New Business Premium in Life Insurance Business

This article was first published in the IIB Bulletin, 2014, Vol. 1, Iss. 2, pp 8-10; Co-Authors: Siddharth Manvendra Chitre (IIB) & Anshuk Pal Chaudhuri (Gramener Technology Solutions Pvt. Ltd.)

https://iib.gov.in/IRDA/Articles/IIB%20Bulletin%20Q2%202014-15.pdf

The New Business Premiums in the Life Insurance business has witnessed a drop in premiums since the last few years due to uncertainties and changes in regulations. Financial Year 2013-14 saw a revival in the total New Business Premium. The Industry registered an overall growth of 11.5% on a base of Rs. 119,641 Crores of Total Premium. LIC had a growth of 17.82% in NB Premium during the year.

Over 83% of Current Year (FY13-14) Total Premium was from the top three Insurance Companies: LIC, SBI Life and HDFC Standard.

The highest YOY-Percent Change is by Edelweiss Tokio (69.85% on a base of Rs 80Crores current year total premium) while the lowest YOY-Percent Change is at Star Union Dai-ichi (-24.43% on a base of Rs 563crores current year total premium).

The size of the box indicates total premium received in crores (2013-14) and the colour indicates YOY growth profit (red is low, green is high). Visuals by Gramener.com  

Top Current Year Total Premium (in Crores)		Top YOY-Percent Change		Top Change YOY (in Crores)
LIC	90,124	Edelweiss Tokio	70.00%	LIC	13,636
SBI Life	5,067	Bharti Axa Life	51.00%	Reliance Life	557
HDFC Standard	4,037	Reliance Life	40.00%	IndiaFirst	365
ICICI Prudential	3,761	IndiaFirst	28.00%	Max LIFE	362
Bajaj Allianz	2,593	DLF Pramerica	26.00%	Bharti Axa Life	127
Bottom Current Year Total Premium (in Crores)		Bottom YOY-Percent Change		Bottom ChangeYOY (in Crores)
Sahara Life	65	Star Union Dai-ichi	-24.40%	ICICI Prudential	-1,047
Edelweiss Tokio	80	Tata AIA	-22.50%	HDFC Standard	-399
Aegon Religare	147	ICICI Prudential	-21.80%	Bajaj Allianz	-395
DLF Pramerica	174	Met Life	-19.90%	Star Union Dai-ichi	-182
Future Generali Life	225	Aviva	-13.70%	Met Life	-167

Private sector Insurers as a whole hold 24.61% of the market share of the Industry New Business Premium for the FY ending March 2014.

If we look at only private sector companies (leaving LIC out), YOY Percent Change was -4% on a base of Rs. 29,517 Crores of Total Premium. Over 44% of Total Premium were from the top three Private Insurance Companies : SBI Life, HDFC Standard and ICICI Prudential. 

The size of the box indicates total premium received in crores (2013-14) and the colour indicates YOY growth profit (red is low, green is high). Visuals by Gramener.com 

Top Current Year Total Premium (in Crores)		Top YOY-Percent Change		Top Change YOY (in Crores)
SBI Life	5,067	Edelweiss Tokio	70.00%	Reliance Life	557
HDFC Standard	4,037	Bharti Axa Life	51.00%	IndiaFirst	365
ICICI Prudential	3,761	Reliance Life	40.00%	Max LIFE	362
Bajaj Allianz	2,593	IndiaFirst	28.00%	Bharti Axa Life	127
Max LIFE	2,261	DLF Pramerica	26.00%	Kotak Mahindra Old Mutual	84
Bottom Current Year Total Premium (in Crores)		Bottom YOY-Percent Change		Bottom ChangeYOY (in Crores)
Sahara Life	65	Star Union Dai-ichi	-24.40%	ICICI Prudential	-1047
Edelweiss Tokio	80	Tata AIA	-22.50%	HDFC Standard	-399
Aegon Religare	147	ICICI Prudential	-21.80%	Bajaj Allianz	-395
DLF Pramerica	174	Met Life	-19.90%	Star Union Dai-ichi	-182
Future Generali Life	225	Aviva	-13.70%	Met Life	-167

If we look at category wise growth in New Business Premiums, the Individual Non-single premium (INSP) which is critical for long-term sustainability dropped by 3.96% for the Industry. Strangely, LIC's drop was more at 4.56%, as compared to the private sector which took a dip of 3.01%.

The highest YOY-Percent Change is at Group Single Premium (31.46% on a base of Rs. 50,448 crores Total Premium) increasing the share of this portfolio from 42% in FY2012-13 to 49% in FY 2013-14. 

The size of the box indicates total premium received in crores (2013-14) and the colour indicates YOY growth profit (red is low, green is high). Visuals by Gramener.com 

Current Year Total Premium (in Crores)		YOY-Percent Change		Change YOY (in Crores)
Group Single Premium	50,448	Group Single Premium	31.00%	Group Single Premium	12,073
Individual Non-Single Premium	43,740	Group Non-Single Premium	29.00%	Group Non-Single Premium	1,947
Individual Single Premium	16,887	Individual Single Premium	1.00%	Individual Single Premium	190
Group Non-Single Premium	8,567	Individual Non-Single Premium	-4.00%	Individual Non-Single Premium	-1,804

Data Quality

This research summary was first published in the IIB Bulletin, 2014, Vol. 1, Iss. 2, pp-11-12; Co-author: Vishnu Vardhan Pallreddy

https://iib.gov.in/IRDA/Articles/IIB%20Bulletin%20Q2%202014-15.pdf

Background

Insurance Information Bureau of India (IIB) was provided with the mandate to collect data from all licensed Non-Life Insurers in 2009. Since then, IIB has developed applications for online submission of data by the Insurers, has made progress in receiving data on a more timely and complete manner.

However, data quality remains a big challenge and concern. Efforts are being undertaken to address this. It will always remain an important item. The following sections talk about various aspects of data quality.

Quality

“Data are appropriate if they are suitable for the intended purpose of an analysis and relevant to the system or process being analysed” – Section 2.1, Actuarial Standard of Practice (ASOP) No. 23 [1].

“Data quality is often perceived as a mundane issue with less recognition and attention devoted to it than other issues, such as actuarial models and methodologies. However, data exists to fulfil a need: the need for optimal decisions” [2].

“Data quality should therefore, be an integral part of the operational considerations of all companies involved in insurance” [3].

“Overview – Data that are completely accurate, appropriate, and comprehensive are frequently not available. The actuary should use available data that, in the actuary’s professional judgment, allow the actuary to perform the desired analysis. However, if material data limitations are known to the actuary, the actuary should disclose those limitations and their implications.” – Section 3.1, ASOP No. 23 [1].

Selection

The following are some selective excerpts from the Section 3.2 of ASOP No. 23 [1]:

a. consider the data elements that are desired and possible alternative data elements; and

b. select the data with due consideration of the following:

1.       appropriateness for the intended purpose of the analysis, including whether the data are sufficiently current;

2.       reasonableness and comprehensiveness of the necessary data elements, with particular attention to internal and external consistency;

3.       any known, material limitations of the data;

4.       the cost and feasibility of obtaining alternative data, including the ability to obtain the information in a reasonable time frame;

5.       the benefit to be gained from an alternative data set or data source as balanced against its availability and the time and cost to collect and compile it.”

Reliance

The following are some selective excerpts from the Sections 3.3 and 3.4 of ASOP No. 23 [1]:

Reliance on Data Supplied by Others—“The accuracy and comprehensiveness of data supplied by others are the responsibility of those who supply the data. The actuary may rely on data supplied by others, subject to the guidance in section 3.5 (Review of Data). In doing so, the actuary should disclose such reliance in an appropriate actuarial communication.”

Reliance on Other Information Relevant to the Use of Data – “The validity and comprehensiveness of such information are the responsibility of those who supply such information. The actuary may rely on such information supplied by another, unless it is or becomes apparent to the actuary during the time of the assignment that the information contains material errors or is otherwise unreliable. The actuary should disclose reliance on information provided by another in an appropriate actuarial communication.”

Quality Review

The following are some selective excerpts from the Section 3.5 of ASOP No. 23 [1]:

“Review of Data - A review of data may not always reveal existing defects. Nevertheless, whether the actuary prepared the data or received the data from others, the actuary should review the data for reasonableness and consistency, unless, in the actuary’s professional judgment, such review is not necessary or not practical.”

“a. Data Definitions - The actuary should make a reasonable effort to determine the definition of each data element used in the analysis”

“b. Identify Questionable Data Values - The actuary should review the data used directly in the actuary’s analysis for the purpose of identifying data values that are materially questionable or relationships that are materially inconsistent. “

“c. Review of Prior Data - If similar work has been previously performed for the same or recent periods, the actuary should consider reviewing the current data for consistency with the data used in the prior analysis.”

“If, in the actuary’s professional judgment, it is not appropriate to perform a review of the data, the actuary should disclose that the actuary has not done such a review and should disclose any resulting limitation on the use of the actuarial work product.”

Use

The following are some selective excerpts from the Section 3.7 of ASOP No. 23 [1]:

 “Use of Data - Because data that are completely accurate, appropriate, and comprehensive are frequently not available, the actuary should make a professional judgment about which of the following is applicable:”

“a. the data are of sufficient quality to perform the analysis;”

“b. the data require enhancement before the analysis can be performed, and it is practical to obtain additional or corrected data that will allow the analysis to be performed. “

“c. judgmental adjustments or assumptions can be applied to the data that allow the actuary to perform the analysis. If the actuary judges that the use of the data, even with adjustments and assumptions applied, may cause the results to be highly uncertain or contain a material bias, the actuary may choose to complete the assignment, but should disclose the potential existence of the uncertainty or bias, and, if reasonably determinable, their nature and potential magnitude;”

“d. if the actuary believes that the data are likely to contain material defects, the actuary should determine, if practical, the nature and extent of any checking, verification, or auditing that may have been performed on the data. Then, if, in the actuary’s professional judgment, a more extensive review is needed, the actuary should arrange for such a review prior to completing the assignment; or”

“e. if, in the actuary’s professional judgment, the data are so inadequate that the data cannot be used to satisfy the purpose of the analysis, then the actuary should obtain different data or decline to complete the assignment.”

Communication and Disclosure

The following are some selective excerpts from the section 4.1 of ASOP No. 23 [1]:

“Communication and Disclosure - When issuing communications under this standard, the actuary should comply with ASOP No. 41 [4]. In addition, the actuary should disclose the following items:”

“a. the source(s) of the data;”

 “b. whether the actuary reviewed the data and, if not, any resulting limitations on the use

of the actuarial work product;”

 “c: the extent of the actuary’s reliance on data and other information relevant to the use

of data supplied by others;”

 “d:any material judgmental adjustments or assumptions that the actuary applied to the data, or are known by the actuary to have been applied to the data, to allow the actuary to perform the analysis;”

 “e: any limitations on the use of the actuarial work product due to uncertainty about the quality of the data;”

 “f: any unresolved concerns the actuary may have about the data that could have a material effect on the actuarial work product;”

  

References:

1.       Actuarial Standard of Practice No. 23: Data Quality, Actuarial Standards Board, revised edition. American Academy of Actuaries, 2011.

2.       Actuarial I.Q. (Information Quality), CAS Data Management Educational Materials Working Party, 2008.3.       Data Quality in the Insurance Market, ACORD Corporation & Watertrace Management Consulting, 2011.4.       Actuarial Standard of Practice No. 41: Actuarial Communications, Actuarial Standards Board, revised edition. American Academy of Actuaries, 2010

Uninsured Vehicles

This article was first published in the IIB Bulletin, 2014, Vol. 1, Iss. 2, pp-6-7; Co-authors: Jacob Thomas (IIB) and M.S.Jayakumar (IRDA)

https://iib.gov.in/IRDA/Articles/IIB%20Bulletin%20Q2%202014-15.pdf

Third Party (TP) liability is compulsory for vehicles or drivers in many countries across the world. In India, Section 146 of Motor Vehicles Act [MVA] (1988) mandates TP liability insurance of all motor vehicles in the country. But noninsurance of motor vehicles is a hard reality, not just in India, but also across the world.

Uninsured vehicles not only increase the cost of Insurance for those who buy the cover but also result in huge costs to the Insurance companies. In the USA, a report by the Insurance Research Council (IRC) estimated that $2.6 billion was paid by insurers to cover uninsured motorist claims in 2012.

“In addition to paying for insurance that covers their own actions, insured drivers pay a portion of the costs incurred by drivers without insurance through uninsured motorist (UM) coverage. For insurers, costs associated with UM claims can be substantial.”.... Uninsured Motorists, 2014 Edition

In a study done by IIB, it was found that out of the 32.9 million vehicles registered in India (excluding two wheelers), 9.5 million were uninsured. If the two wheelers are included, a whopping 55% of vehicles on Indian roads were uninsured in the year 2012.

These statistics are alarming. In an attempt to understand if the other countries around the world also suffer from the same malaise, we collated the available information on percentage of uninsured vehicles for various countries.

Source: Compiled by the authors from various sources

In the USA, the IRC report estimated that 12.6% of the motorists were uninsured in 2012. Oklahoma State had the highest percentage of uninsured motorists, at 26 percent, and Massachusetts had the lowest, at 4 percent.  Penalties and stricter regulations did not help in improving this statistic. Though there seemed to be some relation with unemployment.

Sustained efforts by Motor Insurance Bureau (MIB) of UK have seen a significant fall in the number of uninsured vehicles in the country over the last decade. Police enforcement activity since 2005, combined with the introduction of Continuous Insurance Enforcement (CIE) in 2011 has seen a near 50% reduction in uninsured driving on UK roads, as per a MIB report.

The Italian association of insurance companies reported that 8% of the total vehicles on Italian roads were uninsured in 2013. It also went on to indicate that a drop in the premium for third-party insurance did not result in improving the figures.

According to TISPOL, there were 7.6 billion registered vehicles in Greece, in 2014. As per Greek Union of Insurance Companies, about 10% of them are uninsured. This is in spite of the falling premiums in Greece, due to fierce competition between insurance companies and heavy fines.

Percent of uninsured vehicles in Brazil and South Africa is even higher than in India. We do not expect the situation to be any better in many other emerging countries.

There are large numbers of uninsured vehicles on the road across the globe. This poses a grave danger to the society as a whole. It also results in economic loss to the insurers. Apart from penalties and stricter regulations, a nationwide, sustained mission, supported by enforcement agencies and other stakeholders is the need of the hour, in all countries suffering from this plague.

“It will not be an exaggeration that this menace has to be tackled on a Mission Mode, a la Polio eradication!”...R. Raghavan, CEO, IIB