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					                                 Ferma Risk Management Forum 2009
                                 Prague, 4-7 October




Aon Global Insurance Brokers Pvt. Ltd


  Emerging Insurance Markets - India Spotlight


                              Grant Elliott - CEO


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                                           Ferma Risk Management Forum 2009
                                           Prague, 4-7 October



                  Introduction
• Brief History /Timeline of the Non-Life Insurance Industry in
  India up to 2009
• About Indian Economy
• Current Scenario
• Future Trends
• Conclusion




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                          Ferma Risk Management Forum 2009
                          Prague, 4-7 October




A Brief History /Timeline of Non-Life
    Insurance Industry of India




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                                                                                                    Ferma Risk Management Forum 2009
                                                                                                    Prague, 4-7 October


    1850
              Indian Insurance Timeline
                                 1866
                                                               1907              1938            1947
     Triton Ins. Co. Ltd.                                Indian                  Insurance
                                Companies Act                                                    Independence
                                                         Mercantile Ins.         Act passed
                                                         Co.
                                                                                                                     Insurance Act
                                               Colonial Era                                                                               1950
                                                                                                                     amended to set
                                                                                                                     up Tariff
                                                                                                                     Committee

                                                                                                                 Tariff Advisory
                                                                                                                 Committee (TAC)             1968
                                                                                                                 replaced Tariff
                                                                                                                 Committee by statute




                                                                                                   1972
                                                                                    1994
                                                               1999                                General Ins. in
                                                                                 Malhotra          India fully
                                                       The Insurance             Committee         nationalised
                                  2000                 Regulatory and            Report.
                            Licenses                   Development               Privatisation
                            granted to Pvt.            Authority Act             recommended
                            Cos.                       was passed
       2002
Ins. (Amendment)
Act for Brokers

                                                                         Liberalisation/Detariffication Era


                                                                                                                                        To date
                                      2003                                2007                       2008
                                                                                                                              Limited addl. Covers
                                                                                              Jan: Discount cap
                                  13 Non Life insurers incl.          Detariffication                                         approved by IRDA
                                                                                              removed; wordings as per
                                  8 Pvt. (most with foreign           phase – rate only,
                                                                                              Tariff
                                  ownership)                          wordings as per
                                                                                              Nov: Add on covers
                                                                      Tariff
                                                                                              allowed
                                                          Ferma Risk Management Forum 2009
                                                          Prague, 4-7 October




                             About India

India is a developing country but it is a developed country as far as its intellectual
infrastructure is concerned. We get the highest intellectual capital per dollar here.

                                                       John Welch, Former CEO, GE




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                                                                     Ferma Risk Management Forum 2009
                                                                     Prague, 4-7 October


                    Macro-Economic Outlook
 Demographic outlook – Population Age
 Young population – A Demographic Dividend

   Population           2001        2006                   2011       2016              India’s
Total (Million)      1,027     1,114                1,194         1,268                 demographic
Age Group (Years)               Population Percentage                                   mix is
0–14                 35.6%     32.5%                29.7%         27.1%                 shifting
15–59                58.2%     60.4%                62.5%         64.0%                 towards the
60+                  6.2%      7.1%                 7.8%          8.9%                  15–59 years
                                                                                        age group
   Population of India as on July 2009 - 1,150,000,000

   India ranks first in the availability of qualified engineers in the labour market.

   The country adds about 500,000 engineers and science graduates every year
   out of which 35% are Computer Engineers.

   India has world-class institutes, such as Indian Institutes of Technology (IITs),
   Indian Institutes of Management (IIMs) and Indian Institute of Sciences (IISc).
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                                                                                                                            Ferma Risk Management Forum 2009
                                                                                                                            Prague, 4-7 October


                                 Macro-Economic Outlook
             Demographic outlook – Population Age
                 Population Median Age (in years): 2008E1
                                                                                       Young population (under 25) accounts for
        45
                                                                                       about 50 per cent of India’s total population.
        36

        27
                                                                                       India’s urban population accounted for 29 per
Years




                                                               44
                                                  38
        18
               25
                          34          37
                                                                                       cent of the entire population in 2007. It is
         9                                                                             projected to reach 37.8 per cent by 2025.
         0
              India      China        US        Russia        Japan
                                                                                                Growth in Working Age Population (15–64 years) by 2010 (in million)
        India is expected to register the largest                                            Stock
                                                                                            Position
        addition to the working age population in                                            2005                            Additions to Working Age Population by
                                                                                                                                              2010
        the world by 2010.                                                    World          4,168
                                                                                                                                                                            314

                                                                              India                                               71
                                                                                              691
                                                                                                                                 64
        India is expected to be powered by the                                Africa          500
                                                                                                                            44
                                                                              China           934
        largest working age population worldwide                          South East Asia     362                      33

        by 2050.                                                           Latin America      359                      31
                                                                                                                  17
                                                                           Southern Asia      132
                                                                                              200                10
        India’s labour costs, as a percentage of                              US
                                                                             Europe           497            0
        value added, are one of the lowest among                             Japan             85      -3

        Asian countries.                                                                                -5             45              95   145       195      245    295         345

                                                                                                                                              In million


 As on Feb, 2009 - Sources: 1.CIA      2. Internatioanl Herald Tibune 3. United Natons Statesics 4. India Brand Equity Foundation
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                                                                                                             Ferma Risk Management Forum 2009
                                                                                                             Prague, 4-7 October


                           Macro-Economic Outlook
     Demographic outlook – Changing Lifestyles
                                       2005 E                                          2015 F                                  2025 F
Household
income brackets                                                        Number of Households, (in million)

   Globals                               1.2                                           3.3                                        9.5

   Strivers                               2.4                                                5.5                                        33.1

   Seekers                                 10.9                                                    55.1                                              94.9

   Aspirers                                               91.3                                               106                                     93.1

   Deprived                                                  101.1                                    74.1                                   49.9


                                                          Aggregate disposable income–2000 (in USD billion)

   Globals                                      40                                                   126                                             434

   Strivers                                       32                                               76                                            418

   Seekers                                           62                                                            304                                     612

   Aspirers                                                      228                                               292                         274

   Deprived                                            108                                              76                              52

              Middle Class

 Definition of household income brackets based on annual household income: Globals (more than USD 20,000), Strivers (USD
 10,000 to 20,000), Seekers (4,000 to 10,000), Aspirers (1,800 to 4,000), Deprived (less than 1800)                                             8
 Source: MGI
                                                                        Ferma Risk Management Forum 2009
                                                                        Prague, 4-7 October


                 Macro-Economic Outlook
Business in India – The Basics

                                 Business Opportunity in India

Domestic Market Opportunity            Off-shoring Opportunity                  Sourcing Opportunity

   Vast population                        Availability of skilled                 Availability of raw
   Increasing purchasing                  talent pool                             materials
   Power                                  Cost Savings                            Presence of strong
   Growing size of middle                 Knowledge/R&D hub                       industry infrastructure
   and higher consumer                                                            Developed technology
   class                                                                          Cost savings




                       Penetrating domestic markets and leveraging India’s presence




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                                                                                      Ferma Risk Management Forum 2009
                                                                                      Prague, 4-7 October


                         Corruption - Perception
•       Corruption Perception Index 2008 – India scores 3.4 (85th out of 180
        countries)
•       Introduction of Competition commission
•       Competition Act 2002
                          2007
                          2009 fully operational
                          » Ability to Investigate
                          » Impose penalties
                          » Jail Offender

•      As per Bribe Paying Index 2008- India Scores 6.8 (19th out of 22
      countries)

    Source : Transparency International's Global Corruption Report 2009, Berlin, Germany
             Ferma Risk Management Forum 2009
             Prague, 4-7 October




Current Scenario




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                                                                      Ferma Risk Management Forum 2009
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Regulation in Indian Insurance Industry
•   File and use guidelines – All policies need to be filed with and approved by IRDA before
    being sold in the market
•   Locally admitted Insurance :
     – Only admitted insurances allowed
     – Non-admitted insurances allowed with IRDA permission only if the India insurers
         do not have the product
•   Tax – Premium Tax stands at 10.30%. Marine Cargo, Personal Accident and Healthcare
    are exempted.
•   Cash Before Cover - Premium has to be received by the insurer before going on risk
•   Reinsurance – Obligatory Cession to Indian Reinsurer GIC is 10%
•   Mandatory/Obligatory Covers –
          »   Motor Third Party Liability
          »   Public Liability Act Policy
          »   Stock Brokers Indemnity Policy
          »   Errors and Omission for Insurance Brokers
          »   Mutual Fund Asset Management (MFAM) /Investment Management Insurance (IMI)


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                                                                                                                      Ferma Risk Management Forum 2009
                                                                                                                      Prague, 4-7 October



 Year Wise Growth of Private Insurers
                              25
                                                                                                                           21
                                                                                                                 20
     Number of Pvt. Insuers




                              20
                                                                                                       17
                                                                                              15                      15        15
                              15                                                     14
                                                                     13                                     13
                                                   12       12
                                          10                                                                                         Life Insurers
                              10                        9        9        9               9        9

                                               6                                                                                     Non- Life Insuers
                               5   3 3


                               0
                                   2000   2001     2002     2003     2004            2005     2006     2007      2008      2009
                                                                              Year


As on date there are about 21 Life and 15 Non-Life Insurers (Private) operating in India.
                                                                                     Ferma Risk Management Forum 2009
                                                                                     Prague, 4-7 October



Non-Life Insurance Premium from 2002-03 till July 2009

                                     Currency – USD millions
                           PSU Insurer      Pvt Insurer        Total     % of PSU u/w in                % of Pvt u/w in
        Year              premium u/w Premium u/w            Premium      Total Premium                 Total Premium
  2002-03                          2,853               270         3,123             91%                               9%
  2003-04                          3,020               452         3,471             87%                             13%
  2004-05                          3,203               702         3,904             82%                             18%
  2005-06                          3,422             1,072         4,494             76%                             24%
  2006-07                          3,693             1,734         5,427             68%                             32%
  2007-08                          3,680             2,281         5,961             62%                             38%
  2008-09                          3,916             2,627         6,542             60%                             40%
  2009-10 upto July
  2009                               1,521               1,039            2,559                 59%                     41%


Note: PSU Insurer includes (a) National Insurance (b) The New India Assurance (c) The Oriental Insurance Co. (d) United India
Insurance (e) Agricultural Insurance Co. ( f) Export Credit Guarantee Corporate (ECGC)

• Non-life’s contribution towards India’s GDP has been at 0.6 per cent for the last
  nine years.
                                                                                                          (Source – IRDA Journal)


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                 Ferma Risk Management Forum 2009
                 Prague, 4-7 October


Terrorism Risk - 2007

                  Jan. to Dec. 2007: 359 incidents




                  Source – Terrorism tracker report



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                 Ferma Risk Management Forum 2009
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Terrorism Risk - 2008

                     Jan. to Dec. 2008: 312 incidents




                     Source – Terrorism tracker report




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                 Ferma Risk Management Forum 2009
                 Prague, 4-7 October


Terrorism Risk - 2009

                        Jan. to Sep. 2009:
                        260 incidents




                         Source – Terrorism tracker report




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                                             Ferma Risk Management Forum 2009
                                             Prague, 4-7 October


Why Captives are not operating in India
• There is no relevant legislation and as far as is known none is
  planned.
• Government has no plans to introduce legislations or create
  tax environment to encourage their establishment
• Insurance is managed in house mostly by Finance Division
  rather than Risk Manager whose focus is on reduction in cost
  rather than focusing on risks.
• Post detariffing, Insured gets competitive rates from Insurers.



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           Ferma Risk Management Forum 2009
           Prague, 4-7 October




Future Trends




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Non-Life Insurance costs likely to increase

• Direct Tax Code (DTC) - New Tax on Investment Income - 30% Short term.
  10% on Long Term
• Non-Life industry analysis -

                                         Currency – USD million
    Year             Underwriting Loss     Investment Income      Net effect

    2008-09          -944.6                1,161.2                216.6
•     Insurance Companies’ other major concerns are
       » Tax Deducted at Source (TDS) – 40% increase in reinsurance cost.
       » Tax reserves for unexpired risks.
                        Ferma Risk Management Forum 2009
                        Prague, 4-7 October

The Economist Intelligence Unit Survey
of Sept. 2008
                         Where in India is your
                         company operating today,
                         and where do you expect
                         to have operations within
                         the next ten years?




               Source – Report on Tomorrow’s market by UK Trade
               and Investments written in co-operation with the
               Economist Intelligence Unit.


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                                     Ferma Risk Management Forum 2009
                                     Prague, 4-7 October


        Corporate Governance

• Satyam – USD 2 billion fraud
   » Changed view of both Security Exchange Board of
     India (SEBI) and Boards to potential risks.
   » Enhanced awareness – Training
   » Corporate Governance best practise in India?


                                      Source - Insurance Post



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                                                        Ferma Risk Management Forum 2009
                                                        Prague, 4-7 October



                                         Growth Areas
                             Oil & Gas

                             Power

                             Infrastructure

                             Telecommunications

                             Healthcare

                             Tourism & Hospitality

                             Media and Entertainment




Source – India Brand Equity Resources 2009                                          23
                                                 Ferma Risk Management Forum 2009
                                                 Prague, 4-7 October

                         Conclusion
• World’s largest Democracy
• Huge qualified and growing workforce
• Low cost environment – and showing little sign of changing
• Mature and recognisable Legal and Regulatory Infrastructure
• Non Litigious environment
• Raw Materials availability
• Insurance
   » Competition – Public and Private
   » Capacity – enough for most needs
   » Continuously developing – Foreign Direct Investment (FDI)
• Risk Management awareness
• ERM – Services
       – Tools
• Language – English
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                                           Ferma Risk Management Forum 2009
                                           Prague, 4-7 October



                  Introduction
• Brief History /Timeline of the Non-Life Insurance Industry in
  India up to 2009
• About Indian Economy
• Current Scenario
• Future Trends
• Conclusion




                                                                       25
                           Ferma Risk Management Forum 2009
                           Prague, 4-7 October




View of a 12 year old child about Indian
Culture - Homework !




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                                                       Ferma Risk Management Forum 2009
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What is Culture and observation of Indian Culture?

  •   Culture is what people wear, what people eat, their religion, their
      behavior, their language, what they drink and in other words what
      makes people different.
  •   Observations
      »   Colourful bright clothes made of silks and other amazing materials
      »   Prefer spicy food. Spices includes peppers, turmeric and masala.
      »   Different Languages - Marathi, Hindi, Gujarati, Tamil, Punjabi, etc.
      »   Different religions includes Zoroastrianism (Parsi), Hinduism, Islam
          (Muslim), Christianity, Sikhs. The biggest of which is Hinduism.
      »   Begging on the street is one of the most saddest part of India
      »   The spitting on the street is because they chew paan and this paan is
          not edible so they have to spit it out on the street.
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                                               Ferma Risk Management Forum 2009
                                               Prague, 4-7 October




“Culture is the sum of all the forms of art, of love, and of
thought, which, in the course of centuries, have enabled man to
be less enslaved”

                                            -Andre Malraux quotes




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                                 Ferma Risk Management Forum 2009
                                 Prague, 4-7 October




Aon Global Insurance Brokers Pvt. Ltd


  Emerging Insurance Markets - India Spotlight
                  Thank You

                              Grant Elliott - CEO


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                                                       Ferma Risk Management Forum 2009
                                                       Prague, 4-7 October


                      Current Scenario
• About 273 brokers currently operating in India (includes small
  and mid-sized brokers
• Rating trends
   – Up to 92% discount on tariff lines.
   – Survival of fittest
• IRDA guidelines for Social and Rural Sectors stipulates:
   – Rural
       Life    2002-03       7%          Non-Life   2002-03   2%
               2009-10       25%                    2009-10   7%

    – Social
        » Life – 2 million lives per insurer
        » Non Life – 10% growth per annum
                                                       Ferma Risk Management Forum 2009
                                                       Prague, 4-7 October


               Current Scenario                                             (cont)




• The Insurance Laws (Amendment) Bill, 2008 to the Standing
  Committee on Finance for examination in July 2008.
   a)   Increasing Foreign Direct Investment (FDI) from 26% to 49% and
        maintain cooperative societies at 26%

   b) Allows for nationalised general insurance companies to raise funds
      from the capital markets

   c)   The Bill seeks to facilitate the entry of Lloyd’s India JV with Indian
        partner and also as a branch of foreign re-insurer.

   d) Enhance penalties, etc..
                                     But not yet passed …….
                                                          Ferma Risk Management Forum 2009
                                                          Prague, 4-7 October



                              Who am I
• British – By accident of Birth
• Involved with Indian business from the UK, for nearly 20 years
• Travelled extensively to the country, during that time meeting
    – Insurers
                 » State
                 » Private
    – Clients
• Took over role of CEO in April, 2009
• Since, travelled to
    –   Bangalore                 –   Ahmedabad
    –   Chennai                   –   London
    –   Delhi                     –   Hong Kong
    –   Hyderabad                 –   and Goa!



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                                                            Ferma Risk Management Forum 2009
                                                            Prague, 4-7 October


Aon Global Insurance Brokers Pvt. Ltd.
•   The J.V. company was formed in 2003
•   A partnership between Aon and Global Insurance Services, Global being a company owned by
    my old friend, Mr. Prabodh Thakker, who is now Chairman of AGIB
•   Operate in the key centres of
            – Mumbai
            – Chennai
            – Delhi
            – Bangalore
            – Pune
            – Kolkata
            – Baroda
            – Ahmedabad
            – Hyderabad
•   Provide the full suite of Insurance services, ranging from Energy to Employee Benefits,
    Aviation to Auto manufacturer, Risk Consultancy to Risk Transfer.
•   We are regulated by IRDA (Insurance Regulatory and Development Authority)

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