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India General

Insurance
Vision 2025
Towards an inclusive, progressive
and high performing sector

October 2013

India General Insurance


Vision 2025
Towards an inclusive, progressive
and high performing sector

October 2013

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

Contents
Foreword.................................................................................................................. 7
Executive summary.................................................................................................9
Chapter I: Role and importance of insurance........................................................15
Chapter II: Current position of General Insurance in India................................ 21
Chapter III: Key trends shaping the GI industry..................................................39
Chapter IV: Scenarios for the future..................................................................... 47
Chapter V: Agenda for action................................................................................63

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

Foreword
Dear General Insurance practitioners and
interest groups,
The General Insurance industry in India is at a
critical juncture of its evolution. We have grown at
close to 20% over the last 5 years and reached an
annual premium of ~` 70,000 crore in the fiscal
year 2013. However, penetration levels are low,
leaving much scope for growth.
The business environment for the industry has
been challenging, given the overall slowdown in
the economy, weak investment stream and the
changes accompanying the de-tariffed regime. The
industry is burdened with growing underwriting
losses as claims ratios are well above international
benchmarks.
However, a number of positive developments have
also taken place during these turbulent times. Retail
lines have seen strong growth in the recent past
as customers are becoming increasingly aware of
the benefits of general insurance. With companies
already having weathered the impact of Motor Third
With best regards

Bhargav Dasgupta
Co-chair, FICCI Insurance Committee

Party Pool, the outlook for the industry in the future


is largely positive.

have also laid out an aspiration which is true to our


potential and the path that we will take to get there.

The road to profitability would require players to


reassess all aspects of their business models from
pricing, products, risk management, customer
acquisition and distribution. Progress would
undoubtedly require concerted efforts by the
players to become globally competent in claims and
operations.

I would also take the opportunity to thank key


supporters without whose help the report could
not have materialised. I thank each of my CEO
colleagues for taking time out and sharing their
views on industry evolution and the key changes
required. We also received tremendous support
from our distribution partners, the provider
network, our reinsurers and the regulatory
bodies. Specifically, I would also like to thank the
IRDA for their valuable inputs and support in the
development of the industry vision.

With this backdrop, we embarked on an exercise to


define a long-term vision for the General Insurance
industry in India.
For the industry to become inclusive, progressive
and high performing in the future, we partnered
with McKinsey & Company to build a fact-based
view on the current state of the industry, the key
trends that will shape it in the next decade and,
therefore, its potential evolution. As an industry, we

We hope you find this report insightful and


engaging.

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

Executive summary
The General Insurance (GI) industry in India has
evolved significantly over the last decade and is now
at a watershed in its development. From a ` 12,000
crore top-line industry in 200102, today it is worth
` 70,000 crore, clocking an annual growth rate of
17%. The industry today provides a cover of ` 1,000
lakh crore, which by itself is a huge testament to its
importance to the economy.
While the last few years have been challenging
for the industrys profitability, the industry holds
significant potential, both from the perspective
of growth and value creation. However, to meet
its full potential, Indias GI industry will require a
concerted effort by all the stakeholders. This report
paints a picture of the aspirations of the GI industry
and what it will take to realise the vision.

Role and importance of insurance


GI is a major contributor to the countrys economy. It
effectively pools and transfers risk from individual
and corporate consumers, thus encouraging
investments and driving GDP growth. It supports
the government and society by reinvesting funds
and sharing the cost of catastrophes. The industry is
also a major contributor to employment.
Detailed analyses show that GI is a strong
driver of GDP growth. A one standard deviation
increase in GI penetration induces a per capita
GDP growth of 0.39%. This is superior to the

growth induced by private credit (0.34%) or life


insurance (0.37%).
GI industry in India employs around 7 lakh
people both directly and indirectly.
The industry supports the government and
society by reducing the financial burden of social
welfare and sharing the cost of catastrophes.
The insurance sector contributed 1112% of total
losses over the string of natural catastrophes
in India (e.g., it contributed ` 1012,000 crore
across floods in Mumbai in 2005, Surat in 2006
and Uttarakhand in 2013). Further, the sector
as a whole has invested 35% of its total assets in
government securities.

related elementscustomers, the individual


insurers capabilities, the industry acting in
collaboration and external stakeholders such
as policy makers/regulators and other related
stakeholders (e.g., reinsurers, third-party
administrators, healthcare and motor insurance
providers). This interplay shapes industry
performance and determines how it fares on its
three core objectivesproviding universal access
and coverage; returning value to shareholders; and
ensuring a superior experience for customers. An
assessment of the current position of the industry
indicated that it has some way to go in terms of
performance against these three core objectives.
1. Providing universal access and coverage

The GI industry has also played an unparalleled


role in creating access to financial services and
to protection. Supported by the largest health
insurance programme globally, the industry
prides itself on having added over 300 million
beneficiaries in a short span of 4 years. Further, a
majority of the beneficiaries are from the belowpoverty-line segment, which goes a long way in
contributing to the policy objectives of universal
financial inclusion.

A detailed micro-analysis of underlying needs and


risks indicates substantial scope for improvement
in penetration and access across segments. For
example, home insurance penetration is less
than 1%; there is significant underinsurance in
segments such as two-wheelers and personal health;
corporate (property and indemnity), SME and rural
risk coverage is substantially lower than global
benchmarks. Further, the total economic losses due
to underinsurance are estimated to be close to
` 150200,000 crore.

Current position of General Insurance in


India

2. Delivering returns to shareholders

The GI industrys performance is influenced


significantly by the interplay between various

India has the highest combined ratio compared


across developed and developing economies and
time periods. This has been largely driven by

10

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

substantially higher claims ratios. As a result, the


industry has delivered poor returns to shareholders.
Barring a few exceptions, the returns have been
lower than 15% (i.e., below cost of capital) even in
the tariff era. Returns post detariffication (2007)
have largely remained in a single digit even after
adjusting for TP (motor third-party) pool losses.
While the average economics have been poor, there
is huge spread in industry performance, with a few
players earning substantially higher returns than
the rest of the industry, driven almost entirely by
superior underwriting performance.
3. Ensuring superior customer experience
and building loyalty
GI industry in India has shown considerable
improvement on customer service and experience
(while only 60% of claims were settled in 1 month,
customer grievances have dropped significantly
from 2,800 per million policies in FY10 to 1,100
per million policies in FY12). Even on a relative
basis, the industry has performed better than other
financial services. Complaints are lower compared
to banking (~3,500 complaints per million SA), asset
management (~1,800 per million folios) and life
insurance (~1,200 per million policies).
Even on this dimension, there is substantial
dispersion in performance across players, with the
best players performing up to 5 times better than the
industry average, and about 30 times better than the
bottom quartile performers.

The report card of various inter-related


elements which inf luence industry
performance reveals mixed results:
Customers: Customer awareness and
involvement is increasing. However, there
remains a trust deficit between the customers
and the industry participants, leading to
relatively low loyalty and highly transactional
price-driven relationships. This behaviour is also
leading to underinsurance, particularly among
SME customers, who may buy a risk cover of as
low as 20% of asset value to bring down their
upfront insurance spend.
Individual insurer capabilities: Players
have significantly improved the operating model
and made progress in upgrading their product
and distribution capabilities; however, there is
a large gap vis--vis the desired best practice
on core technical capabilities (claims and
underwriting), with significant spread across
players.
Industry conduct: Over time, the market has
opened up and seen the entry of new players,
which has increased competition and choice for
customers. However, competition has largely
remained price driven, with limited focus on
creating new capabilities. As an industry, there
has been a high degree of collaboration in areas
like dismantling pools, articulating the need for
more consistent product and distribution
reforms and creating entities such as the

Insurance Information Bureau (IIB). However,


there is opportunity to do more in terms of
raising the industry profile, defining common
standards and self-regulation mechanisms, and
building more industry-wide utilities.
Regulatory interventions: Over the last
decade, regulatory interventions have helped
open up the industry, foster more competition
and largely benefited the industry. However,
there remain several areas to be addressed
particularly on issues of distribution, product,
pricing and solvency reform.
Other industry participants:
Reinsurers: India continues to attract
capacity from global reinsurers, particularly
on casualty and specialty lines of business
(while witnessing a reduction in higher rated
capacity on property lines); however, the lack
of local presence of global reinsurers has
inhibited the market from getting access to the
best talent and expertise.
Providers: Relationship of insurers with
motor and health stakeholders (i.e., OEMs/
repair shops and providers) is relatively poor,
with limited progress made in some pockets.
TPAs and surveyors: Capabilities of
the Third Party Administrators (TPA) and
surveyor industry are low and remain a big
area of concern.

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

Key trends shaping General Insurance over


the next decade

2. Changing customer behaviour and


expectations

The GI industry in India will be shaped by trends


and discontinuities across four themes over the next
decade. These themes areglobal forces; consumer
behaviour and expectations; demandsupply
dynamics in related sectors; and macroeconomic
factors.

Increasing consumer awareness and


involvement.

1. Global forces impacting Indias insurance


industry
Emerging Asiamainly China, India and
Southeast Asiais expected to become the most
important playing field for global insurers.
These countries will account for around 35%
of total growth. This will result in heightened
competitive interest from a range of foreign
insurers, who look to India as a major source of
growth.
Continued high bar on technical excellence
with winners pulling away further and
capturing disproportionate share of industry
value.
Technology discontinuities (Big Data, Mobility,
Social Media, Cloud) which will allow for more
sophisticated business models to emerge.
Increasing complexity of risks driven by an
ageing population, lifestyle changes, climate
changes, new types of coverage.

Blurring boundaries between the online and


offline world, with demonstrated multi-channel
behaviour, e.g., 6070% of online users conduct
digital research before purchasing any financial
services product; two-thirds change their
mind about the product and brand after online
research.
Emergence of various segments of customers
with different needs and expectations, requiring
the development of a finer customer centric
approach. Customers increasingly expect a
solution oriented approach rather than a claimlinked transactional approach, e.g., cover for
entire healthcare needs and not just IPD claims.
3. Shifting demandsupply dynamics in
related sectors
Healthcare: Rapid increase in healthcare
spend and formalisation and corporatisation of
provider space will lead to new opportunities.
Auto: Pressure on core sales margin and ageing
of car PARC will result in heightened focus of
OEMs/dealers for insurance pools.

11

Corporate sector: Globalisation, organised


retail and infra spending translate into
significant GI opportunities; continued
importance of SME.
4. Macroeconomic factors
Uncertain and volatile macroeconomic outlook
will temper near-term growth and investment
return; it will necessitate building resilient
business models.
Wage cost squeeze and talent crunch (especially
for technical skills), compounded by increasing
attrition.

Scenarios for the future


The future direction of the industry will be
shaped by the interplay of various stakeholders
the individual insurers efforts to upgrade
their capabilities, industry conduct and level of
collaboration, and external influence, in particular
the policy actions.
In this context, there are three potential evolution
paths/scenarios for the industry:
Status quo: In the status quo scenario, a few
insurers will focus on initiatives to build holistic
capabilities across the value chain. However,
capabilities for a large part of the industry would
continue to be low and industry conduct will remain

12

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

poor. Further, the policy environment would be


largely conservative, with few enabling actions. As a
result, in this scenario, the outcome would be one of
unfulfilled potential. The industry would grow at
a CAGR of 13% and reach a size of ~` 3,00,000 crore
by 2025. However, the industry CoRs would remain
high (~110%), resulting in single digit RoEs and
value creation will continue to be negative.
As a result of underperformance, the industry as
whole will require fresh capital to the tune of
` 4045,000 crore, with a bulk of this required to
recapitalise a few weak players.
In the scenario above, if economic recovery is
accelerated over the next 23 years, the industry
would benefit from both higher growth and higher
contribution from investment income. However, due
to limited effort to build skills and capabilities and
improve industry conduct, the impact would still be
moderate 1415% growth to reach a GWP of
` 3,50,000 crore by 2025; RoE in low double digits,
continued negative value creation and high capital
requirements of ` 2530,000 crore.
Gathering momentum: To break out from this
cycle and control its own destiny (as against being
dependent on external economic conditions), the
industry will require a combination of individual
insurer efforts to upgrade capabilities and
significant improvement in industry conduct
and collaboration. Accordingly, the gathering
momentum scenario will help the industry realise

significant improvement in outcomesgrowth


CAGR of 1516% translating into a total industry
GWP of ` 3,90,000 crore by 2025; improvement in
CoRs to 103104% resulting in a total industry RoE
of 1315%.
In this scenario, the industry would require fresh
capital infusion of ` 2025,000 crore to fund the
higher growth requirements.
Inclusive, progressive and high performing:
For the industry to realise its true potential and
achieve its vision of becoming an inclusive,
progressive and high performing sector, there
will need to be significant enabling policy actions
to complement the industry and individual
insurer actions. The upside of these actions will be
substantialGWP of ` 4,80,000 crore by 2025;
substantially higher penetration levels (over 85% of
motor vehicles covered; about 1 billion health lives
covered; overall GWP to GDP penetration of 1.4%);
industry CoR of 99101% translating into RoE
upwards of 20% and incremental value creation of `
3540,000 crore.
In this scenario, the additional capital infusion
will be ` 1015,000 crore primarily driven by
significantly higher volume and growth. Further,
the industry will witness significant demand for
technical talentover 1 lakh underwriters, claims
assessors and surveyors will be required.

Agenda for action to build inclusive,


progressive and high performing industry
Industry stakeholders will need to take a
coordinated set of actions to help the industry
unlock its full potential and realise its ambitious
vision
1. Individual players need to drive initiatives
across three axes of innovation:
Build distinctive granular customer insights to
capture high potential growth opportunities
and enhance engagement across the customer
lifecycle.
Upgrade to next generation technical capabilities
(claims, underwriting, analytics, and actuarial
capabilities).
Build world class operating models to achieve
gains in efficiency while strengthening the
human capital.
2. Industry-level initiatives required to
further performance:
Raise the profile of general insurance in the
Indian ecosystem.
Contribute in defining industry standards and
protocols.

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

Co-sponsor the building of common


infrastructure (in concert with policy makers/
regulators) for fraud detection, claims
management, skill building, etc.
3. Policy and regulatory initiatives that will
help complement individual and industrylevel actions:
Foster innovation and deepen penetration
through product and distribution reform, and
create an environment to attract capital.
Strengthen the industry structure through
focused regulatory intervention and supervision.
Enable and guide efforts towards a common
industry infrastructure.
Strengthen targeted initiatives to ensure
consumer protection.

13

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

15

Chapter I

Role and importance of insurance


General Insurance significantly contributes to the economy and strengthens the financial system:
Drives GDP growth: 1 standard deviation increment in GI penetration induces GDP growth of 0.39% (higher than banking or life insurance).
Contributes to the employment of ~7 lakh people, directly and indirectly.
GI supports the government and society
Unlocks government resources by reducing the financial burden of social welfare and security, and shares the cost of catastrophes (it paid ` 1012,000 crore
in recent catastrophes).
Finances government activities by investing in government securities (~35% of total invested assets in government securities).
The industry protects individuals and enterprises against uncertainty, and increases social harmony and stability through the coverage
of risks.
The GI industry has created greater access to financial services and protection in recent yearsover 300 million new beneficiaries added
over the last 3 years and ~16 million claims paid in 201213.

16

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

I.Roleandimportanceofinsurance

GeneralInsuranceisastrongdriverofGDPgrowth
GrowthinGIinducesasuperiorGDPgrowthcomparedtoothersectors
Amarginalincrease1 in

Privatecredit penetration

Lifeinsurance penetration

inducesapercapitaGDPgrowth2 of

0.34%

0.37%

Generalinsurance penetration

0.39%

1Definedasaonestandarddeviationincrementinthepenetrationofindependentvariable(privatecredit,lifeinsurance,orgeneralinsurancepenetration)
2Analysisofdatafor56countriesoverthe19762004period
SOURCE:IHSGlobalInsight;Doesinsurancemarketactivitypromoteeconomicgrowth?;MarcoArena(2006),TheWorldBank

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

I.Roleandimportanceofinsurance

GIisalsoamajorcontributorofemploymentbothdirectlyandindirectly
Thousandsofemployees
GIcontributestosalariesof~7lakhpeopleinIndiaandhaspotentialforgeneratingmoreemployment
680
245
250

70

~350
~220

100
Direct

15

Surveyors Agentsand Garage/


bodyshop
andassesors brokers

Population
Million

Health
service
providers

Total

1,240

German
insurance
industry

UK
insurance
industry

82

62

Assumptions:
1 Averageincomeperagent` 60,000peryear
2Insurancesupportedemploymentatautomotivepartsandcomponentssectorbasedonassuming10%oftotalclaimspaidforemployeepayrollandaveragesalary
perworkeratbodyshopis` 8,000permonth
3Insurancesupportedemploymentathospitalsassumes86%privateoutofpocketexpenditure,andrestbyinsurance
SOURCE:IRDA;annualreportsofGIcompanies; McKinseyanalysis

17

18

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

I.Roleandimportanceofinsurance

Theindustryprovideseconomicstabilitytopeopleaffectedby
naturalcalamities
Globally,insurerspaid~USD135billioninthe
3majorcatastrophes

Hurricane
Katrina2005
Japan
earthquake
2011

75

35

175

200

9/11attacks
24 76 100
2001

250

235

Paidbygovernment/
outofpocket

Indianinsurerspaid1012,000crore inrecentmajor
catastrophes

Insuredloss
share
Percent

Totalloss
USDbillion

Paidbyinsurers

Totalloss
000 crore

30

Mumbaifloods
2005

15

Suratfloods
2006

23

23

Uttrakhandfloods
2013

45 1718

30%ofworldwidecatastrophe
lossesin2011werecoveredbyinsurance1
1USD115billioninsurancecoveredlosseswithinatotallossofUSD370billion
SOURCE:SwissRe report;IRDA;Preventionweb;presssearch

Insuredloss
share
Percent

13

12

17

25

27

2024

19

Inspiteoflowpenetration,~11%ofthe
catastrophelossescoveredbyinsurers

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

I.Roleandimportanceofinsurance

GIcreatedsignificantaccesstofinancialcoverageandprotectioninthelastfew
years,recordingthehighestincrementalgrowthamongallfinancialcategories
Customersadded

Numberofclaimspaid

Million

FY09
FY12

624

1.2

+67%

374

2013,million

15.8

461
380

+23%

309

9.8
+367%

4.7
99

Banking
Number
ofsavings
accounts

Lifeinsurance
Numberof
policies

General
insurance
Beneficiaries
covered1

Motor

Health

1Onlyincludesretailbusinessandhealthinsurancecoverageprovidedbythegovernment
SOURCE:RBI;IRDA;IIB;PlanningCommission;PublicHealthFoundationofIndia;publicdisclosures;McKinseyanalysis

Others

Total

19

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

21

Chapter II

Current position of General Insurance in India


GI has been on an accelerated trajectory20% CAGR post tariff deregulation over the past 5 yearsand reached a total size of ~` 70,000
crore in FY 2013. However, the industry has some way to go in terms of performance against three key objectives:
Providing universal access and coverage: A detailed micro-analysis of the underlying needs and risks indicate that there is substantial scope to
improve penetration and access across segments; e.g., home insurance penetration is <1%; there is significant underinsurance in segments such as twowheelers and personal health; corporate (property and indemnity), SME and rural risk coverage is substantially lower than global benchmarks. Further, the
total economic losses due to underinsurance are estimated to be close to ` 150200,000 crore annually.
Delivering returns to shareholders: India has the highest combined ratio across developed and developing economies and across time periods. This
has been largely driven by substantially higher claims ratios. As a result, the industry has delivered poor returns to shareholders. Barring a few exceptions,
the returns have been lower than 15% (i.e., below cost of capital) even in the tariff era. Returns post detariffication (2007) have largely remained in a single
digit even after adjusting for TP pool losses. While the average economics have been poor, there is huge spread in industry performancea few players earn
substantially higher returns compared to the rest of the industry, mainly due to their superior underwriting performance.
Customer experience and loyalty: The industry has shown improvement on customer service and experience (claims settled in 1 month is low at 60%;
however, customer grievances dropped from 2,800 per million policies in FY10 to 1,100 per million policies in FY12). Further, complaints have been lower
compared to other financial services such as banking (~3,500 complaints per million SA), asset management (~1,800 per million folios) and life insurance
(~1,200 per million policies). Even on this dimension, there is substantial dispersion in performance across players, with the best players performing up to 5
times better than the industry average and about 30 times better than the bottom quartile performers.
The outcomes above are a result of the interplay of various factors which have a significant inf luence on industry performance. The
report card of these inter-related factors reveals mixed results:
Individual insurer capabilities: Players have significantly improved the operating model and made progress in upgrading their product and
distribution capabilities. However, there is a large gap vis--vis the desired best practice on core technical capabilities (claims and underwriting), with
significant spread across players.
Industry conduct: Over time, the market has opened up and seen the entry of new players, which has increased competition and choice for customers.
However, competition has largely remained price driven, with limited focus on creating new capabilities. As an industry, there has been a high degree of
collaboration on areas like dismantling pools, articulating the need for more consistent product and distribution reforms, and the creation of entities like the
Insurance Information Bureau (IIB). However, there is opportunity to do more in terms of raising the industry profile, defining common standards and selfregulation mechanisms, and building more industry wide utilities.

22

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

Other industry participants:


Regulatory interventions over the last decade have helped open up the industry and foster more competition which benefited the industry. However, there
remain several areas to be addressedparticularly on issues of distribution, product, pricing and solvency reform.
India continues to attract capacity from global reinsurers, particularly on casualty and specialty lines of business (while witnessing a reduction in higher
rated capacity on property lines); however, the lack of local presence of global reinsurers has inhibited the market from getting access to the best talent
and expertise.
The relationship of insurers with motor and health stakeholders (i.e., OEMs/repair shops and providers) is relatively poor, with limited progress made in
some pockets.
Capabilities of the TPA and surveyor industry are low and remain a big area of concern, particularly in terms of delivering superior customer service and
building technical skills.

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

II.CurrentpositionofGeneralInsuranceinIndia

IndianGImarketassessmentframework
Interplayofvariousfactorsinfluencingindustryperformance
Coreperformance
objectivesforindustry
Provideuniversal
1 accessandadequate
coverageofneeds

Productinnovation
Distribution
Technicalcapabilities

(underwriting,claims)
Operatingmodel

B
Insurer
capabilities

Awarenessand

involvement
Sophistication
andtrust

A
Returnvalueto
2
shareholders

Consumer

Otherindustry
participants
Deliversuperior
3 consumerexperience
andbuildloyalty

SOURCE:McKinseyanalysis

Regulatorandpolicymakers
Healthcareproviders
Motordealersandrepairshops
Reinsurers
TPAsandsurveyors

C
Industry
conduct

Natureofcompetition
Levelofcollaboration

23

24

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

II.CurrentpositionofGeneralInsuranceinIndia

1 ComprehensiveneedsbasedviewofGI
Individual

Corporates/Institutions/Rural

Assetsandrisks Insuranceproducts

Assetsandrisks

Insuranceproducts

Vehicle

MCV/HCV(ODandTP)
LCV/PCV(ODandTP)

Employees

Grouphealth

Assetprotection

Fire

Businesspayments

Exportcreditriskcover

Employees

Individualhealth
Govt sponsored

Grouphealth

Newprojects

Engineering

Accidentcover

Assetprotection

Fire

Transport

Marine

Businesspayments

Exportcreditriskcover

Liability

Professionalindemnity
Aviation(3rd party)

Vehicle

Tractor

Otherassets/risks

Rural/agri.(e.g.,

Personalcar(OD
Vehicle

andTP)
Twowheeler(OD
andTP)

Homeinsurance
Home

Health

policiesforBPL
Travel

Income

Personal

indemnity

Liability
SOURCE:Stakeholderdiscussions

weather,cattle,etc.)

SMEs

Corporates

Rural

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

II.CurrentpositionofGeneralInsuranceinIndia

1 Penetrationheatmap:Individualrisks
FY13

GWP1
000crore

Riskstobecovered
New2
Cars
Old2

Vehicle

Twowheelers

6.5

Home

0.5

VehiclePARC

Homeownership

Massaffluent+
Health

Income
Total

Massmarket

5.53

Below
mass

2.6

Accident

1.6

Benchmark
85%

2.8
18.8

Penetration
80%

9.5

Total
Individual

Penetrationbase

Livesassociated

Disposableincome

60%
25%

>90%

<1%

>95%

20%

90%

Verylow

75%

40%4

65%

0.02%

0.07%

9.7

1GWP:GrossWrittenPremium
2Newcars:lessthan3yearsold;Oldcars:morethan3yearsold
3Almostentirely(95%+)contributedbymassaffluentandabove
4Ofthetotalruralpopulation,40%iscoveredthroughRSBYandstatehealthinitiatives
SOURCE:IHS GlobalInsights;Autocar;IIB;IRDA;NCAER;RSBY website;UScensusbureau;AMBest;AssociationofBritishInsurers;RBI;McKinseyGlobalInsurance
pools;McKinseyanalysis

25

26

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

II.CurrentpositionofGeneralInsuranceinIndia

1 Penetrationheatmap:Commercialrisks(1/2)
FY13

GWP
000crore

Riskstobecovered
MCVsandHCVs

6.0

LCVsandPCVs

4.5

Employees

Grouphealth

1.0

Livesassociated

Asset
protection

Corepropertyrisks
(fire,engg,marine)

1.2

Business

Exportcredit1

0.1

Vehicle

SME

VehiclePARC

Penetration
70%
70%

Benchmark
>85%

10%

75%

IndustrialGDP

0.14%

3%2

ExportsbySMEs

0.02%

Livesassociated

70%

80%

0.83%

3.5%3

12.8

Total

Corporates

Penetrationbase

Employees

Grouphealth

6.2

Newprojects

Engineering

2.2

Asset
protection

Fire

6.0

Transport

Marine

2.7

IndustrialGDP

1Assumedat10%oftotalGWPfromSMEs
2MaturemarketshaveequallybigSMEliabilitycovers(~3%ofSMEindustrialGDP)andothercovers(propertyandliability,upto~2%ofSMEindustrialGDP);these
arealmostnonexistentinIndia
3Includesinsurancecoverswhichcannotbeclassifiedeitheraspurepropertyorpurecasualty(e.g.,accidentandhealth,international,etc.)
SOURCE:IHS GlobalInsights;Autocar;IIB;IRDA;NCAER;MSME annualreport;UScensusbureau;AMBest;AssociationofBritishInsurers;RBI;McKinseyGlobal
Insurancepools;McKinseyanalysis

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

II.CurrentpositionofGeneralInsuranceinIndia

1 Penetrationheatmap:Commercialrisks(2/2)
FY13

Riskstobecovered
Business
payments
Corporates

Professional
indemnity

GWP
000 crore
Exportcredit

1.0

Liability

1.4

Aviation

Total

0.5

Penetrationbase
Exportsbylarge
corporates

Penetration

Benchmark

0.17%

Industrialand
servicesGDP

0.04%

1.25%

30%

85%

0.24%

9%

20.0

Vehicle

Tractors

0.5

VehiclePARC

Otherassets

Rural/agri
(weather,cattle,
etc.)

3.5

AgricultureGDP

Agri

Total

4.0

Others

3.2

TOTAL

69

SOURCE:IHS GlobalInsights;IIB;IRDA;NCAER;AICC website;UScensusbureau;AMBest;AssociationofBritishInsurers;RBI;McKinseyGlobalInsurancepools;


McKinseyanalysis

27

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

II.CurrentpositionofGeneralInsuranceinIndia

2 IndiahasthehighestCoRacrossdevelopedandemergingcountries

Claims

Percent

Expenses

Combinedratio(CoR)
200106
Developed
countries

200709

201012

US

73

25 98

74

24 97

76

23 99

Germany

73

21 95

73

20 93

75

20 95

UK

68

31 99

70

34 104

67

33 100

Indonesia
Emergingcountries

28

47

45 92

SouthAfrica

79

18 97

China

70

34 104

Malaysia

60

India1

83

32 92
33 116

51
82
71
64
85

39 89
17 99
33 104
31 96
35 119

1ReferstoperiodsFY0207,FY0810,FY1113respectively.Also,theCoRincludestheimpactofmotorTPpoollosses
SOURCE:McKinseyGlobalInsurancePools

53
80

34 87
16 96

64

30 94

61

29 90

88

35 123

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

II.CurrentpositionofGeneralInsuranceinIndia

2 Theindustryhasdeliveredlowreturnsonequity(RoE)inthelast5
years,evenafteradjustingforlossesduetothirdpartymotorpool

ReportedRoE
RoEexcluding
TPpoollosses

Percent

22

21
16

15
13

13

8
6

13

7
4
2

13

5
5

FY01

FY02

FY03

FY04

FY05

Initialliberalisation

FY06

FY07

FY08

FY09

FY10

Detarrification

FY11

FY12

FY13E

Partialrecovery

Thelevelofunderperformanceisnotthesameacrossplayers.Significantspreadexistsbetween
topperformersandtherest,withsuperiorunderwritingperformancebeingthekeydifferentiator
SOURCE:IRDA;annualreportsofGIcompanies; McKinseyanalysis

29

30

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

II.CurrentpositionofGeneralInsuranceinIndia

3 Improvedperformanceoncustomerexperience;hugespreadacrossplayers
Claimssettlement,percentsettledwithinamonth1

Complaintspermillionpolicies
Complaintslowercompared
tobanking(~3,500),MF
(~1,800)andLI(~1,200)

78
60

2,800
1,100
FY10

FY12

Topquartile
average

95

90

Topquartile
average

Bottomquartile
average

20

30

Bottomquartile
average

FY10

FY12

170

200

24,500

6,000

Keytrends

Claimssettlementdroppedfrom78%to60% forinsurers;bestin
classplayersstillmaintain~90% levels

Sharpdropincomplaintsperpolicy,lowercomparedtoother
financialservicessectors;however,hugespreadacrossplayers

Note:Onlyplayerswhichhavebeenpresentfrom2005onwardshavebeenincludedinthequartileanalysis
1Onlyshorttailclaims(motorODandretailhealth)considered
SOURCE:Publicdisclosures;IRDAannualreport;IRDApolicyholderwebsite;McKinseyanalysis

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

II.CurrentpositionofGeneralInsuranceinIndia

Reportcardofprogressonvariousfactorswhichinfluence
industryperformance(1/2)
Keycapabilities/metrics
A Customers

B Insurer
capabilities

Status

Littleornoimprovementmade;
significantrequired
Someimprovementmade
Significantimprovementmade

Comments

Awarenessand
involvement

Improvementinawarenessandinvolvementinlast5years;
however,remainslowonabsolutebasis

Levelof
sophisticationand
trust

Continuedtrustdeficitonmotorandhealth;commercial
relationshipsextremelytransactionalandpricedriven

Productinnovation

Innovationintermsofprovidingaddonbenefits;customised
productstospecificsegments(SME,weather)

Distribution

Evolutionofamoremultichannelarchitecture;however,
structuralchallengesandlowpenetrationacrossmostchannels

Technicalcapabilities

Limitedriskbasedpricing;claimscapabilitiesstilllowon
advancedanalytics,frauddetection

Operatingmodel

Higherprocesscentralisation;severalinnovationsinformofE
andMcovernotes1;instantissuance;efficiencygainsbothona
premiumperemployeeandperofficebasis

C Industryconduct Natureof
competition
Levelofcollaboration
1Covernotesinelectronic/mobileformat
SOURCE:Stakeholderdiscussions;McKinseyanalysis

Increaseinnumberofplayersandreducedconcentration;but
competitionprimarilypricedriven
Collaborativestandonpooldismantling,distributionreforms,
IIB;cancollaboratemoreincreatingindustryutilities

31

32

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

II.CurrentpositionofGeneralInsuranceinIndia

Reportcardofprogressonvariousfactorswhichinfluence
industryperformance(2/2)
Keycapabilities/metrics
D Otherindustry
participants

Status

Littleornoimprovementmade;
significantrequired
Someimprovementmade
Significantimprovementmade

Comments

Regulatory/policy
support

Systematicallyopenedupindustrythroughdetariffication,pool
dismantling,demat;needforproductanddistributionreforms,
betterdisclosureandaccountingnorms,enhancementsin
solvencyregime,andmandateinsuranceforgovt bodiesto
enableinsurersbettersupportthemduringnaturalcatastrophes

Healthcareproviders

Continuestobeablackboxfortheindustry;limitedcollaboration
withinsurerstoimprovestandardsandoutcomes

Motordealersand
repairshops

OEMsmoreprofessionalbutexercisefullcontrol;semiorganised
andunorganisedworkshops(~4045%volume)havelowmaturity

TPAandsurveyors

Veryfragmented;significantskillandprocessgapsresultingin
mostplayerssettingupoperationsinhouse

Reinsurers

Changingdynamics:
Reducedtreatycapacityforpropertyfromtopratedinsurers
makingitmorechallengingforcertainsegmentsofplayersto
participateinbusiness
Simultaneousincreaseincapacityprovidedbylowerrated
insurersopeningup/holdingmarketforothersegmentof
players
Capacityincreasedonthenonpropertysidewithmore
disciplineonratesandterms
Lackoflocalonthegroundpresenceofglobalreinsurers
constrainingaccesstotalent,capitalandexpertise

SOURCE:Stakeholderdiscussions;McKinseyanalysis

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

II.CurrentpositionofGeneralInsuranceinIndia

A Retailcustomersawarenessandinvolvementhasclearlyriseninthe
last4years

MOTORONLY

Customerawarenessisincreasing;morecustomers
renewingpolicybeforeexpiry

Highercustomerinvolvementinpurchase;
selfinitiatedrenewalsmorethandoubledin4years

Whendidyoustarttherenewalprocess?

Whoinitiatedtherenewalprocess?

Afterexpiration
ofpolicy

46

33

Insurancecompany

34

24

33

Lessthan2weeks
beforeexpiration
Morethan2
weeksbefore
expiration

54

Dealer/agent

47

43
42
11

13

2009

2013

Selfinitiated1

19
2009

2013

1Asansweredbytherespondent;thiswillalsoincludecustomerswhoreceivedrenewalreminderfrominsurersbutbelievethattheyinitiatedtheprocessontheir
ownaccordandnotduetothereminder
SOURCE:McKinseyproprietarymarketresearch inpersonquantitativesurveyof1,000+retailcustomersin2009andin2013

33

34

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

II.CurrentpositionofGeneralInsuranceinIndia

A Motorinsurance:Significanttrustdeficitvisvisinsurers
Customer
segments

Pricesensitive

Younger
generation
(Value
consciousand
aware)

Qualityseekers

Agent

NonOEMworkshop

OEMworkshop

Insurer

Seesagentasa
trustedallytoextract
maximumvaluefrom
policy

Costeffectiveand
efficientsolutionto
minorcarissues;
preferregulargarage

Costlybutprovides
expertiseformajor
repairs

Seenasopaque,big
corporationwithno
personalengagement

Seesagentas
unnecessary
complication

Costeffectiveand
efficientsolutionto
minorcarissues;
preferregulargarage

Costlybutprovides
expertiseformajor
repairs

Seenastedious,with
unclearintentions,
butcanbeengaged
withdirectly

Unnecessaryand
lacksauthority

Lacksqualityand
expertise

Providesquality,
convenience,and
expertisebutata
price

Professionalbutlacks
expertise.Doesnot
provideconvenience

SOURCE:McKinseyproprietarymarketresearch inpersonqualitativeinterviewsofcustomers,dealers,workshopownersandagents

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

II.CurrentpositionofGeneralInsuranceinIndia

A Commerciallines:CustomerrelationshipwiththeGIecosystemisextremelyprice
driven

Customer
view

Industry
view

LackofclarityonbenefitsfromGI

Lackoftrust intermsofclaimssettlement

Unawareoffullbouquet ofproductofferingsthatcanmeettheirspecific
needs

SMEpurchaseprimarilyduetobankpush forassetcoveroncollateral

Pricesensitivesegment, thecustomerwillchoosethelowestcostplayer
evenatthecostofunderinsuranceorinferiorservicelevel(insomecases,
riskcoveraslowas20%ofthevalueofassetinsured)

Priceisthekey(oftenonly)pitchpointanddifferentiatoracrossplayers
evenleadinginsurers

TheGIindustryhasnotinvestedenoughtoeducatecorporateclients

SOURCE:McKinseyproprietarymarketresearch

35

36

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

II.CurrentpositionofGeneralInsuranceinIndia

B Distribution:Twolargestchannels agencyandbrokers faceseveralchallenges


intheirmodelandvisvistheinsurers
Severalchallengesintheagentsandbrokerchannel,whichtogetherdistribute60%ofindustrypremiums
ShareofGWP,000crore,percent
FY0910

Keychallenges

FY1213

Perceivedlowincomeearningpotentialresultingin

Individual
agents

13.7

36%

25.0

36%

relativelypoortalentattractedtoindustry translating
intolowengagement,highchurnandlowproductivity
Aggregatorscontrolasignificantpartofagency
resultinginlowercustomerconnectandoverallcontrol
onprocess
Keyasksfromtheinsurers Bettercustomerservice
level;ownershipofcustomers;transparencyinclaims
andtimelinessofpayments

Highfragmentationandlowlevelofprofessionalism

Brokers

5.7

15%

16.8

24%

beyondthetop2530brokers(outoftotalof300+)
Beyondaselectfew,mostbrokersunabletoofferfull
rangeofservices tocustomers(riskassessment,loss
control,policydesign)
Largelyonesizefitsall approach;lackofrealproduct
(e.g.,liability,specialrisks)andsegmentspecialist
expertisebeingdeveloped
Insurersnotfullyevolvedtoworkwithbrokersas
businesspartners;relationshipsremaintransactional

SOURCE:IRDA;publicdisclosures;McKinseyproprietarymarketresearch;McKinseyanalysis

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

II.CurrentpositionofGeneralInsuranceinIndia

B Distribution:Industryhasnotleveragedbancassurance toits
fullpotential

LIincomeper000NII
GIincomeper000NII

FY13,

PlayershavenotfullyleveragedthebancassurancechannelacrossPSUandprivatebanksandlagtheirlifeinsurance
peers
Privatesectorbanks

Publicsectorbanks

34.8
27.3
23.3
19.4
12.2
7.6
3.4

2.0

LItoGI
premium1

6.5

4.8

2.4

0.7

2.3

1.8

Bank#1

Bank#2

Bank#3

Bank#4

Bank#1

Bank#2

Bank#3

10x

5x

2x

1x

4x

2x

1x

1Assuming1015%feeonGWPforGIand2025%forLI;overallLItoGInewbusinesspremiumratiofortheindustry(acrosschannels)is1.5xinFY13
SOURCE:RBI;bankannualreports;McKinseyanalysis

37

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

Chapter III

Key trends shaping the GI industry


Global forces impacting the Indian landscape:
Emerging Asia will become the major playing field for global insurers with heightened interest and increased competition for China, India, and Southeast
Asia.
The bar on technical capabilities will keep rising with winners pulling away.
Several discontinuities on technology, increasing complexity of underlying risks, and continued policy and regulatory intervention.
Customer behaviour and expectations:
Rise in customer awareness and sophistication, along with the blurring of boundaries between online and offline world, will require fundamental shifts in
the operating model.
Segmentation and customer centricity will become a key capability.
Shifting demandsupply dynamics in related sectors:
Healthcare: Rapid increase in healthcare spend and formalisation and corporatisation of the provider space will lead to new opportunities.
Auto: Pressure on core sales margin and ageing of car PARC will increase the focus of OEMs/dealers on insurance pools.
Corporate sector: Globalisation, organised retail and infra spending will translate into significant GI opportunities; the importance of SMEs will
continue.
Economic factors:
Uncertain and volatile macroeconomic outlook will temper near-term growth and investment return; resilient business models will need to be built.
Human capital will be scarce while wage-cost squeeze will increase.

39

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

III.KeytrendsshapingtheGIindustry

KeytrendsanddiscontinuitieswhichwillshapethefutureoftheGIindustry
inIndiaoverthenextdecade(1/2)

Globalforcesimpacting
theIndialandscape

Consumer
behaviour&
expectations

40

KeyShifts/Discontinuities
i. EmergingAsia(inparticularChina,IndiaandSEAsia)asthemajor
playgroundforglobalinsurers resultinginhigherforeigninterestand
increasedcompetitiveintensity
ii. Everincreasingbarontechnicalcapabilities: Spreadbetweenthebest
andrestwideningandalmostfullydrivenbytechnicalperformance
iii. Rapidconvergenceof4majortechnologydiscontinuities:BigData,
Cloud,InternetofThings/Mobility1 andSocialMedia willallowforfiner
pricing,moredisruptivebusinessmodelsandlargescalemass
customisationofproducts
iv. Evolvingnatureofunderlyingrisks(increasingseverityfromclimate
changebutdecreasingfrequencyfrombettertechnology;lifestyle
changesandlifestylediseases;increasinglifeexpectancies)requiring
largercapacitiesandnewtechnicalcapabilities
v. Morechallengingwayofdoingbusinessasaconsequenceof
regulatoryreforms,e.g.,riskbasedcapital,consumerprotection

Impact
horizon

Growth
impact

<3years
37years
>7years

Profitability
impact

vi. Increasingconsumerawareness,sophisticationandinvolvementacross
categorieswithimportanceofbrandsrisingrapidly
vii. Emergenceofmultichannelworld:Blurringofboundariesbetween
offlineandonlineworldwithrapidproliferationofmobilityenabled
accesstointernet
viii.Segmentationasakeycapabilityofcustomercentricity,toaddress
moregranularconsumerneedsandevolvingdemographics

1Abilitytogeneraterealtimeandinteractivereportsfromdevicesacrossanetwork,enabledeepdataprocessing,andprovideimmediatefeedback/correctiveactions
SOURCE:McKinseyanalysis;stakeholderdiscussions

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

III.KeytrendsshapingtheGIindustry

KeytrendsanddiscontinuitieswhichwillshapethefutureoftheGIindustry
inIndiaoverthenextdecade(2/2)

Structuralshiftsinrelatedindustries
demandandsupply

Healthcare:Rapidincreaseinhealthcarespending,evolutionof
diseasepatterns andgovernmentinitiativetoprovideuniversal
coveragewillresultinnewopportunitiesforhealthinsurancebut
requiringaverydifferentsetofcapabilities
x. Healthcare:Increasingformalisationandcorporatisationofthe
providerspaceandemergenceofnewbusinessmodels willsetanew
basisforengagementbetweenpayors andproviders
xi. Auto:IncreasingpressureonmarginsoncoresalesforbothOEMsand
dealers,ageingcarPARCandrisingautocomplexity(e.g.,more
electronics)willresultinanincreasedcompetitionfordownstream
autovaluechain
xii. Corporate sector:IncreasingglobalisationofIndiancorporateswill
significantlyincreaseexposuretoreputationandotherliabilityrelated
risks;privateinfraspending(~50%ofnearlyUSD1trillion)and
organisedretailwillopenupopportunitiesinengineering,marine,etc.
xiii. Corporate sector:ContinuedrelevanceandimportanceofSMEs to
industrialoutputandexpansioninrangeofactivities

Economicfactors

KeyShifts/Discontinuities
ix.

xiv. Macroeconomicoutlook:Uncertainandmorevolatilemacroeconomic
environmentinthenearterm(next34years)willtempergrowthand
investmentincome,andrequirebuildingamoreresilientbusiness
model
xv. Productivityandhumancapitalchallenge:Continuousincreasein
employeewagecostsdrivenbyaseveresupplycrunchcallforre
evaluatingthecurrentproductivityandtalentmanagementmodel

SOURCE:McKinseyanalysis;stakeholderdiscussions

Impact
horizon

Growth
impact

<3years
37years
>7years

Profitability
impact

41

42

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

III.KeytrendsshapingtheGIindustry

USNONLIFEEXAMPLE
ii Continuedhighspreadbetweentopperformersandtherest,
withsuperiorunderwritingcapabilitybeingthekeydifferentiator

19881996

ROE
inpercent

Underwriting
profitability
vs industry
average

Investment
margin
vs industry
average

19972005

20062012

16
12

2
3

SOURCE:Annualreports;AMBest;McKinseyanalysis

10

10

Top
Quintile
Bottom
Quintile

3
4

Top
Quintile
Bottom
Quintile

10

14

11

3
0

Top
Quintile
Bottom
Quintile

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

III.KeytrendsshapingtheGIindustry

vi Consumerinvolvementandmaturityhasbeenincreasingandwill
starttrendingtowardsgloballevels

MOTOREXAMPLE

Activechoice1 increasingbutstilllowerthangloballevels
Percentofcustomersactivelyshoppingformotorinsurance

81
Active
shoppingisexpectedtoincrease
furtherwithgrowing
marketsophistication

44

40
33

27

21

7
UK

Spain

Poland

China

Italy

FY13
FY09

India

1Referstocustomerswhoactivelycomparedifferentofferingsinthemarketandchoosethebestproductinsteadofbeingguidedbyagent/dealerintobuyinga
specificproduct
SOURCE:McKinseyproprietaryconsumerresearch

43

44

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

III.KeytrendsshapingtheGIindustry

vii Blurringboundariesbetweenonlineandofflineworld

DIGITAL HIGH VALUE


CONSUMERS

Asignificantportionofinternetuserswhoboughtaproductofflinedoonline
research
Onlineresearch
Percentofinternetuserswhoboughtaproductofflineinthelast12months
Creditcards

70

Healthinsurance

68

Lifeinsurance

66

TD/FD

63

Autoinsurance

63

Savingsaccount
Personalloans
SOURCE:McKinseyDigitalConsumerResearch;McKinseyGlobalInstitute;McKinseyanalysis

62
53

66%changed
theirmindabout
productand
brandafter
onlineresearch

Insurance:65%
Personalloans:

73%
Homeloans:
75%

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

III.KeytrendsshapingtheGIindustry

xi PressureinmarginsoncoresalesmakingOEMsanddealersfocuson
aftersalesandloweffortinsurance
Economicsfordealersinautoindustry

EconomicsforOEMsinautoindustry
Newcarsales

Services

Aftersales

Marginsandtheir
expectedtrends

100%

85

65

20
2

13

Revenues

15

Newcarsales

Accessories

Aftersales

Financing

Marginsandtheir
expectedtrends

100%

48
1015%

33

2025%
5
2

Profits

25%
2025%

85

2025%

Insurance

5 3
2
6
11

Revenues

1015%
23%
1015%

Profits

Keyimplications

Keyimplications

OEMs arelikelytofocusonaftersalesparts

Dealers viewinsuranceashighvalueloweffort

marketbecauseofthelargeprofitpools
OEMsinterestininsuranceislikelytobearound
Securingaftermarketsalesthroughclaims
handling
Securingadditionalrevenues

SOURCE:McKinseyanalysis

profitpool
Dealersmakehighermarginsof~20%onsaleof
partsandonly~2%onsaleofnewcars
Dealersarelikelytocontinuetheirfocuson
capturingrenewalsandsellingaftermarketparts

45

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

47

Chapter IV

Scenarios for the future


The future direction of the industry will be shaped by the interplay of various stakeholdersthe individual insurers efforts to upgrade
their capabilities, industry conduct and level of collaboration, and external inf luence, policy actions in particular. In this context, there are
three potential evolution paths/scenarios for the industry.
Status quo: In this scenario, a few insurers will focus on initiatives to build holistic capabilities across the value chain. However,
capabilities for a large part of the industry would continue to be low and industry conduct will remain poor. Further, the policy
environment would continue to be conservative with few enablers. As a result, in this scenario, the outcome would be one of unfulfilled
potential
Modest growth CAGR of ~13% resulting in GWP of ~` 3,00,000 crore by 2025.
Combined ratio remains very high at 108110%; very few players operate below 100%.
Incremental value creation will be negative to the tune of ` 5560,000 crore while delivering average RoE of 68%.
As a result of underperformance, the industry as a whole will require fresh capital to the tune of ` 4045,000 crore, with a bulk of this required to recapitalise
a few weak players.
If economic recovery is accelerated over the next 23 years, the industry would benefit from both higher growth and higher contribution
from investment income. However, with limited effort to build skills and capabilities and improve industry conduct, the impact would
still be moderate
Growth CAGR of ~1415% resulting in GWP of ~` 3,50,000 crore by 2025.
With no improvement in combined ratio, the industry would continue to have a negative value creation of ` 2025,000 crore while delivering average RoE of
1012%.
Capital requirements remain relatively high ` 2025,000 crore of fresh infusion.
To break out from this cycle and control its own destiny (as against being dependent on external economic conditions), the industry
will require a combination of individual insurer efforts to upgrade capabilities and significant improvement in industry conduct and
collaboration. Accordingly, the gathering momentum scenario will help the industry realise marked improvement in outcomes.
CAGR of 1516% resulting in GWP of ~` 3,90,000 crore by 2025.

48

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

Improvement in CoR to 102104%; many players starting to operate below 100%.


Average RoE of 1315%; however, the industry as a whole will continue to operate at or around the cost of capital and not create any incremental value.
Capital commitment will be more limited ` 2025,000 crore.
For the industry to realise its true potential and achieve its vision of becoming an inclusive, progressive and high performing sector,
significant enabling policy actions are needed to complement the industry and individual insurer actions. The upside of these actions
will be substantial.
GWP will potentially reach ` 4,80,000 crore (CAGR of 1719%) by 2025.
Significant increase in penetrationover 80% of vehicles covered; close to 1 billion health lives covered; overall GWP to GDP at 1.4%.
Combined ratio of 99101%, with many players operating sustainably below 100% and a few high performing players below 95%.
Industry RoE of 2123%, translating into a total industry wide value creation of ` 3540,000 crore.
Realising this will require a capital commitment of ` 1015,000 crore from the industry.
More balanced portfolio mix (across retail and commercial; large and SME) and industry structure.
This scenario will also result in greater demand for high quality technical talent; over 1 lakh underwriters, claims assessors and surveyors will be required.

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

IV.Scenariosforthefuture

FactorsinfluencingtheevolutionoftheGeneralInsuranceindustryoverthenext
10years
Natureandextentofactionsundertakenbyindustrystakeholder
Capturegrowthopportunity
Strengthendistribution
Upgradetechnicalcapabilities
Developworldclassoperating
model
Enhancecustomer
engagement
Strengthenhuman
capital

Driveproductand
distribution
reform
Ensurestronger
industrystructure
Strengthen
industry
infrastructure
Protectconsumer
interests
Createenabling
environmentto
attractcapital
SOURCE:Stakeholderdiscussions

willdrive7keyindicators

1 Sizeoftheindustry
(GWP)

Individual
insurer
capabilities

2 Penetration
3 Portfoliomix

C
Policyand
regulatory
framework

Consumer

4 Businessefficiency
(CoR)
B
Industry
conduct

5 Industrystructure
6 Capitalrequirement
7 Talentandskills
required

Raisetheprofileofinsurance
Defineindustrystandardsandprotocols
Buildandleveragecommoninfrastructure
(inconcertwithpolicymakers/regulators)

49

50

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

IV.Scenariosforthefuture

Inthestatusquoscenario,afewinsurerswillfocusonupgradingindividual
capabilities;however,industryconductandpolicyenvironmentremainconservative
Consumerbehaviour

Insurercapabilities

Industryconduct

Policyandregulatory
framework

Relatively
immature,
primitive
shopping(push
drivenselling)

Highlyaware,
sophisticated
customers(pull
drivenselling)

Focuson
strengthening
onlyspecific
capabilities

Focuson
buildingholistic
capabilities
acrossvalue
chain

Independent
initiativesby
individual
players

Coherentinitiatives
byplayersfostering
collaborative
environment

Conservative
policy
environment
withfewer
enablers

Enablingpolicy
frameworkthrough
targetedreforms
onproduct,
distributionand
industryconduct

Scenario1: Statusquo:
Unfulfilledpotential
SOURCE:Stakeholderdiscussions

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

IV.Scenariosforthefuture

Inthestatusquoscenario,theGIindustrywilllikelygrowatamodest~13%CAGR,
continuetounderperformandbewellbelowpotential
Fuellingthisgrowthwillrequireafreshcapital
commitmentof4045,000crore

Growth:GWPtrend
000crore
69

55
2012

2013E

CAGR
Percent

300

160

Totalcapital
Retainedearnings2

2020F
13

Capitalrequirement,000crore

Freshcapital3

2025F

100110

13
3035

Profitability:CoRtrend
Percent

RoE
Percent

122

113

2012

2013E

301

110112 108110

2020F

2013

2025F
68

4045

Value
creation4

2025F
(5560)

Theindustrycanpotentiallyclock1415%CAGRifmarketsrevivetosupporta
higherreturnoninvestments.Butdowewanttobeexternallydependent?
1DoesnotincludeAICCandECGC
2 Assumingdividendpayoutof15%andtaxrateof25%
3.AvailableSolvencyMargincomparedto1.6timesRequiredSolvencyMargintodeterminecapitalrequired
4.Valuecreation=(Returnonequity Costofequity)*AverageNetWorth;assumingaBetaof1.1andequityriskpremiumof5% ;()denotenegativevaluecreation
SOURCE:IRDA;annualreportsofGIcompanies; publicdisclosures;RBI;McKinseyanalysis

51

52

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

IV.Scenariosforthefuture

Ifeconomyrecoveryisaccelerated,theindustrycanpotentiallygrowat1415%but
willstillseelimitedperformanceimprovement
Thegrowthwillstillrequirecapitalcommitmenttothe
tuneof2025,000crore

Growth:GWPtrend
000crore

CAGR
Percent

58

69

2012

2013E

350

170
2020F
14

Capitalrequirement,000crore

Retainedearnings2
Freshcapital3

2025F
15

130140

Profitability:CoRtrend
Percent

RoE
Percent

Totalcapital

7882

122

113

2012

2013E

110112 108110

2020F

301

2025F
1012

2013
Value
creation4

2025
2025F
(2025)

1DoesnotincludeAICCandECGC
2 Assumingdividendpayoutof15%andtaxrateof25%
3.AvailableSolvencyMargincomparedto1.6timesRequiredSolvencyMargintodeterminecapitalrequired
4.Valuecreation=(Returnonequity Costofequity)*AverageNetWorth;assumingaBetaof1.1andequityriskpremiumof5% ;()denotenegativevaluecreation
SOURCE:IRDA;annualreportsofGIcompanies; publicdisclosures;RBI;McKinseyanalysis

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

IV.Scenariosforthefuture

IfstakeholdersacrosstheGIindustrygathermomentum,itcanreachclosertoits
truepotentialwithoutleaningheavilyonthemacroeconomy
Consumerbehaviour

Insurercapabilities

Industryconduct

Policyandregulatory
framework

Relatively
immature,
primitive
shopping(push
drivenselling)

Highlyaware,
sophisticated
customers(pull
drivenselling)

Focuson
strengthening
onlyspecific
capabilities

Focuson
buildingholistic
capabilities
acrossvalue
chain

Independent
initiativesby
individual
players

Coherentinitiatives
byplayersfostering
collaborative
environment

Conservative
policy
environment
withfewer
enablers

Enablingpolicy
frameworkthrough
targetedreforms
onproduct,
distributionand
industryconduct

Scenario1: Statusquo:
Unfulfilledpotential
SOURCE:Stakeholderdiscussions

Scenario2:Gathering
momentum

53

54

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

IV.Scenariosforthefuture

Inthisscenario,industryislikelytogrowat1516%withimprovedprofitabilityand
muchlowerdependencyoncapital
Thegrowthwillrequireafreshcapitalcommitmentof
2025,000crore

Growth:GWPtrend
000crore

390
58

69

2012

2013E

CAGR
Percent

Capitalrequirement,000crore

180

Retainedearnings2
Freshcapital3

2020F
15

2025F
140150

16
9095

Profitability:CoRtrend
Percent

RoE1
Percent

Totalcapital

122

113

2012

2013E

105106 102104
2020F

301

2025F
1315

2013
Value
creation4

2025

2025F
(010)

1DoesnotincludeAICCandECGC
2 Assumingdividendpayoutof15%andtaxrateof25%
3.AvailableSolvencyMargincomparedto1.6timesRequiredSolvencyMargintodeterminecapitalrequired
4.Valuecreation=(Returnonequity Costofequity)*AverageNetWorth;assumingaBetaof1.1andequityriskpremiumof5% ;()denotenegativevaluecreation
SOURCE:IRDA;annualreportsofGIcompanies; publicdisclosures;RBI;McKinseyanalysis

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

IV.Scenariosforthefuture

Enablingpolicyactiontosupportindividualandindustrylevelactionscanhelpthe
industryrealiseitsambitiontobeinclusive,progressiveandhighperforming
Consumerbehaviour

Insurercapabilities

Industryconduct

Policyandregulatory
framework

Relatively
immature,
primitive
shopping(push
drivenselling)

Highlyaware,
sophisticated
customers(pull
drivenselling)

Focuson
strengthening
onlyspecific
capabilities

Focuson
buildingholistic
capabilities
acrossvalue
chain

Independent
initiativesby
individual
players

Coherentinitiatives
byplayersfostering
collaborative
environment

Conservative
policy
environment
withfewer
enablers

Enablingpolicy
frameworkthrough
targetedreforms
onproduct,
distributionand
industryconduct

Scenario1: Statusquo:
Unfulfilledpotential
SOURCE:Stakeholderdiscussions

Scenario2:Gathering
momentum

Scenario3:Inclusive,Pro
gressive andHighPerforming

55

56

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

IV.Scenariosforthefuture

Inthisscenario,theGIindustrycangrowat1719%CAGRwithsignificantlybetter
economicperformance
Thegrowthwillrequireafreshcapitalcommitmentof
1015,000crore

Growth:GWPtrend
000crore

480
58

69

2012

2013E

CAGR
Percent

Capitalrequirement,000crore

200

Retainedearnings2
Freshcapital3

2020F
17

2025F
19

180190

Profitability:CoRtrend

140145

Percent

122

2012
RoE
Percent

Totalcapital

113

2013E

301

103104 99101
2020F

2013

2025F
2123

Value
creation4

1015
2025F
3540

1DoesnotincludeAICCandECGC
2 Assumingdividendpayoutof15%andtaxrateof25%
3.AvailableSolvencyMargincomparedto1.6timesRequiredSolvencyMargintodeterminecapitalrequired
4.Valuecreation=(Returnonequity Costofequity)*AverageNetWorth;assumingaBetaof1.1andequityriskpremiumof5%;()denotenegativevaluecreation
SOURCE:IRDA;annualreportsofGIcompanies; publicdisclosures;RBI;McKinseyanalysis

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

IV.Scenariosforthefuture

Comparisonofvolumesandprofitabilityacrossscenarios

Keymetrics

Current

Statusquo:
unfulfilledpotential

Gatheringmomentum

Inclusive,
progressive and
highperforming
480

GWP
000crore

390
300
200

180

160
69
2013

2020

2025

2020

2025

2020

2025

CoR
Percent

108110

102104

99101

RoE
Percent

68

1315

2123

SOURCE:McKinseyanalysis

57

58

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

IV.Scenariosforthefuture

Morebalancedindustrystructureinthethirdscenario
Number
ofplayers

GWP
` 000crores

20+

45

Large
full
service
insurers
Multispecialist
insurers with
dominanceinfew
LOBs/channels

410

Product
(e.g.,Health,
Commercial)

SOURCE:McKinseyanalysis

Channel
(e.g.,Direct)

Basisofcompetition

Inorganicgrowth
Technicalexcellencein34areas
Multichannelmanagement

Privilegedinsightandcapabilities
1520

intoselectregions/channels/
products
Technicalexcellence

Distinctivecapabilitiesacross

Specialists
14

2020VIEW

1015

businesssystemforchosen
model/segment

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

IV.Scenariosforthefuture

Keypenetrationlevelsacrossthethreescenarios
Possiblescenarios
Statusquo:
unfulfilledpotential

Current
Privatecars
insured
Percent
Livesinsured
(health)
Million
Corecommer
cial GWPto
industrialGDP1
Percent
Total
Penetration
(GWPtoGDP)
Percent

1AcrossSME,midandlargecorporates
SOURCE:McKinseyanalysis

69

350

0.49

75

550

0.55

0.75

0.90

2013

2025

Gathering
momentum
80

770

0.75

1.15

2025

Inclusive,progressive
andhighperforming
85

960

1.00

1.40

2025

59

60

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

IV.Scenariosforthefuture

Portfoliomixacrossthethreescenarios
000crore,per cent,FY25

Statusquo:unfulfilled
potential

Current

100%=

Motor

Commercialproperty

Health

Commercialliability

Gatheringmomentum

Inclusive,progressive
andhighperforming

69

300

390

480

43

40

39

38

22

28

30

31

18
3
14

16

16

16

13

12

12

SME1
Percent

22

23

24

25

Retail2
Percent

39

43

44

45

1IncludesCV,SMEgrouphealth,SMEassetprotectionandSMEexportcredit
2Includespersonalvehicles,health(retailandgovernment)andothers(home,accident,travel)
SOURCE:IRDA;annualreportsofGIcompanies; publicdisclosures;McKinseyanalysis

Others

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

IV.Scenariosforthefuture

Technicalmanpowerrequirementacrossthethreescenario

Underwriting

Employeesinthousands,FY25

Statusquo:unfulfilled
potential

Assessors/surveyors

Gatheringmomentum

Inclusive,progressive
andhighperforming
95115

7090
5575

2535

2030

1525
7080
4050

5060

Note:Estimatesonlyforunderwriting,assessorsandoperationsemployees.Doesnotestimatethetotalmanpowerrequiredforthe industry.Basedongrowthin
businessandclaimsvolumeineachlineofbusiness;further,1530%efficiencyimprovementisassumeddependingonpossibleadvancements(lean
processing,straightthroughclaimsprocessing,techenablement,etc.)ineachlineofbusiness
SOURCE:IRDA;annualreportsofGIcompanies; publicdisclosures;McKinseyanalysis

61

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

Chapter V

Agenda for action


The various industry stakeholders will need to take a set of coordinated actions to help the industry unlock its full potential and realise its
ambitious vision.
Individual insurers will need to build capabilities across three axes of innovation:
Build distinctive granular customer insights to capture high potential growth opportunities and enhance engagement across the customer lifecycle.
Upgrade to next generation technical capabilities (claims, underwriting, analytics, and actuarial capabilities).
Build world class operating models to achieve gains in efficiency while strengthening the human capital.
Industry-level initiatives that will be required to further performance:
Raise the profile of GI in the Indian ecosystem.
Contribute in defining industry standards and protocols.
Co-sponsor the building of common infrastructure (in concert with policy makers/regulators) for fraud detection, claims management, skill building, etc.
Policy and regulatory initiatives suggested to complement individual and industry-level actions:
Foster innovation and deepen penetration through product and distribution reform, and strengthen the industry structure through focused regulatory
intervention and supervision.
Enable and guide efforts towards a common industry infrastructure.
Continue to scale up initiatives to ensure consumer protection.
Create an environment to attract capital.

63

64

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

Insurerswillneedtobuildcapabilitiesacross3axesofinnovationtoensuresuperior
performance

Nextgenclaims
andfraud
Riskbased
pricingand
underwriting

Enhancedengagementacross
customerlifecycle
(CLM,renewalmanagement)
Nextgeneration
technical
capabilities
Individual
capabilities

Distinctivegranular
customerinsightsand
segmentedpropositions

Talent
development
(strengthand
skills)

Endtoendbusinessmodeltocapture
highpotentialgrowthopportunities
(Health,SME,specialtycommercial)
Efficienttech
enabledoperating
model
Multichannelretaildistribution;
Partnershipapproachtobrokers

SOURCE:McKinseyanalysis

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

CompanylevelinitiativestoaddressprioritiesoftheIndianGeneralInsurance
industry(1/2)
Distinctive,granular
customerinsights

Nextgenerationtechnical
capabilities

A.

Capturehighpotentialgrowthopportunities
1. Health: Buildaholistichealthinsurancepropositioncomprisingnewproduct
propositions(e.g.,outpatient,preventivecare),worldclassproviderandclaims
managementandenhancecustomerengagement(e.g.,medicalhelplines)
2. SME: Developsegmentspecificpropositionsenabledbybroadbaseddistribution
throughpartnershipsandeffectiveindustrialisedunderwritingcapabilities
3. Adoptagranularapproachtotargetpotentialgrowthhotspotsthrough
differentiatedbusinessmodelforselectedriskexposures(e.g.,greenrisksin
commerciallines;commercialvehiclesegment)

B.

Boostgrowthopportunitythroughenhancedengagementacrosscustomerlifecycle
1. Buildaneffectiveendtoendrenewalmanagementmechanism
2. Focusonholisticcustomerlifecyclemanagementtosignificantlyboostcrosssell
andupsellopportunities

C.

Maximisevaluecapturebyupgradingtonextgentechnicalcapabilities
1. Investinbuildingbestinclassnextgenerationmotorclaimsmanagement
incorporatingmultidimensionalcapabilities(e.g.,rulesbased,segmented
workflowsandstraightthroughprocessing,leanoperationsandTPclaims)
2. Supplementclaimsmanagementwithrobustfraudfightingmechanism
3. Buildadvancedtechnicalpricingmodelforpersonallines
4. Strengthencapabilityforefficientunderwritingandclaimsmanagementfor
commerciallines

SOURCE:Stakeholderdiscussion;McKinseyanalysis

65

66

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

CompanylevelinitiativestoaddressprioritiesoftheIndianGeneralInsurance
industry(2/2)
Customercentriclowcost
operations

D.

Buildworldclassoperatingmodeltocapturevaluethroughgaininefficiency
1. Adoptanendtoendtechenabledoperatingmodeltostreamlinebackend
processingandimproveefficiency
2. Improveexpensemanagementcapabilitybystreamliningorganisation,
prioritisinglocations,optimisingprocurementandoutsourcing

E.

Strengthendistributiontomaximisereach
1. Buildacomprehensivemultichanneldistributionforretailandpersonallines
acrossagency,bancassurance,digitalandPOS(e.g.,dealer)
2. Maximisepotentialthroughdifferentiatedpartnershipapproachforthebroker
channel incommerciallines
3. Developsuitablemodelstoeffectivelytapintoexistinginfrastructuretoenhance
reachinunderpenetratedruralareas(e.g.,CSCsandBCsinruralIndia)

F.

Strengthenhumancapitaltobridgeskillgaps
1. Undertakeacomprehensiveleadershipdevelopmentandcapabilitybuilding
approachcustomisedforvariouslevelsandfunctionalareas

SOURCE:Stakeholderdiscussion;McKinseyanalysis

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

A2 BestinclassexampleofendtoendSME focusedbusinessmodel
InitiativestakentoestablishitsSMEbusiness
Establish
ment ofa
dedicated
unit...
gradual
improvement
mode

continuous
innovation
andupward
transfer

SMEpremiums doubledigitgrowthrates

SeparationofSMEsandindependent

analysis(profitability,growth,etc.)forSMEs
EstablishmentofadedicatedSMEfield
salesteamandunderwritingstaff

Establishmentofservicecentres,toallow

agentstotransferSMEpolicyrenewaland
routineservices(suchasendorsement)to
insurerforafee
Concentrationofunderwriterstosales
centres
Formationofprofessionalfieldsales
representatives(withlimitedpricing
authority)
Formationofprofessionalpricingmodelfor
SMEbusiness

Policyadjustmentrelyingonitsscale(more

than1millioninsurancepolicies)and
implementationofdifferentialprices
ContinuousproductinnovationforBOPde
commodificationaccordingtotheemerging
needsofendcustomers

SOURCE:Insurerannualreports;McKinseyanalysis

+11%

1.2 1.4
1.0
0.8

1.7 1.9

2.7 2.8 2.7 2.6


2.5
2.3
x3.2

98 99 00 01 02 03 04 05 06 07 08 09
SMECoR(excludingcatastrophes)
PercentofNPE
CoR <100for
2%
consecutive
20years
100
100 99 97 96 95 94 90
84 81 77 84

98 99 00 01 02 03 04 05 06 07 08 09

67

68

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

C1 Nextgenerationclaimscapabilities:Techandanalyticsdrivenclaims
processing(1/2)
Predictiveanalytics
Usestatisticaltechniquestoanalyselargevolumesofdata(internalandexternal)and
identify thesmallsubsetofclaimslikelytoexperiencesignificantandunexpectedadverse
development,duetofactorssuchaslitigationandmedicalcomplications.Then,proactivelydeploy
resources,suchasexpertcounselandnurses,tomanagetheserisksandprovide bettercustomer
service
Decisionsupporttools
Achievehigherlevelsofconsistencyandaccuracyinclaimsoutcomesbyequippingadjusterswith
moresophisticated,factbased,realtimedecisionsupporttools thatharnessadvancedanalytical
horsepowertoprovidenewinsights.Reviewofliabilitydetermination,medicalpaymentsandauto
repairdamageareexamplesofclaimadjudicationtaskswheresophisticateddecisionsupporttools
haverapidlygainedtraction
Automation
Automatethecompletionofstraightforward,highvolumeandlowcomplexity
tasks (e.g.,policyinforceverification,payments,regulatoryletters).Thefullpowerof
automationisunleashedinstringingtogethermultipletaskstoautoadjudicateorhandleentire
classesofhighvolume,lowcomplexityclaimswithoutinvolvinganadjuster.Incomplexclaims,
automatingspecifictasks canfreeadjusterstofocusonthosecriticaldecisionsinthelifeofaclaim
thatdrivetheoveralloutcomeandimpactcustomersatisfaction
SOURCE:McKinseyanalysis

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

C1 Nextgenerationclaimscapabilities:Techandanalyticsdrivenclaims
processing(2/2)

Rulesaretechniques
topredictoutcomes,
supportdecisions
andautomate
processesby
codifyingand
embeddingbusiness
intelligenceandlogic
intodaytoday
claimsworkflows

SOURCE:McKinseyanalysis

Deliversignificantfinancialimpact identifyand
capture34pointsofcombinedratioimprovement
withbenefitsaccruingrapidly

Differentiatethroughdistinctivecustomerservice
provideongoingcompetitiveedgeanddifferentiation
topersonalandcommerciallinescustomers

Enhanceclaimsoperatingmodel improveaccuracy
andproductivityofclaimshandlingprocesses(e.g.,
segmentation/assignmentrecognisingcapabilityand
capacity)

Use bestpracticesconsistently systematically


leverageinstitutionalexpertiseandinternaland
externaldatasourcesfordecisionmaking,transparency
andinternal/regulatorycompliance

Energisetheclaimsorganisation enhancequalityof
workforadjustersandmaximiseimpactoftalentinthe
organisation

69

70

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

C2 Endtoendfraudmanagementcapabilities
Coreprocesses
Detection

Investigation

Prevention

Fraudindicators
Triageofsuspiciousclaims

Interactionwithotherunits
Incorporatefraudalertsin

tobeinvestigated
Proactiveanalysis
Engage3rd parties

Casesegmentation
Desktopinvestigation
Cognitiveinterview
Crossinsurerinvestigation

Fraudfunnel

Automated

Awareness

granularKPIs
Fraudscorecard
Keyanalyses

detectionsystem
Fraudworkflow
Investigationtools

programme
Trainingprogramme
(e.g.,detectionskills)
forclaimshandlers
Internalbestpractice
sharing

Enablingfactors
SOURCE:McKinseyanalysis

subscription
Internalandexternal
communicationprogramme

Dedicatedtriageunit

withdedicatedfraud
coordinatorsand
desktopinvestigators
Coordination
mechanismswithother
functions/units

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

Toachievefullpotential,individualactionswillneedtobesupplementedbyindustry
conductandenabledbypolicyandregulation
Fosterinnovationand
deepenpenetrationthrough
productanddistribution
reform
Strengthenindustry
structurethroughfocused
regulatoryinterventionand
supervision(e.g.,riskbased
capital)
Enableandguideeffortsto
strengthencommonindustry
infrastructure(e.g.,enabling
informationsharing)
Launchtargetedinitiatives
toensureconsumer
protection
Createenabling
environmenttoattract
capital(projectingIndiaas
anattractivedestinationfor
FDIandreinsurance)
SOURCE:Stakeholderdiscussion;McKinseyanalysis

Individual
capabilities
RaiseprofileofGIinthe
Indianecosystem
(consumerawareness,
communicationplan)

Consumer
Policyand
regulatory
framework

Industry
conduct

Contributeindefining
industrystandardsand
protocols (fraud
definition,medical
standards)
Cosponsorbuildingof
commoninfrastructure
(inconcertwithpolicy
makers/regulators)(e.g.,
claimsbureau)

71

72

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

InitiativesforindustrylevelcollaborationtoaddressprioritiesoftheIndianGeneral
Insuranceindustry
Industryconduct

A.

RaiseprofileofGIintheIndianecosystem
1. Launchanationwideconsumerawarenessdriveincludinginsuranceweek,
awarenessads,associatewithdrivesforhealthcareandroadsafety
2. Initiateasystematiccommunicationplanforphasewisedisseminationof
informationaboutindustryinitiativesandpoliciestostakeholders
3. Driveawarenessofimportanceofinsurancetootherstakeholders, e.g.,banksrisk
losingcustomersiftheyinsistoncoverageonlyuptothevalueofloansandnottotal
assets

B.

Contributeindefiningindustrystandardsandprotocols
1. Collaboratetodevelopastandardiseddefinitionofclaimsfraudacrosslinesof
business
2. Collaboratewithhealthcareindustrytodevelopstandardprotocolsformedical
treatment (onlinesofDRGsseeninmarketslikeUS,Germany,Australia)

C.

Cosponsorbuildingofcommoninfrastructure(inconcertwithpolicy
makers/regulators)
1. CreatecentralisedclaimsinformationcentreundertheaegisofInsurance
InformationBureauwithappropriategovernanceandprivatefunding
2. Cosponsorafraudinvestigationunittoundertakeongroundinvestigation,legal
actionanddevelopanalyticsmodelforearlydetection
3. Institutionaliseskillbuildingbypromotinganindustryaccredited insurance
academy cateringtodevelopmentoftechnicalskillsatscaleandincorporating
certificationstandards

SOURCE:Stakeholderdiscussion;McKinseyanalysis

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

A Caseexample:GDV coordinatesindustryefforttowardscustomer
educationandrepresentsaconcertedpositionoftheindustry
AboutGDV

TheBerlinbasedGesamtverbandderDeutschenVersicherungswirtschaft(German
InsuranceAssociation)istheumbrellaorganisationforprivateinsurersinGermany, with
470membercompanies

Keyroles

IllustrativelistofactivitiesperformedbyGDV

GDVarticulatesandrepresentsthe

Pressarticles:GDVpublishespressreleasestargetedat

positionsoftheGermaninsuranceindustry
beforesociety,politicians,businesses,the
mediaandacademia.Itworkstoachieve
regulatoryconditionswhichwillallow
insurerstoperformtheirresponsibilitiesin
theoptimalfashion

Itisalsoasourceofexpertinformation

aboutallmattersrelatingtotheinsurance
industry,makingavailableitswealthof
experienceandinformationtothepublic

GDVinformsandsupportsitsmember

companiesasaserviceprovider,identifies
politicalandsocialdevelopmentsof
relevanceforthesectorandproposes
solutions

SOURCE:GDV website

insurancecustomersalmosteveryweek.Recentlistoftopics
published:

Floodinglosses:Howtoprotectyourself
ClimatechangechallengesforGermany
Goingonvacation:Gettherightinsurance
Howtoavoiddamagetosolarcellunits
Besafeinthegarden
Securechildreninthecar

RadioandTVcampaigns:GDValsorunsradioandTV

campaigns.TVcampaigns,whichwouldnormallycosta
player200perspot,isfullysponsoredbyGDV

73

74

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

C Globally,insurershaverespondedtofraudwithawiderangeofindustrylevel
initiatives

Information
sharing

Description

Examples

Inseveralcountries,insurersshare relevant information


toidentifypotentialfrauds
Themosteffectivewaytoexchangeinformationisthe
settingupofindustrywidedatabases thatcanbe
accessedbyinsurers
Insurancecompanieshaveestablishedformalisedunitsto
analysedatatoidentifymulticarrier/multiclaimsfraud:
Disseminate bestpracticesamongmembers
Educate legislatorsaboutthecostsofinsurancefraud
totheconsumersandtheindustry
Lobby toincreaseresourcestofightfraud
Investigatefraudcases
Increasedcooperation withpolice,judiciaryandother
agencies

IntheUK,theinsuranceindustryfunds the
InsuranceFraudEnforcementDepartment,
whichispartoftheLondonPoliceandisin
chargeofinvestigating potentialfrauds

Formaltraining ofinsurancestaffandpolicetoraise
awarenessandincreaseprobabilityofdetection

InDenmark,thelocalagencyorganisesseminars
foritsmembers
InFinland,theinsurancefederationhas
organisedspecifictrainingforthepolice
InSpain, awardsaregiventoemployeesof
insurersthatarebestindetectingfrauds

Dedicated
units

Cooperation
withlaw
enforcement
agencies

Training

Cheatlines
SOURCE:Presssearch

Inseveralcountries,helplinestoreport suspectedor
knowninsurancefrauds havebeensetup
Often,thesecheatlinesarerunbyindustrywide
organisations

IntheUK,theInsuranceFraudRegisterisa
databasethatstoresdetails ofindividuals who
madefraudulent claims
InsurescansearchtheDBandmayrestrict
access toinsurancetothoseindividuals
IntheUS,NICBanalysesdatatoidentifyfraud
cases
InFrance,in1989insurerssetupasectorial
agencytopromotecounterfraudactivitiessuch
astrainingandcertification offraudinvestigators
andadvice onhowtohandlefraudulentcases

Ireland,Sweden,UKandUS

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

C Insuranceindustryresponsetofrauds UKexample
Claimsfraudisaserious
issuein theUK

thatgeneratedstrongindustrywideresponses,withabout200
millioninvestmentperyear

Over139,000

bogusor
exaggerated
insuranceclaims
detectedin2011,
up5%vs 2010

Everyhour,

Setupin2006,theIFBcurrentlyfocuseson

Insurancefraudadds,

Currently,ithas33insurermembersthat

Valuesavingof

Itusesadvanceddatamatchinganalytical

TheIFBhas

personallines:motor,home,personalinjury
claims.Itactsassinglepointofcontactfor
lawenforcementagencies

15 fraudulent
insuranceclaimsare
reportedinthe UK

manageinexcessof95%ofUKpersonal
linesclaims.Ithasaccesstoanindustry
wideDB(theInsuranceFraudRegister)with
morethan130millioninsurancerecords

onaverage,anextra
50ayeartothe
annualbillforevery
policyholder

In2012,thecostof

techniquestoidentifypotential frauds

cashforcrash1

TheIFBmanages acallcentrethatallows

fraudswasworth
392million

individualstoreportinsurancefrauds

Itisestimatedthat

thereisafurther2
billionofundetected
fraud

InsuranceFraud
Enforcement
Department

Directlyfundedbytheinsuranceindustry,

theIFEDisaspecialistpoliceunit of34
detectivesdedicatedtotacklinginsurance
frauds

1Todeliberatelycausearoadtrafficcollisionforthepurposeoffinancialgain
SOURCE:InsuranceFraudBureau;AssociationofBritishInsurers

thesefraudswas
983million (a
7%increasevs
2010)
overseenmore
than 700arrests
since2006

Overthepast3

years,9,000
reportsof
insurancefraud
havebeenmade
viacheatline

75

76

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

C Skillbuildinginitiativeatindustrylevel InsuranceInstituteofCanada
Structureand
governance

Keyactivities

Notforprofit organisation established in 1899 through collaboration of GI players to help set


professional standards and training courses for insurance practitioners
Serves more than 39,000 members across Canada through 19 volunteerdriven provincial
institutes and chapters
Closelyworkswithfederalandprovincialregulatorsto:
Designcourses
Developtrainingmaterial
Conductcertificationexaminationswhicharerecognisedbyregulators(additionalexams
mayberequiredforspecificproductordistributioncategories)
3primarycoursesareoffered:
GeneralInsuranceEssentials(GIE):Entrylevel2courseprogrammefocusingonbasic
practicesandprinciples
CharteredInsuranceProfessional(CIP):10courseprogrammefocusingontechnicaland
appliedinsuranceknowledge.HighlyrecognisedthroughoutCanadaandinternationally.
Applicableforagent/broker,marineinsurancespecialist,claimsinvestigator,and
underwriter.
FellowCharteredInsuranceProfessional(FCIP): 6coursePremierdesignationforinsurance
professionalsfocusingonstrategyandinsuranceessentials

Industrylevel
activities
SOURCE:Presssearch

Platinum sponsor of the National Insurance Conference of Canada


Sponsor of Annual Conference and Trade Show hosted by the Insurance Brokers Association of
British Columbia
It is also actively involved in various womencentric insurance associations

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

PolicylevelinitiativestoaddressprioritiesoftheIndianGIindustry(1/3)
Policyandregulatory
framework

A.

Fosterinnovationanddeepenpenetrationthroughproductanddistribution
reform
1. Providescopetodeepenproductwisepenetrationandenabledifferentiation
by(a)designatingcertainproductsasmandatoryand/orprovidingtax
incentive (e.g.,homeinsuranceincatastropheproneareas);(b)streamlining
productapproval(e.g.,useandfileapproachforsimplestandardproducts(c)
liberalisingpolicywordingsandpricingacrossallcategories(d)expandingthe
frameworktoallownewproductstructurese.g.,savingslinkedcomponentwith
health;multiyearpoliciesforcategoriessuchastwowheelerstoreducechurn
2. Acceleratedistributionreforms: (a)Frameworkforclearlyclassifyingchannels
aseithertiedagentorIFA;(b)Cleararticulationofbasisofremuneration
(serviceproviderremuneratedbyservicereceiver insurerorcustomer);(c)
Ownershipoftrainingandcertificationbasedonproductcomplexityand
channel;(d)Uniformityinregulationsforsimilarlinesofbusinessacross
categoriesofplayers

B.

Strengthenindustrystructurethroughfocusedregulatoryinterventionand
supervision
1. Provideadifferentiatedregulatoryoversightandencourageplayerstoearn
therighttogrowthroughholisticperformancemeasurement(e.g.,RoE,
channel,productmix)anddifferentiatedsupportintermsofproductapproval,
investmentflexibility,solvencyrequirementsandlicensingprocess
2. Increasethelevelandrigouroffinancialdisclosures andensure
standardisationandtransparencyinreservingnorms
3. GraduallyadoptashifttowardshigherselfregulationwithIRDAplayingthe
roleofaprinciplebasedregulator(e.g.,allocationofriskbasedcapital)

SOURCE:Stakeholderdiscussion;McKinseyanalysis

77

78

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

PolicylevelinitiativestoaddressprioritiesoftheIndianGIindustry(2/3)
Policyandregulatory
framework

C.

Structuralinterventionstoincreasepenetrationinuncovered/undercovered
segments,e.g.,disaster,rural,home,health
1. LeveragetheexperiencesandtechnologyplatformdevelopedthroughRSBYand
otherstatesponsoredhealthinsuranceschemestoextendscopeofmass
healthinsurancecoveragetoincludea)othervulnerablesegments,e.g.,APL,
b)outpatientanddiagnostics,c)preventivecare,e.g.,vaccinations
2. Enabledevelopmentof"benefit"basedhomeinsuranceproductstodrive
penetrationinlowcost/masshousingandruralhousingsegments
3. Catalysebuildingofnationaldisasterrecoveryfund tohelpinsurersincaseof
naturalcalamities,onlinesofsimilarsetupsabroad;takepolicyactionto
ensurenaturalcatastropherisktransfer(individuals,corporatesand
governments)1
4. Structuralreformstoincreasetakeupandefficiencyofagriculturecrop
coverage throughacombinationofremotesatelliteimagingbasedsurveys,
promotingweatherindexbasedproductofferingsandgovernmentsubsidy
onpremiumsinsteadofonclaims

D.

Enableandguideeffortstostrengthencommonindustryinfrastructure
1. Facilitateinformationgatheringandsharingacrossplayersbyoverseeing
infrastructuredevelopment,institutingprocessesandparticipatinginregular
governance(e.g.,acommonclaimsdatabasewithfeebasedaccesstoallGI
players)
2. Formulateguidelinesandfacilitatecoordinationwithassociatedindustry
bodiesforusageofruraldistributionnetworkbyallGIplayerstoenablecost
efficientaccessinremotegeographies

1DiscussionpaperbyIRDA NDMA,titled'DisasterReliefandRiskTransferThroughInsurance'providesdetailedstudyandactionsonthistopic
SOURCE:Stakeholderdiscussion;McKinseyanalysis

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

PolicylevelinitiativestoaddressprioritiesoftheIndianGIindustry(3/3)
Policyandregulatory
framework

E.

Strengthentargetedinitiativestoensureconsumerprotection
1. Bringhigherlevelofcustomercentricityindisclosures (e.g.,clearlydefine
customercomplaint;no.ofcomplaints,claimssettledin<1monthtobepart
ofdisclosuresandIRDAreports);thiswillenablehealthycompetitionon
servicelevelsandlesscommoditisationofindustry
2. Designandlaunchaportfolioofinitiativesaimedatprotectingconsumer
interest(e.g.,enforcinggreatertransparencyinpolicyinformation,arbitration
committees,etc.);allocateresponsibilitiestorelevantindustrystakeholders
andoverseeexecution

F.

Createenablingenvironmenttoattractcapital
1. TakeproactiveinitiativestoprojectIndiaasanattractiveinvestment
destinationandhencepavethewayforFDIinflowsintotheIndianGIindustry
(e.g.,sponsorroadshowsinforeignmarketsforpotentialinvestors)
2. FacilitatedevelopmentofIndiaintoareinsurancehubtohelpunderwriteand
retainmorewithinIndiaandenableaccesstomoretalentandexpertiseto
supportmarketdevelopment(inparticularreviewcapital,legalstructureand
taxationnorms)

SOURCE:Stakeholderdiscussion;McKinseyanalysis

79

80

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

A1 Globally,significantproductreformshavebeeninitiated;MultipleProduct
ApprovalSystemisprominentamongthose
MultipleProductApprovalSystemincludes4keyproduct
approvalcategories

FileandUse:Insurerfirstfilestheproduct/ratesandcan
startsellingtheproductimmediatelyorwithinastipulated
periodoftime.Theregulatormightdisapproveoftherates
laterbasedonwhichtheinsurerisexpectedtotake
correctiveaction
UseandFile:Insurerdirectlyintroducesnewproducts/rate
inthemarketand,withinastipulatedtimeframefilesthe
detailswiththeregulator.Onsubsequentdisapproval,
correctiveactionsneedtobetakenbytheinsurer
Flexible:Newproducts/ratesareintroducedbytheinsurer
withoutpriorpermissionprovidedtheyarewithina
stipulatedrange.Theregulatorstepsinonlywhenthereisa
caseofnoncomplianceorcustomergrievance
Competitive:Insurersaregiventhefreedomtointroduce
newratesorproductsinthemarketwithoutregulatory
approval.Itisapurelymarketdrivensystemwithno
interventionfromtheregulatorunlesstherearecasesof
noncomplianceorcustomercomplaints
SOURCE:Presssearch

Countrieswherecorrespondingapproval
categoriesareallowed

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

A1 PotentialMultipleProductApprovalSystemforIndianGIindustry
Contoursof4typesofproductapprovalsystems
Prior
Approvals File&Use

Massmarketed
Custombuild

Typeofmarketing

FrameworkforpotentialMultipleProduct
ApprovalSystem
Fileanduse
(Forsomestandard
productsUseand
Filecanbe
considered)

Priorapproval
system

UseandFile

UseandFile
Systemwith
Regulatory
Safeguards

Simple/standard

Complex

Levelofproductcomplexity

Use&File
(Reg Std)

Product
Design

ByInsurer Standard
Products
GICouncil
Simple
Products
ByInsurer

Customer/
Insurer

Customer/
Insurer/
Reinsurer

Product
training

ByInsurer ByInsurer

ByInsurer

ByInsurer

ByCUO/AA

ByCUO/AA

ByCUO/AA

Yes

NoforStd
Products
Yesfor
others

NoforStd
Products
Yesfor
others

ByIRDA
ByCEO
within90
daysof
filing

ByCEO

ByCEO

ByIRDA

ByCEO

ByCEO

ByCUO/
Product
AA/
Viability
Certification
Product
Filing

Product
Approval
Pricing
Approval

SOURCE:McKinseyanalysis

Use&File

Yes

ByCEO

81

82

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

A2 SeveralEuropeancountriesmakecleardistinctionbetweendistributionchannels
representinginsurersandchannelsrepresentingcustomers
Country

Policyregardingdistributionchannels

Distinctionmadebetweenadvisorsandsellers

Advisorsofferproductsfrommultipleinsurers
Sellerssellproductsofasingleprovider

DistinctionmadebetweenIndependentFinancialAdvisorsandtiedagents

IFAs havethelibertytoadvisecustomersonproductsofvariousinsurers
basedonwhichproductwouldsuitthembetter

Tiedagentsrepresentthecompanyandcansellproductsofonlyasingle
insurer

Distinctionmadebetweentiedagentsandnontiedagents

Tiedagentsofferproductsofonlyasingleinsurer
Nontiedagentsarepermittedtocoverproductsofmultipleproduct
providers

SOURCE:McKinseyanalysis

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

C2 Homeinsurancepenetrationdriventhroughgovernmentandindustryaction,
productinnovationandmandate
Country
US

Homeinsurance
penetration
96%

Keycharacteristics/enablersofhomeinsurancemarket

UK

97%

Germany

>80%

France

99%2

1GesamtverbandderDeutschenVersicherungswirtschaft
2OnlycontinentalFrance
SOURCE:Presssearch;expertinterviews;McKinseyanalysis

Mandatorycover:Banksrequirehomeinsuranceformortgages
Liabilityprotection:3rd partyliabilityisacriticalriskintheUS,leadingto
demandforcomprehensivehomeinsurance(covering3rd partyliability)
Crosssell:Insurersprovidecrossselldiscounts(e.g.,1015%discountonhome
insuranceifcustomeralreadyownsinsurersmotorpolicy)
Governmentactionsandsupport:Norefusaltofloodcoverageenforcedby
government;potentialoverflowingindustrylossestobeabsorbedby
government
Mandatorycover: Banksinsist(thoughdonotmandate)riskcoverageof
mortgagedproperties
Productinnovation: Playersdevelopinnovativeandrelevanthomecontent
covers,e.g.,petinsuranceforrisingvetcost
Industryaction:Coordinatedawarenessandproductknowledgecampaignsby
theindustryassociation,GDV1 (throughprintads,TV,articles,etc.;theyalso
publicisetherangeofproductofferings)
Mandatorycover:Firecoverismandatoryformortgagesbybanks
Liberalisedpricingandproductdesign: Enablesproductbundling(e.g.,fire,
home,hail,etc.,allcoveredunderonepolicy)
Mandatorycover: Mortgagelendersrequirehomeinsurance,evenfrom
lessees
Productinnovation: GarantiedesAccidentsdelaVie(GAV)introducedfor
coverageofaccidentsathome/leisure;promotedasfamilyprotectioncover

83

84

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

C3 Severalcountrieshaverealisedthesebenefitsbysettingupspecialinsurance
systemstodealwithnaturaldisasters

US:
Nationalflood
insurance
program

California:
Earthquake
Optional
protection
providedtoall
byprivate
playersorstate

SOURCE:McKinseyanalysis

Florida:
Hurricane

Japan:
Earthquakes
Optional
protectionwith
publicre
insuranceby
privateplayers

Turkey:
Turkish
catastrophic
insurancepool
Caribbean:
Climatechange
related
disasters

France:Natural
catastrophes
Mandatorycoveragefor
allbyprivateplayers

Australia:
Flooding
Moveto
provide
coveragefor
allinprogress

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

C3 Thereareavarietyofdesignchoicesinsettingupanationalcatastrophe
insuranceprogrammeforIndia(1/2)
Area

Exposure
and
premiums

Private
sectorin
volvement

SOURCE:McKinseyanalysis

Designchoices
Isthereadifferentiation
betweenrisks?
Riskadjusted
premiums

Examples

Japan:sixpremiumrates(fourzonesbasedon
earthquakerisk,twoclassificationsbasedon
buildingstructure)
NFIP:premiumsdifferbyamountofcoverage,
locationandpropertycharacteristics
France/UK:fixedrate

Legacyvs newrisks

NFIP:subsidisedratesonexistinghomes,risk
adj.ratesonnewones

Whatistheroleof
privateinsurers?

US:sellingandservicingofpolicies

Whatistheroleof
thegovernment?

Japan/France:setupofaspecialisedreinsurer
bythegovernment
France:reinsurancewiththegovernment
isnotcompulsory
Japan:allearthquakeinsurancepolicies
cededtothegovernment

85

86

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

C3 Thereareavarietyofdesignchoicesinsettingupanationalcatastrophe
insuranceprogrammeforIndia(2/2)
Area

Designchoices

Examples

Coverage

Istheparticipationin
theschemevoluntary
ormandatory?

Loss
event

Adapta
tionand
mitigation

SOURCE:McKinseyanalysis

Whatisthe
"refinancing
mechanism"incase
ofloss?

Aremitigationand
adaptationmeasures
included?

Japan:earthquakeinsuranceisanoptional
rider
France:coverforwinddamagecompulsoryin
anyfirepolicy
England:compulsoryfloodinsurance
Japan:buildupofreserves,lossesarecapped
USNFIP:buildupofreserves,federal
governmentas"backstop"
Florida:bondissuance

NFIPintheUSsupportsfloodplain
managementordinancestoreducefuture
flooddamage

India General Insurance Vision 2025: Towards an inclusive, progressive and high performing sector

V.Agendaforaction

Initiativesneedtobesequencedinordertomaximiseimpact
Mediumlongterm
(37years)

Nearterm
(03years)
A
Individual
player
level
initiatives

Longterm
(Beyond7years)

CaptureopportunitiesinSME,healthandadoptdifferentiated
businessmodeltotargetgreenrisksincommerciallines
B Strengthencustomerlifecycleandrenewalmanagement

C Upgradetonextgenerationtechnicalcapabilities(e.g.,U/W&claims,fraudmanagement)
D Buildworldclassoperatingmodelthroughtechenablement
E Strengthendistributiontoexpandreach
F Strengthenhumancapitaltobridgeskillgapthroughtargetedcapabilitybuildingprogrammes
A Initiatesystematicinitiativestoraiseconsumerawarenessbackedbytargeteddrivesandcommunicationplan

Industry
level
initiatives

Standardisedefinitionofindustry
B standardsandprotocols(e.g.,fraud
definition,healthtreatmentprotocols)
C Cosponsorbuildingofcommoninfrastructure(e.g.,fraudinvestigationunit)
A,B

Policy
level
initiatives

Focusonreformsrelatedtoproduct,
distributionandregulatorysupervision
D

Initiateinterventionstoincrease
penetrationindisaster,home,etc.

Enablebuildingofcommonindustryinfrastructure
(e.g.,informationsharingplatforms,etc.)

E Conducttargeteddrivesaimedatconsumerprotection
F

Pavethewaytoattractcapitalby
enablingFDI relatedinvestments

SOURCE:Stakeholderdiscussions;McKinseyanalysis

Initiateinterventionstoattract
reinsurerstosetuplocalpresence

87