Vol :3 Issue 1

We are pleased to release our quarterly newsletter on the developments of life insurance industry in India.

Life insurance in India has major growth potential. The Indian insurance industry has undergone transformational changes since 2000 when the industry was liberalized. With a one-player market to 24 in 14 years, the industry has witnessed phases of rapid growth along with extent of growth moderation and intensifying competition.

There have also been a number of product and operational innovations necessitated by consumer need and increased competition among the players. Changes in the regulatory environment also had a path-breaking impact on the development of the industry. While the insurance industry still struggles to move out of the shadows cast by the challenges posed by economic uncertainties of the last few years, the strong fundamentals of the industry augur well for a roadmap to be drawn for sustainable long-term growth.

India continues to be a country of savers, though we have witnessed a decline in the household savings rate in the past couple of years. In India, the problem lies in household savings lying idle or getting invested in saving instruments that do not help them achieve their life stage goals. There is a worrying trend of larger portion of household savings getting into non-productive physical assets such as real estate and gold.

But even then, the future looks interesting for the life insurance industry with several changes in regulatory framework which will lead to further change in the way the industry conducts its business and engages with its customers. World over it has been observed that the life insurance industry does behave in a counter cyclical manner in many cases, e.g., in a situation where the economic growth is slowing down, due to other factors such as high current account and fiscal deficits, currency depreciation, high interest rates, savings rate will continue to be high, leading to higher demand for life insurance.

Life insurance is a big savings vehicle along with banking in such uncertain economic environment and so we expect the industry to fare reasonably well. Demographic factors such as growing middle class, young insurable population and growing awareness of the need for protection and retirement planning will also support the growth of Indian life insurance.

For life insurance, it is time to re-commit itself to customer-centric behavior, product solutions based on consumer needs, ethical market conduct, transparency and governance. The growth will be the natural outcome for now and years to come.

We provide an overview of these and other market developments in this edition of the newsletter. We hope you find the newsletter interesting and informative and look forward to receive your feedback.

RegardsS.ANANDZonal Secretary

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Government approved promulgation of an ordinance to hike foreign direct investment (FDI) cap in the insurance

sector to 49 percent from 26 percent, as the legislation could not be passed in the Parliament session that ended on rd

Tuesday December 23 2014.

The Insurance Bill, which has been pending since 2008 in the RajyaSabha, seeks to increase the composite foreign

investment limit in insurance companies to 49 percent from current level of 26 percent. The 49 percent cap would

include both FDI and foreign portfolio investments. The proposed hike in foreign investment limit to 49 percent in

the insurance sector has potential to attract up to USD 7-8 billion (about Rs 50,000 crore) from overseas investors,

giving a major boost to the segment. The total capital deployed in the private life insurance sector is close to Rs

35,000 crore. At FDI at 26 percent, foreign equity is close to Rs 8,700 crore.

The Insurance Laws Amendment Bill, 2008 could not be taken up for discussion despite being approved by the Select

Committee of the Upper House because of the uproar by opposition parties over the conversion and other issues.

There are 52 insurance companies operating in India, of which 24 are in the life insurance business and 28 in general

insurance business. In addition, GIC is the sole national reinsurer.

Govt proposes amendments to Insurance Act 1938

The Government has proposed amendments to Insurance Act 1938, General Insurance Business Nationalization

Act, 1972 and the Insurance Regulatory and Development Authority Act, 1999 through the Insurance Laws

(Amendment) Bill, 2008. The Insurance Laws Amendment Bill proposes, inter-alia, to empower the Authority to

frame regulations on matters involving policy holder protection and other aspects of insurance sector development.

The proposed amendments also aim at removing archaic and redundant provisions in the legislations.

Standard Life to increase stake in HDFC Life

Standard Life is planning to increase its stake in joint venture HDFC Standard Life Insurance Co to 33% after India amends

its law increasing the limit of foreign investment in the insurance sector, according to reports. Report stated that the stake

purchase will happen before HDFC Life lists its shares. Standard Life may have to invest Rs 1,250-1,400 crore for the

additional 7% to increase its stake.

LIC presents a Dividend Cheque to the Union Finance Minister

S.K. Roy, Chairman, Life Insurance Corporation (LIC) of India presented a dividend cheque of rupees One Thousand Six

Hundred Thirty Four Crore Eighty Nine Lakhs Fifty Seven Thousand and Six Hundred Two (Rs.1634, 89, 57, 602.00) to the

Union Finance Minister ArunJaitley in his office. Rajiv Mehrishi, Finance Secretary, Dr.HasmukhAdhia, Secretary,

Department of Financial Services, Ministry of Finance, Manak, V.K. Sharma and Ms.UshaSangwan, all Managing

Directors, LIC were also present on the occasion among others

HDFC Life bags National Award for Excellence in Cost Management for the second consecutive year

HDFC Life, India's leading long term private life insurance solutions provider, has been recognized for its excellence

in cost management at the 11th National Awards for Excellence in Cost Management organized by Institute of Cost

Accountants of India. HDFC Life received first prize under the category of Private-Service Sector (Large) Companies.

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Digitisation of LIC Policies

Life Insurance Corporation of India (LIC) has informed that LIC has been digitizing all its polity records and

as on date all of LIC policy records have been digitized. The Insurance Regulatory and Development

Authority (IRDA) vide Circular ref: IRDA/ADMN/GDL/GLD/080/04/2011 dated 29th April, 2011 has issued

Guidelines on insurance repositories and electronic issuance of insurance policies followed by a

clarification circular vide ref: IRDA/NL/CIR/MISC/138/07/2013 dated 18th July, 2013.

Online insurance sales to touch Rs 15000 Crores by 2020

Online insurance sales market in India would be around Rs 3,500-Rs 6,000 crore for life insurance and Rs

11,000-Rs 15,000 crore for non-life insurance, the report said. The insurance industry expects online sales

to grow by around 20 times to Rs 15,000 crore by 2020, according to a study. "Digitalisation influence is

quite high in the country with the Internet access is growing at a phenomenal pace and rising smart phone

penetration. We are expecting sales in the insurance sector to grow by 20 times to Rs 15,000 crore by 2020

through the digital medium," Boston Consulting Group Principal Amit Kumar told PTI, explaining the

'Insurance @Digital -20X by 2020' report.

Mergers and Acquisitions

Majesco merge with Cover-All Technologies Inc

Majesco (formerly, MajescoMastek), the global provider of core insurance systems and services to

approximately 100 insurance carriers worldwide, announced that it has entered into a definitive merger

agreement with Cover-All Technologies Inc., an insurance software company based in Morristown, NJ, in a

100% stock-for-stock transaction, pursuant to which Cover-All's stockholders and the holders of its

options and restricted stock units, in the aggregate, will, upon the closing of the merger, receive 16.5% of

the outstanding shares of common stock of the combined company, on a fully diluted basis.

Appointments

Tata AIA Life appoints Naveen Tahilyani CEO and MD

Tata AIA Life Insurance Company Ltd, the joint venture life insurance company formed by Tata Sons Ltd.

and AIA Group Ltd., announced the appointment of Mr. Naveen Tahilyani as its Chief Executive Officer

(CEO) and Managing Director (MD).

Trevor Bull appointed as Aviva India CEO

Aviva Life Insurance, announced the appointment of Mr. Trevor Bull as the Chief Executive Officer and

Managing Director for its operations in India. The appointment is subject to regulatory approval. Bull will

join as the MD & CEO in January, 2015. He takes over from Mr. TR Ramachandran, who led Aviva India since

October, 2008.

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Regulatory Update

Life insurers to file only 5 plans in each fiscal

IRDA In order to reduce the time taken for product approvals, the Insurance Regulatory Development

Authority (IRDA) has introduced a new product planner rule, according to a media report. According to the

product planner rule, insurance company can file only five products for approval in a year, the report

added. The regulator has asked life insurers for a product planner before every financial year. The planner

would give an indication of the number of products an insurer proposes to file each quarter, the report

further said. IRDA has said if the number of products exceeds five, the insurer should furnish supporting

documents such as market research, product-wise persistency ratio, etc.

IRDA favours hiking cap on agent fees

The IRDA on Monday has suggested to the parliamentary panel looking into the Insurance Bill, to add a

provision to give a free hand to insurers to fix the agency commission, according to a media report. At

present, the agency commission is capped at 40% of the first-year premium to the agents as commission,

the report added. The regulator also wants the new law to let insurers fix the agency commission on their

own. There were 21.5 lakh life insurance agents at the end of the September quarter.

Bancassurance practice needs to be inspected

The government and RBI have decided to inspect the practice of banks selling insurance products i.e.

called bancassurance, according to a media report. This inspection will be done for both the private as well

as the public sector banks. Recently, many customers have complained that they are being forced to buy

insurance products when they apply for loans or seek other banking services, the report added. Several

issues regarding the mis-selling of the products and use unfair practices are also being reported. The

central bank previously pointed out the need to revisit the marketing and sales strategies used by banks in

pushing insurance products.

Insurance needs Rs 60Kcr funds in 5 years

According to report, domestic insurance industry needs investments worth up to Rs 60,000 crore in next 5

years. The domestic insurance industry wants to increase penetration levels substantially from current

3.9%, report added. Report said, IRDA official predicted that 2015 will be in a better position in terms of

premium collection for Life, Non-Life and Health Industry.

Product Update

HDFC Life launches SampoornSamridhi Plus

HDFC Life, India's leading long term private life insurance solutions provider announced the launch of

SampoornSamridhi Plus, a traditional 'with profit' plan that offers lumpsum payment at the end of the

policy term and provides an option to continue life cover for whole of life till 100 years of age. On the

occasion of the launch Sanjay Tripathy, Senior EVP – Marketing, Product, Digital & Ecommerce, HDFC

Life said, “Life insurance is often perceived to be just another investment option.

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Shriram Life Insurance launches 'Shriram Life Assured Income Plan

Shriram Life Insurance Co. Ltd (SLIC), part of Rs 80,000 CroreShriram Group, today announced the launch

of its brand new “Shriram Life Assured Income Plan” with simplified attractive guarantees. This new

product is designed to meet the diverse needs of its customers such as children's education, retirement,

elderly parent's care and many more.

SBI Life Insurance launches Smart Champ Insurance

Further strengthening its vast product offerings, SBI Life Insurance has launched a new non-linked

participating Child Plan, SBI Life - Smart Champ Insurance, The product is structured to ensure fulfillment

of a child's educational aspirations, even in unforeseen circumstances.

Edelweiss Tokio Life launches 'Edelweiss Tokio Life - MyLife+

Edelweiss Tokio Life Insurance, an Edelweiss Financial Services Group Company, launched Edelweiss Tokio

Life – MyLife+, an online term plan that covers your life and provides security to your family. It provides a

great opportunity to secure one's family in a comprehensive manner with a choice of payout options,

riders and for longer term period. Edelweiss Tokio Life – MyLife+ is being offered exclusively online and

hence one can choose to protect the family from the comfort of one's home

Max Life Insurance introduces 'Guaranteed Income Plan

Max Life Insurance, one of India's leading life insurers today announced the launch of 'Max Life

Guaranteed Income Plan' - a unique, first of its kind life insurance solution which provides 100%

guaranteed regular income to you or your family to ensure extra income to meet planned and un-planned

expenses.

The plan has been designed to provide Guaranteed Income that is guaranteed upfront, for a period of 10

years after the Policy Term. The monthly income payable in the first five years gets doubled in the next five

years. Additionally, the income payout is complemented by a one-time guaranteed Terminal Benefit

payable at the end of the Payout Period. Apart from guaranteed survival benefits, GIP provides

completepeace of mind to you by offering financial protection to your family in case of untimely loss of life

during the policy term

SBI Life Insurance launches Smart Guaranteed Savings Plan

SBI Life Insurance, the trusted and preferred private life insurer has launched a new product, SBI Life -

Smart Guaranteed Savings Plan. The product is structured to boost savings through regular guaranteed

additions which are paid even after the end of the premium payment term. Announcing the launch of this

unique product, Mr.ArijitBasu, MD and CEO, SBI Life Insurance said, "The Life Insurance sector in India has

never looked more promising.

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Learning

10 Financial Products to help you plan your Retirement

Let us look into financial products for investment pre-retirement and post retirement. Retirement

Planning in India is not an easy job at all. Rising inflation numbers, slowing economy growth, love for Gold

and of course too many financial products do not make life easy for any individual planning for retirement.

Mis-selling of financial products by banks and other financial institutions has only doubled the customer's

confusion.

In this article, we will be talking about different retirement products available for investment in India.

Retirement has two phases – Accumulation and Distribution. Accumulation phase is the period where you

accumulate the amount required for your needs post retirement. Distribution phase is where the

accumulated corpus is distributed well to suffice the post retirement needs. Let us look into financial

products for investment pre-retirement and post retirement.

Pre-Retirement Investment Products

New Pension Scheme or NPS is a perfect retirement product open to all individuals across 1) NPS:

the country. NPS has delivered annualized returns of around 10% in the last 4 years. This scheme is

mandatory for government employees. The fact that fund managers of NPS scheme can also take

exposure to equity and equity related instruments is also a positive for the scheme in the long run. NPS also provides tax benefit in the form of deduction under section 80C. Remember that it is

mandatory to purchase annuity worth 40% of the corpus accumulated through NPS at the time of

retirement. You can use these Pension Calculators from Govt. of India to calculate basic pension,

family pension and pension commuted.

Employee's Provident Fund or EPF is the most popular retirement saving instrument in 2) EPF:

India. Though it was introduced as a retirement product, not many see it so. The current rate of

return from EPF is fixed at 8.5% p.a. EPF offers deduction up to 1 lakh limit under section 80C;

interest from EPF is tax free and withdrawal is also tax free if there is continuous service of 5 years.

Unlike NPS, EPF does not have any restrictions such as purchasing annuity. However, it is advisable

to stay invested in this scheme by opting for EPF transfer whenever there is change of job. This

would ensure that you reap the benefits of guaranteed returns along with power of compounding. 3) Equities: No matter how many financial instruments you pick, none of them can match the

returns provided by equity related instruments such as Stocks and Mutual Funds. While investing

in these instrument, make sure that you pick products for the long term i.e at least 10 years or more

and your emotions are under control in this period.

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This doesn't mean you have to stick to the product evening though it is not performing well. Review

the products every year or switch to better products only is something has gone wrong

fundamentally. Mutual funds also give you an option of monthly SIP, where you can invest in a

disciplined manner for your retirement. Equity related products are also tax free after 1 year of

investment.

4) ETF: Exchange traded funds, popularly known as ETF's are also a good option for accumulating

corpus for retirement. In India, ETF can be done through Index or Gold. Index ETF tracks the index

and Gold ETF invests in Gold. You can purchase units of ETF by purchasing Gold units every month.

You would thus benefit from cost averaging rather than investing in bulk and entail the risk of

timing the markets.

Bond is a type of loan taken from you by a company or government and giving you some 5) Bonds:

interest for the loan. You would have seen a flurry of bonds these days such as IIFCL tax free bonds,

HUDCO bonds, inflation bonds, etc. Many of these bonds are for 10 and 15 year durations. Some of

these bonds offer interest rates in excess of 10-12% p.a. Do check the ratings of these bonds before

investing in them.

Post-Retirement Investment Products

1) Monthly Income Schemes: Post retirement, you would require schemes which provide regular

income for you. Such schemes are popularly known as Monthly Income Schemes (MIS). Various

mutual funds provide these in the form of funds. Post office also provides MIS.

You usually invest a lump sum and the corpus is invested in various instruments to provide you

monthly income. Post office offers interest rate of 8.4% p.a and the maturity period would be 5

years.

2) SCSS: Senior citizens saving scheme (SCSS) is just the kind of retirement product you would need

post retirement. This is the safest investment option for senior citizens. You can gain an interest of

9.2% p.a with a maturity period of 5 years. The account can be opened in post office or any

nationalized banks.

3) Reverse Mortgage: Reverse mortgage is a wonderful option given to senior citizens for a regular

source of income. You can pledge your house with a bank to receive income from the bank regularly

for a set period of time. The amount received will depend on the valuation of the house and the

term opted. A recent ruling on this scheme has made the income received from house property

under this scheme totally tax free.

4) Pension Plans: Pension plans are provided by insurance companies as well as mutual funds.

They would invest a lump sum amount and provide you monthly income just as in the case of SCSS

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or MIS. Charges from insurance company provided pension or annuity plans are usually higher

than mutual fund provided ones.

5) Liquid Funds and FD's: The investment options given above do not give you proper liquidity. As

senior citizens, you might need to put some amount aside as an emergency. To make sure that this

amount also earns decent returns, you can opt for liquid funds or fixed deposits of varying tenures.

Liquid funds are also tax efficient.

Conclusion

These are the retirement products available for investment in our country. Ideal time to start saving for

retirement would be 1-2 years after you get your first job. If you have not started yet, it is time to start now.

The contents of this Insight newsletter were compiled by

S. Kamalthiagarajan

Joint-Secretary

South Zone.

Note:

Source: company websites and press reports.

Disclaimer: The India Market Life Insurance Update has been prepared by NFSIS for general information

purposes only and does not constitute professional advice. The information, opinions and projections

contained in this Newsletter are derived from various sources and have not been independently verified

by NFSIS.

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