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India's First White Paper on Online Insurance Trends in India

TRANSCRIPT

Page 1: Online Insurance Trends in India

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Page 2: Online Insurance Trends in India

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Foreword

When I was asked to write a foreword for this report, ‘A New Beginning - Online Insurance

Trends’, I was not quite sure what to expect. A flip through the first few pages of the report

however, gave me a sense of the enormity of the impending change that is poised to soon sweep

the Indian insurance industry via online distribution. Most of the insurance bought till date is

offline; however going forward, it is clear that convenience and speed would influence the choice

of internet as preferred mode of distributing insurance in India.

MDI has been contributing to research in various fields of management and this report is a product

of the research interests of the institute’s faculty in combination with MDI’s initiatives to support

businesses, new and old. This is a proud moment for MDI since this white paper has been co-

authored by three of our students in partnership with InsuringIndia. What began as a research

initiative has shaped up into a ‘first-of-its-kind’ report on the topic of online insurance in India.

New ideas and new approaches can be the only way to progress forward and improve the quality

of life in society. This report is an attempt to think differently by analyzing trends in a field as

nascent as online insurance in India. Like all researches, this report is an attempt to point out new

possibilities and a new direction to the way in which the insurance sector operates in India.

I compliment the authors on the great job they have done in bringing out lucid presentation of the

report in simple language. I would especially like to congratulate the authors for bringing within

the ambit of their report, the study of both rural and suburban reach for insurance in the country. I

believe the trends are worth pondering over. I commend the report and have no hesitation in

saying that it deserves a serious reading.

Asha Bhandarker, PhD

RML Chair Professor of Leadership Studies & Dean Research

Management Development Institute, Gurgaon

Page 3: Online Insurance Trends in India

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Acknowledgement

The idea to work on a research report titled ‘Online Insurance Trends in India’ was borne out of

the sheer lack of any existing available research on the topic. We got in touch with few business

schools in the National Capital Region about a partnership and all of them showed their interest.

After due diligence, we decided to go ahead with the Management Development Institute,

Gurgaon.

We specially thank Gourav, Saurabh and Harsh, the three student participants from MDI for

tirelessly working on the report. We also thank Dr. Asha Bhandarker for agreeing to do the

foreword for this report and her kind words. In the end we thank the entire InsuringIndia team for

their help in making this report possible.

We are very glad with the outcome of the research and are proud to be part of this initiative.

Bhavesh Sharma

Managing Director

InsuringIndia.com

Page 4: Online Insurance Trends in India

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Table of Contents

1. Methodology ............................................................................................................................. 5

1.1 By Regions ........................................................................................................................... 5

1.2 By Cities............................................................................................................................... 6

2. Executive Summary ................................................................................................................... 7

3. The Trends ................................................................................................................................. 9

3.1 Overall ................................................................................................................................. 9

3.2 Health .................................................................................................................................. 9

3.3 Term .................................................................................................................................... 9

3.4 Motor ................................................................................................................................... 9

4. The Big Picture ........................................................................................................................ 10

4.1 Geography ......................................................................................................................... 10

5. Health Insurance Trends .......................................................................................................... 12

5.1 Geography - Small is also Big ............................................................................................ 12

5.2 Cover – Average National Online Health Insurance Cover is INR 4.2 lakh ....................... 13

5.3 Product - Family Always Comes First ................................................................................ 15

5.4 Age - Online health insurance is driven by 30 to 39 year olds .......................................... 16

6. Term Insurance Trends ............................................................................................................ 18

6.1 Geography - West and North driving the demand ............................................................. 18

6.2 Age – Maximum term insurance seekers start at 31 years .................................................. 20

6.3 Cover – Average cover across India is more than INR 40 lakh .......................................... 21

6.4 Policy Period - People desire term insurance with bigger term periods ............................. 24

6.5 Gender - Females are highly under insured ....................................................................... 25

7. Motor Insurance Trends ........................................................................................................... 28

7.1 Geography - North India has the maximum demand ........................................................ 28

7.2 Product - Comprehensive policy is most popular .............................................................. 30

7.3 Insurers - Private insurers need to relook their strategy ...................................................... 31

8. The Last Word ......................................................................................................................... 35

9. Cases........................................................................................................................................ 36

9.1 Health Insurance needs of an Average Indian ................................................................... 36

9.2 A Farmer’s Quest for Agriculture Insurance ....................................................................... 37

10. About Us ................................................................................................................................. 38

Page 5: Online Insurance Trends in India

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1. Methodology

The main objective of the report is to highlight the emerging trends in Online Insurance in India.

For the purpose of this research, we used the primary data of the visitors who visited our portal

www.insuringindia.com from a six-month period preceding October 2011. The data was scrubbed

clean of all the personal information, i.e. names, numbers, email ids and addresses. Outliers in

different product categories were removed. In the end, out of nearly one million visitors, a sample

of more than 75,000 was selected for the study. Three products namely, Motor and Health

Insurance (Non-Life) and Term Insurance (Life) were compared. For this, the sample has been

compared against demographic data available from the Census of India, 2011 besides other

available research, references to which are given, both in the report and at the end of the report.

For the purpose of analysis, we have classified India by regions, states and cities.

1.1 By Regions

According to the administrative division of Government of India, the country is divided into 5

zones. We included the North-Eastern states as part of the East India region.

Region States

North India Delhi, Chandigarh, Punjab, Haryana, Jammu and Kashmir, Himachal Pradesh and Rajasthan

West India Goa, Gujarat, Maharashtra, Daman and Diu; and Dadra and Nagar Haveli

South India Karnataka, Andhra Pradesh, Tamil Nadu, Kerala, Lakshadweep, Pondicherry; and Andaman and Nicobar Islands

East India West Bengal, Jharkhand, Orissa, Bihar, Sikkim, Arunachal Pradesh, Meghalaya, Mizoram, Manipur, Nagaland, Assam and Tripura

Central India Madhya Pradesh, Uttar Pradesh, Chhattisgarh and Uttarakhand

Regions

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1.2 By Cities

We have used a 5-point classification from Tier I through Tier V. The cities have been classified

according to their population. The population figures are from the recent Census of India, 2011.

The classification is as follows

City Classification Population Examples Tier I 40 lakh and above New Delhi, Kolkata, etc. Tier II 20 lakh to 40 lakh Jaipur, Lucknow, etc. Tier III 10 lakh to 20 lakh Indore, Patna, etc. Tier IV 5 lakh to 10 lakh Guwahati, Mysore, etc. Tier V Below 5 lakh Palwal, Bilaspur, etc.

Page 7: Online Insurance Trends in India

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2. Executive Summary

The response to online insurance products has amazed everyone. What started as a novelty

product is being lapped up by the Indian consumers. The annual online sale projections of

companies have been met in less than two months. The Indian Insurance regulator, IRDA, recently

came up with an application to compare ULIP products (Unit Linked Insurance Product). So much

so that the public sector life insurance giant LIC has plans for coming up with a game changing

online term insurance product shortly. We believe these trends suggest how the future of

insurance is going to be in India. People are not just going online to check and compare insurance

quotes because it is convenient, for growing number of Indians; it has now become a necessity. As

with many sectors such as travel and retail, internet is now looking to transform the insurance

sector in India.

The regulators, and the insurers, have been trying very hard to increase the insurance penetration

in India. Despite that, insurance penetration (ratio of premium to GDP) is only 5.1% (IRDA Annual

Report 2010-11), which is less than the world average. With nearly 50 insurers, each having

multiple distribution channels, one hoped the insurance penetration would be better. Comparing

us with other countries with a more mature insurance market, one very clear difference is visible.

Indian insurance has a very nascent online presence as compared with countries like the US, UK,

Italy, Spain and Germany. Online insurance sales account for more than 30% of all sales in these

countries compared to roughly 3% in India. The insurance industry there has seen a gradual shift

from complete offline model to a more online, less offline, model. We think this is the way to go

forward for the Indian insurance industry as well.

A country as big and diverse as ours has many challenges. One of the biggest challenges always, is

to reach out to the maximum people at the lowest possible costs. Google is potentially reaching

out to a large chunk of India’s online population by providing customized searches in 10 Indian

languages. Warren Buffet’s Berkshire Hathaway recently opened its operations in India by ‘not

opening an office’ – pure online model. They are selling motor and travel insurance through the

internet and telephone, a model they have already proved to be highly successful. GEICO of US, a

USD 28 billion company, is the 3rd largest auto insurer in that country.

Online insurance may be a new and unchartered territory for many insurance shoppers in India;

however it seems to be the way forward. With only 10% of the population being online, the

potential is huge. India is the 3rd largest market for Facebook and it expects the country to reach

the 1st rank in a not so distant future. This growth of the internet, supported by the ever increasing

young population of this country, has fueled the growth of many online trends. Ecommerce is a

big success story. People have less time and an increased faith in products and services sold

online.

Page 8: Online Insurance Trends in India

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In this report, we analyze insurance buying trends of visitors to our portal www.insuringindia.com.

The study reveals some interesting and surprising outcomes that should be of interest to all the

stakeholders in the Indian Insurance Industry. Some of key trends that we observed are

summarized below:

1 out of every 3 visitors is from smaller towns - less than 10 lakh population - which

incidentally have the maximum internet density, even better than top 8 metros

Health Insurance

Average age of online health insurance shopper is 39.9 years

More than 50% of the population is looking for a cover size between INR 3.5 lakh to 4.5

lakh

Average National Online Health Insurance Cover is INR 4.2 lakh

Average health shopper in smaller cities is demanding bigger cover sizes compared to

fellow citizens from big metros

Almost 80% shoppers are looking for Family Floater products

2 out of every 5 people looking for health insurance are aged between 30 to 39 years

The middle aged population (30 to 49 years) accounts for 2 out of 3 online health

insurance visitors

Term

Top 5 states make up for almost 60% demand against a population share of almost 30%

The urban term insurance demand is equally distributed amongst the bigger and smaller

cities at 50% each

The average term insurance seekers start early at 31 years

1 out of every 2 shoppers is aged between 30 to 39 years

9 out of 10 shoppers are from age group of 20 to 49 years

Average National Online Term Insurance Cover is INR 46.1 lakh

Average term insurance cover across all 5 regions is more than INR 40 lakh

10% of online term insurance shoppers are smokers

Every 2nd customer is looking for a policy period of 25 years or more

Females are highly underinsured with only 4% of the total term insurance sample

Motor

Almost 90% of the visitors are looking for Comprehensive Policies

At 56% of the total motor insurance demand, Comprehensive Renewal is the most popular

product

7 out of every 10 shoppers reported their previous insurer to be a private insurance

company

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3. The Trends

The data has been analyzed across different categories for all three (Health, Term and Motor

Insurance) products. The trends have been found across the following classification:

3.1 Overall

Geography

3.2 Health

Geography

Age

Cover

Product

3.3 Term

Geography

Age

Cover

Policy Period

Gender

3.4 Motor

Geography

Product

Insurers

Page 10: Online Insurance Trends in India

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4. The Big Picture

4.1 Geography

Exhibit 1: Online insurance demand (Top 10 States)

Insurance is not being trended necessarily from the areas with maximum population. Delhi shows

a very high demand across the spectrum of products analyzed although it ranks very low in terms

of population as compared to the rest of the country.

The top 10 Indian states account for 81% of the study sample. These states make up for 63% of the

country’s population. Maharashtra, which ranked 2nd on the Census 2011 ranking, leads in the

online ranking with 18% of the total demand. Delhi surprises with its huge online demand. With

only 1% of the country’s population it is ranked 2nd in its online demand. Uttar Pradesh, the most

populated state of the country is a lowly 6th rank. Looking at the diversity across these states, one

expects exciting trends if insurance products and their information is available to these regional

visitors in the languages of their choice. (Exhibit 1)

Looking at the demand from a region wise perspective is even more interesting. Eastern and

Central India with a share of over 50% of the country’s population are only trending an online

demand of 20%. 8 out of every 10 online insurance shoppers are coming from the regions of

Western, Northern and Southern India. (Exhibit 2)

18%

14%

9%

8% 7%

6%

6%

5%

4%

3%

19%

Maharashtra

Delhi

Andhra Pradesh

Karnataka

Gujarat

Uttar Pradesh

Tamil Nadu

Haryana

West Bengal

Kerala

Rest of India

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Exhibit 2: Online Insurance Demand (Regions v/s Population)

The urban population has been the traditional drivers of the internet revolution everywhere. It has

been assumed that internet is the privilege of the big cities only. It is time we changed such

notions. We compared the sample with the recent ICube 2011 report. (Exhibit 3)

Exhibit 3: Urban Online Insurance Demand (Demand v/s Internet Density)

1 out of every 3 visitors is from the smaller cities and towns, i.e., semi-urban centers with a

population of 10 lakh and below. An average citizen from Adampur and Dhule is showing that

they are curious enough like their friends from Ahmedabad and Delhi. This demand is completely

against the conventional logic of smaller cities not being aware of internet and insurance. In most

of these smaller cities, insurers have a smaller presence, catered mainly though agents or

extension counters. Traditional leaders of the online market, the big metros have 42% of the total

demand. Insurers have always been looking for a justification to reach out to this population. One

reason why, until now, insurers chose to ignore the smaller cities was a lack of sufficient demand

to support costs. Our research shows that a large part of the insurance market in these cities is

waiting to be tapped. Online insurance with its ease of access and low cost can be an answer to

address the problems of insurers and customers alike.

28%

26%

26%

10%

10%

21%

14%

13%

26%

25%

South

West

North

East

Central

Enquiries Population

42%

22%

11%

25%

35%

18%

11%

37%

Top 8 Metros Other Big Cities 5-10 Lac Towns Less than 5 Lac Towns

Online Enquiries Claimed Internet Users

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5. Health Insurance Trends

Health Insurance is the product with the maximum potential in the general insurance sector. It is

also the most popular product trending with maximum enquiries out of the sample researched.

Consumers are comparing premiums and benefits for health products available in the market.

We classified the health insurance trends across the following categories:

Geography

Age

Cover

Product

5.1 Geography - Small is also Big The Tier V cities show the maximum online health insurance visitors second only to the 8 big

metros. This is an eye opener against common perception of the people in smaller cities not being

aware of health insurance. It seems that the government schemes such as Rashtriya Swasthya Bima

Yojana are making the average citizen of these smaller towns more and more aware of the basic

right to good healthcare. Most of these Tier V cities are also centers of high rural activity. An

average citizen of these towns and the rural population around them now wants better hospitals

and facilities instead of depending on the traditional Indian medicinal system. High demand from

these towns along with their capability to serve as rural hubs makes for an exciting prospect.

(Exhibit 4)

Exhibit 4: Online Health Insurance Demand (Cities – Tier wise)

25%

12%

16%

6%

42%

Tier V

Tier IV

Tier III

Tier II

Tier I

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The average North Indian is the most curious online health insurance consumer. 1 out of every 4

online insurance shoppers is from the North with the region only accommodating 13% of the

country’s population. This is followed by South and West respectively. Eastern India is the most

under-insured region in the sample.

The top 10 state rankings are similar to the overall rankings shown earlier except Uttar Pradesh

and Tamil Nadu trading places. The top 3, Maharashtra, Delhi and Andhra Pradesh have a

combined demand of 40%. Interestingly, two big western states of Maharashtra and Gujarat make

the top 5 and all the 4 southern states make the top 10 rankings. (Exhibit 5)

Exhibit 5: Online Health Insurance Demand (State wise)

5.2 Cover – Average National Online Health Insurance Cover is INR 4.2 lakh

More than half the population is looking for a cover size in the range of INR 3.5 lakh to 4.5 lakh.

This is not surprising considering that online buyers are big ticket buyers who are considerably

better educated and with more money to spend in comparison with their peers who buy through

other channels. Widening the range to INR 2.5 lakh to 5.5 lakh gives an INR 3 lakh window in

which 90% of online health shoppers were found enquiring. This is an opportunity area for

providers of health insurance.

The national average online health insurance cover is INR 4.20 lakh. The regions of Western and

Northern India have their average slightly more than this and that for the remaining 3 regions is

below this. (Exhibit 6)

17%

13%

10%

8% 7%

7%

6%

4%

4%

4%

19%

Maharashtra

Delhi

Andhra Pradesh

Karnataka

Gujarat

Tamil Nadu

Uttar Pradesh

Haryana

West Bengal

Kerala

Rest of India

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Exhibit 6: Average Health Insurance Cover (INR lakh)

We compared the value of sum assured with the total enquiries demanded by the cities across the

country. The result gives us a sense of what an average consumer from these cities demands as a

cover size. The average ticket sizes of the top 10 cities make a very interesting find. Only two Tier

I Cities make the list along with two Tier II Cities. The rest are all smaller cities and towns led by

Ludhiana with an average ticket size of INR 5.7 lakh. An average health insurance shopper from

Ludhiana is asking for more value per person as against his friend from Chennai. (Exhibit 7)

Exhibit 7: Average health cover demanded by average health shopper (Top 10 Cities)

3.85

3.97

3.99

4.20

4.31

4.39

East

South

Central

National Average

North

West

448,090

451,061

453,870

458,465

467,881

499,753

507,248

509,123

515,445

566,162

Chennai

Thiruvananthapuram

Navi Mumbai

Noida

Lucknow

Mumbai

Gurgaon

Bhubaneshwar

Pune

Ludhiana

Average Ticket Size (in lakh)

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5.3 Product - Family Always Comes First

A huge 79% of the health consumers are looking for Family Floater products and the rest for

Individual products.

The success of the Family Floater Health product can also be seen in the online model. Family

Floater (Self, Spouse & Children) is the most popular product with 57% demand followed by

Individual (Self) at 20% and Family Floater (Self & Spouse) at 15%. (Exhibit 8)

Exhibit 8: Online Health Insurance Products Market Share (in %)

The average cover for a Family Floater policy is INR 4.2 lakh and that for an Individual policy is

INR 3.9 lakh. Average cover size for all the products in the health insurance segment is more than

INR 3 lakh. The ticket size for health insurance products searched online is big and insurers can

specifically target the online customer with bigger cover size. The average cover per person is a

different story with the Family Floater population seemingly under insured at INR 1.4 lakh. The

average Individual health insurer is however doing just fine at INR 3.9 lakh. (Exhibit 9)

Exhibit 9: Average Health Policy Size (in lakh)

1%

2%

5%

15%

20%

57%

Family Floater -Self + Children

Individual -Parents

Family Floater -Parents

Family Floater -Self + Spouse

Individual -Self

Family Floater -Self + Spouse + Children

3.1

3.5

3.6

3.9

4.0

4.2

4.3

4.3

Individual -Parents

Family Floater -Parents

Family Floater -Self + Children

Individual - Average

Individual -Self

Family Floater - Average

Family Floater -Self + Spouse + Children

Family Floater -Self + Spouse

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The average cover size per person seems to suffer with most people not going beyond the limit of

INR 4.5 lakh per policy be it Individual or Family Floater despite different number of members in

each policy. Hence, Family Floaters seem to be an under-insured segment while the Individual

health insurance appears the most protected segment. We believe the reasons for higher sale of

Family Floater covers are a one-cover-for-all policy as well as Family Floaters being cheaper for

younger families.

Consumers seem to be more price conscious than product conscious. Health insurance cover size

does not change with policy type. The policy size for Self is almost 29% higher than parents in the

Individual category.

Only 7% families reported three or more than three children. 93% families report up to two

children while shopping for family floater products. Thus the profile for a family floater health

insurance shopper is most likely to be Self, Spouse and up to two children (Exhibit 10).

Exhibit 10: Family Floater Policies (No. of Children wise)

5.4 Age - Online health insurance is driven by 30 to 39 year olds

The average age of the online health insurance seeker is 39.9 years. Post this there is a gradual

decline in health enquiries. 90% of the health insurance enquirers had an average of 37.3 years.

An age-slab analysis shows that in most probability (41%) the customers are 30 to 39 year olds

and 2 out every 3 persons demanding online health insurance would fall in the 30 to 49 years old

category or what is called the ‘middle-aged’ population. (Exhibit 11)

45%

48%

6%

1%

One

Two

Three

Four

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Exhibit 11: Online Health Insurance Demand (Age wise)

We established a human life-cycle through the health insurance demand data that we analyzed.

Individuals first (34.5 years) get themselves a health cover, and then they get a health cover for

complete family (Self, Spouse & Children) when they anticipate future illnesses for themselves and

their children (39.3 years). (Exhibit 12)

Only 7% of the total health cover enquiries were for parents. The average parental age seeking a

health cover was around 57.5 years. When seeking Individual parental insurance for single

parents, the shoppers are younger (54.8 years) than when searching for a couple or family cover

(58.5 years).

We hope that with more people becoming aware of online health insurance, the age of the

average online health insurance shopper should come down.

Exhibit 12: Online Health Insurance Shopper Life Cycle

1%

15%

41%

25%

12%

7%

<20 20-29 30-39 40-49 50-59 >=60

30 35 40 45 50 55 60

Individual (Parents) 2%

Self, 20%

FF(S+S+C), 57%

FF (S+S) 15%

FF(S+C) 1%

FF (Parents) 5%

Age (in years)

36.1 yrs

39.3 yrs

41.9 yrs

58.5 yrs 54.8 yrs

34.5 yrs

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6. Term Insurance Trends

Online Term Insurance is one product which has made the entire insurance industry see the

potential of the online distribution channel. Term insurance is traditionally a simple product.

Therefore, it makes it easy to sell it online. One can buy an online term insurance policy within

minutes today.

We track online term insurance trends across the following categories:

Geography

Age

Cover

Policy Period

Gender

6.1 Geography - West and North driving the demand

Generally, population seems to have an inverse ratio to the number of enquiries for term insurance

from that region. An average citizen of Western and Northern India shows the maximum appetite

for online term insurance. The highly populated regions of East and Central India appear to be

most underinsured in comparison to the rest of the country. (Exhibit 13)

Exhibit 13: Online Term Insurance Region wise (Demand v/s Population)

30%

14%

27%

13%

23% 21%

10%

25%

10%

26%

Total Enquiries Population

West

North

South

Central

East

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The top 5 states make for almost 59% of the demand and only 29% of the population. With just

1% of the country’s population and 14% of the total demand, Delhi shows its important position

in the online insurance space. (Exhibit 14)

Maharashtra and Delhi are ranked 1st and 2nd; however Andhra Pradesh drops down to 6th rank.

Kerala is not in the top 10 making way for a new entrant at 10th rank, Rajasthan.

Exhibit 14: Online Term Insurance Demand (State wise)

The demand for online term insurance is split equally between the bigger cities and the smaller

cities and towns. This demand is more evenly distributed across the smaller cities as compared to

the bigger cities. The online consumer from the smaller cities has become curious enough to

match up to their fellow citizen from the big metros.

Drilling down further, Tier I cities make up the biggest urban market for the online term insurance

industry. Out of the remaining city classes, the Tier V cities have a huge demand with customers

asking for almost a quarter of the total demand.

21%

14%

8%

8% 7%

6%

5%

5%

4%

3%

18%

Maharashtra

Delhi

Karnataka

Gujarat

Andhra Pradesh

Uttar Pradesh

Tamil Nadu

Haryana

West Bengal

Rajasthan

Rest of India

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Exhibit 15: Online Term Insurance Demand (Cities-Tier wise)

The Top 10 cities cater to 50% of the total online term insurance demand. The share increases to

54% in terms of the total sum assured. (Exhibit 15)

6.2 Age – Maximum term insurance seekers start at 31 years

The ideal age to buy term insurance is when one starts earning and has dependents to support.

The maximum online term insurance shoppers start at the age of 31 years. At this age the average

Indian may have a family of his own and this explains his need for term insurance.

The average age is around 29 to 31 years. The number of enquiries shows a steep increase at the

age group of 22 to 25 years and again at 27 to 32 years, after which there is a steady decline until

the age of 60. Dividing the number of enquiries as per age slabs gives a clearer picture. More than

50 % of all enquiries for term insurance are coming from users in the age group of 30 to 39 years.

Users in the age group of 20 to 29 years and 40 to 49 years each have more than 20% of

enquiries. Thus, users in these age groups make almost the entire online term-insurance seeking

population in India. (Exhibit 16)

43%

7% 16%

10%

24% Tier I

Tier II

Tier III

Tier IV

Tier V

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Exhibit 16: Online Term Insurance Demand (Age wise)

6.3 Cover – Average cover across India is more than INR 40 lakh

The cover amount was categorized into following segments:

< 25 lakh – Less than 25 lakh

25 lakh to < 50 lakh – 25 lakh to 50 lakh

50 lakh to < 1 crore – 50 lakh to 1 crore

1 crore < - More than 1 crore

The national average cover for online term insurance is INR 46.1 lakh with the North and West

India above this and the other 3 regions below this demand. It is notable that the average cover

across all regions is more than INR 40 lakh.

In two categories, demand for term insurance is more than others – INR 50 lakh to 1 crore (31%)

and INR 5 lakh to 25 lakh (31%). Generally speaking, consumers are looking to go for policies

with maximum protection for their dependants. This also gives a sense of the average consumer

because term insurance cover is a direct factor of one’s annual income. (Exhibit 17)

0.5%

22%

50%

21%

6% 0.6%

<20 20-29 30-39 40-49 50-59 >=60

Page 22: Online Insurance Trends in India

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Exhibit 17: Online Term Insurance Demand (Cover wise)

Geographically, Rs 50 lakh to Rs 1 crore is the top demanded term insurance category in the West

and North India. INR 5 lakh to 25 lakh is the most in-demand policy cover size in the South,

Central and East India. (Exhibit 18)

Exhibit 18: Online Term Insurance Demand (Cover v/s Regions)

8% 8% 8%

3% 4%

7% 5% 5%

2% 2%

10% 9%

7%

3% 3%

5%

5%

4%

1% 1%

West North South Central East

1 crore <

50 lakh to < 1 crore

25 lakh to < 50 lakh

< 25 lakh

30%

27%

23%

10% 10%

31%

22%

31%

16%

< 25 lakh

25 lakh to < 50 lakh

50 lakh to < 1 crore

1 crore <

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INR 50 lakh to 1 crore is most demanded in the Tier I, Tier II, Tier III cities and towns of India.

Showing a lower appetite for term insurance, Tier IV and Tier V towns threw up more enquiries for

INR 5 lakh to 25 lakh category.

The online sample reveals a much lesser percentage of visitors reporting themselves as tobacco

users as compared to the national average. The sample reveals 10% tobacco users against Global

Adult Tobacco Survey (GATS) – India 2010 figures of 35%.

It is interesting to note that though tobacco-users have a greater risk of death compared to non-

users, they demand lower policy size. Tobacco-users demand more of INR 5 lakh to 25 lakh term

policies than any other policy while most non-users demand INR 50 lakh to 1 Crore closely

followed non-users demanding INR 5 lakh to 25 lakh policies. This could also be attributed to

non-users being more risk conscious and therefore insuring themselves for bigger cover amount.

Thus, the non-users are better insured as compared to tobacco-users despite the latter having a

bigger need for term insurance.

A surprise lies in the age group comparisons. 20 to 29 year olds and 40 to 49 year olds demanded

a policy cover of the size INR 5 to 25 lakh more than any other cover size. People in the age

group of 30 to 39 years perceived highest life risk with INR 50 lakh to 1 crore term insurance

shooting to the top spot by a clear margin. In fact, as the age progresses, we see a gradual decline

in size of policy demanded, probably due to a decrease in perceived life risk. 50 to 59 year old

prospective customers show a clear preference (3.1% out total 5.7%) for INR 5 lakh to 25 lakh

policy cover. This may also be due to existing savings already in place to support the family and

possible retirement of policyholder at the age of 60. (Exhibit 19)

Exhibit 19: Online Term Insurance Demand (Cover v/s Age Groups)

7.7% 13.2%

6.4% 3.1%

4.3%

11.2%

4.7%

7.0%

17.0%

6.1%

3.5%

8.7%

3.4%

<20 20-29 30-39 40-49 50-59 >=60

1 crore <

50 lakh to < 1 crore

25 lakh to < 50 lakh

< 25 lakh

0.5%

22.4%

50.1%

20.6%

5.7%

0.6%

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6.4 Policy Period - People desire term insurance with bigger term periods

The policy period was divided into 3 segments:

<15 years – Less than 15 years

15-24 years - 15 years to 24 years

>=25 years – 25 years and above

Every 2nd consumer is going for a policy period of 25 years and above. Since most people retire by

the age of 60, this suggests that the ages of most buyers in this segment are in the early to mid 30s,

a trend also proved earlier. Consumers are looking for maximum policy periods to cover their

dependants against any eventuality. The consumer here seems well informed and is not going for

short term plans to save on premiums or because they help save taxes over a smaller period of

time but are actually looking to take maximum benefits from this product over a long term period.

This trend is visible across different geographical regions of the country. A policy period of 25

years and above is the most popular category across all regions.

We see similar trends when we compare the policy period with the cover size. With policies of 25

lakh and upwards, consumers show the maximum need for a period of 25 years and above

followed by 15 to 24 years and less than 15 years respectively as shown in the figure below.

However, this trend is reversed in the under 25 lakh segment. People in the 50 years and above

age group, of online term insurance consumers are looking for ‘low cover-low policy period’

products i.e. below 25 lakh and less than 15 years. Most of them will retire by the age of 60 to 65

and may already have enough savings to take them through a comfortable retirement period. Also,

as the age increases, the premium increases substantially, making term insurance less lucrative as

one grows old. Thus, these consumers plan very carefully, spending only as much as is absolutely

necessary. (Exhibit 20)

Exhibit 20: Online Term Insurance Demand (Policy Period v/s Cover)

9% 12%

20%

10%

11% 6%

8%

4%

11%

3%

3%

2%

< 25 lakh 25 lakh to < 50 lakh

50 lakh to < 1 crore

1 crore <

<15 Years

15-24 Years

>=25 Years

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The age group of 30 to 39 years with a policy period of 25 years and above is the single most

lucrative segment. A total of 31% of the visitors are from this category, more than any other

category. Every 2nd enquiry for term insurance was from the age group of 30 to 39 years and 9

out of 10 were from 20-49 years age group. (Exhibit 21)

Exhibit 21: Online Term Insurance Demand (Policy Period v/s Age Groups)

6.5 Gender - Females are highly under insured

Females form a minority in the total term insurance sample at only 4% of the total visitors. The sex

ratio of India according to the Census 2011 is 933 females for 1000 males. This gives an

indication of the extremely high levels of uninsured female population in India’s life insurance

sector. We compared the male and female samples against each other to give a sense of fair

comparison. The trends are very interesting especially from the perspective of the female

population.

13%

31%

6%

4%

12%

10%

2%

5%

7%

4%

3%

<20 20-29 30-39 40-49 50-59 >=60

<15 Years

15-24 Years

>=25 Years

0.5%

22%

50%

21%

6%

0.6%

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Average female term insurance buyer prefers buying policies with shorter policy period compared

to her male counterpart. (Exhibit 22)

Exhibit 22: Online Term Insurance Demand (Gender v/s Policy Period)

Younger and older females buy more term insurance as compared to the males in the same age

groups. The males are more prolific buyers in the middle age group. (Exhibit 23)

Exhibit 23: Online Term Insurance Demand (Gender v/s Age Groups)

19%

29%

52%

29% 28%

43%

<15 Years 15-24 Years >=25 Years

Male

Female

0.5%

22%

51%

21%

5%

0.6% 2%

31%

36%

15% 13%

2%

<20 20-29 30-39 40-49 50-59 >=60

Male Female

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Average females in bigger cities are buying more term insurance in comparison with their male

colleagues in these cities. The males overtake the females in smaller cities and towns. (Exhibit 24)

Exhibit 24: Online Term Insurance Demand (Gender v/s Cities Tier wise)

Females are buying policies with lower cover amounts and the males lead in all categories except

25 lakh and below. (Exhibit 25)

Exhibit 25: Online Term Insurance Demand (Gender v/s Cover)

43%

7%

16%

11%

24%

51%

8% 11%

8%

22%

Tier I Tier II Tier III Tier IV Tier V

Male Female

30%

21%

32%

16%

41%

20%

25%

14%

< 25 lakh 25 lakh to < 50 lakh 50 lakh to < 1 crore 1 crore <

Male Female

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7. Motor Insurance Trends

Motor insurance is one of the popular general insurance products being asked for online. Online

renewal of motor insurance is possible on most insurance websites today with the customer able

to buy a cover within minutes. In case of new policies, the online process helps speed up things

by doing all the application process in a jiffy. We trended motor insurance across the most

popular product in motor, car insurance.

We compared motor insurance across the following categories:

Geography

Product

Insurers

7.1 Geography - North India has the maximum demand

North India shows the maximum appetite for online motor insurance with one of every three

customers mainly due to Delhi showing a great demand. West and South India are not very far

behind.

State wise, Delhi leads the way with the maximum enquiries for this product. Almost every 5th

visitor to our motor insurance page was from the state of Delhi. This could be attributed to the

high number of passenger cars in Delhi. The top 10 states make up for 3 out of every 4 visitors to

enquire about motor insurance in the sample. (Exhibit 26)

Exhibit 26: Online Motor Insurance Demand (Top 10 States)

19%

13%

8%

8% 6%

5%

5%

4%

4%

3%

25%

Delhi

Maharashtra

Haryana

Karnataka

Gujarat

Andhra Pradesh

Uttar Pradesh

Kerala

Tamil Nadu

Punjab

All Other States

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Considering the response from Delhi, it is no surprise that the city with maximum hits on the

motor insurance page is from Delhi. Surprisingly, Mumbai is not ranked 2nd in this list and comes

only at rank 4. Bengaluru comes 2nd and Gurgaon is 3rd. All the top 10 cities hold a little less

than 50% share in the overall demand. Thus, a greater demand comes from all the smaller cities

and towns across the country. (Exhibit 27)

Exhibit 27: Online Motor Insurance Demand (Top 10 Cities)

If one looks at the urban demand from a Tier I through V classification, one understands that both

the bigger cities and smaller cities and towns have the similar demand.

Tier I and II cities (population of 20 lakh and above) and Tier IV and V cities (population of less

than 10 lakh) both have a demand of 44% each.

The Tier III cities make up the remaining 12%. Thus, any insurer looking to capture this segment

can’t afford to have a localized strategy. (Exhibit 28)

19%

6%

6%

5%

4%

3% 2%

2% 1% 1%

51%

New Delhi

Bengaluru

Gurgaon

Mumbai

Hyderabad

Pune

Chennai

Noida

Surat

Ahmedabad

All Other Cities

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Exhibit 28: Online Motor Insurance Demand (Cities Tier wise)

7.2 Product - Comprehensive policy is most popular

An overwhelming majority, 88% online visitors searched for comprehensive motor insurance and

rest for third party insurance. As much as 64% of the online market comprises of renewals and the

rest 36% make for the new car insurance. The main reason behind this could be car dealers

offering new car insurance at the time of sale of a new vehicle whereas when it comes to renewals

the consumers have to mostly look for it themselves. With a huge 56% share of the entire online

motor insurance market, comprehensive renewal is the most trended product category. (Exhibit

29)

Exhibit 29: Online Motor Insurance Demand (Products)

39%

5% 12%

14%

30% Tier I

Tier II

Tier III

Tier IV

Tier V

32%

4%

56%

8%

Comprehensive Third Party Liabilities

Renewal

New

88%

12%

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7.3 Insurers - Private insurers need to relook their strategy

Prospective customers looking to renew their motor insurance gave interesting insights into their

previous insurers. As many as 71% visitors checking renewal quotes were from private insurers

and only 29% were from the four PSUs. The market share of the PSUs is 59% and that of the

private insurers is 41% (IRDA Annual Report 2010-2011). This does not seem to be good news for

the private sector insurers. Despite the four PSUs having a commanding share in the market, the

average insurance shopper seems to be happy with them and does not want to change. The trend

is completely opposite for the private insurers. (Exhibit 30)

Exhibit 30: Online Motor Insurance Demand (Public Sector Insurers v/s Private Insurers)

We publish the charts for the top 10 previous year insurers across the country and the 5 regions.

(Exhibits 31 to 36)

Exhibit 31: Nationwide Top 10 Insurers (Previous Year)

59%

29%

41%

71%

Non-Life Market Share FY 2010 Enquiries

Public Insurers Private Insurers

17%

13%

10%

10% 8%

8%

6%

5%

5%

4%

14%

Bajaj Allianz

ICICI Lombard

New India Assurance

National Insurance

TATA AIG

Reliance

IFFCO Tokio

United India Insurance

HDFC Ergo

Bharti Axa

All Other Insurers

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Exhibit 32: Western Region Top 10 Insurers (Previous Year)

Exhibit 33: Northern Region Top 10 Insurers (Previous Year)

21%

15%

13% 7%

6%

5%

5%

5%

5%

5%

13%

Bajaj Allianz

New India Assurance

ICICI Lombard

TATA AIG

Reliance

Royal Sundaram

National Insurance

Cholamandalam

HDFC Ergo

IFFCO Tokio

All Other Insurers

16%

13%

12%

10% 9%

8%

7%

6%

5%

4%

10%

Bajaj Allianz

ICICI Lombard

National Insurance

Reliance

TATA AIG

IFFCO Tokio

New India Assurance

Bharti Axa

HDFC Ergo

Oriental Insurance

All Other Insurers

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Exhibit 34: Southern Region Top 10 Insurers (Previous Year)

Exhibit 35: Eastern Region Top 10 Insurers (Previous Year)

17%

12%

9%

9% 9%

9%

7%

6%

5%

5%

12%

Bajaj Allianz

ICICI Lombard

New India Assurance

Reliance

TATA AIG

United India Insurance

Royal Sundaram

National Insurance

IFFCO Tokio

Oriental Insurance

All Other Insurers

15%

12%

10%

8%

8% 8%

7%

7%

6%

6%

13%

National Insurance

Bajaj Allianz

New India Assurance

HDFC Ergo

ICICI Lombard

IFFCO Tokio

Reliance

Royal Sundaram

Bharti Axa

TATA AIG

All Other Insurers

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Exhibit 36: Southern Region Top 10 Insurers (Previous Year)

14%

14%

14%

13%

11%

7%

6%

4%

4%

3% 10%

ICICI Lombard

National Insurance

New India Assurance

Bajaj Allianz

TATA AIG

United India Insurance

Cholamandalam

Reliance

IFFCO Tokio

Bharti Axa

All Other Insurers

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8. The Last Word

A recent report on Indian Digital Consumer Industry by Avendus Capital says online insurance

accounts for 3% of the total insurance sales today. As per the last IRDA Annual Report (2010-11),

the total premium booked was 335,400 crores. Thus, we could infer that Rs.10,062 crores of

insurance was booked online by the end of last financial year. With analysts projecting

approximately 10% of total insurance being booked online by 2015 and the insurance industry

looking to double by then, we are looking at the online insurance sector being pegged at 60,000

crores by 2015, a whopping 6 times in 4 years.

Customers like the benefits of instant policy issuance, fast and convenient purchase process and

easy customization. Online insurance is simple and fast, has low acquisition costs for the insurers,

provides ease of accessibility and can help save both the insurer and consumer up to 50% in

costs. Chances of mis-selling and overpricing are negligible as everything from proposal forms to

premium calculation is logic driven. Insurance consumers in the near future will become more

demanding in search for more customized products. This level of customization is only possible

through faster and smarter online platforms. Customers will seek the convenience of easy

information availability through smart phones and tablets. Intelligent platforms which educate the

customer and at the same time allow easy comparison of various insurance products are thus the

need of the hour.

Not only is the internet changing the way people buy products and services, it is changing how

people make their buying decisions. The consumer today likes to do their research before making

a decision. People use the internet to compare and choose the products and services with the right

fit for their needs. A company’s website can help create the first impact.

We hope that the understanding one derives from this study helps the Indian Insurance Industry

evolve towards a better future especially in the online space.

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9. Cases

We interviewed two people from different parts of India. Both the interviewees had an impending

need for insurance albeit for different products. The cases in point show the difficulties faced by an

average insurance shopper in India.

9.1 Health Insurance needs of an Average Indian

Rajesh Kumar is a cloth merchant from the town of Siwan in Bihar. At 32 years, he is the primary

bread winner of a family of six which includes his wife, two children and his parents. For the last

couple of months, he has been looking for a health insurance cover for his family including his

parents. A friend referred him to an agent selling health insurance products of a leading private

insurer. Rajesh was not satisfied with the information he received from the agent. The agent tried

to hardsell the insurance products of his insurance company. Rajesh wanted to know if there were

other insurers who could offer him better services and coverage within his budget. He also wanted

to know if there were separate products available for his parents with benefits specific to old age

and critical illness. The agent had no clue about these products. Rajesh then visited offices of three

insurance companies, two private and one public, on his next business trip to the state capital

Patna. The private insurers advised about different products and specific products for senior

citizens. However, he was not happy as they did not offer any comparisons with similar products

of competitors. As a layman it was difficult for him to understand the insurance jargon used by

private insurers. He visited the regional office of a public sector insurance company, from where

he was rudely turned away. He did not have enough time to visit a branch office as he had to

leave in the evening. Despite spending almost an entire day, his position as a health insurance

shopper had not changed much except having some brochures.

In the end, he had to buy health insurance from one of the private insurers.

Three months later, he recounts his ordeal to his cousin Sunil, who faced similar dilemma six

months back. Sunil had checked insurance quotes from different insurers and a couple of web

aggregators, online. In the end, the premium he paid for a cover similar to Rajesh’s was 20%

cheaper.

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9.2 A Farmer’s Quest for Agriculture Insurance

Mange Singh is a hardworking farmer with 20 acres of fertile land in the district of Sonipat,

Haryana. He has all the modern farm equipment such as a tractor, access to a harvester, pumpset,

seeder, etc. He is a modern day farmer who likes to be updated with the latest trends and practices

in agriculture. However, the last years below normal rainfall left him worried before the new

harvest. He had heard of schemes like crop insurance and farmer insurance, but never really

thought he would need them one day. On enquiring with the local cooperative bank’s branch in

his village and with the Block Development Office he only got names of some insurance

companies. He had no way of knowing how to reach these companies. He discussed his situation

with the village headman and panchayat and someone suggested the internet. Luckily the

government had recently installed a computer with an internet connection in the village

panchayat office as part of a pilot project. On checking Mange is disappointed that there was not

even a single website which provided information about different types of crop insurance schemes

or farmer policies on one platform. Almost all insurers’ websites were in English, a language he

did not understand. Nevertheless, he found someone to translate the information for him. He was

surprised to find that many general insurers have completely ignored the rural segment on their

websites. Only a few insurers provide information which did not seem sufficient.

Mange Singh is still looking to insure his assets and is yet to find a solution.

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10. About Us

InsuringIndia.com

InsuringIndia.com is India’s first multilingual ecommerce portal and one of the leading online

insurance aggregators.

We provide an intelligent customer-centric online platform for our clients, in their language of

choice, to compare, choose and purchase all types of insurance products.

www.insuringindia.com

Management Development Institute (MDI)

Management Development Institute (MDI) was formed as an autonomous body in 1973, in

collaboration with several reputed institutions like UNDP, UNIDO, World Bank and ILO. MDI is

recognized in the business and education community for the outstanding growth it has been able

to achieve in a short time span. The first Indian Business School and Second in Asia to be

accredited by the Association of MBAs (AMBA), United Kingdom, MDI is consistently ranked

among the Top 5 Business schools in India. Over the years, students have joined well renowned

corporations and have done their alma mater proud with their exceptional performance and

professional approach.

www.mdi.ac.in

Research Team

Bhavesh Sharma [email protected]

Gourav Dokania [email protected]

Harsh Maru [email protected]

Saurabh Gothoskar [email protected]

External Resources

Census 2011 http://censusindia.gov.in/

IRDA Annual Report 2010 http://www.irda.gov.in/

Internet in India (I-Cube) 2011 http://www.imrbint.com/ and http://www.iamai.in/

India Goes Digital-November 2011 http://www.avendus.com/

Global Adult Tobacco Survey (GATS) http://www.who.int

India 2010

Changing Channels-Accenture Multi- http://www.accenture.com

Channel Distribution Insurance Customer

Survey

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Contact Details

For more copies or other information please contact:

Corporate Office: Plot-8, Sector-32, Urban Estate, Gurgaon-122001, Haryana, India

Phone: 0124 – 499 88 88

Email: [email protected]

Disclaimer

This report is for the personal information of the authorized recipient and does not construe to be

any investment, legal or taxation advice to you.

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soliciting any action based upon it. This report is not for public distribution and has been furnished

to you solely for your information and should not be reproduced or redistributed to any other

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The report is based upon information that we consider reliable, but we do not represent that it is

accurate or complete, and it should not be relied upon such. GIMCS or any of its affiliates or

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