Market Research Report : ICT in Insurance Industry in India 2012


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ICT adoption in Insurance Industry is expected to witness a dynamic growth in the ensuing years. Currently, the adoption of ICT in insurance industry is undergoing through a dynamic growth rate owing to the growing complexities arising from huge customer base. Insurers primarily implement technology in the areas of customer service, data analytics and process management.

With the ongoing growth in customer base and daily transactions, insurers in India are gradually shifting their focus towards the adoption of ICT oriented tools, services and platforms. Till now, the ICT adoption in insurance industry has occurred in a phased manner, wherein it has exhibited a steady but impressive growth rate over the years. ‘Judging by the current scenario in the market, ICT spending by insurers in India stood at INR 76.17 bn in 2011 and is anticipated to grow at a CAGR of around 14% till 2015,” says Mr. Kalyan Banga, Product Manager at Netscribes. Maturing along with technology standards, the current ICT landscape within the insurance industry can be associated with rising demand and cut throat competition amongst the ICT vendors. Types and attributes of the solutions that experiences the most demand within the insurance sector have also changed over the years. “Primarily, technologies focused to provide better customer services are preferred the most. Analysis of colossal amount of data and information along with generating insights from these data are also experiencing exponential surge in demand. Advancement in the field of mobile technology and the immense popularity of social networking sites has also grabbed the attention of industry significantly,” noted Kalyan.

The report begins with a snapshot of the insurance industry which briefs about the facts and figures of insurers operating in India. It lists down the number of insurers operating in the sector along with the segmentation of public and private insurers. Hierarchy of the Indian insurance industry is well illustrated for which gives a brief highlight about the operational model of the industry. It also enlists the primary drivers and challenges for the overall insurance industry. “Primary reasons to propel the market forward comprises of young consumer segment, wide range of products, technological advancement and growing middle class, whereas the basic challenges faced by the sector are the tight premium rates and dependence on overseas re-insurers,” says Kalyan. Moving along the report features a section on the ICT in Insurance wherein the growth rate and spending on ICT is enlisted in great details. “IT spending basically comprises the costs associated with hardware, software and services while the telecom services mainly includes support and services,” added Kalyan. The report covers an explicit break up of IT expenses of insurers in terms of hardware, software and services.

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Market Research Report : ICT in Insurance Industry in India 2012

  1. 1. Insert Cover Image using Slide Master View Do not distortICT Adoption in Insurance Industry ‐ICT Adoption in Insurance Industry IndiaFebruary 2012
  2. 2. 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  aaaTechnologies  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 PlayersCo pet t oCompetition IBM Microsoft Red Hat Wipro CMC TCS ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 2
  3. 3. •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 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 3
  4. 4. Indian Insurers ‐ History xxx Insurers ‐ IndiaNumbers25 22 22 23 1 1 120 16 16 13 13 14 1415 11 1 1 1 1 1 110 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 IndiaNumbers 2425 22 2220 6 16 17 6 6 14 15 15 1515 11 6 6 6 6 610 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 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 4
  5. 5. Rise in working class population and growing disposable income is driving the insurance sector in IndiaInsurance 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 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 5
  6. 6. 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 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 6
  7. 7. 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 ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 7
  8. 8. ICT spending of insurers in India is expected to witness a  SAMPLE significant momentum in the ensuing years ICT Spending – Indian Insurance IndustryINR bn IT Telecom Z l k j Y i h g X e f c d a b B A E D CW 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 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 8
  9. 9. Insurers exhibit a tendency to shell out more on hardwares  SAMPLE as compared to software and services IT Expenditure Segmentation ‐ Insurance A B C D120%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 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 9
  10. 10. 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 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 10
  11. 11. 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 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 11
  12. 12. 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 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 12
  13. 13. 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 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 13
  14. 14. 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 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 14
  15. 15. 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  manifoldsInsurance Penetration ‐ abc Insurance Penetration ‐ def USD abc def % abc def60 55.7 6 4.440 4 2.220 9.1 8.7 2 0.6 0.7 2.40 0 2001 2010 2001 2010 xxx ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 15
  16. 16. xxx with its ability to reach a massive amount of audience happens to be a significant tool for insurersyyy – 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 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 16
  17. 17. Major Public Companies ‐ SummaryNet Profit/Loss3,000 Size of the Bubble represents Market Capitalization in INR bn2,5002,0001,5001,000 500 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 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 17
  18. 18. Public: Domestic Company – xxx. (x/x)Company Information Offices and Centres – India Corporate AddressTel No.Fax No. New DelhiWebsiteYear of IncorporationTicker SymbolStock Exchange Head OfficeProducts and ServicesProducts and ServicesCategory Products/ServicesLogistics Key PeopleEducation & Training g Name N Designation D i tiData Services MD & CEOOutsourcing Chief Financial OfficerOthers Chief Operating Officer Vice President ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 18
  19. 19. 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 iKey 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 RatiosMarket Capitalization (INR mn) Fixed Asset Turnover ‐30.05% 5.31 7.59 9.69 12.55Total 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 2.10EPS (INR)EPS (INR) Working Capital Turnover 13.22% 2.45 2.16 2.65 6.87PE Ratio (Absolute) Capital Employed Turnover ‐3.10% 1.65 1.71 2.31 3.40 Improved Decline ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 19
  20. 20. Public: Domestic Company – xxx (3/3)Key Business Segments Key Geographic Segments a b c e abc def ghi jkl100% 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 2011Key Recent DevelopmentsDescription  NewsOverview • xxxParent Company • xxxMost Recent Auditor • xxx ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 20
  21. 21. 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 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 21
  22. 22. General Insurer‐ yyyCorporate 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: bPhone: Products and Services P d t dS i a b c d e f g h i j ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 22
  23. 23. 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 ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 23
  24. 24. Sales Intelligence (1/x)Mr. xxx Mr. xxxCFO Vice President ‐ ITE‐mail xxx E‐mail xxxPhone yyy Phone yyyProfessional  •xxx Professional  •xxxHistory: y History: y ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 24
  25. 25. Strategic Recommendations abc def ghi• xxx • xxx ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 25
  26. 26. 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 itReturn 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  / ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 26
  27. 27. Thank you for the attentionThe ICT Adoption in Insurance Industry – India report is a part of Research on India’s  h d i i d di i f h di ’Information Technology Series. For more detailed information or customized research requirements please contact:Kalyan BangaPhone: +91 33 4064 6215E‐Mail: kalyan.banga@netscribes.comResearch on India is a product of Netscribes (India) Pvt. Ltd. Research on India is dedicated to disseminating information and providing quick insights on “hot” industries in India and other emerging markets. Track our new releases and major updates in these industries onAbout NetscribesNetscribes is a knowledge‐consulting and solutions firm with clientele across the globe. The company’s expertise spans areas of investment & business research, business & corporate intelligence, content‐management services, and knowledge‐software services. At its core lies a true value proposition that draws upon a vast knowledge base. Netscribes is a one‐stop shop designed to fulfil clients’ profitability and growth objectives.Disclaimer: This report is published for general information only. Although high standards have been used the preparation, Research on India, Netscribes (India) Pvt. Ltd. Disclaimer: This report is published for general information only Although high standards have been used the preparation Research on India Netscribes (India) Pvt Ltdor “Netscribes” is not responsible for any loss or damage arising from use of this document. This document is the sole property of Netscribes (India) Pvt. Ltd. and prior permission is required for guidelines on reproduction. ICT ADOPTION IN INSURANCE INDUSTRY INDIA 2012.PPT 27