Growth of Indian Insurance IndustryGrowth of Indian Insurance Industry&&

Opportunities for the Global Insurance Opportunities for the Global Insurance

a

PresentationPresentationat

Symposiumon

Catastrophe Risk Management

1

By

Yogesh LohiyaChairman-cum-Managing Director

GIC Re

IntroductionIntroduction

Contents:

– Part I; Challenges before the Global Insurance Industry.

– Part II; Story of Growth of India.– Part II; Story of Growth of India.

– Part III; Development of Indian Insurance Industry.

– Part IV; Indian Insurance Industry-An opportunity for Global Insurance

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Part IPart I

Challenges before the Global Insurance Industry.

3

Challenges for Global InsuranceChallenges for Global Insurance--11

• Demographic Changes– Customer base is changing; Younger generation is

techno-savvy; Wealth accrual begins early.

• Natural Catastrophes• Natural Catastrophes– Frequency & Severity increasing making fiscal and

economic exposure larger by the year.

• International terrorism– Growing specter alters risk perception and exposure

increases.

4

Challenges for Global InsuranceChallenges for Global Insurance--22

• Channels of Distribution– Ability to manage growth in a multi-channel world.

• Regulatory Scrutiny & Corporate GovernanceGovernance– Regulations are complex, evolving constantly &

compliance is a challenge.

• Increasing Competition– Competition increases as trade & commerce flourish.

One has to stand out.

5

Challenges for Global InsuranceChallenges for Global Insurance--33

• New Products & Services

– To differentiate from competition & provide value added services-Age of Customisation

• New Markets

– Globalisation brings growth and emerging markets – Globalisation brings growth and emerging markets with low penetration offer growth opportunities.

• Developed Markets are Saturated

– Emerging markets are still at a nascent stage and can be exploited

• Information Security

– Data Security is very vital to any organisation & needs to be maintained at all cost.

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Part IIPart II

Story of Growth of India.

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Drivers of India Growth StoryDrivers of India Growth Story--1 1

• Political Stability

– Democratic Multi-Party Parliamentary System with universal adult franchise.

• Burgeoning Economy

– Liberal economic set-up with corporate friendly policies.policies.

• Strong & Growing Middle Class

– Prosperous, educated & growing middle class catalyses economic growth.

• Demographically Young Nation

– 54% of the population is below the age of 25 and 72% is below the age of 35.

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Drivers of India Growth StoryDrivers of India Growth Story--2 2

• Ambitious Planning

– To become a truly developed nation in the shortest possible time.

• Developing Infrastructure

– Infrastructure has a major role to play in beefing up the GDP growth.GDP growth.

• Stable & Booming Financial Sector

– One of the stars of global economies; growing 9.2% in 2007 and 9.6% in 2006 supported by markets reforms.

• Active Regulatory Environment

– Is favourable due to liberalisation & economic reforms; Establishment of new businesses, JVs & raising capital from market is easy.

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Drivers of India Growth StoryDrivers of India Growth Story--3 3

• Technically trained/ English speaking Manpower

– We have one of the largest bank of English speaking professionals.

• Global Institutions of Higher learning

– Institutions of higher learning like IITs & IIMs provide support to face challenges of the globalised world. support to face challenges of the globalised world.

• Established Legal System

– A well-established stable, independent legal system based on English common law.

• Strong IT Infrastructure

– India has been propelled by a phenomenal growth of its IT sector.

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Drivers of India Growth StoryDrivers of India Growth Story--4 4

• Geo-spatial Advantage

– India is midway between Australia & Atlantic.

• Relationship with Global Economies

– Ensures substantial flow of investment in various sectors.

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28 years of high growth

6.06.0

8.98.9

Average annual GDP growthAverage annual GDP growth

66

88

1010

(%)(%)

1.01.0

3.53.5

00

22

44

66

19001900--19501950 19501950--19801980 19801980--20022002 20022002--20072007

Population growth is slowing

1.01.0

2.22.22.12.1

1.81.8

1.51.5

1.51.5

2.02.0

2.52.5

(%)(%)

Sources: 1900Sources: 1900--1990: Angus 1990: Angus MaddisonMaddison (1995), Monitoring the World Economy, 1990(1995), Monitoring the World Economy, 1990--2000:Census of India (2001) 2000:Census of India (2001)

00

0.50.5

1.01.0

19011901--19501950 19511951--19801980 19811981--19901990 19911991--20002000 20012001--20102010

Literacy is rising

5252

6565

8080

6060

8080

100100

(%)(%)

Source: Census of India (2001)Source: Census of India (2001)

1717

00

2020

4040

19501950 19901990 20002000 20102010 ((projproj))

Part III Part III

Development of Indian Insurance Industry.

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INDIAN INSURANCE INDIAN INSURANCE

• Insurance in India is over 200 Years old.

• Industry contributes 3.1% to the Indian GDP.

• % of World Insurance Market:

– Life: 1.98% (US $ 48.3 bln)– Life: 1.98% (US $ 48.3 bln)

– Non-life: 0.40% (US $ 7.1 bln)

• 46 Insurance Companies (life + non-life) in

India.

• Insurance in India is a 'Sun-rise' Industry.

INDIAN INSURANCE LANDSCAPE INDIAN INSURANCE LANDSCAPE

�Post-liberalisation (After 1991):

� Private sector allowed entry; FDI currently

at 26% in JVs with foreign partners

� Detariffication: An opportunity for � Detariffication: An opportunity for

Innovation & Differentiation

� Catalyses development of industry

� Phasing out of cross-subsidisation

� Pricing based on scientific underwriting17

2,765.20

3,102.85 3,478.03

4,050.88

4,955.33

5,596.28

6,508.19

GrossGross PremiumPremium UnderwrittenUnderwritten (non(non--life)life) inin IndiaIndia(in million US $)(in million US $)

Source: IRDA 2009Source: IRDA 2009

1,461.97 1,521.52 1,731.57

1,879.35 1,951.24 2,277.53

2,765.20

POST-LIBERALISATION I Phase:I Phase:

– GIC : a holding company for the 4 Non-life PSUs; post liberalisation:-

(Controller to Supporter)(Controller to Supporter)

• Assumes the role of Indian Reinsurer• Assumes the role of Indian Reinsurer

• Provides cover to the insurance industry

• Optimises retention within the country

• Creates Reinsurance Capacity

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CURRENT POTENTIALS

– More players, more capacity, more business.

– Growing awareness, Double digit growth.

– Improved Distribution Reach:-Faster & – Improved Distribution Reach:-Faster & Low Cost Access to Customers.

– Globalisation for India means focus on Liability Insurance.

– Increased International Trade spurs demand for Credit Insurance.

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Part IV

Indian Insurance Industry-Indian Insurance Industry-

an opportunity for Global Insurance

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Indian Insurance-An Opportunity-1

• Indian Insurance Sector has stood its ground in the global recession.

• Growth Opportunities for all:-• Growth Opportunities for all:-Intermediaries; Insurers; Reinsurers.

• Geographical Spread/ Volumes/ Diversity makes India attractive for Global Insurers.

Indian Insurance-An Opportunity-2

• Premium Growth is stagnating in Global Insurance Industry.

• Most Developed Markets are Saturated • Most Developed Markets are Saturated & need fresh markets for sustaining growth.

• Technology Up-gradation by entry of Foreign Players

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Indian InsuranceIndian Insurance--An OpportunityAn Opportunity--33

• Health Insurance is Growing

• Tariffs are no longer Controlled

• Consumer is more Aware & Educated

• Globalisation of Indian Corporates• Globalisation of Indian Corporates

• Rising Disposable Incomes

• Distribution has Improved

• Micro Insurance

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ConclusionConclusion

Even though the world has just discoveredit, the India growth story is not new. It hasbeen going on for years.

And so is the case with the IndianInsurance! Opportunity!

Thank YouThank YouThank YouThank You

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