Life Insurance- Industry Insights

Gopalakrishnan.C

Contents
Key Points Major IT players SWOT Mobility in Insurance Key player profiles

Key Industry facts

Fifth largest life insurance industry in the world
Total industry value quadrupled, from INR254 billion in 2000 to 1 trillion in 2010 Lowest Per-capita spending on life insurance services in India

Over two-thirds of total revenue is collected from industrial buyers significantly higher than the average in most developed economies.
The industry is highly concentrated & is still heavily dominated by the state-owned Life Insurance Corporation of India (LIC)

Life Insurance & Pension Funding are the key products offered in this sector

Opportunities & Threats

Opportunities
Huge Untapped Market Potential growth in foreign direct investment in India Opex Reduction Measures by major players Newer & innovative Products tax benefits for policyholders low in-force policies per capita

Threats
inefficient underwriting practices Price competition Redefined regulatory changes in F2011 Distributors Leaving business due to sharp fall in ULIP Adverse Macro Environment Volatile Market, Inflation

Emerging Trends
Emergence of new Channels Private Players Innovative Products
BAncassurance NBFCs NGOs

Increasing Market share of Private Market awareness Rising Mergers & JVs Affluent middle class

Cross selling of products Bundled Products

Competitive Landscape
Buyer PowerModerate

Supplier Power- High

Theat of new entrants- Low

Substitutes

Lack of Close Substitutes Higher no. of industrial customers High Switching cost for Individual Consumers

Complex Processing systems High Switching Costs Forward Integration is difficult Supplier Training Cost

Capital Intensive Highly monopolized business Strength of Channel High Exit costs by regulator

Lack of close Substitutes Protection offered by Life insurance is high Reliability of the alternates

Regulatory Landscape
Proposal to maintain minimum premium payment term at 5 years Cap for maximum commission IRDA -new product phasing out products guaranteeing highest NAV. designing minimum sum assured for traditional products guidelines

Impact

Negative Impact on Insurers with less products Positive impact on Insurers with more products Change of the product portfolio

Across the globe, Mobility Solutions have been predominantly adopted across the following stakeholders Customer Claims submission, photos upload Quote Generation and locating agents Status Updates-claims, policies Premium Billing and Payments Sales promotions E-mail, Alerts, SMS etc Agent Quote Generation, retrieving real time policy data Policy, Commission status updates Real-time access to email, calendar Alerts, Broadcast, Messages about new
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Mobility in Insurance current global trends

Claims Adjuster
end applications

Notification - data import from back

Integration for uploading photos from

the accident site

Report & Proof of loss submission Online repair and repair cost database Data Entry for real time back-end updating Reports Generation such as Summary report, Loss estimate

launches, performance tables

Mobility in Insurance current global trends

Insurers were one of the early adopters of mobile technology The rapidly evolving telecommunications technology landscape has been both a boon and a bane for advancements in mobile technology since carriers could not decide on budget allocation fearing redundancy Recent years have seen a rise in the number of large insurance companies that introduced mobile applications to enable real-time connect with their customers During 2001-06, spending on mobile technology in the advanced markets accounted for a substantial portion of insurers total IT spending Some insurers have seen a rise in productivity of nearly 30% as a result of adoption of mobility in the sales function The recent economic crisis was an eye-opener to the significance of online connect as an important client retention strategy Though insurance business registered a remarkable drop in advanced economies during the crisis, online insurance sales volumes remained encouraging signaling the need for shift in carrier strategies towards mobile technologies
9

25.0 20.0 15.0 10.0 5.0 0.0

Need for Mobility in Indian Insurance market

14.0 10.0 Life Non-Life 8.0 6.0 4.0 2.0 US Australia China India 0.0 US UK China India
Insurance Penetration (ratio of premium to GDP) 08-09

12.0

Life Non-Life

Insurance Penetration (ratio of premium to population) 08-09

The Indian Insurance Industry needs to embrace Mobility Solutions because There is a large market to be tapped out there both in Life and Non-life Insurance has to keep pace with the giant strides made by other industries vis--vis enhancing customer experience Insurance can not be oblivious to the rapid developments in telecommunication technology that India has been witnessing in recent years Personal insurance space life, motor, accident, health, etc. is likely to witness record growth numbers. It is virtually impossible to capitalise on it unless insurers employ technology in reaching out to millions of individuals
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Insurance Mobility Solutions in India neither justifies the market potential nor the technology at its disposal However, there have been some prime movers when it comes to adoption of mobility solutions Insurer Field Force Access to front-end application system in the offline mode offered by IFFCO Tokio General Insurance Company Ltd to its field force Customer Bill payments over telephone using a credit card introduced by ICICI Lombard in 2008

Mobility in Indian Insurance market how have we fared so far?

Agent Access to front-end application system in the offline mode offered by IFFCO Tokio General Insurance Company Ltd to its field force
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PayMate - Bill payments via SMS introduced by ING Vysya

Instant Insurance Policy via mobile

commerce offered by ICICI Lombard

WHY Mobility?
Operational challenges for Insurers Opportunities for leveraging Mobility Solutions
Cost of Service Customer acquisition and service costs

Dynamic Customer Environment

Need for increased focus on rural markets distribution Challenge of Low premiums & large volumes customers need for cost-effective distribution channel Fierce competition for urban pie challenge of business growth & retention Large manual processes with multiple handoffs- Lack of straight through processing & paper based leading to higher overheads

Extensive Manual Handling Low usage of Web SelfService Limited Access to Information

Need for customer awareness will help lower transaction cost Mobile access to operational information is limited Web-to-Mobile conversion is not in place

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Mobility goes hand-in-hand with Insurers business strategies

Increase efficiencies & Drive Revenues
Faster time to quote, market focus Tap Currently inaccessible customers for e.g. rural
Growth of Existing Mkt Expansion Into new Mkts

Reduce Costs Insurers Mobile Strategy

Lower cost-of-service Lower handoffs Easier up-to-date client information
Internal Efficiencies Customer-Facing Efficiencies

Enhance Customer Experience

Multi-channel strategy Convenience

Paper Phone Web Mobile

Branding

Branding opportunity

Immediate opportunity : Cost Reduction and Customer Experience hold the most near-term promise Medium terms : Revenue Growth contributes as stakeholders & consumers change their habits to favor mobile transactions
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Mobility works across the insurance value chain

Sales & Distribution Prospect case assignment Sales Reporting Activity Logging New Business Policy Servicing Alerts for changes/ endorsements Claims Management Loss adjuster case assignment Claim Assessment Transmit claims data Settlements Quoting Underwriting Status

Where

Contact Management Calendar Management Portfolio management for channel

Insurance Value Chain

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Mobility in New Business Sales / Underwriting

Prospecting Application Processing Underwriting Booking & binding Upsell / Cross Sell
Receive up sell /cross sell communication

Customer

Provide proposal form / requirements

Accept / Reject Quote.

Make payment

Intermediary

Contact prospects via e-mail, mail or cold calling

Forward Proposal information to insurer

Send quote to customer

Receive payment

Acquire Prospect data/ list

Contact existing customers to identify additional needs Communicate Multipolicy Discounts Communicate referral incentives for existing customers

Issue quote

Insurance company
Analyse proposal

Bind coverage & issue policy

END

Yes Proposal acceptable No

Decline proposal and inform customer / agent

Contact intermediary / existing customers to identify additional needs Communicate Multipolicy Discounts Communicate referral incentives for existing customers

Possible Points of usage of Mobility Solutions in the New Business Sales Process

Mobility in Policy Servicing

Prospecting Application Processing Underwriting Booking & binding

Customer

Provide endorsement requirements

Accept / Reject Quote.

Make payment

Intermediary

Forward request to insurer

Send quote to customer

Receive payment

Issue quote Bind coverage & issue endorsement

No

END

Insurance company
Analyse proposal
UW required? Yes

Yes

Proposal acceptable

No

Decline proposal and inform customer / agent

Possible Points of usage of Mobility Solutions in Policy Servicing

Mobility in Claims Management

Notification
Reports claim via internet / call center / mobile

Scheduling & Assignment

Assessment
Right information at hand of coverage & policy helps assessment & reduces site visits

Repair

Negotiation

Closure Settlement & Recovery

Claimant

Confirms closure of claim

Insurance company
Right scheduling affects efficiency of adjustor & satisfaction of customer

Appoints & informs loss adjustor

Approves settlement & arranges for payment

Loss Adjustor

Conducts assessment & sends report Advices rental car company for customer

Claim within threshold for on spot approval

No

Yes

Loss adjustor approves claims payment based on claim size

Using handheld for rental car advice

Advices workshop for repair

Workshop

Using handheld for workshop advice

Compltes repairs , informs insurer

Ability to settle small claims to customer at site reduces cost & effort

Possible Points of usage of Mobility Solutions in Claims Process

Benefits offered by Mobility Solution in Insurance

Customers
Full self servicing capabilities Minimized effort for policy purchases Claims submission quick and

Insurer
Improved operational effectiveness and efficiency Reduced cycle time for sales and claims processes Increased retention of agents Higher customer satisfaction and retention Stronger brand value and competitive edge

Agents / Field Force

Real-time access to email, calendar and customer information Increased sales due to

convenient
Fast and seamless support from Insurance company service providers Superior customer service with faster response time

improved operational
efficiencies Enhanced productivity Faster quote issuance due to greater access to leads and customer information Seamless information access and self-service support across the Claims/Customer value chain
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Faster information sharing

Better management insight into agents activities and customer preferences Elimination of duplicate data entry and data errors

Products offered by LIC

Plain Vanila Life Insurance plans
Bhima plans

Endowment linked plans

Linked to

HNI plans Micro Insurance plans Group Insurance plans

Financials
Largest Life Insurer in India 71.4% market share
2011(x1000 INR) Net worth 403736000 OPEX 1.698E+10 Total Assets 1.3174E+12 NBP 38.40% IT Expenses 927084900

Systems landscape
EPS: Enterprise Portal System
Application Server: Oracle WebLogic Portal 10.3.2 (11g R2) (64 bit) Operating System: Red Hat Linux AS 5.4 (64 bit) Database: Oracle Enterprise Edition 10g with RAC (64 bit) Application: J2EE platform

ODS: Online Data Store

Operating System: Red Hat Linux AS 4.5 (64 bit) Database: Oracle Enterprise Edition 10g with RAC (10.2.0.3) (64 bit)

Middleware: Enterprise Application Integration (EAI)

Operating System: Red Hat Linux AS 5.4 Software: TIBCO RV and BusinessWorks

SBI life
Individual Plans
Unit Linked Plans Special Protection Plans

Group plans Micro Insurance

Financials
Second largest player with a market share of 19.22% as on March 2011
2011(x1000 INR) Net worth 16,297,016 OPEX 15,545,123 Total Assets 395,258,108 NBP growth 7% IT Expenses 239,053

Systems landscape
Shift from Vendor TCS to Credence iDeal

Recent IT initiatives
efforts to make IT system secure and process driven Integrated Dealing Solution in Dealing room Integrated Treasury system solution in 2009 Mobile payments and viewing of details

Bajaj Allianz
Unit Linked Traditional Plans Life + Health plans Term Plans Women Plans Group Life Insurance Micro Insurance

Financials
Market share of New Business premium 8.3%
(X 1000 INR) Net worth OPEX Total Assets NBP IT Expenses 2012 35,606,071 14,062,756 394,485,970 27,200,000 572,420 2011 22,494,057 16,065,847 392,749,002 34700000 232,010

Systems landscape
GIOS (Global Insurance Operating Solution) Opus Software vendor - CGI

ICICI Prudential
Unit Linked Plans Traditional Plans Group Plans Term Plans Micro Insurance

Financials
ICICI prudential has a market share of 6.2% which shrunk to 4.4% in 2012

All values in bn INR

Systems landscape
BMC Software's Control-M, work automation & integration KASTLE Banking Solutions of 3i infotech

STAR UNION DAI-ICHI LIFE INSURANCE

Traditional Insurance products Unit Linked Plans Group Insurance

Systems Landscape

HDFC life
Term Plans Women Insurance Savings & investment Plan Micro& group Insurances The company has adopted customer segmentation approach for designing new products & identified 3 segments
Young Aspirant, Wisdom Investor Urban Woman

Financials for 2012

Recorded maiden profit after tax (PAT) of Rs 2.7bn during the year ended, FY12

All values in bn INR

Systems Landscape
Maia 1key for CRM ATLAS-Agency training software

Reliance
Individual plans Savings and Investment plans Group Insurance The company has lowered the number of agents in order to focus on productivity and performance Product mix sifted towards traditional products with 70% share

Financial data
Ranked number 1, in terms of Individual premium policies sold during FY12 Have infused fresh capital of Rs 3bn in 2012 Have recorded Rs 3.7bn PAT during FY12

All values in bn INR

Recent Trends
Reliance Insurance (RGICL) partnered with GoDB Tech, for the development of a mobile insurance point of sale (M-POS) application enterprise mobility solutions

Kotak Mahindra Old Mutual

Traditional ULIP Group insurance Micro Insurance

Channel Data For Insurers