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com 1



Introduction
We are pleased to circulate our latest newsletter covering some key
developments in the general (non-life and health) insurance industry in India
during the period June to September 2012.
In an attempt to reduce losses and restore profi tabili ty of the four public sector
general insurers, the Finance Ministry has instructed them to sui tably raise
premiums wherever necessary, particularly for the Property and Group Health
classes of business.
The Insurance Regulatory and Development Authori ty (IRDA) has drafted
health insurance guidelines that are expected to bring about much needed
clarity on various contentious issues and provide an extent of standardization
between offerings from different insurers.
Several recent steps have been taken by the Finance Ministry to initiate far
reaching changes impacting the Indian insurance market. This includes
Insurance Laws (Amendment) Bill that, inter alia, proposes raising FDI cap in
the sector from the current ceiling of 26 per cent to 49 per cent and permitting
foreign reinsurers to transact business in India. The Motor Vehicles Act 1988
was also sought to be revised in order to cap for li mi ting third party liabili ty.
As reported earlier, the Government has decided to partially dilute its existing
100 per cent stake in the PSU general insurers. Keeping the IPO plan in mind,
the Finance Ministry has taken the first steps by asking General Insurance
Corporation of India Re (GIC Re) and New India Assurance (NIA) to appoint
merchant bankers and finalise their valuations by December 2012.
In the face of ongoing sanctions imposed on Iran by the European Union and
USA, most foreign insurers declined to offer insurance to shipments of crude
oil from Iran. India, which buys significant share of its global oi l i mports from
Iran, has not joined hands for such sanctions. The Government directed the
PSU insurers and GIC Re to provide coverage to Indian ships carrying Iranian
crude oil.
These and other market developments are briefly covered in this issue.
We hope you find the newsletter informati ve and look forward to your valuable
comments and feedback.
Towers Watson, India
In this issue
Industry statistics
April- August 2012

Market update
Insurers
Other market developments
Appointments

Regulatory update

Government update

Distribution

Products

Contact details
India Market
General Insurance Update
India | Issue 23 | September 2012

Copyright 2012 Tow ers Watson. All rights reserved. tow erswatson.com 2
Industry statistics
April-August 2012
As per latest statistics released by the IRDA, Gross
written premium (GWP) figures for the period Apri l to
August FY12-13 for the General Insurance (non-life and
health) industry in India was Rs27,940 Crores, registering a
year on year growth of 17.7 per cent as compared to the
same period last year. The corresponding figure for the last
fiscal (FY11-12) was Rs23,740 Crores.
GWP (business figures)

Source: IRDA
PSU general insurers continue to lead, wi th ICICI Lombard
and Bajaj Allianz following close behind.
The business figures for the general insurers (apart from
specialist insurers) comprise of Motor, Property and
Casualty in addition to Health. Since the segment wise
figures are not avai lable at this stage, comparison of Health
business for different non-life insurers wi th standalone
health insurers is not possible.
Religare is the newest standalone Health insurer in a
market lead by Apollo Munich. As reported in our previous
issue, Apollo Munich has seen the highest number of
rollover customers i.e. who have ported from their existing
health insurer in favor of Apollo Munich. One of the main
reasons for the de-growth in Star Health figures is due to
some State Government sponsored mega group health
policies not being renewed wi th them.

Growth rates
The GWP growth rates for general insurers ranked over
premium collected is shown above. During the period Apri l
to August FY12-13, the non-life industry registered a
growth of 17.7 per cent against a growth of 24.2 per cent in
FY11-12 over the same period.
Source: IRDA
Market shares
The market continues to be dominated by PSUs, including
AIC and ECGC at 58 per cent, and rest is di vided between
pri vate players. Pie chart A shows the spli t of 4 PSU's, AIC,
ECGC and all Private Sector general insurers as a block at
42 per cent. Pie chart B, further elaborates the respecti ve
market shares of pri vate players, notable among which are
ICICI Lombard, Bajaj Allianz and ITGI wi th market shares
of 8 per cent, 6 per cent and 4 per cent respecti vely.
Others in the chart include Star Health, SBI General,
Uni versal Sompo, Apollo Munich, L&T General, Max Bupa,
Raheja QBE and Religare.

Source: IRDA
0 1,000 2,000 3,000 4,000 5,000
New India
Uni ted India
National
Oriental
ICICI-lombard
Bajaj Allianz
AIC
IFFCO-Tokio
HDFC ERGO General
Tata-AIG
Reliance General
Cholamandalam
Royal Sundaram
Shriram General
Bharti AXA General
Future Generali
ECGC
Star Health & Allied Insurance
SBI General
Universal Sompo
Apollo MUNICH
L&T General
Max BUPA
Raheja QBE
Reli gare
i n Rs millions
Comparison of GWP by non-life insurers
April 2012 to August 2012 April 2011 to August 2011
New India, 16%
United India, 14%
National , 13%
Ori ental ,
10%
AIC, 4% ECGC, 2%
ICICI-lombard,
8%
Bajaj Alli anz,
6%
IFFCO-Toki o, 4%
HDFC ERGO
General , 3%
Tata-AIG, 3%
Rel iance
General,
3%
Chol amandal am ,
2%
Royal Sundaram,
2%
Shriram
General ,
2%
Bharti
AXA
General ,
2%
Future Generali , 2%
Others, 4%
Pri vate Sector, 42%
Non-life insurer market share
Pie chart A
Pie chart B
Copyr ight 2012 Towers Watson. All rights r eserved. towersw atson.com 3
Market update
Insurers
Bharti AXA intends to infuse addi tional capital of
approxi mately Rs150 to 200 Crores. within the next two
years to fund its annual growth plan of 35-40 per cent in the
current fiscal; much above the industry's projections of 20
per cent growth. This is to be achieved wi th increase in
footprint and launching new products. They have identified
South and West India as their growth dri vers.
United India (UII) is set to launch the country's first mobile
phone premium payment facili ty. Standard Chartered Bank
wi ll offer cash management services for UII.
GIC Re took a conscious decision staying away from
providing reinsurance support for the recently held London
Olympics. This comes after they posted losses for the first
ti me in their history during the last fiscal as their book of
international business sank due to natural catastrophe
events in Asia like floods in Thai land and the tsunami in
Japan. This move is being seen as a sign that state-run
reinsurers may stay away from some global risks for a few
years.
Insurance Australia Group (IAG) wi ll be increasing its
presence in Asia including India in a bid to generate 10 per
cent of its business from the region wi thin four years. In
India, IAG has a joint venture wi th SBI General Insurance
Company Ltd. SBI owns 74 per cent of the total capital and
IAG the remaining 26 per cent.
New India Assurance (NIA) has once again been chosen
by Air India Ltd to insure i ts fleet of more than 120 planes
for a total amount of $10.5 billion (around Rs57,750
Crores). The annual premium works out to $24 mi llion
(around Rs132 Crores), making it one of the biggest
insurance deals in South and Southeast Asia. The contract
comes into force on 1 October 2012. Chartis Insurance UK
Ltd continues to be the reinsurer for this deal.
Iffco Tokio General Insurance (ITGI) and GIC Re are
likely to take a Rs200 Crores hi t because of a claim filed by
Hi tachi following a major fire destroying its plant at Kadi in
Gujarat. Initial reports suggest that the loss to the property
could be in excess of Rs200 Crores.
Bajaj Allianz General Insurance plans to launch health
insurance products wi th various value-added services in
order to extend addi tional benefi ts to customers beyond
hospitalisation. They wi ll help customers avail discounts for
health checkups, gym memberships and other wellness
components. They also plan to launch a specific womens
product that will be priced at least 15 per cent cheaper than
the corresponding gender agnostic insurance cover.
Star Health and Allied Insurance is redrawing i ts
business strategy by aiming for premium of Rs150 Crores
from Government led / sponsored group health insurance
schemes like Rashtriya Swasthya Bima Yojna (RSBY) and
Rs850 Crores from the retai l segment in FY2012-13. The
company was earlier known to focus on Government
sponsored business.
Other Market Developments
European Union and USA led sanctions against Iran from
July 2012 placed an embargo on insurers and reinsurers
from covering tankers carrying Iranian crude anywhere in
the world. A six-month waiver allows 20 countries, including
India, to continue buying lesser quanti ties of Iranian oi l,
with some restrictions, wi thout running afoul of the
sanctions. Following this, the Indian Government asked the
4 PSUs and GIC to provide insurance / re-insurance cover
to ships flying Indian flags carrying crude oil from Iran to
India. However, India's leading ship-owners are not happy
with the insurance offered to them, saying the extent of
coverage is not qui te adequate. It was pointed out that a
recent shipment carried by an Indian tanker was insured for
only $50 mi llion (around Rs275 Crores.) against liabili ty,
compared wi th the multibi llion-dollar policies that European
insurers typically provided for spi lls or accidents.
Cholamandalam MS has recently introduced Policy on the
Go, a mobi le application to generate quotes and issue
motor policies online. The mobi le application can be used
by its insurance agents and direct sales teams to generate
instant quotes and issue e-policies to its customers.
UII has recently launched touch screen kiosks to enable i ts
customers to obtain a digi tally authenticated online policy.
UII intends to use this format for i ts motor, health, personal
accident and overseas mediclai m policies.
Nearly all insurers in the Health segment plan to introduce
several no-fri ll product offerings in smaller Tier-II and Tier-
III locations where the cost of treatment is low. These wi ll
be identical to the standard Mediclaim products in terms of
illness and disease coverage but wi ll have lower li mits on
hospital room rents and a li mi ted choice of hospitals to
avail cashless and rei mbursement facili ties.
A recent government ini tiati ve to provide free generic drugs
to government hospitals is expected to have a posi ti ve
impact on the health insurance industry in India, particularly
for RSBY type of group health insurance schemes. The
overall cost of drugs account for 15 per cent to 20 per cent
of healthcare cost. This is much higher in rural areas and
for critical illnesses and is expected to lower as generic
drugs which are priced 80 to 85 per cent lower than
identical branded drugs are to be distributed free and may
in turn lower the cost of health insurance.
PSU general insurers will soon be ending their six year
freeze in the health insurance pricing and raise premium by
around 15 per cent.
Copyr ight 2012 Towers Watson. All rights r eserved. towersw atson.com 4
The four PSU general insurers and members of General
Insurance Public Sector Association (GIPSA), have
decided to revive the plan to jointly co-promote their own
common Third Party Administrator (TPA) for the health
insurance business.
Appointments
ITGI has scrapped its recent appointment of Mr Yogesh
Lohiya (ex-Chairman of GIC Re) as their new MD. The
appointment was objected to by the Finance Ministry as its
prior approval was not sought. Mr Lohiya has since moved
as Advisor on the Board of Iffco. Mr Rakesh Kapur, JMD at
Iffco, has been appointed as the interi m MD.
SBI General Insurance has recently appointed Mr B J
Sarma as the new MD and CEO of the company for three
years with effect from 1 August 2012.
Tata AIG General Insurance (TAGIC) has also made a
top level change by appointing Mr K. K. Mishra as the new
CEO in place of Mr Gaurav D. Garg.
IRDA has appointed Chief Public Information Officers as
required under the Right to Information Act. These officers
have been appointed for different departments; actuarial,
brokerage, health, accounts, F&I and non-life. All these
appointments came into effect from 11 June 2012.
Regulatory update
IRDAs recently released exposure draft on proposed
Health Insurance guidelines covers several i mportant
aspects that have often led to contentious issues in the
past. Some of the important aspects include
Uniformity of product design in terms of
mini mum entry age (no exi t age),policy period
/ term (up to 3 years for non-life),access to
countrywide provider network
freedom to migrate from one policy type to
another (e.g. indi vidual to floater) wi thout
losing accumulated benefi ts
treatment of cumulative benefi ts
cost of health check prior to proposal
acceptance
inclusion of non-allopathic treatment
renewal loading due to poor clai ms
experience
free look period
special provisions for senior citizens
standardisation of defini tions in policy forms
standardisation of nomenclature for critical
illnesses and excluded expenses during
hospitalisation
Renewabi li ty of insurance
Portabi li ty of insurance
Policyholders' protection
Servicing of health insurance
TPA
Combi products offered jointly by a life insurer and a
health insurer combining term life insurance and health
/ sickness insurance.
Draft norms for IPOs by Indian insurance companies have
been issued by IRDA that, inter alia, makes it mandatory
for insurers to seek approval from IRDA prior to
approaching SEBI. Any insurer planning to tap the capital
market must have at least ten years' experience in the
industry. IRDA wi ll consider the insurers financial position,
its capital structure and regulatory record before providing
its approval.
Draft guidelines to boost micro-insurance have been issued
by IRDA. These include broadening of the existing product
portfolio and widening the distribution network. In order to
strengthen distribution, the regulator plans to allow several
enti ties such as cooperati ve banks, regional rural banks,
primary agricultural co-operati ves and indi viduals to act as
micro-insurance agents. On the product side, IRDA has
also proposed a standard insurance product that is a
composite package of essential life and non-life insurance
covers ai med at the rural and social sector. The standard
insurance product would be in addi tion to government
schemes, which provide insurance cover at concessional
rates.
To fast track the process for regulatory approval of
products filed by Indian insurers, IRDA is planning to
develop 10 standard products that wi ll be eligible for
approval under the Use and Fi le system as against 'Fi le
and Use' process.
The mini mum solvency ratio required for di vidend
payments by an insurance company was eased by the
IRDA from 150 to 130. This move will allow Oriental
Insurance and National Insurance to make di vidend
payments to the government.
A higher startup capital requirement from Rs100 Crores to
Rs200-250 Crores for insurance companies is reportedly
being contemplated by IRDA for future entrants to the
industry.
Copyr ight 2012 Towers Watson. All rights r eserved. towersw atson.com 5
The current tied agents model for allowing agents to sell
products of more than one insurance company is also
being reportedly considered by IRDA.
To educate the public on insurance, IRDA has launched a
new portal (www.policyholder.gov.in). The portal ai ms to
provide useful information for policy holders and prospects.
The regulator has also introduced a new feature in i ts
websi te (www.Irda.gov.in > Other Links > Compare Non
Life products) that compares simi lar general insurance
products offered by different companies in the market
based on factors like coverage, exclusions, discounts and
deductibles.
MyInsuranceClub has become the first IRDA licensed web
aggregator si te that can officially compare premiums and
features of insurance policies online for life, health and
motor insurance across multiple insurers. This platform
would enable customers to compare different policies and
buy the product online based on preference of price, brand
and policy benefits. The si te also helps in promoting zero-
commission products.
Government update
An amendment to the Motor Vehicles Act 1988 capping the
maximum liabi li ty of Insurance Companies to Rs1 lakh in
the case of injuries or disabi lity and Rs10 lakhs in the case
of death was tabled in the monsoon session of Parliament.
To cut down underwri ting losses of the 4 PSU general
insurers, the Government of India has increased pressure
on them to raise premiums, bringing them to the same
levels as in 2007, prior to detariffication. The Ministry of
Finance is said to be deeply concerned over the increasing
losses in their hi therto profitable Fire and Engineering
businesses. The PSUs have been asked to desist from
charging unviable low premiums from commercial
organizations and undercutting each others pricing.
The process for listing of two state owned general
insurance companies has been initiated. The Government
of India has asked GIC Re and New India Assurance to
start their valuation process by appointing merchant
bankers. Finance Ministry officials want these two
companies to finalise their valuation by December 2012.
Keeping the IPO plan in mind, the Finance Ministry has
asked PSUs to tone up their performance.
The long pending proposal to raise the FDI cap in the
Indian Insurance sector from 26 per cent to 49 per cent has
been revi ved by the Government. As a first step, the
cabinet's approval has been obtained. The Insurance Laws
(Amendment) Bi ll, 2008 had earlier been introduced in the
Parliament in December 2008 for increasing foreign
participation in the sector. The increase in FDI li mi t in the
insurance sector may attract Rs30,000 Crores. that the
industry requires over the next fi ve years. According to
IRDA, the Indian insurance sector constitutes around 4.5
per cent to the GDP. With the increase in the FDI li mi t, the
percentage of contribution from the insurance sector to the
GDP is expected to go up.
The proposal for allowing foreign re-insurers to open
branches in India has also been approved by the Cabinet.
Such branches would be prohibited from investing
policyholders' fund directly or indirectly outside India. The
amendments to the bi ll would allow UK-based reinsurer
Lloyd's to do business in India. Further, the amended bi ll
sets the capital requirement of standalone health insurance
companies at Rs50 Crores.
Alleged service tax evasion by insurers to the tune of more
than Rs300 Crores. is under probe by the Finance Ministry.
It has issued summons to about a dozen insurance
companies seeking documents pertaining to sale of
insurance policies and commission paid to their
distributors. It is suspected that several insurers may have
indulged in irregularities, including evasion of service tax by
misrepresenting the information on accounts book and
fudging records related to commission paid to
intermediaries like agents and brokers who were selling the
insurance policies.
Distribution
SBI General Insurance is currently setting up a unique
multi-distribution model encompassing Bancassurance,
Agency, Broking & Retail Direct channels. It has also
entered into a corporate agency agreement with State
Bank of Mysore for marketing i ts general insurance
policies.
United India Insurance (UII) is planning to deploy 50,000
agents across the country in the next couple of years to
strengthen i ts marketing team. The company is targeting
Category 4 locations as defined by Indian Census
Operations.
Revised guidelines for bancassurance business are being
drafted by IRDA, which would make i t possible for banks to
offer more than one insurer's products and services.
Products
A pilot weather-based crop insurance scheme (WBCIS)
has been launched for both loanee as well as non-loanee
farmers for Mrig Bahar in Kharif 2012 in Maharashtra. The
State Government has approved HDFC Ergo General
Insurance to carry this out.
Horticultural crops wi ll henceforth be included under the
Weather-Based Crop Insurance Scheme. This was hi therto
applicable only to field crops. This ini tiative has been taken
by West Bengal's Agriculture Department.
Copyr ight 2012 Towers Watson. All rights r eserved. towersw atson.com 6
Farmers not covered by crop insurance scheme under the
National Agriculture Insurance Scheme (NAIS) are likely to
be included. This move has been ini tiated by the State
Government of Andhra Pradesh.
Weather based crop insurance for tea is being developed
by Agriculture Insurance Company of India Limi ted (AIC)
and the Indian Tea Board (ITB).
A composite micro-insurance for the rural sector has been
launched by Future Generali. It has been named Future
Sampoorna Suraksha policy and will cover multiple risks
such as hospital cash, personal accident cover, fire,
burglary, cart protection and liabili ty, agricultural pump sets,
pedal cycles.
Two marine specialty products, Multi-modal Transport
Operators Liabi lity and Port & Terminal Operators Liabi lity,
filed by Raheja QBE General Insurance have been
approved by the IRDA, clearing the insurer's foray into this
niche space.
Unemployment insurance product in view of the ongoing
economic downturn is being developed by Bharti AXA
General Insurance and is likely to be finalised in the
current fiscal. It would cover the general credit risk of a
person.
A tailor made jewelry block insurance policy has been
provided by National Insurance to Vibgyor Gold for buyers
of its Virtue range of jewelry.
Star Health and Allied Insurance has launched a
premium product The Star Comprehensive, which comes
wi th no room rent capping, no disease wise limi ts and
includes hospital cash benefit and new born baby cover. In
addition, the policy also covers HIV posi tive indi viduals.
Apollo Munich Health Insurance has launched its
'Optima Senior' for citizens above 61 years of age to
provide lifelong health coverage with a guarantee of no
loading for change of health status. The product is for
senior citizens looking for easy to understand health
insurance coverage, with mini mal restrictions and
maximum benefits and can choose from any of the three
sum-insured levels - Rs2 lakh, Rs3 lakh or even Rs5 lakh.
ICICI Lombard General Insurance has launched
Complete Health Insurance, a product wi th lifeti me
renewal and no restriction on maxi mum entry age. The
product also features a wide range of sum insured from
Rs1 lakh to Rs50 lakh, OPD coverage and materni ty
benefits.
Companies such as Max Bupa Health Insurance and
Bajaj Allianz General Insurance are planning to provide
cover for outpatient treatment (OPD) benefi ts and dental
care. The inclusion of OPD benefi ts implies that the insured
need not necessarily be hospitalised to seek insurance
benefits. The cover is likely to be in the market by the year-
end to make the insurance sector more attractive to
consumers.



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Contact details

Towers Watson's Risk Consulting team covers the length and breadth of India wi th associates based in Gurgaon and Mumbai.
Vikas Newatia Director & Practice Leader, General Insurance Consulting, India
Gautam Mazumdar Senior Consultant, General Insurance Consulting, India
Rajesh Sabhlok Senior Consultant, Risk Consulting, India

Emails:
vikas.newatia@towerswatson.com
gautam.mazumdar@towerswatson.com
rajesh.sabhlok@towerswatson.com

Gurgaon
Suite 1, Redshift, 802-803, 8
th
floor
Tower-B, Unitech Cyber Park, Sector-39
Gurgaon- 122002
Tel: 91 (124) 4101018
Fax: 91 (124) 410 1010


Mumbai
511/512, Soli taire Corporate Park
Andheri-Kurla Road, Andheri East
Mumbai 400 093
Tel: 91 (22) 4232 9900
Fax: 91 (22) 2837 0700

The India General Insurance Update has been prepared by Towers Watson for general information
purposes only and does not consti tute professional advice.
The information, opinions and projections contained in this Newsletter are deri ved from various sources and
have not been independently verified by Towers Watson. If you require professional advice or require any
further information please contact any of the above named indi viduals.







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