PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR APRIL 2018 - PWC INDIA

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PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR APRIL 2018 - PWC INDIA
PwC’s Insurance Insights
Analysis of regulatory changes and
impact assessment for April 2018

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PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR APRIL 2018 - PWC INDIA
Our point of view on recent trends in    Other key guidelines issued by the
                  Preface                                                                                                     Contacts
                                                       the insurance sector                   Authority in April 2018

Preface
For the insurance sector, agents have traditionally been the main method of selling
policies. However, recently, a dip has been observed in the number of agents in the
private life insurance sector. This is primarily due to agents not being able to meet
their sales targets and hence losing their jobs. However, contrary to this trend, the Life
Insurance Corporation of India (LIC) has continued to introduce more agents into the
system. This demonstrates LIC’s dominance in the life insurance sector in India.

Individual agents of life insurers

 1400000.00
 1200000.00
 1000000.00
   800000.00
   600000.00
   400000.00
   200000.00
         0.00
                        Private life insurers                     LIC

            No. of agents as of 01 April 2017   Net no. of agents as on 31 March 2018

Source: Life Insurance Council

2 PwC                                                                                                                             PwC’s Insurance Insights
PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR APRIL 2018 - PWC INDIA
Our point of view on recent trends in      Other key guidelines issued by the
                Preface                                                                                                                                      Contacts
                                                    the insurance sector                     Authority in April 2018

Preface
In March 2018, the insurance sector continued to witness a significant               Life insurance sector
increase in the amount of premiums collected. LIC continues to dominate
the life insurance market. A brief overview of the general and life                  Premium in crore INR
insurance sectors, in terms of premium collection, market share, number of
policies issued and lives covered, as well as the number of agents in the life                       160000.00
insurance sector, is presented below.                                                                140000.00
                                                                                                     120000.00
1. The figures clearly depict the dominance of the public sector in terms of                         100000.00
   premium collection and market share in both life and general insurance.                            80000.00
                                                                                                      60000.00
2. Within the life insurance market, although LIC’s market share is still                             40000.00
   very high, there has been a slight dip from 70% to 69%.                                            20000.00
                                                                                                          0.00
3. Within the general insurance sector, there has been growth in the                                               For March         For March           Up to         Up to
   revenues earned by companies. Private and public sector general                                                   2017              2018          31 March 2017 31 March 2018
   insurers both continue to enjoy a large market share in the general                 Private life insurers        9376.04          10423.15          50626.23          59314.55
   insurance sector.
                                                                                       LIC                         25299.69          18748.16         124396.27         134551.68
4. There has been a significant reduction in the number of life insurance
   agents in the private sector. In contrast, there has been a significant rise                                    Private life insurers             LIC
   in life insurance agents in LIC.
                                                                                     Market share up to March 2018

                                                                                                                 31%
                                                                                                                                     Private life insurers

                                                                                                                                     LIC

                                                                                           69%

                                                                                     Source: IRDAI

3 PwC                                                                                                                                                            PwC’s Insurance Insights
PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR APRIL 2018 - PWC INDIA
Our point of view on recent trends in       Other key guidelines issued by the
                                   Preface                                                                                                           Contacts
                                                                           the insurance sector                      Authority in April 2018

Preface
General insurance sector

New business premium (in crore INR)

                       160000.00
                       140000.00
Premium in crore INR

                       120000.00
                       100000.00
                        80000.00
                        60000.00
                        40000.00
                        20000.00
                            0.00
                                    Private and public sector       Stand-alone private         Specialised
                                         general insurers             health insurers           PSU insurers
                                                                General insurers
                       For March 2017    For March 2018         Up to 31 March 2017       Up to 31 March 2018

Market share up to March 2018

                              6%
                         6%

                                                                 Private and public sector general insurers
                                                                 Stand-alone private health insurers
                                                                 Specialised PSU insurers

                                   88%

Source: IRDAI

4 PwC                                                                                                                                                    PwC’s Insurance Insights
PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR APRIL 2018 - PWC INDIA
Our point of view on recent trends in        Other key guidelines issued by the
                Preface                                                                                                        Contacts
                                                    the insurance sector                       Authority in April 2018

Our point of view on recent trends in the insurance sector
Digital insurance (DI) – an overview
In this edition, we wish to emphasise the role of digitalisation in the insurance
industry and the impact that it has had on insurers specifically and on the insurance
sector as a whole. Insurance companies have started using digital technology to
further improve customer experiences. Various tools such as customer self-service
capabilities and digital portals have been recently introduced and implemented by
insurance companies to not only help reduce their costs but, more importantly, to
help improve the way business is conducted.
For a long time, the traditional insurance business model proved to be remarkably
resilient. But it is now beginning to feel the impact of digital. Digital technology is
changing how products and services are delivered, and increasingly, it will change
the nature of insurance products and services and the business model itself.
The importance of digitalisation is only recognised when a solid platform is built.
This base helps companies to meet not only the current expectations of customers
but also their future needs through data analytics and market research. Through
such a platform, companies can support their business models and technology needs
over and above the standard core issues such as billing, policy issuance and claims.
While it is important to have a strong digital base, if companies cannot understand
and identify the needs of their customers, it becomes increasingly difficult to
generate a return on their investment. It is imperative for companies to understand
customer needs to improve customer value. Digital platforms assist with this
process. The real value in the process is realised when these digital processes are
incorporated from the beginning, helping to create a framework to effectively
measure the impact and viability of each scheme and product.

5 PwC                                                                                                                              PwC’s Insurance Insights
PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR APRIL 2018 - PWC INDIA
Our point of view on recent trends in         Other key guidelines issued by the
                 Preface                                                                                                                          Contacts
                                                      the insurance sector                        Authority in April 2018

Our point of view on recent trends in the insurance sector
Indian regulation on DI                                                                          Applicability of DI
The rise and impact of DI have been seen worldwide. Recognising the need for DI in               The general insurance sector has seen a major increase in the amount
the Indian insurance sector, IRDAI, in a notification dated 13 April 2017, laid down             of digital interactions with the customer. In the case of health and
rules for insurance web aggregators titled IRDAI (Insurance Web Aggregators)                     motor insurance, customers have been widely encouraged to use their
Regulations, 2017, which superseded the IRDAI (Web Aggregators) Regulations, 2013.               mobile devices to pay premiums and file for any claims. This has allowed
                                                                                                 insurance companies to process these claims more quickly, leading to
These regulations came into force with the twin objectives of supervising and                    better customer satisfaction and increased efficiency. Travel insurance
monitoring web aggregators as intermediaries, responsible for maintaining websites               has seen an increase in the usage of blockchain, which has helped
that allow insurance prospects to compare the price and features of products offered             tremendously in initiating and closing customer claims and reducing
by different insurers and other related matters.                                                 the time from days to minutes. These technology-driven changes
Over the last two years, there has been a drastic increase in the amount of new                  have helped in providing greater convenience to insurance customers
business premiums collected. For FY 2015–16, the total amount of premium collected               specifically in India.
through web aggregators was 0.03 crore INR. However, by the end of FY 2016–17, the
                                                                                                 Implications of DI
total premium collected through this medium rose to over 46 crore INR.
                                                                                                 Having a strong framework in place helps companies to continue to
Channel-wise new business – amount of premium collected by web aggregators (in crore INR)
                                                                                                 focus on achieving their business strategies and, at the same time, to
  50.00                              2016-17, 46.36
                                                                                                 continue to invest in more data-driven exercises to further improve
  45.00                                                                                          customer value. Also, the framework will help to continue building the
                                                                                                 back-end processes that will in turn help support platform stability.
  40.00
  35.00                                                                                          Way forward in DI
  30.00                                                   One of the key factors
                                                                                                 The advent of technology has already led to the digitalisation of
  25.00                                                   highlighting the importance and
                                                                                                 insurance companies. Most of the processes that are in place have
  20.00                                                   applicability of web aggregators
                                                                                                 already improved due to the adoption of digital technology. Along
                                                          is that they are now permitted
  15.00                                                                                          with this, leaders in the market are continually striving to improve
                                                          to sell low-cost unit-linked
  10.00                                                                                          and bring in new technologies that can help create and search for new
                                                          insurance plans (ULIPs) with
                                                                                                 opportunities. However, the Indian market is still lagging behind in
   5.00                                                   premiums of up to 1.5 lakh INR.
             2015-16, 0.03                                                                       terms of average investment in digital technologies as compared to
   0.00                                                                                          the rest of the world. With the rise of smartphone usage in India and
                2015-16                  2016-17
                                                                  2015-16    2016-17             greater Internet penetration, there lies a huge opportunity for greater
Source: IRDA: Handbook on Indian Insurance Statistics 2016-17                                    investment in the field.

6 PwC                                                                                                                                                  PwC’s Insurance Insights
PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR APRIL 2018 - PWC INDIA
Our point of view on recent trends in       Other key guidelines issued by the
                 Preface                                                                                                                      Contacts
                                                      the insurance sector                      Authority in April 2018

Other key guidelines issued by the Authority in April 2018
Compliance on Order of Preference1

                                                                                                        Applicability: To all CEOs/CMDs of all insurance companies/
Ref: IRDAI/RI/CIR/061/04/20181                              Date of issue: 11 April 2018
                                                                                                        reinsurance companies/ FRBs

Introduction
Regulation 5 of IRDAI (Registration and Operations of Branch
Offices of Foreign Reinsurers other than Lloyd’s) (First
Amendment) Regulations, 2016, dated 28 January 2016,
states that every Indian insurer shall obtain the best terms for
their facultative and treaty surpluses from Indian reinsurers,
fulfilling certain criteria as laid down by the said regulation.
These best terms of participation shall then be offered by
Indian insurers in the following order of preference:
1. Indian re-insurer(s) having a minimum credit rating as
   under regulation 4(a) of the above guidelines
2. To the Indian re-insurers that have a granted certificate of
   registration as per 4(b) of the regulations
3. To the branch office of foreign reinsurers set up in special
   economic zones, this is only after reinsurers of (a) and (b)
   have been covered.
4. If there is any balance remaining, then this will be offered
   to Indian insurers and other overseas re-insurers.
However, these regulations are not being complied with by all
insurers. If they fail to, they are likely to face regulatory action.

1 https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.
   aspx?page=PageNo3443&flag=1

7 PwC                                                                                                                                              PwC’s Insurance Insights
PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR APRIL 2018 - PWC INDIA
Our point of view on recent trends in      Other key guidelines issued by the
                Preface                                                                                                                   Contacts
                                                   the insurance sector                     Authority in April 2018

Other key guidelines issued by the Authority in April 2018
Re: Compliance of Motor Third Party Obligations

                                                                                                    Applicability: To all CEOs/CMDs of General
Ref: IRDA/NL/CIR/MOTP/065/04/20182                     Date of issue: 26 April 2018
                                                                                                    Insurance Companies

With reference to the IRDAI regulations dated 2 June 2015 regarding compliance of motor third party obligations, insurers who have been licensed to underwrite
the direct motor insurance business in India are required to use the gross direct premium figures as published on the IRDAI website for computing motor third
party obligations.

2 https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo3463&flag=1

8 PwC                                                                                                                                            PwC’s Insurance Insights
Our point of view on recent trends in    Other key guidelines issued by the
        Preface                                                                                              Contacts
                                      the insurance sector                   Authority in April 2018

Contacts

          Vivek Iyer                                       Joydeep K Roy
          Partner                                          Partner
          vivek.iyer@pwc.com                               joydeep.k.roy@pwc.com
          Mobile: +91 9167745318                           Mobile: +91 9821611173

          Dnyanesh Pandit                                  Saigeeta Bhargava
          Director                                         Associate Director
          dnyanesh.pandit@pwc.com                          saigeeta.bhargava@pwc.com
          Mobile: +91 9819446928                           Mobile: +91 9560518833

          Yugal Mehta                                      Varsha Mehrotra
          Manager                                          Consultant
          yugal.mehta@pwc.com                              varsha.mehrotra@pwc.com
          Mobile: +91 9970163293                           Mobile: +91 83890640211

          Prateek Kannan
          Consultant
          prateek.kannan@pwc.com
          Mobile: +91 9840753109

9 PwC                                                                                                            PwC’s Insurance Insights
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