INDIAN ECONOMIC OUTLOOK
During the past three years, the global economy has faced significant
upheavals, resulting in three major shocks. The initial shock occurred in 2020 with the
onset of the COVID-19 pandemic. Two years later, as the global economy was in the process
of recovering from the pandemic-induced downturn, a new challenge emerged in February
2022—the Russia-Ukraine conflict. This conflict led to a sudden surge in commodity
prices, exacerbating already high inflationary pressures and causing disruptions in supply
chains. The third challenge materialized when global central banks implemented monetary
tightening measures to combat inflation, consequently slowing down economic growth.
The Indian Government presented a growth-oriented, non-inflationary
budget with a focus on capital expenditure and job creation. The government adhered to the
fiscal glide path of achieving a 4.5% fiscal deficit in FY26, thereby ensuring commitment
towards long-term macro-stability.
India is expected to be one of the worlds fastest growing major
economies in 2023 as well. According to the International Monetary Fund (IMF), Indias GDP
is expected to grow by 6.9% in 2023 encouraging and attracting foreign investment.
However, it is subject to India undergoing some structural reforms. These reforms include
measures to improve business operations, accelerate infrastructure development, promote
digitization, and streamline the tax system. The economy is bouncing back with gradual
uptick in manufacturing and consumption post the pandemic stutter.
India is the 6th largest economy in the world by nominal GDP and the
3rd largest by purchasing power parity (PPP). The countrys economy has undergone major
changes in recent years due to the shift to a service-oriented economy and increased
integration into the global economy. The Indian economy is characterized by a large labour
force, an important agricultural sector, and a rapidly growing service sector. The
services sector accounts for a significant portion of the countrys GDP, along with
important industries such as information technology, financial services, and healthcare.
As we move into a new fiscal year, India remains on the cusp of
unlocking growth, with recovery expected in the agriculture, manufacturing and service
sectors. Government policies, including Production- Linked Incentives (PLI),
indigenisation of defence manufacturing and a focus on capital expenditure and
infrastructure creation (roads, railways, irrigation and so on), are expected to boost
future growth and aid the economys recovery. India has also followed a prudent monetary
policy and the RBIs commitment to contain inflation will help ensure macro-stability and
lead to more sustainable and inclusive growth over the medium term.
India is expected to be one of the worlds fastest growing major
economies in 2023 as well. According to the International Monetary Fund (IMF), Indias GDP
is expected to grow by 6.9% in 2023 encouraging and attracting foreign investment.
The country has undergone significant economic liberalization in recent
decades with reforms aimed at increasing foreign investment and encouraging
entrepreneurship. However, India still faces challenges such as a large informal economy,
high unemployment, and poverty. The country has also been hit by the COVID-19 pandemic,
which has reduced its GDP in 2020. Overall, the Indian economy has grown significantly in
recent years and is expected to continue growing, driven by ongoing economic reforms and a
growing middle class. However, challenges remain that must be addressed to ensure
sustainable and inclusive growth.
LIFE INSURANCE INDUSTRY OVERVIEW
The insurance industry in the country is undergoing rapid expansion and
is anticipated to reach a market size of US$ 280 billion by 2025, per a recent
International Trade Administration report, with a compound annual growth rate (CAGR)
ranging between 12% and 15%, primarily attributable to rising awareness about the
importance of insurance and increasing disposable incomes where Substantial increases in
subscriber numbers and Assets Under Management (AUM) have been observed across various
financial institutions. The growth of the sector has been facilitated by government
initiatives, including Pradhan Mantri Fasal Bima Yojana (PMFBY), Pradhan Mantri Suraksha
Bima Yojana (PMSBY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Vaya
Vandana Yojana, and Ayushman Bharat - Pradhan Mantri Jan Arogya Yojana (AB- PMJAY).
The banking sector and capital markets have also been expanding their
reach, and this growth is reflected in the insurance and pension sectors. In India,
insurance penetration rose steadily from 2.7% at the turn of the millennium to 4.2% in
2020 and stayed the same in 2021. The Indian insurance market has seen government
interventions and a favourable regulatory environment, leading to partnerships, product
innovations, and dynamic distribution channels, that has led to its constant growth. The
said growth in the insurance industry has expanded the opportunities available to
individuals to save money, protects their future, and form a sizable fund reserve.
Contributing to the capital markets with the aid of these funds, the growth of the sector
has consequently helped in accelerating significant infrastructure improvements in India.
Over the past two decades, the insurance market in India has
experienced exceptional growth, owing to higher private sector involvement, better
distribution capacities, and significant increases in operational effectiveness.
Collaboration with foreign markets has also played a pivotal role in facilitating
substantial growth within the industry. In 2000, India permitted private enterprises in
the insurance market, limiting FDI to 26%, which was raised to 74% in 2023, as stated by
the IRDAI in the Insurance Laws (Amendment) Act, 2015.1
INSURANCE DENSITY
Indias insurance density increased from USD 11.1 in 2001 to USD 91 in
2021, with life insurance having a density of USD 69 in 2021.
GOVERNMENT SCHEMES AND INITIATIVES
The Government offers insurance to people who live below the poverty
level by implementing schemes such as:
Pradhan Mantri Suraksha Bima Yojana
The programme offers beneficiaries risk coverage of 2 lakh for
accidental death and full disability, as well as 1 lakh for partial disability. As of
November 30, 2022, the scheme had enrolled 31.3 crore beneficiaries and disbursed 1.07
lakh claims.
Pradhan Mantri Jeevan Jyoti Bima Yojana
The scheme provides coverage of 2 lakh to the policyholders family in
the event of their death. As of November 30, 2022, the programme had enrolled 14.4 crore
beneficiaries and disbursed 6.3 lakh claims.
Pradhan Mantri Vaya Vandana Yojana
Under the scheme, old age income security is provided to senior
citizens through the provision of an assured pension/return linked to the subscription
amount. As of November 30, 2022, the scheme had enrolled 8.6 lakh subscribers with a
subscription amount of 84,659.4 crore.
The introduction ofthese schemes would make it easier for Indians with
lower and lower-middle income levels to take advantage of the new insurances reduced
premiums. The growth of the insurance industry is also projected to be supported by
regulatory changes and digitalisation.
state of affairs of Indian life insurance SECToR
One of the coveted sectors in India that is expanding quickly is life
insurance. Growing earnings and more industry awareness are the catalysts for the life
insurance sectors favourable expansion in India. Insurance penetration in the life
insurance market was 3.2% in 2021, which is slightly higher than the worldwide average and
twice as high as that of developing nations.
Penetration and Density of |
Life Insurance in India |
| Particulars |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
| Life Insurance
Penetration (in %) |
3.17 |
3.10 |
2.60 |
2.72 |
2.72 |
2.76 |
2.74 |
2.82 |
3.20 |
3.20 |
| Life Insurance
Density (In $) |
42.7 |
41.0 |
44.0 |
43.2 |
46.5 |
55.0 |
55.0 |
58.0 |
59.0 |
69 |
The Indian life insurance market has witnessed a number of changes in
terms of new innovations, altered laws, amendment suggestions, and growth in the last few
fiscals. These advances have created new growth opportunities for the sector while
ensuring that insurers remain relevant in light of modern technological advancements and
societal changes. Interesting to note is that in FY 2023, the first-year premium numbers
grew by 179% vs. the 12.9% growth reported in FY 2022, per a recent CARE Ratings Report.
The report also mentioned that the FY 2023 growth can continue to be attributed primarily
to group single premiums and more specifically to LIC and a low base, which saw subdued
levels due to the pandemic-induced (Covid-19 second wave) lockdowns. Meanwhile, private
insurance companies continue to extend their lead in the individual nonsinge premium
segment. Private insurance companies have continued their growth momentum as the fiscal
year closed (tax saving options) and non-par policies to high-net-worth individuals were
pushed aggressively prior to new taxation regime kicked in beginning April 2023.
| SUM ASSURED BY LIFE INSURERS |
|
|
|
| Insurer |
Sum assured
in (in f crore) |
|
Growth (%) |
|
FY 22 |
FY 2023 |
|
| Private sector |
4730780.36 |
6042628.06 |
27.73 |
| LIC |
1040479.57 |
1237475.12 |
18.93 |
| Total |
5771259.93 |
7280103.18 |
26.14 |
According to the Life Insurance Council, the private life insurance
industry in India demonstrated robust premium growth of 35% in March 2023. Furthermore,
the overall premium growth for FY 2023 was impressive, experiencing a significant increase
of 20%. The upsurge in demand for life insurance policies was predominantly observed
towards the conclusion of the financial year, with the private life insurance sector
emerging as the prominent beneficiary.
Life Insurance Corporation (LIC) of India had a lacklustre performance
with a significant reduction in premiums despite being the largest life insurer in India.
In March 2023, LIC witnessed a substantial 32% reduction in premium as compared to
previous month, and the premium growth for FY 2023 was limited to only 17%. Furthermore,
the retail annualised premium equivalent (APE) for LIC in March 2023 showed only a modest
growth of 10%.
Despite LICs underwhelming performance, the private life insurance
industry experienced a remarkable surge in premiums, contributing positively to the
overall figures. In March 2023, the retail annualised premium equivalent (APE) for the
private life insurance industry achieved an impressive annual growth rate of 56%,
resulting in overall premium growth of 13%.2
This substantial growth in premiums for the private life insurance
industry in March 2023 and throughout FY 2023 reflects an increasing awareness among the
Indian population regarding the significance of life insurance. As the industry continues
to prioritise digitisation and innovation, it is poised to witness further expansion in
the future3.
Despite LICs underwhelming performance, the private life insurance
industry experienced a remarkable surge in premiums, contributing positively to the
overall figures. In March 2023, the retail annualised premium equivalent (APE) for the
private life insurance industry achieved an impressive annual growth rate of 56%,
resulting in overall premium growth of 13%.
CORPORATE DEVELOPMENTS
Max Financial Services Limited (MFSL or the Company), a part of the
$4-Bn Max Group, is the holding company for Max Life Insurance Company Limited (Max Life).
It owns and actively manages an 870% majority stake in Max Life - Indias largest non-bank
owned, private life insurance company. On April 6, 2021, Axis Bank Limited, Indias
third-largest private sector bank, together with its subsidiaries
Axis Capital Limited and Axis Securities Limited (collectively referred
to as "Axis Entities") became the co-promoters of Max Life. This was after
completion of the acquisition of a 12% stake collectively by the Axis Entities in Max Life
till March 31, 2022.
Subsequently, on January 9, 2023 the Company has executed revised
agreements with the parties in terms of which Axis Entities have the right to purchase the
balance 7% equity stake of Max Life from the Company at Fair Market Value using Discounted
Cash Flows instead of valuation as per Rule 11UA of the Income Tax Rules, 1962. This
revision has been done consequent to the guidance received by Max Life from IRDAI. This
development resulted in a mutually beneficial and enduring relationship between Axis Bank
and Max Life. It further solidifies Max Lifes decade-long relationship with Axis Bank,
providing long-term saving and protection products to over 2.5 million customers over
3,81,900 crore worth of sum assured to cover their risks (as of 31 March 2023). This
relationship will permanently address uncertainty around Max Lifes distribution and
improve its position amongst its peers
During FY 2022, Max Life had filed an application for approval with
IRDAI for acquisition of 99,136,573 equity shares constituting 5.17% equity stake in Max
Life (balance shares held by MSI) by the Company under MSI Put/Call option. The Company
had received approval from Insurance Regulatory and Development Authority of India
(IRDAI) vide its letter dated November 25, 2022. Pursuant to the approval, on December
8, 2022, the Company acquired residual 5.17% equity stake held by MSI in Max Life at a
price of 85 per share. On acquisition of the aforesaid stake in Max Life, the
shareholding held by the Company in Max Life increased to 87%.
BUSINESS PERFORMANCE
MFSL reported consolidated revenues of 31,431 crore, grew 1% mainly
due to lower investment income, excluding investment income, consolidated revenues grew
13% in FY 2023. Consolidated Profit after Tax (PAT) stood at 452 crore, grew 42% in FY
2023.
In FY 2023, Max Life grew by 11%, ranking fifth in the industry. During
the year, the total new business premium (First Year Premium and Single Premium) of Max
Life increased by 13% to 8,960 crore. In terms of adjusted individual first year premium,
your Company recorded a 11% growth to 6,025 crore. Further, the renewal premium income
(including group) grew by 13% to 16,382 crore, taking gross written premium to 25,342
crore, an increase of 13% over the previous financial year. Max Life generated a posttax
shareholders profit of 435 crore in FY 2023, as compared to 387 crore in the previous
financial year, recording an increase of 12%. The net worth increased from 3,064 crore in
FY 2022 to 3,505 crore in FY 2023, a growth of 11%.
Proprietary channels registered highest ever growth of 43% in FY 2023,
new business premium grew to 2,176 crore, driven by secular growth across all channels
i.e. online (ecommerce), agency, direct selling teams. Proprietary channels contribution
to individual sales increased from 28% in FY 22 to 36% in FY 23. Max Life strengthened its
retirement offering with the launch of regular pay annuity variant, annuity sales grew by
300%, in FY 2023 on APE basis.
Max Life generated a posttax shareholders profit of 435 crore in FY
2023, as compared to 387 crore in the previous financial year, recording an increase of
12%. The net worth increased from 3,064 crore in FY 2022 to 3,505 crore in FY 2023, a
growth of 11%.
Max Lifes assets under management (AUM) were 1,22,857 crore as on
March 31, 2023, a rise of 14% over the previous year.
Max Life achieved the highest New Business Margin (NBM) of 31.2% in FY
2023, improved by 380 bps over corresponding previous period. Value of New Business (VNB)
grew at 28% to 1,949 crore in FY 2023. Max Life reported an Embedded Value of 16,263
crore, while the Operating Return on EV (RoEV) improved by 290 bps to 22.1% year-on-year.
Max Life has secured 4 new banca partnerships with DCB Bank, Tamilnad
Mercantile Bank, Ujjivan Small Finance Bank, Capital Small Finance Bank and 6 new renowned
Brokers in FY 2023.
Max Life Pension fund management (PFM) commenced operations in FY 2023,
AUM as at March 31, 2023 ~143 crore and also obtained a point of presence (POP) license
will aid mobilization of NPS funds.
Max Life has been recognised by a number of Indian and foreign business
bodies for its excellence in business, customer service and focus on people select
recognitions are Celent Model Insurer Award; ICAI for excellence in financial reporting
for FY 21-22; Awarded Excellence in driving distribution through Digital at the FICCI
Insurance industry awards 2022; Awarded Excellence in Claims service and Best product
innovation for SFRD at World BFSI Congress and awards
HUMAN RESOURCES
Max Life believes that the employees overall wellbeing represents the
core of the business. It aspires to empower employees and enrich their careers by
providing various opportunities to upskill them, develop an inclusive work environment and
evaluate their performance for continuous improvement. Max Life enables a seamless flow of
communication and further motivates them to perform better.
Our progressive policies and practices, a value- driven culture and
inspirational leadership have helped us attract, engage and retain key talent. By
advancing employees competencies and skill sets through various initiatives, we bring
value at every stage of the employee life-cycle, which benefits both the organisations
productivity and the individual employees motivation and encouragement.
SETTLEMENT OF CLAIMS
Prompt settlement of death claims is the most important promise a life
insurer makes while selling a life insurance policy. A timely and hassle-free claim
settlement is the most important moment of truth for the life insured and life insurer
relationship. We endeavour to keep promises and keep dreams alive at the time of the
customers utmost need by paying death claims within one day for eligible policies.
Max Life has paid in-total 19,563 death claims worth 1,242 crore
during FY 2023. Since its inception, Max Life Insurance has paid 7,375 crore towards
death claims on 1,83,261 policies. With the InstaClaim™ initiative for our vintage
policyholders (i.e., policies that have been in force for at least 3 continuous years with
us), your Company endeavours to provide death claim payment within one day. Currently, 56%
of claims are settled in a day and this number is expected to increase materially with our
relentless customer obsession to be provide financial security to our customers when it
matters the most.
Long-term customer retention is of critical importance in creating a
win-win for customers, distributors, and your Company. Ongoing improvements in our
structural solutions and services to improve persistence are one of the key focus areas
for your Company. In FY 2023, the 13th-month persistency of Max Life Insurance was at
84.1% (Premium) and the 61st-month persistency stood at 51% (Cumulative, Premium).
The Company also tracked performance on customer engagement and
satisfaction through Net Promoter Score (NPS) across key customer touchpoints During FY
2023, your Company witnessed an improvement of 3 points (+6%) in the NPS scores to 52.
Further, our transactional NPS reflecting the satisfaction of our customers at key
touchpoints increased from 66 to 69, another reflection of your companys obsession to
better serve our customers.
OUTLOOK
Indias insurance sector is experiencing rapid growth and is
well-positioned to become the worlds sixth largest by 2032. The total premiums in nominal
local currency are estimated to witness a surge of an average of 14% annually over the
next ten years, with a real-term growth rate of 9% each year. The life insurance segment
is anticipated to register 9% annual growth (in real terms) by 2032, making India the
fifth largest life insurance market worldwide. The pandemic has raised awareness of the
need for life insurance, resulting in greater demand. Additionally, regulatory
developments and the adoption of digital technologies are expected to boost the growth of
the insurance sector in India. These measures, accompanied by an increase in the FDI limit
for insurance companies, are likely to expedite an increased flow of long-term capital,
global technology, processes and international best practices, which will bolster the
growth of Indias insurance sector.
Max Life creates a three-year strategy and reviews it periodically.
With Axis Bank becoming a co-promoter of Max Life in FY 2022, the Companys management
team decided to chart a new growth trajectory by combining the forces of the third largest
private bank in India with the fourth largest private life insurer. The management team
undertook a detailed review of the market landscape and opportunities to redefine our
growth ambitions and sharpen our strategic framework to drive consistent and profitable
growth.
As a part of a three-year business plan for FY24- 26, Max Life
redefined the comprehensive strategic framework around five key elements and will remain
focus on Sustainable and Profitable Growth, Product innovation to drive margins, Customer
centricity, Digitization and Human Capital.
MFSL and Max Life are committed to ensure financial protection of the
larger community by leading with agility and transitioning the business processes onto
digital channels to promptly provide life insurance solutions and service to the
customers. Consumer receptiveness is driving digital adoption in the industry by
demonstrating their comfort in engaging through online channels.
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