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com 1



Introduction
We are pleased to circulate our latest quarterly newsletter on some of the key
developments in the general (i.e. non-life and health) insurance industry in
India during the period January to March 2013.
The total Gross Written Premium (GWP) for the Indian general insurance
industry during FY 2012-13 was INR69,081 Crores (USD12,592 million) as
against INR58,120 Crores (USD10,594 mi llion) in FY 2011-12 representing an
annual growth of a li ttle over 18 per cent. ICICI Lombards total business at
INR6134 Crores (USD1,118 million) is close to Orientals figure of INR6544
Crores (USD1,193 mi llion).
The industry business growth up to February 2013, over 2012, was 19.3 per
cent as against 23.4 per cent in FY 2011-12.
In his recent budget speech, Indias Finance Minister Mr P. Chidambaram had
proposed that Banks be allowed to sell products of multiple insurers in order
to improve penetration. For this to happen, Banks wi ll need to be licensed as
brokers as per Insurance Regulatory & Development Authori ty (IRDA)
regulations. Banks wanting to become brokers will need to gi ve up their
current license as corporate agents under Bancassurance arrangements that
are currently being re-examined by IRDA.
The industrys expectation that the Union budget will extend tax benefi ts for
non-mandatory personal lines remained unmet.
IRDA has recently issued Health Insurance Regulations; this is pri mari ly
based on the exposure draft that i t had issued earlier. IRDA has also allowed
some relaxations in the investment guidelines that are expected to lead to
better yield in investments.
The regulator has directed insurers to implement fraud management in view of
its adverse i mpact on the industry. It is esti mated that the industry losses due
to frauds are nearly 10-15 per cent of their premium income. As per recent
directi ves issued by IRDA, all insurers have now started sharing a data base
of frauds wi th each other under the aegis of the General Insurance (GI)
Council.
IRDA has halved the requirement of compulsory ceding of reinsurance
business by domestic general insurers to the General Insurance Corporation
(GIC Re) from 10 per cent to 5 per cent.
The last fiscal passed wi thout any NatCat event in India. Property premium
rates that were raised last year by most insurers are expected to remain
stable in FY 2013-14.
As a part of the US led sanctions against Iran for i ts nuclear programme,
reinsurance cover continues to be denied for Indian petrochemical companies
that use Iranian crude. The government is exploring risk pooling arrangements
to counter this.
In this issue
Industry statistics
April 2012 - February 2013
Market update
Insurers
Other market developments
Awards

Regulatory update

Government update
Other Government Updates

Distribution

Products

Contact details

India Market
General Insurance Update
India | Issue 25 | April 2013

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Industry statistics
April 2012 - February 2013
As per latest data released by the IRDA, the Gross
Written Premium (GWP) figures for the period Apri l 2012
to February 2013 for Indias General Insurance (i.e. non-life
and health) is INR61,885 Crores (USD11,280 mi llion). The
corresponding figure for the last fiscal (FY2011-12) was
INR51,855 Crores (USD9,452 million).
GWP (business figures)

As earlier, the PSU general insurers continue to lead, wi th
ICICI Lombard close behind Oriental.
Growth rates
The GWP growth rate for general insurers is shown in the
following graph. During the period Apri l 2012 to February
2013, the non-life industry registered a growth of 19.3 per
cent, which was a decline as compared to 23.4 per cent in
FY2011-12 for the same period.
Market Shares
The market continues to be dominated by PSUs, including
Agriculture Insurance Company (AIC) and Export Credit &
Guarantee Corp. (ECGC) at 57 per cent and the rest is
di vided between pri vate players. Pie A, shows the spli t of
four PSUs, AIC, ECGC and all Pri vate Sector general
insurers as a block at 43 per cent. Pie B shows the
respective market shares of various pri vate players,
notable among which are ICICI Lombard, Bajaj Allianz,
Iffco Tokio and HDFC Ergo wi th market shares of 9 per
cent, 6 per cent, 4 per cent and 4 per cent respectively.
Others in the chart include Star Health, SBI General,
Apollo Munich, Uni versal Sompo, Max Bupa Health, L&T
Insurance, Magma HDI, Religare Health, Raheja QBE, and
Liberty Videocon.


Source: IRDA
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Market update
Insurers
New India Assurance (NIA), Indias largest general
insurer has reported a net profit of INR517 Crores (USD94
mi llion) in the 3rd quarter ended December 2012 on rising
premium income and i mproved operational efficiency. They
had posted a loss of INR177 Crores (USD32 mi llion) in the
corresponding period of the previous fiscal.
After several rounds of meetings, the Chandigarh Transport
Undertaking (CTU) has finally zeroed in on the National
Insurance Company (NIC) to provide insurance cover to its
450-strong fleet of buses, running on local and long-
distance routes.
Bajaj Allianz General Insurance (BAGIC) plans to
increase its retai l healthcare portfolio by nearly 50 per cent
during 2013-14. The company will use i ts distribution
network to ramp up i ts presence in the healthcare portfolio.
Retai l health insurance currently accounts for 33 per cent
of its healthcare portfolio. With the same aim, BAGIC is
exploring the possibili ty of tapping BPL (below poverty line)
fami lies under the Rashtriya Swasthya Bima Yojana
(RSBY) scheme
Due to better product pricing and an expanded agent base,
Reliance General Insurance Company (RGIC) has posted
a profit of INR16 Crores (USD3 mi llion) for the quarter
ended December 31, 2012, as against a loss of INR34
Crores (USD6 mi llion) during the same period last year.
NIC might be listed by March 2015, following the
finalisation of norms for ini tial public offerings (IPOs) by the
regulator
Tata AIG General Insurance (TAGIC) has introduced a
fast-track claim settlement process for health insurance
which will settle clai ms wi thin four hours of submission.
This is faster than the usual process that takes over si x
hours to settle clai ms. The feature would be avai lable to
both existing and new customers.
SBI General Insurance has provided personal accident
cover to over 7 mi llion State Bank of India account holders
across India.
Liberty Videocon General Insurance, the newest entrant
in the general insurance space, is targeting a premium
collection of INR120 Crores (USD22 mi llion) by December
2013. Liberty Videocon has received the regulators
approval to launch products in the fire, engineering, and
motor insurance space.
Air India might have to rely solely on Boeing for
compensation for the financial loss caused due to its 787
Dreamliners being grounded, as the insurance cover i t has
taken from NIA does not cover financial losses due to
glitches occurring on account of technical and other factors.
United India Insurance has tied up wi th Agriculture
Insurance Company for distribution of some of the latters
crop insurance products.
Other Market Developments
According to industry sources, due to increase in property
premium rates by 10-30 per cent in April 2012, and wi th no
major calami ties occurring throughout this year, premium
rates for companies would remain stable for 2013-14. In
addition, reinsurance rates too are likely to remain stable
for insurers when they renew their annual treaty
programmes.
Poor renewals and low levels of penetration of general
insurance products in the retail line of business have
prompted insurers to move the regulator to allow issuance
of longer term policies wi th renewal every 3-5 years. The
retail line of business includes health, home, personal
accident and motor insurance.
Concerted efforts over a period of ti me by general insurers
has led to a significant fall in post-accident repair expenses
in garages as new methods are being devised and
practiced to repair rather than replace damaged parts.
Several car manufacturers are bringing in design changes
based on data gi ven by insurance companies to bring down
cost of post-accident repair claims.
According to sources in the General Insurance Council
(GIC), the representative body of the non-life insurers, a
more sophisticated and detai led insurance pricing system
is being developed independently by each insurer, which
will now include many more risk factors that customers are
subjected to. Factors like profession, gender and mari tal
status, among many others, are now being used by
insurers to determine the premium.
According to a recent study done on health insurance
claims, data shows that women are generally healthier than
men and yet end up paying the same price for health cover
as several Indian insurers do not practice gender-based
pricing. As per the survey, women accounted for only 44
per cent of the total clai ms. Clai ms for injuries are more for
men at 11.5 per cent in contrast to women at 6.8 per cent
of all clai ms. Si mi larly, in claims related to the circulatory
system the ratio is 9.3 per cent of total claims for men and
5.2 per cent in women. Women are more afflicted by
genitourinary ailments wi th 13.4 per cent claims under this
segment as compared to 9.5 per cent for males.
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ICICI Lombard which has analyzed close to a lakh of i ts
motor clai ms last quarter discovered that nearly 30 per cent
of all accidents are due to head-on collisions. The number
is this high because of two reasons - poor road conditions
(single lane roads) and lack of lane discipline. Side swipes
wi th other vehicles account for the second largest cause of
motor clai ms at 22 per cent, whi le a vehicle running into
another at an angle accounts for 17 per cent of claims.
Clai ms to the rear of the vehicle account for a very low 6
per cent.
Mangalore Refineries & Petrochemicals Li mi ted and
Chennai Petroleum Corporation face a crisis situation wi th
Western reinsurers stating that their coverage wi ll not be
avai lable to any company processing Iranian crude. While
both these refiners process Iranian crude oil, Chennai
Petroleum Corporation is worse affected as the Iranian oil
companies have a 15 per cent stake with 2 Iranians on the
board. This is a part of the US led sanctions against Iran for
its nuclear programme.
Non-life insurers are working on a catastrophic fund to
provide relief to victi ms of natural calami ties such as
cyclone, floods, earthquake and tsunami. Insurers are in
talks wi th the National Disaster Management Authori ty
(NDMA) and state governments to set up a fund that will
take care of providing immediate relief to victims.
Insurers would soon be able to issue smart cards for their
health insurance customers that will be loaded with a pre-
defined credit li mi t depending on the patients policy
specifications. The new system would enable real ti me
online approval by simply swiping the issued card. Max
Healthcare has already initiated this as a pilot project.
Maharashtra State Consumer Disputes Redressal
Commission has rejected an insurance company's
contention that a laser surgery to correct one's vision is a
cosmetic surgery. Upholding an earlier district forum order
that held UII gui lty for repudiating a claim on this ground,
the commission directed i t to pay the insured (a senior
citizen) the needful amount wi th compensation.
Awards
Mr N S R Chandraprasad, Chairman and Managing
Director of NIC, was recently conferred with the Skoch
Person of the Year Award for the innovati ve office-on-
wheels ini tiati ve.
Regulatory update
IRDA has recently issued health insurance regulations that
come after an exposure draft released earlier. These new
regulations wi ll lead to, inter alia, standardisation of the
important aspects of health insurance such as key
definitions of ai lments and the nature of medical treatments
which are covered or not covered under a policy contract.
This wi ll bring uniformity in health coverage practices.
To increase the penetration of health insurance products
across the country, IRDA has decided to allow standalone
health insurance companies to avai l the services of agents,
corporate agents of other life or non-life insurance
companies to distribute their products. An agent cannot
offer his/her services to more than one standalone health
insurance company.
Mr J Hari Narayan, ex-Chairman, IRDA indicated that
mandatory product approvals would now become faster,
since the product structures would be clearly defined by the
new regulations. The IRDA board has approved the
product guidelines and these are expected to be notified
shortly.
IRDA has decided to include vehicle paint under the
purview of depreciable part and fi xed rate of depreciation
for the same. The depreciation rate of 50 per cent shall be
applied only on the material cost of the total painting
charges. In case of a consolidated bi ll, the material
component shall be considered as 25 per cent of painting
charges. The change is applicable to all policies whose risk
inception date falls on or after February 1, 2013.
Following IRDAs directi ve to the industry to finalise
procedures for fraud detection and control under the aegis
of the GI Council, all insurers have started to share
fraudulent data. The database wi ll contain information
about indi viduals, hospi tals, pharmacies, diagnostic
centers, nursing homes and motor garages who have
defrauded insurers in health and motor insurance.
Fraudulent cases in home insurance, shopkeepers
insurance policy and other retai l policies wi ll also be
shared. The data collected would be used to analyze
trends in fraud and would also ensure that individuals who
have committed frauds are not covered by any insurer in
future, while business transactions wi th enti ties who have
commi tted fraud could be avoided by all insurers.
In a move to control fraudulent practices prevai ling in the
Insurance sector and to boost consumer and shareholder
confidence, IRDA has issued instructions to all insurers to
put in place measures to protect themselves against frauds
from policyholders, claims, intermediaries and internal
frauds. Insurers are to carry out due diligence on the
personnel (management/staff), agents, intermediary, and
TPAs before appointment with them. As per industry
esti mates, insurers lose 10-15 per cent of their premium
income due to frauds. Well-defined procedures to identify,
detect, investigate and report insurance frauds wi ll have to
be laid out by insurers. The insurers have to submit a
compliance report wi th the regulator by June 30, 2013.
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The regulator is likely to scrap the embedded value
requirement for listing of general insurance companies on
stock exchanges. Instead general insurance companies wi ll
be required to make additional disclosures on adequacy of
premiums, reserves, asset-liabi li ty management, and
current financial condition. Also, the regulator wi ll look into
the financial position, capital structure and regulatory
record before permitting them to come up wi th share sale
offer. This may require insurers to undertake independent
financial stress testing of their businesses.
The IRDA is planning to shift insurance companies to a
risk-based solvency model from the current factor-based
solvency model in the near future.
In an exposure draft, the insurance regulator has
prescribed a higher provision for risky assets and lower
provision for less risky assets, which will bring down the
solvency margin requirement to 145 per cent from the
current norm of 150 per cent for insurers.
Insurance companies wi ll now be allowed to increase their
exposure in equity in a given company from the present
level of 10 per cent to 12 per cent and 15 per cent
depending upon the size of the Controlled Fund of any
gi ven insurer. The decision comes on the back of the
Finance Ministry pitching for raising equity investment limi t
for insurance behemoth LIC to up to 30 per cent.
An additional headroom for investing in higher yielding
corporate bonds (AA rated) have been created by
lowering the requirement of 75 per cent of investments in
AAA rated bonds and government securities to 65 per
cent.
SEBI wi ll be making another attempt to convince the IRDA
board to allow insurance companies in the stock lending
and borrowing (SLB) mechanism. Through SLB, an enti ty
can borrow shares on a temporary basis to meet i ts
deli very obligations.
The IRDA has halved the requirement of compulsory
ceding of reinsurance business by domestic general
insurers to the General Insurance Corporation (GIC Re).
Apart from the obligatory 5 per cent cession to GIC Re,
each insurer will be able to take a call to reinsure the rest
wi th any re-insurer. IRDA is expected to soon take a call on
the commission to be paid by GIC Re to insurers on the
obligatory cession.
IRDA continues to remain concerned over foreign
investments flowing into the sector via tax havens and
called for measures to discourage such flows.
Government update
The Indian Finance Minister, Mr. P. Chidambaram in his
Union budget said that Banks may be permi tted to act as
insurance brokers to increase insurance penetration. The
move comes at a ti me when the domestic industry is going
slow on expansion due to losses and high costs. The GI
industrys expectations that the Union budget wi ll extend
tax benefi ts for non-mandatory personal lines remained
unmet.
According to the Union Budget 2013-14, general insurers
will be asked to open one branch each in towns with a
population of over 10,000. The insurance companies have
also been asked to sell policies to people who have
completed KYC obligations wi th banks. The insurance
companies wi ll now be empowered to open branches in tier
II cities wi thout prior IRDA approvals.
The Bombay High Court gave approval to IRDA to process
and finalize regulations for settling insurance claims and
the role of Third Party Administrators (TPAs) and powers of
Ombudsmen.
The Court suggested that IRDA empower the Insurance
Ombudsman to levy compensatory or penal costs on
insurance companies for repudiating medical insurance
claims on fli msy grounds. This wi ll remove the ambiguity
regarding the Ombudsmans role in awarding
compensation under the Redressal of Public Grievances
Rules, 1998 and allow the Ombudsman to give awards
over and above the cover amount.
Progress of RSBY
The top fi ve states in terms of number of districts selected
for enrolment versus number of districts actually covered
appears in the following graph.

The following graph shows the extent of enrolment in terms
of total number of BPL fami lies versus number of fami lies
enrolled in different states.
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Other Government Updates
The government has put on hold i ts plan to list state-run
general insurers, wi th the finance ministry taking the view
that the current financial health of these companies is not
conducive for listing.
The Finance Ministry has asked public sector general
insurance companies to improve their financial health
through prudent underwri ting and efficient clai m
management.
Distribution
New guidelines are being framed to allow banks to sell
insurance products of multiple carriers by becoming a
broker instead of being a bancassurance partner /
corporate agent. Those opting to be brokers will have to
wi thdraw from existing bancassurance partnerships.
Under the proposed rules, a bank can at the most tie up
wi th a particular life, non-life and health insurance company
in a maximum of 20 and a minimum of 10 locations. For the
remaining areas i t will have to seek alternati ve partners.
To increase the penetration of health insurance products
across the country, IRDA has decided to allow standalone
health insurance companies to avai l the services of agents
and corporate agents of other life or non-life insurance
companies to distribute their products. An agent cannot
offer his/her services to more than one standalone health
insurance company.
Lok Mitra Kendras, set up across the state by the
government, have decided to distribute micro-insurance
products in Kangra, Una and Chamba districts. Future
Generali India Insurance Limi ted has inked a pact wi th
Zoom Developers Li mited, a service centre agency (SCA),
to distribute its micro-insurance products at an affordable
cost through over 1,000 common service centres (Lok Mitra
Kendra).
BAGIC has launched a mobile phone application named
'Eezee Tab' on Android based platform to instantly issue or
renew motor insurance policies as well as register clai ms.
This application comes wi th a device which can accept
payments by credit or debit cards, said a press release
issued by the company.
NIA has launched its online portal for private car, two-
wheeler, health, personal accident and overseas medi-
claim insurance policies. The portal will allow registered
users to link existing policies, track the status of clai ms and
also renew linked policies. It allows payment through debi t
and credit cards.
Products
Apollo Munich Health Insurance Company has planned to
launch a health insurance scheme to cover diabetics. The
cover is expected to be more expensi ve by approxi mately
20-25 per cent, but the insured wi ll get benefi ts on
diagnostics and a few discounts if they control sugar levels.
Bharti-Axa General Insurance Company is working on a
long-term health insurance product which will provide cover
for 3-5 years and will be renewed automatically. For the
pricing of the long-term product, the company will have to
arri ve at the net present value of claims factoring in
inflation. The rate of premium on a long-term policy will be
higher than on an annual contract.
Max Bupa Health Insurance has introduced Heartbeat
Fami ly First policy, which is designed for Indian joint
families, covering up to 13 relationships and fi ve
generations. The product provides cover for both the
indi vidual and fami ly, where the indi vidual covered under
the policy has a certain cover for hi mself/herself, the other
sum is distributed among all the other family members. The
policy also provides a discount of 20 per cent on the
second-year premium.
NIA is actively considering offering a 'zero depreciation
policy' in the two-wheeler insurance segment after
launching the same in the four-wheelers space, a top
company official said. It is planning to come out with a new
householder insurance product in anticipation of the
government coming out with some kind of tax breaks.
Nokia India announced a partnership wi th New India
Assurance, to safeguard Nokias consumers against risks
of mobi le handset loss and damage. This includes thefts,
burglary, malicious acts, riots among others, as well as
damage that is beyond the purview of the consumers
standard warranty.


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Contact details
Towers Watson team covers the length and breadth of India wi th associates based in Gurgaon and Mumbai.
Vikas Newatia Director & Practice Leader, General Insurance Consulting, India
vikas.newatia@towerswatson.com

Gautam Mazumdar Senior Consultant, General Insurance Consulting, India
gautam.mazumdar@towerswatson.com

Rajesh Sabhlok Senior Consultant, Risk Consulting, India
rajesh.sablok@towerswatson.com

Gurgaon Mumbai

Suite 1, Redshift, 802-803, 8
th
floor 511/512, Solitaire Corporate Park

Tower-B, Uni tech Cyber Park, Sector-39 Andheri-Kurla Road, Andheri East

Gurgaon- 122002 Mumbai 400 093

Tel: 91 (124) 4101018 Tel: 91 (22) 4232 9900

Fax: 91 (124) 410 1010 Fax: 91 (22) 2837 0700

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








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