Market Research Report : ICT in Insurance Industry in India 2012

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ICT Adoption in Insurance Industry ‐
ICT Adoption in Insurance Industry India
February 2012

Executive Summary
 The ICT adoption in insurance market was valued at INR xyz bn in 2011 and is anticipated to
grow at a CAGR of xxx% to reach INR 230.85 bn by 20‐‐
 Out of the overall ICT expenditure in 2011, insurers spent about INR aa bn and INR cc bn on
Market IT and telecommunications respectively
 Hardware Software and Services comprise of 45 4% 19 2% and 33 7% respectively of the
Hardware, Software and Services comprise of 45.4%, 19.2% and 33.7% respectively of the
overall IT expenses of insurers
 Some of the prevailing key technologies identified within the Indian insurance sector so far
comprise of:
Key
y  aaa
Technologies  bbb
 ccc
 ddd

 Technology trends identified in the industry can be summarized as below:
Technology trends identified in the industry can be summarized as below:
 xyz – zzz
 abc – yyy
Trends  def – xxx

Major Players

Co pet t o
Competition IBM Microsoft Red Hat
Wipro CMC TCS

ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 2

•Insurance Industry – Snapshot
•ICT in Insurance – Overview
Key Technologies Adopted
h l d d
Government Initiatives
Drivers and Challenges
•Trends in Insurance Industry
SOA
Cloud Computing
Cl d C i
Web 2.0
•Key ICT Vendors
y
•IT Landscape – Indian Insurers
•Strategic Recommendations
•Appendix


Indian Insurers ‐ History

xxx Insurers ‐ India
Numbers
25 22 22 23
1 1 1
20 16 16
13 13 14 14
15 11 1 1
1 1 1 1
10 1 21 21 22
4 13 13 15 15 a
5 10 12 12
1 b
3
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

xxx Insurers ‐ I di
I India
Numbers
24
25 22 22
20 6
16 17 6 6
14 15 15 15
15 11 6
6 6 6 6
10 8 5
4 15 15 17
a c
5 4 8 8 8 8 9 10
6 x
3
0 1 1 1 1 1 1 1 1 1 1 1
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010


Rise in working class population and growing disposable
income is driving the insurance sector in India
Insurance Industry – Snapshot (India) xxx Insurers – India (2011)
•The highly dynamic Insurance sector can be x y z
Numbers
primarily segregated into Life and Non‐Life
Insurance segments 60
41
• Indian Life insurance business is ranked 9th 40
23
amongst 156 countries and contributes to 20 8
about 2.69% to the global market in 2010 6 1 18
0 1 0
• On the other hand, the non‐life insurance
xxx zzz
business was ranked at the 19th position in 2010
No. of Insurers taken are as of 30th Sep, 2011
and contributes to about 0.58% of the global
market
•Post liberalization in India, the sector
P t lib li ti i I di th t
witnessed a persistent entry of foreign
xxx Insurance ‐ Market Share
players
 As of now, state owned LIC maintains its INR tr
xxx yyy
leadership with approximately 76% in terms of
l d hi ith i t l 76% i t f 2.92
3 2.65
new business premiums while the remaining
25% is split amongst 23 private players 2
•Favorable economic demography and rising 1 0.35 0.43
disposable incomes are the primary growth
disposable incomes are the primary growth 0
drivers for the sector 2009‐10 2010‐11


Insurance Industry Hierarchy – India
State run LIC governs
Public the entire public life
insurance domain

Life Insurance

Currently, a stiff
competition
Private prevails amongst
il t
23 private players
Ministry of
IRDA
Finance
Players have
y
primarily targeted
the retail segment
Public and brought in
efficient strategies
Non‐life to strengthen their
distribution
distribution
Insurance channel

Private players have
carved a niche for
Private
Pi t themselves in terms
th l i t
of service quality


Insurance industry relies majorly on technology and has
shown a strong IT adoption over the years
ICT in Insurance ‐ Overview
•Gradual entry of private players in the sector has resulted in the formation of a stiff competition which in
turn has forced insurers to adopt IT so as to gain a competitive edge over other players
•The ICT spending of insurers was valued at INR 76.17 bn in 20‐‐ and is expected to attain a CAGR of
h d f l d b d d f
13.1% to reach INR xxx bn by 2020
•Primarily, areas of policy administration, claims management, HR solutions, re‐insurance management
and business intelligence are automated by insurers
 With the advent of technology players have also shifted their focus on tools such as portal services and sales IVR
With the advent of technology, players have also shifted their focus on tools such as portal services and sales, IVR
and request SMS
 Apart from the above mentioned, insurance vendors also emphasize on touch points for customers, agents and
sales managers
IT adoption Phases
IT adoption Phases ‐ Insurers

Phase I Phase II Phase III Phase IV

xxx yyy zzz aaa


ICT spending of insurers in India is expected to witness a
SAMPLE
significant momentum in the ensuing years
ICT Spending – Indian Insurance Industry
INR bn
IT Telecom
Z l
k
j
Y i
h
g
X e f
c d
a b B A
E D C
W I H G F
L K J
0
2009 2010 2011 2012e 2013e 2014e 2015e 2016e 2017e 2018e 2019e 2020e

Analysis of ICT Spending Indian Insurance Industry
Analysis of ICT Spending – Indian Insurance Industry

• ICT in Insurance industry was pegged at INR xx bn in 20‐‐ and is expected to witness an
impressive CAGR of 13.1%
• Over the years, incorporation of IT has been the top choice amongst insurers in India as
compared to telecommunications services
compared to telecommunications services
• IT spending of insurers hovered at around INR AAA bn in 2011, whereas amount spent on
telecommunications stood at INR BBB bn during the same year
• An analysis of the overall spending brings forth the fact that insurers in India will shell out more
on IT expenses as compared to telecommunication expenditures
 IT expenses mainly include the amount invested in hardware, software and services


Insurers exhibit a tendency to shell out more on hardwares
SAMPLE
as compared to software and services
IT Expenditure Segmentation ‐ Insurance
A B C D
120%
100% 100%

80% 46.4% 45.9% 45.4% 45.0% 44.0% 43.1% 42.2% 38.6%
60%
18.7%
18 7% 18.3%
18 3% 17.0%
20.6% 19.9%
19 9% 19.2%
19 2% 18.8%
18 8% 19.0%
19 0%
40%
20% 30.8% 32.3% 33.7% 34.9% 36.0% 37.3% 38.6% 44.0%

0% 2.2% 2.0% 1.7% 1.3% 1.0% 1.0% 1.0% 0.4%
2009 2010 2011 2012e 2013e 2014e 2015e 2020e

A B C

•XXX •YYY •ZZZ


SAMPLE
BBB Expenditure – Insurance Industry
BBB Expenditure – Segmentation

2009 2010 2011 2012e

24.4% 23.9% 23.4% 22.4%

52.3% 52.3% 52.3% 52.3%
23.3%
23 3% 23.8%
23 8% 24.3% 25.3%

2013e 2014e 2015e 2020e

21.3% 20.7% 19.5% 14.3%

52.3% 52.3% 52.3% 52.3%
26.4% 27.0% 28.2% 33.4%

ABC DEF GHI


XYZ Basic Framework
SAMPLE
AAA
DDD

Platform 1
Feature Phone

Tablet PC
BBB Platform 2
EEE

Smartphone

CCC Platform 3 Portable Media
Player
End Users
Digital Distribution
Platform
Where applicable


SAMPLE
Popular Technologies Implemented (X/X)
Usage of enterprise softwares also has found immense popularity amongst insurers, wherein these customer relationship
management and business intelligence tools are most widely used

abc def

• xxx • xxx


Government Initiatives
SAMPLE
SAMPLE
•The insurance sector in India is primarily governed by the IRDA (Insurance Regulatory and Development
Authority
•It has taken several initiatives which have directly or indirectly or indirectly acted as a driver for the ICT
industry
•Some of the major initiatives has been mentioned as under:
•Some of the major initiatives has been mentioned as under:

Selling of high value ULIPs via telemarketing Setting up Integrated Grievances
forbidden
f bidd Management System (IGMS)
M S (IGMS)

• xxx • xxx


Drivers & Challenges – Summary

Drivers Challenges
Need for better customer service Cyber threats

Presence of huge volume of data Lack of technology awareness

Rise in internet usage

Rise in enterprise mobility


Need for better xxx is increasing the demand for xxx
oriented ICT tools
Need for better customer service Impact
•At present, there are 49 insurers operating in the nation, thus making the sector
very competitive with so many players vying for greater market share
 Insurers are now forced to revamp their services and product quality on a regular basis so as
to survive the prevailing competition
•A better and efficient customer service happens to be the top priority of major
insurers and thus they have shifted their focus onto IT implementation
y p
 Customer service oriented tools and solutions such as xxx, xxx and other xxx tools are
currently experiencing a dynamic demand and hence is boosting the overall ICT usage by
manifolds

Insurance Penetration ‐ abc Insurance Penetration ‐ def
USD abc def % abc def
60 55.7 6
4.4
40 4
2.2
20 9.1 8.7 2 0.6 0.7
2.4
0 0
2001 2010 2001 2010

xxx


xxx with its ability to reach a massive amount of audience
happens to be a significant tool for insurers
yyy – Insurance Industry
• yyy is another nascent technology which is yet to experience a full fledged take off within the insurance sector in India
• A slow but steady popularity about yyy is seen amongst the sector which in turn happens to be a splendid opportunity
for ICT Vendors
for ICT Vendors
• The primary reason supporting the growth of yyy is the mammoth use of social media space all over the world
• Social media websites such as Twitter, Facebook and Linkedin are constantly attracting people across all age groups,
culture and geographic demographics and hence have become the most effective way to facilitate visibility
• The following illustration will provide better understanding of yyy in insurance sector:

Insurance Player

xxx

xxx


Major Public Companies ‐ Summary
Net Profit/Loss
3,000
Size of the Bubble represents Market Capitalization in INR bn
2,500

2,000

1,500

1,000

500

0

‐500

‐1,000
‐2,000 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000
Total income

xxx yyy zzz

Note: All figures are in INR mn and are based on the latest financials available


Public: Domestic Company – xxx. (x/x)
Company Information Offices and Centres – India

Corporate Address

Tel No.
Fax No. New Delhi
Website
Year of Incorporation
Ticker Symbol
Stock Exchange
Head Office

Products and Services
Category Products/Services
Logistics Key People
Education & Training
g
Name
N Designation
D i ti
Data Services
MD & CEO
Outsourcing
Chief Financial Officer
Others
Chief Operating Officer
Vice President


Public: Domestic Company – xxx (x/x)
Financial Snapshot
i i lS h Key Ratios
K i
Total Income Net Profit/Loss y‐o‐y change
Particulars 2011 2010 2009 2008
INR mn INR mn (2011‐10)
4 d 4 Profitability Ratios
a c Operating Margin ‐0.18 18.41% 18.59% 12.44% 11.35%
b 3
3 Net Margin 0.17 16.42% 16.26% 12.02% 8.63%
2 Profit Before Tax Margin 0.39 19.39% 19.01% 14.88% 11.53%
2 Return on Equity ‐0.61 27.43% 28.05% 28.52% 29.53%
1
Return on Capital Employed ‐0.49 30.75% 31.24% 26.40% 35.72%
0 0
Return on Working Capital 5.08 40.66% 35.58% 32.79% 59.62%
2008 2009 2010 2011
Return on Assets 0.48 17.95% 17.47% 14.98% 13.36%

Financial Summary Return on Fixed Assets ‐36.68 88.11% 124.79% 119.76% 108.85%

Cost Ratios
• The company incurred a net profit of INR xxx mn in FY 2011, as Operating costs (% of Sales) 0.20 81.39% 81.19% 87.21% 88.60%
compared to net profit of INR xxx mn in FY 2010 Administration costs (% of
‐0.97 9.35% 10.32% 10.78% 13.50%
• The company reported total income of INR zzz mn in FY 2011, as Sales)
compared to total income of INR zzz mn in FY 2010
compared to total income of INR mn in FY 2010 Interest costs (% of Sales)
Interest costs (% of Sales) ‐0.36 0.02%
% 0.38%
% 0.26%
% 0.10%
%
Liquidity Ratios
• The company earned an operating margin of 18.41 per cent in FY
Current Ratio ‐3.57% 2.28 2.36 2.11 1.44
2011, a decrease of 0.18 percentage points over FY 2010
Cash Ratio ‐8.10% 0.82 0.89 0.63 0.42
• The company reported debt to equity ratio of 0.53 in FY 2011, a Leverage Ratios
decrease of 12.75 per cent over FY 2010 Debt to Equity Ratio ‐12.75% 0.53 0.61 0.90 1.21
Debt to Capital Ratio
b i l i
Key Financial Performance Indicators ‐100.00% 0.00 0.03 0.11 0.08
Interest Coverage Ratio 1742.04% 914.14 49.63 49.66 116.68

Indicators Value (08/02/2012) Efficiency Ratios
Market Capitalization (INR mn) Fixed Asset Turnover ‐30.05% 5.31 7.59 9.69 12.55

Total Enterprise Value (INR mn) Asset Turnover 1.79% 1.08 1.06 1.21 1.54
Current Asset Turnover 10.14% 1.37 1.25 1.39 2.10
EPS (INR)
EPS (INR)
Working Capital Turnover 13.22% 2.45 2.16 2.65 6.87
PE Ratio (Absolute) Capital Employed Turnover ‐3.10% 1.65 1.71 2.31 3.40

Improved Decline


Public: Domestic Company – xxx (3/3)
Key Business Segments Key Geographic Segments
a b c e abc def ghi jkl

100% 100%
28% 25%
53% 41% 51%
69% 57%
79%
50% 55% 54% 50%
36% 46%
1% 38% 43%
13% 5% 16% 5% 18% 2% 26%
4% 6% 5% 8% 2%
0% 0% 4% 3% 2% 3% 2%
2008 2009 2010 2011 2008 2009 2010 2011

Key Recent Developments

Description News
Overview • xxx

Parent Company • xxx

Most Recent Auditor • xxx


SWOT Analysis – xxx
SAMPLE
SAMPLE
Strength Weakness
•Wide and dynamic range of
Wid dd i f
products and services
•Limited liquidity
•Capability to serve key
industry verticals

SWOT

Threat Opportunity
•Global growth in the IT
services market
•Rapid change in technology
Rapid change in technology
•Growth in domestic ICT
•Intense competition
adoption in insurance
industry


General Insurer‐ yyy

Corporate Information Business Highlights
• Operates as a subsidiary of yyyy zz
Company Snapshot
• Through its subsidiaries, provides insurance solutions
Foundation: for protection, health, wealth with protection,
for protection, health, wealth with protection,
Headquarter: children, and retirement needs
• The company comprises of …
Address:

Website:
b
Phone:

P d t dS i

a b c d

e f g h

i j


Technology Implementation (x/x)
SAMPLE
SAMPLE ICT Vendor – abc

Requirements Solution Benefit

• Gain a better understanding of • BI and CRM initiative provided • Increased efficiencies in
customers across the financial valuable insights for all sales, productivity and deployment of
services businesses
services businesses marketing and customer
marketing and customer its services
its services
• Provide better, relevant and service‐related business units • Currently, customers receive
timely service to its customer within the Financial Services improved, relevant and timely
base Group services

Technology Used

xxx


Sales Intelligence (1/x)
Mr. xxx Mr. xxx
CFO Vice President ‐ IT

E‐mail xxx E‐mail xxx

Phone yyy Phone yyy

Professional •xxx Professional •xxx
History:
y History:
y


Strategic Recommendations

abc

def ghi

• xxx • xxx


Appendix
SAMPLE
Ratio Calculations Ratio Calculations
(Operating Current Assets / Current
Operating Margin Current Ratio
Income/Revenues)*100 Liabilities

Net Margin (Net Profit / Revenues) *100 {(Cash & Bank Balance +
Cash Ratio Marketable Securities) / Current
(Income Before Tax / Revenues Liabilities)}
Profit Before Tax Margin
*100
Total Liabilities / Shareholders
q y
Debt to Equity
(Net Income / Shareholders
(N I / Sh h ld Equity
E it
Return on Equity (ROE)
Equity)*100
{Total Debt / (Shareholders
Debt to Capital Ratio
EBIT / (Total Assets – Current Equity + Total Debt)}
Return on Capital (ROCE)
Liabilities)*100
Interest Coverage Ratio EBIT / Interest Expense
(Net Income / Working Capital)
(N I / W ki C i l)
Return on Working Capital
*100
Fixed Asset Turnover Sales / Fixed Assets
Return on Assets (Net Income / Total Assets)*100
Asset Turnover Sales / Total Assets
Return on Fixed Assets (Net Income / Fixed Assets) *100

(Operating Expenses / Sales) Current Asset Turnover Sales / Current Assets
Operating Costs (% of Sales)
*100

Administration Costs (% of (Administrative Expenses / Sales) Working Capital Turnover Sales / Working Capital
Sales) *100

Interest Costs (% of Sales) (Interest Expenses / Sales) *100 Capital Employed Turnover Sales / Shareholders Equity
/


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Market Research Report : ICT in Insurance Industry in India 2012