go and tap its current
potential
 Willingness to invest capital, improving on the digital front
from cost and automation perspective, focus on rural market
and innovative distribution holds the key for the future of
insurance industry.
 These factors will be reflective in the future insurance
penetration and insurance density.
 Now, India no more being a closed economy, one critical
factor that may affect Insurance sector and economy together
is the Global risk factors
15

16. THANKS
16

17. GDP GROWTH RATE
17

18. INSURANCE PENETRATION
Not enough compared to
developed countries which is
around 10%
18

19. INSURANCE DENSITY
0
10
20
30
40
50
60
70
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
11.5
14.7 16.4
19.7
22.7
38.4
46.6 47.4
54.3
64.4
59
53.2 52
55
Insurance Density (USD)
19

20. INCREASE IN EMPLOYMENT- EMPLOYEES AND
AGENTS , FIGS IN LACS
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
1.5 1.9 2.5 2.9 3.0 3.4
2.5 2.5 2.4 2.5 2.5
14
20
25
29
30
27
23.4
21.2 21.6
20.43 20.16
No. of Employees No. of Agents
20

21. PREMIUM INCOME
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
1st Yr Premium Existing Business Total Premium
11%
9%
11%11%14%
14%
15%
17%
12%
10%
7%
4%
2%1%
% indicates Share of Private Sector
Cr
21

22. GROSS DOMESTIC SAVINGS AS A % OF GDP
Definition of 'Gross Domestic Saving' Definition: Gross Domestic
Saving is GDP minus final consumption expenditure. Gross Domestic
Saving consists of savings of household sector, private corporate sector
and public sector.
22

23. DISPOSABLE INCOME
Disposable Personal Income in India increased to 138192890 INR Million
in 2015 from 127880080 INR Million in 2014
23

24. FDI IN INDIA
FDI in India increased by 1547 USD Million in May of 2016. FDI in India
averaged 1153.89 USD Million from 1995 until 2016, reaching an all time
high of 5670 USD Million in February of 2008 and a record low of -60 USD
Million in February of 2014.
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25. ASSETS INVESTMENTS (CR)
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Equity (Market Value) Fixed Income (Book Value) 25