Transcript MMA Presentation, 20th April 2015.

New Insurance Bill: Vision & Paradigm Shift
Facilitating Opportunity
20th April 2015, Chennai
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Agenda
Current Overview of Life Insurance Sector
Overview of the ‘The Insurance Laws (Amendment) Act ,2015’
Significant Changes in the Insurance Bill 2015 impacting the Policyholder
Impact of Changes in the Insurance Bill 2015 to the Economy
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Current Overview of Life Insurance Sector
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Current Overview of Life Insurance Sector
Life Insurance penetration since 1956 and how it has progressed since then
•Life Insurance penetration was approximately 0.53% in 1957-58 (GDP of Rs.139.51 billion
and Total premium of LIC was approximately Rs.74 Crores).
•The life insurance penetration increased at an average rate of 0.037% per annum between
1956 and 2000.
•Thereafter, between 2001 to 2012, the life insurance penetration increased
at a rate of 0.092% p.a.
•The Life insurance penetration rate increased to 2.15% in 2001 and to 3.17% in 2012.
•The annual rate of insurance penetration has increased 3 times since private sector was
allowed to do life insurance business.
•Currently there 24 life insurance companies having 11,000 branches with approximately 21
lakh agents and employs 2.5 lakh direct employees
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Current Overview of Life Insurance Sector
Life Insurance Penetration
Parameter
FY 99-00
FY 10-11
FY 11-12
FY 12-13
FY 13-14
0.50%
2.54 %
2.30 %
1.99%
2.20 %
Penetration as % of GDP
1.77
4.4
3.4
3.2
3.17
New Business Policies Indiviual
(In Cr)
1.69
4.81
4.41
4.41
4.08
In force Policies (In Cr)
10.14
32.91
33.52
33.61
33.54
India’s share of world premium
(Life)
The industry services largest number of life insurance policies in the world.
Source: IRDA, Life Insurance Council
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Current Overview of Life Insurance Sector
Global Comparison
Source: IRDA report 2012-13
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Current Overview of Life Insurance Sector
Indian Life Insurance market has huge growth potential when compared with other countries
Size of the Market
(US $ Billion)
Asia: 958
World: 2,621
Life Insurance Penetration (Premium/GDP)
–%
Asia: 4.1%
World: 3.7%
Life Insurance Density
(Premium per capita – US $)
Asia: 230
World: 373
Current Overview of Life Insurance Sector
Gross Savings of Household sector
In 2013-14 Gross Domestic Saving rate as a % of GDP was 30.1 %
The share of Gross Savings in Household sector in % terms is as below:
FY 11-12
FY 12-13
FY 13-14
Bank and other deposits
59.1
56.6
58.8
Insurance
21.2
17.3
17.0
Provident and Pension fund
10.3
11.7
11.6
Shares and debentures
-0.3
4.1
2.9
Currency and others
9.7
10.3
9.7
Type of Savings
Source: RBI
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Current Overview of Life Insurance Sector
Type of Savings
FY 11-12
FY 12-13
FY 13-14
Bank and other
deposits
59.1
56.6
58.8
Insurance
21.2
17.3
17.0
Provident and
Pension fund
10.3
11.7
11.6
Shares and
debentures
-0.3
4.1
2.9
Currency and
others
9.7
10.3
9.7
% share of Life Insurance within net household
21.2%
2011-12
17.3%
17.0%
2012-13
2013-14
Inclusive growth of Life Insurance Sector
Life Insurance Industry contribution towards economic growth of the country (Rs. Crore)
180
1956-57 to
1960-61
750
3,500
1966-67 to
1970-71
16,000
1976-77 to
1980-81
7,25,000
1,32,000
1986-87 to
1990-91
1996-97 to
2000-01
2006-07 to
2010-11
Life insurance sector has provided long-term funds for infrastructure development through five-year plan
AUM of Life Insurance Companies
Category of Investments
2000-01 ` Cr.
(%)
2012-13 ` Cr.
(%)
2013-14 ` Cr.
(%)
Traditional Products
Central Govt. Securities
47,513
(24.48%)
5,11,248
(36.55%)
6,04,651
(37.19%)
State Govt. Securities
52,524
(27.07%)
2,66,003
(19.02%)
3,33,951
(20.54%)
Infrastructure
Investments
24,887
(12.80%)
1,16,645
(8.34%)
1,55,026
(9.54%)
Approved Investments
50,502
(26.03%)
4,45,611
(31.86%)
5,03,059
(30.94%)
Other than Approved
Investments
18,584
(9.58%)
59,161
(4.23%)
29,118
(1.79%)
ULIP
Approved Investments
--
3,25,281
(94.97%)
3,22,456
Other Investments
--
17,226
(5.03%)
9,205
17,41,175
(100%)
19,57,466
Total
1,94,010
(100%)
(97.22%)
(2.78%)
(100%)
Investments have been targeted towards established funds that helped in infrastructure growth of the country
Source:IRDA
Overview of The Insurance laws (Amendment) Act, 2015
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Overview
THE INSURANCE LAWS (AMENDMENT) ACT, 2015
 The Insurance laws (Amendment) Act, 2015 received the Hon. Presidents assent on 20th March
2015.
The Insurance Laws (Amendment) Act, 2015 was notified in the official the Gazette of
India on 23rd March 2015
 The Insurance Laws (Amendment) Act, 2015 has increased the limit of FDI from 26 % to
49 %. This significant change will not only benefit in increasing insurance penetration but
will also enable channelling savings for long term funds for infrastructure development.
 The new bill also has many significant changes that impacts the Policyholders and
insurers in a big way such as:•Protection of Interests of Policyholders – Section 45 of Insurance Act.
•Protection of family members from Creditors.
•Recognition of Partial assignments under life insurance policies.
•Increase in insurance penetration.
• Grievance Redressal
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Significant Changes in the Insurance Bill 2015
impacting the Policyholder
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Significant Changes in the Insurance Bill 2015 impacting the
Policyholder
Protection of Interests of Policyholders – Section 45 of Insurance Act.
•Section 45 has been amended to protect the interests of Policyholders who have been loyal
to the life insurance companies.
•If any claim is made under life insurance policies 3 years after the issuance of
policy/commencement of risk/reinstatement of the policy, the insurance company loses the
right to cancel the policy proceeds on the grounds of misstatements in proposal form for
insurance.
•This is on the premise that the life assured has outlived his ailment, if any,
•Therefore, even if there is a misstatement in the proposal form, it ceased to have any impact
on the health/mortality of the person whose life has covered and therefore the claim is
payable.
Grey Area
A word of precaution here is that it could give rise to fraudulent claims by unscrupulous
nominees of lives assured which die in, say, first year, and who can wait for 3 years to
complete before lodging the claim with the insurance company for avoiding repudiation of
claims.
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Significant Changes in the Insurance Bill 2015 impacting the
Policyholder
Protection of family members from Creditors
• Earlier, any nominee acted as a Trustee and was accountable to the Legal heirs of the life
assured
• Now, Section 39(7) of the Insurance Laws (Amendment) Act 2015 gives special protection
to parents, spouse and children who are appointed as nominees under life insurance
policies.
• These nominees will be beneficially entitled to the policy proceeds and no other legal heir
can claim the policy benefits and dispute the claim made by the family members as above.
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Significant Changes in the Insurance Bill 2015 impacting the
Policyholder
Recognition of Partial assignments under life insurance policies
• Earlier a life insurance policy cannot be partially assigned even if the Policyholder intends to
transfer only a part of the rights.
• Now a partial assignment of policy interest only to the extent of the outstanding loan to the
Creditor is possible and the balance rights belongs to the Nominee.
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Significant Changes in the Insurance Bill 2015 impacting the
Policyholder
Assignments do not impact nomination in certain cases
• Before the amendment assignment of life policy resulted in cancellation of namination.
• Now in the Bill, it has been provided that a transfer of a policy for consideration shall not
cancel the nomination, but will affect the rights of the nominee to the extent of the
outstanding loan
• Further where the policy is re-assigned, the nomination which was cancelled earlier will
stand automatically reinstated
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Significant Changes in the Insurance Bill 2015 impacting the
Policyholder
IRDAI empowered to decide ceilings on Commission and Expense of Management
limits.
Insurance penetration can increase through substantial increase of spread in rural areas.
The Insurance Amendment Act has scrapped ceilings on commission and expenses of
management (Sections 40A, 40B) and given powers to IRDAI to prescribe ceilings
IRDAI can use the powers effectively by encouraging rural insurance penetration through
some of the following measures on the lines of backward area incentives:
•IRDAI may allow Concessions in fees/Fee holidays for insurance premium generated in
rural areas.
•More allowance for expenses of management incurred in rural areas.
•Relatively higher commission on products sold in rural areas.
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Significant Changes in the Insurance Bill 2015 impacting the
Policyholder
E-Insurance Account – a Revolution
• First of its kind in the world – holding all insurance policies in electronic form by opening
a single e-insurance account with an Insurance repository.
•Free for the customer and the charges are paid by the Insurance company.
•Loss of insurance policies and issue of duplicate policies have become history with the
introduction of e-insurance account – facilitates faster settlement of claims.
•Single KYC done for e-insurance account instead of each policy – reduces the paper work.
E-insurance account completes the paperless insurance policy system and makes the
insurance purchase seamless.
A customer buying policy online, pays insurance premium online, gets receipt online and also
gets credit of insurance policy account online and
Finally the claims are settled by direct transfer of funds to the account of the
nominee/Policyholder
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Impact of Changes in the Insurance Bill 2015 to the
Economy
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Impact of Changes in the Insurance Bill 2015 to the
Economy
n •It is estimated that approximately Rs.50,000 crore will come through FDI and
domestic investors over the period of 5 years.
• Increase in capital infusion of approximately Rs.50,000 will increase customer
coverage in rural and semi urban areas from 72% to 80% and fuel employment
growth in the country and contribute to increase in GDP of the country.
•Life insurance segment has the potential to grow 2.5 times its current size by
2020.
•This will result in more global players setting up offices in India, existing insurers
expanding their operations in turn creating employment.
•Expected CAGR of Life Insurance industry will be 12-15% in the next 5 years
•Life Insurance employment potential till FY 2020 – 5 Lakh employees
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Impact of Changes in the Insurance Bill 2015 to the
Economy
n •The net Household Financial savings could reach around 35% in the next 5 years
from the present level of 30%; Life Insurance being the second most preferred
financial instrument will benefit from this.
• It is estimated that the household saving percentage to GDP will also increase
significantly which will assist long term infrastructure funding.
•Life insurance industry contribution to Infrastructure projects – Rs. 3.5 Lakh Cr.
by FY 2020
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Overview – Life Insurance Premium Projection
Life insurance Premium projection at growth rate of 6 % of current GDP (Penetration)
Parameters
GDP
(Trillion USD)
Premium (Billion USD)
Actual as of
Projection
2014
2015-16
2020-21
2023-24
2024-25
1. 876
2.10
2.81
2.65
3.55
57
( 3.15 lakh crore)
---
---
---
---
Gross Premium underwritten
as % of GDP( Penetration)
(Billion USD) :-
(a)
3%
---
63
85
101
107
(b)
4%
---
84
113
134
142
(c)
5.5%
---
126
169
202
214
 1USD = INR 55
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Summary
•Life Insurance Industry is a silent contributor to the nation building activities.
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Thank You
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