Insurance body working on common market wording

New Delhi, June 28 The General Insurance Council, a self-regulatory body of all general insurance companies, along with general insurance companies is working on developing a common market wording. The council hopes to complete the formalities by September end and submit it to the Insurance Regulatory and Development Authority (IRDA) for approval.
The IRDA after a meeting with general insurance companies in Hyderabad on June 11 had asked the non-life companies to finalise a common market wording so that it could decide on considering advancing the second phase of detariffing from April 2008 to January 2008. Market wordings is a document which contains all the policy terms and conditions.
“We are working on developing the common market wording and are likely to submit it to the IRDA by September end. After which it would be up to the regulator as to when the date for introducing the second phase of detariffing would be notified,” Mr K.N. Bhandari, Secretary General of the General Insurance Council, told Business Line.
He added that it would take at least 90 days for the regulator to go through the document and suggest if any changes are required.
Explaining the importance of developing the common wording, Mr Bhandari said: “If total freedom is allowed, then each of the 12 companies might have different ways of wording the policy terms and conditions which might create confusion among the customers. In order to avoid such a scenario, the IRDA has suggested that there should be a common market wording that all the companies have to use.”

No timeframe
Meanwhile, Mr C.S. Rao, Chairman of the Insurance Regulatory and Development Authority, said that they have not set any timeframe for the companies to develop the market wording.
“After the meeting I told the representative of the various companies to come back once they are ready with the document. After the submission it might take at least two to three months for us to go through the contents. Only after this we will be able to decide if the second phase of detariffing can be advanced as requested by the general insurance companies,” Mr Rao said. The Chairman also said that insurers will have to identify the revised terms and conditions, flexibility needed in terms of packaging of insurance products, and alternative wordings in respect of certain areas. “However, in certain conditions there will be no changes in terms and conditions and the interests of the insured will be protected. The initiative has to come from the insurance companies,” Mr Rao said.
Insurance companies also feel that there should be competition on product innovation and packaging of products.

Limiting competition
“At the moment the limitations by the regulator is restricting competition. So what we are asking the IRDA is to do away with the restrictions and allow companies the freedom to rate the policies based on their perception of risks so that the benefits of competition may be enjoyed by the customer,” a company official said.
In the first phase of detariffing, which came into affect from January 1 this year, the IRDA had given freedom to insurance companies to fix premium rates. In the second phase, once the regulatory clearances are obtained, companies will be able to customise products for individual clients.

Source: The Hindu Business Line

Global reinsurers fail in meeting Fac Re contracts

Bangalore June 25 Faced with reinsurers defaulting in meeting claims, non-life insurers are confronted with the first major challenge since the deregulation of the industry.
Highly placed sources said that some global reinsurers had failed to entertain claims made by the primary insurers. This was especially in the case of non-treaty Facultative Reinsurance arrangements. The amount involved is estimated at around Rs 750 crore among all the non-life insurers.
Non-life insurers have entered into Facultative/Excess of loss reinsurance arrangements with some of the East Asian reinsurers. This was over and above their treaty arrangements with national reinsurers and global reinsurers.

Treaty arrangements
In treaty arrangements, the primary insurer cedes a certain percentage of the liabilities of business and the reinsurer is obliged to make good the claims as and when they arise. Facultative Reinsurance (Fac Re) is entered for specific risks that are not covered by treaties. Fac Re is an arrangement where ceding insurers offers individual risks to a reinsurer, who has the right to accept or reject each risk. Excess of loss reinsurance is done for only the portion that is not covered by the treaty reinsurance.
The sources said that most of the Fac Re contracts were placed through international reinsurance brokers. However, the sources added that the brokers had failed to respond for meeting the claims settlements. In fact, some of the primary insurers have approached the Insurance Regulatory and Development Authority (IRDA) for intervention.
But the IRDA Chairman, Mr C.S. Rao, said: "There is no question of our intervention at this juncture. This is an issue to be settled by the insurers and their customers."
However, Mr Rao made it clear, that irrespective of the reinsurers failing to settle claims, primary insurers would be expected to meet their obligations to policyholders.
Consequently insurers would have to take a hit on their own respective balance sheets for claims settlements.
Non-receipt of reinsurance claims would have to be provisioned and treated as bad assets in the balance sheets of the private sector insurers. This would though substantially damage solvency margins. Insurers are currently expected to maintain a solvency margin (the excess of value of assets and capital in excess of the insured liabilities) of 150 per cent.
The sources said that such a situation was taking place when reforms in the sector were entering the second phase. Private sector insurers have focused on building business, and ceding the same to overseas reinsurers in a bid to take advantage of high commissions and build high toplines. The commission till last year were as high as 40 per cent, though this has now declined to less than half.
Besides the major global reinsurers are unwilling to accept all the post deregulation tariffs and accordingly have opted to cherry pick. This has prompted private sector insurers to increasingly shift to second rung companies in East Asia, through intermediaries for complying with solvency.

Source: The Hindu Business Line

FIPB may review ICICI holding co proposal

Three days after it rejected ICICI Bank’s proposal to divest 24 per cent in ICICI Financial Services, the holding company for the bank’s insurance joint ventures, the Foreign Investment Promotion Board is likely to review the case again after the bank submits a fresh application.

ICICI Bank Group Head Strategy and Communications Officer Kalpana Morparia today met Department of Economic Affairs Secretary D Subbarao, who heads the board.

When asked if there could be a rethink on ICICI Bank’s proposal, a source said, “That option is always open.”

The board had rejected ICICI Bank’s proposal to divest 24 per cent stake in ICICI Financial Services in favour of foreign investors as a subsidiary could not take part in insurance business, the source said.

Regulation 2(g)(i) of the IRDA regulations said “Indian promoter” meant a company formed under the Companies Act, 1956 (1 of 1956), which was not a subsidiary as defined in section 4 of that Act, the source added.

The IRDA has backed ICICI Bank’s proposal to set up a holding company for its insurance ventures, saying for all practical purposes the parent bank will remain the promoter of the insurance ventures.

Morparia is learnt to have carried to her meetings a certificate from the IRDA that the bank will continue to be the promoter of ICICI Prudential Life Insurance and ICICI Lombard General Insurance even with the existence of the holding company.

Source: Business Standard/Anindita Dey / Mumbai June 26, 2007

`Insurance biz size may touch $60 b by 2010'

New Delhi June 21 The size of the insurance business will jump six times to reach $60 billion by 2010 from the current size of around $10 billion, according to industry chamber Assocham.
The projections are based on the feedback the chamber received from its constituents engaged in the insurance business.
The country's life insurance premium as a percentage of GDP is currently estimated at 1.8 per cent against 5.2 per cent in the US, 6.5 per cent in the UK and about eight per cent in South Korea.

Rural, semi-urban sectors
Rural and semi-urban India will contribute $35 billion to the insurance industry by 2010, including $20 billion by way of life insurance and the rest through non-life insurance schemes.
Urban sector insurance is estimated to reach $25 billion by 2010, life insurance $15 billion and non-life insurance $10 billion, according to the chamber.

Big avenues

The rural market offers tremendous growth opportunities for insurance companies.
The chamber found that there are a total 124 million rural households. Nearly 20 per cent of all farmers in rural India own Kissan Credit cards. The 25 million credit cards used till date offer a huge database and opportunity for insurance companies.

Source: Bureau, The Hindu Business Line

Report - India 2010: A Lloyd's View (June 2007)

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Howden plans cover for human lab tests

India now attracts hundreds of clinical research service projects from both domestic and multinational drug makers

Howden Insurance Brokers India Pvt. Ltd, the Indian broking arm of the London-based Hyperion Insurance Group, is extending its services to the Indian clinical research services sector, trying to capitalize on a fast-emerging opportunity.
India now attracts hundreds of clinical research service projects from both domestic and multinational drug makers and contract research organizations (CROs) because of its cost advantages, availability of a varied genetic pool of subjects and a growing pharmaceuticals market.
At the same time, the high risk due to involvement of human subjects for testing new drugs has still not been brought under a foolproof monitoring system even as the regulator gets about 30 applications a month for new drug trials.
A clinical trial insurance will cover the risk of any legal liability arising out of physical injury, death or any harm caused to the health of the subject. According to industry analysts, Howden is the first insurance broking company looking at this opportunity in India.
In India, many players, including the four state-owned general insurance firms and a few private sector ones such as Bajaj Allianz General Insurance Co. Ltd and Cholamandalam General Insurance Co. Ltd , are ready to offer policies for clinical trials.
In most cases, these companies are going for re-insurance with international insurance firms as claims could possibly be huge.
As an insurance brokerage firm, Howden’s role will be to identify the suitable risk cover offered by the insurers looking at the nature of trials, number of human volunteers required for the trials, the capability of CROs, risk nature of the drugs under test, etc. A right risk analysis and a project-long follow-up by the broking firm would also help both the parties settle claims in the event of mishaps and litigations.
“The entry of globally experienced clinical trial insurance players into India will also help developing the right regulatory framework for this sector. In the recent past, litigations against clinical trials has increased manifold. CROs and their sponsors are sued for lack of care and negligence by human subjects for bodily injury and even death,” says Arun Bhatt, president, ClinInvent Research Pvt. Ltd, a local CRO.
“Clinical research is one of the areas which our group has expertise in. Since India is emerging as a preferred global destination for clinical trials, this is the right time to enter this space,” says Anup K. Mathur, vice-president (corporate business division) Howden India.
“Initially, we are not looking at expanding our topline by entering this sector. But it is more of an experimentation phase now in India and also a service to this high-risk sector,” adds Mathur.
According to him, insurance companies were not coming forward in the absence of a proper legal framework pertaining to clinical research, risk clauses of test subjects, recruitment procedures and compensation of volunteers.
“There is a need to create strong awareness about the possibilities of risk cover for all stakeholders, such as sponsors, CROs and the human volunteers,” Mathur adds.

Source: Mint

Insurer ordered to pay Rs1.6 lakh for repudiating claim

Consumer court says heart disease difficult to detect, does not qualify as pre-existing disease if claimant is unaware he suffers from it

New Delhi: The State Consumer Commission has pulled up an insurance company for denying mediclaim on the ground of “concealment of pre-existing ailment” and asked it to reimburse Rs1.61 lakh to a man who underwent cardiac surgery within days of purchasing the policy.
Terming the act as an example of “unfriendly approach”, the Commission headed by Justice J D Kapoor asked the National Insurance Company Ltd (NICL) to pay the amount, with interest, to the policy holder Raj Narayan in a month.
“Such an approach is not at all consumer friendly but is an approach accentuated and prompted by dubious design as to how to frustrate and reject the claim of consumer...,” the Commission said.
Denying its liability, NICL took refuge under the exclusion clause of the insurance policy which provided that mediclaims can be denied if it is proved the pre-existing disease was not disclosed by the insured at the time of purchasing the policy.
Heart disease is such an ailment which sometimes a person finds difficult to detect at first go, it said, adding “Unless a person is diagnosed and hospitalised for such a disease in the near proximity of obtaining insurance policy, he is not supposed to know as to from which disease he is suffering from”.
To expect a layman to come to the conclusion that he is having a heart disease merely because he feels chest pain or some other pain, was “too much,” the Commission said.
Narayan, a resident of Rohini in north-west Delhi here, was forced to undergo a heart surgery in July 1999 following his sudden illness and was denied reimbursement of Rs1.61 lakh incurred on his treatment.
Narayan, however, had challenged the repudiation of mediclaim, saying he had no history of any heart problem and hence, the stand taken by NICL was “unjustified and unfair”.
Making a strong remark on the structure of the proposal forms that are signed by the consumers in order to accept the terms and conditions of the policy, the Commission observed that no consumer was expected to understand these “micro printed terms running into pages”.
It has directed the NICL to pay Rs1.61 lakh towards reimbursement along with an interest of 10 per cent within a month to Narayan.

Source: PTI

Article: Distribution channels driving the insurance business in India

Distribution, mainly through insurance agents and banks, has emerged as the single most important factor driving the business of Indian life insurers

New Delhi: Eric B. Campbell recounts the tale with a smile. In 1976, a savvy insurance agent in the US discovered that Campbell was dating a girl, whom he would eventually marry, and pitched the need for a life insurance policy. Campbell succumbed and bought his first policy, one from New York Life.
Thirty-one years later, Campbell, now executive vice-president and chief distribution officer, New York Life International, Llc., visits India at regular intervals to sharpen the distribution network of the company’s joint venture, Max New York Life, and perhaps train his agents to be as savvy as the one who sold him his first policy.
Campbell’s visits to India come at a time when insurers’ premia are growing at a scorching pace. The annual report of the Insurance Regulatory and Development Authority (Irda) for 2005-06 said the industry’s premium collections in April-September 2006-07 grew by 162% year-on-year to Rs29,664.64 crore.
Distribution, mainly through insurance agents and banks, has emerged as the single most important factor driving the business of Indian life insurers. The complicated nature of an insurance policy has made the efficacy of distribution channels the key determinant in a company’s profitability.
“Insurance is sold, whereas a banking product is bought,” says U.S. Roy, managing director and chief executive officer of SBI Life Insurance Co. Ltd.
“Overall, the distribution channel is the primary deciding factor in customer choice. Trust takes a long time to build up,” he adds.
But once it does, it helps in a big way. “It is primarily the SBI brand which attracted me. I need not think twice, I know what SBI is,” says V. Amrithavarshini, a Chennai-based SBI Life customer who bought a policy last September.
SBI Life, where India’s largest bank State Bank of India (SBI) has a 74% equity stake and the balance is held by the French firm Cardif SA, broke even in March 2006, its the fourth year of operations, becoming the first private insurer to do so. SBI Life leveraged the 14,000-odd bank branches of its parent SBI to push insurance policies.
In India, penetration is very low, making distribution channels important, says Roy. India’s insurance penetration (gross premium as a percentage of gross domestic product) was 2.53% in 2005, against a global average of 4.34% the same year.
The distribution channels’ importance also puts them in a position to influence customer choice. “Most people do not understand insurance; what they understand is what is conveyed by distributors,”says Rahul Aggarwal, director, Optima Risk Management Services Ltd, which carries out broking in both life and non-life products.
The influence of distribution channels on customer choice holds the potential of partially neutralizing product innovations as they would push the product that is the flavour of the month.
For instance, unit-linked insurance products, which unlike traditional insurance products such as endowment policies, allow the customers to choose from one among the investment options offered by the company. Insurers offer equity investments as an option in unit-linked products, and in the wake of the boom in the stock market, these products are gaining market share.
Thanks to the bull run in the markets, distribution channels have been hawking these products regardless of the customer’s ability to bear the risk.
The market share of unit-linked products increased to 44.78% in 2005-06 from 32.54% in the previous year. “The customers’ response to the unit-linked products in the last two years clearly reflects their preference for such products,” said the Irda report for 2005-06.
Despite the huge influence of distribution channels, some insurers feel novelty in designing insurance packages has not lost its relevance.
“Product innovation will continue to be important, but it will not give you sustainable long-term advantage unless you keep innovating,” says Vivek Khanna, director, marketing, Aviva India.

Article By: Sanjeev Shankaran for Mint

SC reserves order on Motor Vehicles Act provisions

States fail to comply with directions of High Courts, claims petition

New Delhi June 20 The Supreme Court has reserved its verdict on a petition alleging non-compliance of the provisions of Section 158 (6) of the Motor Vehicles (MV) Act in sending accident reports to the insurer and the Motor Accident Claims Tribunal. The final order is expected soon.
The court reserved its order after noting that its earlier directions in various other cases that district Superintends of Police shall be responsible for complying with the provisions, had not been observed.
As per the Act, as soon as any information regarding any accident involving death or bodily injury to any person is recorded, the police officer should forward a report of the same within 30 days to the Claims Tribunal having jurisdiction with a copy thereof to the insurer and the owner of the vehicle. Appearing before the Vacation Bench, for the petitioners - the General Insurance Council, National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company — the Solicitor-General, Mr Goolam E. Vahanvati said that various states have failed to comply with the provisions despite the earlier orders of the court in various other cases.
Mr Vahanvati also assured the court that the insurance companies were willing to constitute a special committee to evolve and suggest steps for overcoming the problem.
The Supreme Court had on May 28 issued notice to all the states seeking implementation of the provisions of Section 158 (6) of the MV Act.
The Bench had asked the respondent states to indicate the number of cases wherein the report in terms of Section 158 (6) of the MV Act had been forwarded to the Tribunal.
The petition said there had been a near breakdown of the adjudicatory system with as many as 1.5 million cases pending in the Claims Tribunals and the High Courts. Of the total number, around 70 per cent cases relate to minor injuries. It said the states had failed to comply with the directions of the High Courts in this regard.

Source: The Hindu Business Line

Life insurance cos aim at tapping health segment

General insurance cos contribute 63% of total biz in '06-07

New Delhi June 21 Health insurance is a young sector which is predominately dominated by the public sector general insurance companies. It is also one of the fastest growing businesses for them.
As on March 31, 2007 these companies accounted for nearly 63 per cent of the health business and the segment grew by about 44 per cent that is almost double the growth witnessed by the entire non-life business in the same period.
To cash in on this boom, life insurance companies are looking at entering the segment.
Though the public sector players have enjoyed the dominant role in the segment, they are receiving stiff competition from private players. ICICI Lombard General Insurance was the most aggressive in the segment and recorded a 168.1 per cent growth at Rs 735.85 crore compared with Rs 274.46 crore in 2005-06.
On the other hand, New India Assurance grew only by 14.34 per cent in 2006-07 fiscal to Rs 765.29 crore from Rs 669.28 crore in the previous fiscal.

Private players
According to Mr Rahul Aggarwal, Chief Executive Officer, Optima Risk Insurance Services, "Both private and public sector insurers are growing their health insurance portfolios at a healthy pace. Reliance General Insurance, ICICI Lombard and Bajaj Allianz are looking at this segment seriously among the private insurers."
Mr Aggarwal said general private insurers were able to show better results because retail financial distribution required strong and well-defined processes to minimise human intervention and discretion.
"It is in this area that the PSU insurers lag behind and are ceding ground to private insurers in metros and large cities. However, they are growing because of their distribution spread in many small towns and villages where private insurers do not have a presence," he said.

Big push
The current fiscal is likely to see a major push from both the private as well as public sector companies. "On the other hand, general insurance companies might face some stiff competition from life insurance companies who are also eyeing this segment. From last year, life insurance companies too have started providing health insurance.
ICICI Prudential has launched its standalone product and has more schemes lined up. Bajaj Allianz Life Insurance has recently launched `Care First' which is modelled along the lines of health insurance products sold by general insurance companies.
ING Vysya Life Insurance has also been among the first few to offer a plan that protects against critical illnesses.
"Due to increasing health awareness and escalating medical costs, there seems to be a growing demand for products that cater to health related expenses," Mr Y.V.D.V. Prasad, Head of Products, ING Vysya Life Insurance, told Business Line.
He also added that the company is in the process of expanding its portfolio in this category of products.
Max New York Life is also looking at tapping this segment and is evaluating its prospects. "We are mapping the landscape very carefully. And once the IRDA comes out with the rules and regulations on the issue, we will plan our next move and decide if it is a viable option for us to foray into the health segment or not," Mr B. Ananthraman, Joint Managing Director, Max India Ltd, said.
The icing on the cake, however, would be when Life Insurance Corporation (LIC) enters the segment. LIC has a health division in place and with a strong distribution network, it will be a force to reckon with.

Source: The Hindu Business Line

Birla Sun Life expects online premium payers to double

Birla Sun Life Insurance, which was the first life insurance company in India to enable purchase of insurance policies through its website, is expecting the number of its policyholders using the internet to pay their insurance premium to double this financial year.

The company’s website was launched in 2006 to test if insurance could be sold online in the country, and since then the company has seen more online activity for paying premiums than attracting new policy takers through the internet.

The company’s 15 per cent premiums now comes through the internet with around 15,000 policy holders using the internet service.

However, the percentage of new insurance policy holders signing up through the internet still remains close to only two per cent for the company.

“Most people in India still prefer the personal touch from the company’s side, when it comes to buying life insurance policies,” said Vikram Mehmi, president and CEO, Birla Sun Life Insurance.

The company offers products such as Birla Sun Life Flexi SecureLife Retirement Plan (without life cover) and Birla Sun Life Single Premium Bond for online purchase and intends to place only simple products online. Other players in the online life insurance segment include Bajaj Allianz, ICICI Prudential and Tata AIG Life.

Mehmi added the company was receiving 40 per cent of its revenues from its new products. Birla Sun Life Insurance now has close to 18 products in its stable and has just launched the Gold-Plus plan, which has a minimum premium of Rs 10,000 for a duration of three years and takes investment in seven fund options in varying proportions depending on an individual’s risk appetite.

In Gujarat, the company clocked a premium of Rs 53 crores for the year ended March 2007. It has developed a network of 3,000 advisors in the state.

The company recorded 1.2 million life insurance policies across the country in March 2007, and expects a further one million policies to be added in the coming few months.

Source: Business Standard

Swiss Re sets up advisory firm

Swiss Re, a diversified global insurer, has set up an advisory firm, Swiss Re Healthcare Services, in India. The new entity will focus on individual product development and corporate health schemes to assist health insurance companies in the country.

Girish Rao, former CEO of TTK Healthcare Services (the TTK Group-Swiss Re joint venture), has been appointed the managing director of the new company.

The Bangalore-based company’s product development expertise will focus on assisting health insurance providers develop comprehensive insurance products on medical expenses.

“Swiss Re Healthcare Services is designed to enhance the existing market skills in product development, pricing and risk management for the country’s growing health insurance industry,” said Jean-Michel Chatagny, managing director (Asia), Swiss Re.

The company has been operating in the country since 1998. It established Swiss Re Shared Services in Bangalore in 2001. In 2007, Swiss Re entered into a joint venture with India’s TTK Group by acquiring 26 per cent of TTK Healthcare Services.

With Girish Rao taking the new role, S Krishnamurthy has been appointed the CEO of TTK Healthcare Services.

Source: Business Standard Reporter

Swiss Re sets up advisory firm

Swiss Re, a diversified global insurer, has set up an advisory firm, Swiss Re Healthcare Services, in India. The new entity will focus on individual product development and corporate health schemes to assist health insurance companies in the country.

Girish Rao, former CEO of TTK Healthcare Services (the TTK Group-Swiss Re joint venture), has been appointed the managing director of the new company.

The Bangalore-based company’s product development expertise will focus on assisting health insurance providers develop comprehensive insurance products on medical expenses.

“Swiss Re Healthcare Services is designed to enhance the existing market skills in product development, pricing and risk management for the country’s growing health insurance industry,” said Jean-Michel Chatagny, managing director (Asia), Swiss Re.

The company has been operating in the country since 1998. It established Swiss Re Shared Services in Bangalore in 2001. In 2007, Swiss Re entered into a joint venture with India’s TTK Group by acquiring 26 per cent of TTK Healthcare Services.

With Girish Rao taking the new role, S Krishnamurthy has been appointed the CEO of TTK Healthcare Services.

Source: Reporter, Business Standard

Pvt sector general insurers corner 20% of Air India deal

MUMBAI, JUN 19: Private sector general insurance companies led by ICICI Lombard General Insurance for the first time has bagged 20% of Air India insurance renewal deal for 2007-08.
Amidst tough competition, the $4 billion Air India insurance deal has also seen a fall in the premium by almost 40% to $9 million at the time of renewal.
Led by Mumbai based New India Assurance, the four public sector general insurance companies which earlier used to hog the entire deal have managed to retain 80% of the transaction at the time of the current renewal.
The other private sector general insurance companies that have a share in the Air India deal are Bajaj Allianz General Insurance, Reliance General Insurance and Iffco Tokio General Insurance. London-based reinsurers led by Ace , AIG and Global Space have reinsured the Air India deal.
Aon Global brokered the deal on behalf of PSU companies while HSBC, Independent and Willis were the main brokers for the private sector general insurance companies. Prabodh Thakkar, chairman, Aon Global when contacted, refused to divulge details of the deal.

Source: Financial Express

Tata AIG General Insurance appoints Garg as MD

MUMBAI: Tata AIG General Insurance Wednesday announced the appointment of Gaurav Garg as the managing director, effective July 1. He will succeed Michael Carlin.
Currently, Garg is the vice president - field operations, AIG, New York.
Garg was a part of the start up team of Tata AIG General Insurance Company in 2000.

Source: Times News Network

Non-life insurers getting ready for new regime

Shifting to half-yearly solvency reporting in line with global practices

Bangalore June 19 In a bid to improve solvency monitoring, non-life insurers in the country are quietly being prepared to migrate to a half-yearly reporting regime.
The Insurance Regulatory and Development Authority (IRDA) Chairman, Mr C.S. Rao, told Business Line, "After shifting to a deregulated tariff regime, it is necessary that solvency should also be monitored more frequently. We prefer a half-yearly audited reporting."
Currently, only life insurance companies have migrated to a quarterly reporting of solvency, beginning this financial year.
Non-life insurer's solvency reporting is still done on an annual basis though deregulation of tariff regime was introduced from the beginning of this financial year. The insurance regulator's prescribed solvency margin is 150 per cent.

Solvency margin

Solvency margin is the excess of the value of assets and capital that non-life insurers have to maintain over the insured liabilities. Mr Rao said IRDA has not yet decided on the timing of the introduction. However, the regulator is in discussion with the non-life insurers for accelerated introduction, he added.

IAIS guidelines
The reporting would be on the basis of the total balance sheet, instead of segment-wise reporting. This is an approach that has been suggested by the International Association of Insurance Supervisors (IAIS) in its final guidelines for migration to the Solvency II regime. The IAIS final guidelines released in February this year addresses material risks that insurers face — underwriting risk, market risk, credit risk and operational risk.
Mr Rao said IRDA shift to half-yearly monitoring was in line with global practices followed by insurance supervisors and partly in line with the IAIS guidelines.
However, this kind of monitoring would bring more volatility in capitalisation requirements of insurance companies. This is particularly in an environment where the probable maximum loss ratios could change in the event of catastrophic events, including natural calamities with consequent changes in underwriting risks.
Besides, sources said that what could also alter the capitalisation requirements would be the change in the value of the assets (market risks) particularly investments, as insurers begin shifting to a value at risk basis method of valuations. Almost all the insurers have shifted to a marked to market basis valuing of investments, though this is currently done only on an annual basis.
Already non-life insurers have been hit by depreciation in the value of government securities, and other debt securities that comprised the bulk of their investments.
A shift to half-yearly or quarterly basis, the sources said, would in turn, imply that either the insurers bring in additional capital to meet the solvency requirements or resize their insured liabilities by ceding some liabilities to reinsurers, the sources said.
Private sector insurers, to ensure compliance to the current tight solvency guidelines, are doing ceding liabilities on a large scale both to the national reinsurer GIC and to global reinsurers through the treaty and non-treaty routes - facultative or excess of loss reinsurance (spot covers).

Source: The Hindu Business Line

New CEO of AEGON Religare

New Delhi, June 19
AEGON Religare Life Insurance Company Ltd, the joint venture of AEGON NV and Religare, on Tuesday announced that it has appointed Mr Rajiv Jamkhedkar as CEO. Currently, Mr Jamkhedkar is Head of Personal Lending at CitiBusiness, which focuses on the SME segment at Citibank. AEGON and Religare, a Ranbaxy Group company, have partnered to establish a life insurance company in which Religare holds a 44 per cent stake while Aegon has 26 per cent stake; Bennett & Coleman holds the rest.

Source: The Hindu Business Line

New insurance product

The product, Gold Plus Plan, also offers the option of reducing your premium amount from the first year onwards

Realizing that Indians prefer short pays, Birla Sun Life Insurance has launched a life insurance product where you need to pay a premium only for three years. Life insurance policies generally have a lock-in period of 7-10 years.
The product, Gold Plus Plan, also offers the option of reducing your premium amount from the first year onwards. It is a unit-linked insurance plan under which your premium money is invested in the stock markets.

Other features

Premium:Even if you reduce the premium amount from the first year, there will be no lowering of the assured sum. You can start your policy with a minimum annual pay of Rs10,000.
Fund offer:You can choose from seven kinds of funds that decide the proportion of exposure in equity and debt instruments. You can also change the allocation into the various funds any time during the term of the policy. The seven funds are— Assure, Protector, Builder, Enhancer, Creator, Magnifier and Maximiser.
Eligibility:Individuals between 18 and 70 years of age are eligible for the policy.
Tax benefits: You will get tax benefits under Section 80 C and Section 10 (10D) of the Income-Tax Act.
Top-up premium:You can increase your fund whenever you have additional savings prior to the maturity of the policy. The minimum top-up premium is Rs5,000.

Policy charges

Premium allocation charge:This is the percentage of the premium appropriated towards charges from the premium received. The balance, known as allocation rate, constitutes that part of the premium which is utilized to purchase units for the policy. For the first year, allocation charges are 8% for the policyholder and for the second and third year, 4%.
Fund management charge:This is the charge levied as a percentage of the fund value. Under this head, the company will cut 1.5% of the fund value every year.
Policy administration charge: The policy has a high administration charge. For the first three years, it is 18.4%. If you want to continue the policy for the fourth year, the rate is 14.4%.
Mortality charge:This is the cost of insurance cover. As you grow old, the mortality charge increases. It is age-specific and will be deducted every month. For instance, for a 25-year-old person, the mortality charge is 1% while for 65-year-old person, it is as high as 21%.
Surrender charge:If you plan to surrender your policy before three years, the surrender charges are 15%, 12.5% and 10% for first, second and third years, respectively. From the fourth year, the surrender charge will be zero. But, in case of surrender in the first three policy years, the benefits will be paid out only after the third policy year.

Source: www.livemint.com

Tata AIG`s rural policy launch soon

Tata AIG Life Insurance Company, a private life insurance player, is planning to add rural health insurance product to its rural insurance portfolio.

Talking to Business Standard, Joydeep Roy, chief distribution officer, Tata AIG Life Insurance, said, “The company is coming up with rural health insurance product in the next six months”.

However, the company is yet to finalise the features of the product and whether the health insurance product would be combined with life insurance.

Before the product is launched, the company has to comply with the micro-insurance guidelines, informs Roy.

“We are yet to file for the permission for rural health product with Insurance Regulatory and Development Authority (IRDA)”, adds Roy.

Apart from launching rural health insurance product, the company is also working on creating a new distribution channel to market its insurance products in the rural areas of the country.

Speaking on the company’s efforts to find out a new distribution model for its rural insurance products for the rural markets, he said, “We are working to find out a innovative ways of distribution of our life insurance product in rural market”.

He further said, “Just like agricultural produce moving without restricted to any one market, we would like to have a situation where services can also flow in a similar way “.

The company is exploring new distribution system where the life insurance products will be distributed in a similar way as any other products and goods are distributed in the market.

Source: Business Standard

ULIPs in vogue thanks to equity investments

Kolkata June 14 ULIPs (unit-linked insurance plans) are riding high on their equity investments, increasingly making their presence felt as savings and investment tools, a trend that is getting reflected in terms of both performance and average ticket size.
Unit-linked products, the domain of which is seen to be expanding steadily, will continue to attract sections of the investing populace, insurance companies feel, while referring to figures that are evident in the latest performance charts.

Performance chart

ULIPs - those focusing on equities - have on the whole managed to perform well during recent times, relative to the broad market, which has delivered decent returns in the past few years, the frequent ups and downs in indices notwithstanding, they point out.
While returns from the index may not have been anything to write home about insofar as very short-term periods are concerned, its three-year performance has been quite impressive, notes Mr Sam Ghosh, CEO, Bajaj Allianz Life Insurance. The results have found reflection in ULIP returns too, he mentioned.
"That ULIPs are here to stay is not a subject of debate any more. What we have to see how they perform in the days to come", he said, adding that the insurance industry is likely to throw up ULIP variants in the days ahead.

Strong show
A random selection from the list of performs include products such as Kotak Aggressive Growth, which has given 47.5 per cent over a two-year period ending on April 30, 2007, ICICI Pension Maximiser (36 per cent since inception in May 2002) and Aviva Life Unit Linked Growth (34 per cent CAGR since inception in January 2004). These are heavily invested in equities selected from across industries. These figures are based on market prices declared by the insurance companies; market price declared is essentially NAV after adjusting transaction charges.
Unit-linked plans, which essentially seek to blend insurance with investment, have managed to convince larger sections of the market, insurers suggest. This, it is felt, is mirrored in the larger ticket sizes that are getting reported these days.
The industry has in recent times witnessed a general increase in the average consumer's allocation, indicates Mr S.K. Mitra, who heads Birla Sun Life Insurance. "We know how savers are taking to insurance products. There has been a clear upturn on this front", he stated.
A variety of ULIPs are available in the market, courtesy insurers who have tried to widen their range of products. These include those that have considerable investment in equities. The latter, they feel, have been able to satisfy investors adequately.
Investment advisors who counsel clients on their portfolios confirm that insurance products now account for a greater share of investors' surpluses, securing a firmer place against such straight-laced options like mutual funds. The latter, according to figures pertaining to end-May, have seen a definite increase in their asset base: The AUM (assets under management) of all fund houses put together has now crossed previous records. Of these, diversified equity funds (which are lately increasing in number, thanks to the arrival of newer products) have generated an average 40 per cent for the one-year period ended June 11.

Source: The Hindu Business Line

Study soon on creating natural catastrophe risk insurance pool

To tide over unpredictable weather, natural calamities

New Delhi June 15 The creation of Indian natural catastrophe risk insurance pool has been deferred for the time being.
A decision on this issue was taken after a meeting between the chief executives of general insurance companies and the Insurance Regulatory and Development Authority recently. Mr K.N. Bhandari, Secretary-General of the General Insurance Corporation (GIC), told Business Line: "The meeting looked at the possibility of setting up a natural catastrophe risk insurance pool. We would be commissioning a study soon on the issue and in all probability we might arrive at a conclusion by the end of the year."
The proposed natural catastrophe risk insurance pool would be structured in the same format as the existing terrorism and motor pools. A pool is a fund created out of the commitments from insurance companies as per their individual exposure. In the case of claims, the pool reserves could be used to make payouts and market forces would determine the size of the pool.
In this case, insurance companies would be putting in the premium collected for providing coverage to natural calamities, which would then be insured abroad.
"The need for creating natural catastrophe pool has been proposed looking at the unpredictability of the weather and the widespread damage caused by natural calamites. Companies while taking optimal rates do not want to take higher exposure so they are willing to create the pool," Mr Bhandari said.

Detariff Regime
The meeting also reviewed the working of the general insurance sector in the last six months under the detariff regime and also convinced the regulator to advance implementing the second phase of detariff regime.
"We have urged the IRDA to consider advancing the second phase of detariff regime from April 1, 2008, to January 1, 2008," Mr Bhandari said.
In the first phase of detariffing, which came into effect from January 1 this year, the IRDA had given freedom to insurance companies to fix premium rates. This leads to a price war among the companies with companies offering heavy discounts on the policies.
Now, in the second phase, companies will be able to customise products for individual clients. Industry observers also feel that this will allow insurance companies to bring in newer and better internationally accepted products in the Indian market.
"The Chairman of IRDA, Mr C.S. Rao, heard our proposal and assured us that he would talk to the concerned authorities (the Government) and get back to us," Mr Bhandari added.

Source: The Hindu Business Line

IRDA mulls halving minimum training period for agents

Insurers have long maintained that the 100 hours of mandatory training translated to micro-management by the regulator.

Mumbai June 17 The Insurance Regulatory and Development Authority is considering halving the minimum training period for insurance agents from 100 hours to 50 hours.
"We are considering a possible reduction of the mandatory 100 training hours to 50 hours. Insurers say that they are finding the 100-hour stipulation to be excessive," Mr C.S. Rao, Chairman, IRDA, told Business Line.
Insurance agents are currently required to complete 100 hours of training spread over two to three weeks from an IRDA approved institution, and pass the qualifying test. In the case of online training, agents have to complete their training within a minimum period of 18 days and a maximum of 30 days. However, those who have an MBA or a CA qualification need just 50 hours of training.
Mr Rao said the Life Insurance Council had submitted a list of recommendations on behalf of the life insurers.
Insurers have long maintained that the 100 hours of mandatory training translated to micro-management by the regulator.

Focus on agent's needs
"Training has to be focused on the agent's needs. An agent, who is mainly selling unit-linked insurance plans, needs to trained on the capital and debt markets, while an agent selling traditional products may not require as much training," said Mr Sam Ghosh, CEO, Bajaj Allianz Life Insurance.
"Similarly, an agent selling in the rural areas may require minimal training as the products are simple and less sophisticated," he added.
Bajaj Allianz Life currently has a large agency force of 2.3 lakh and plans to expand it to 3.5- 4 lakh by the end of the year.
Mr Deepak Satwalekar, MD and CEO, HDFC Standard Life, said that while there is no grouse against licensing agents, the 100 hours of training amounts to micro-management. He illustrates with an example: "The on-line training facility works well in the smaller towns and that is where it hurts the most. You have to complete 100 hours in 30 days. So, if I have done 98 hours on the 29th day, but on the 30th day there is a power cut and I cannot access the Internet, then on the 31st day I have to start at zero."
"Why should one worry if it is done in 15 days or 30 days? What is really needed is monitoring the integrity of the testing process rather than input controls," he adds.

Source: The Hindu Business Line

Non-life players churn top deck

MUMBAI: A host of senior-level changes are in the offing in the general insurance industry. Gaurav Garg is expected to join Tata AIG General Insurance as CEO in place of Michael Carlin who put in papers a couple of months after taking charge. Shrirang Samant, former CEO of HDFC Chubb General Insurance has joined Lloyds of London as their representative in India. Lloyds is expected to open an office in India soon. Mr Garg was formerly head of Tata AIG General Insurance’s personal lines before moving to AIG New York. He will now be returning to take over as managing director. Meanwhile, the search is on for chief executives for Royal Sundaram Insurance and for the public sector United India Insurance. The top position in Royal Sundaram fell vacant after present chief Antony Jacob got larger responsibilities for the region from UK insurer Royal Sun Alliance. The government is engaged in identifying a candidate to replace MK Garg who put in his papers last month. The non-life industry association is also looking for a new CEO for managing the motor insurance pool. Non-life companies are bracing themselves for a fresh round of poaching with several companies planning to set shop this year. The joint ventures include Bharti Axa General Insurance, the joint venture between Future Group (Pantaloon) and Generali of Italy, and Allahabad Bank Sompo joint venture. Shriram Sanlam has already started recruiting a big way Insurance officials are forecasting more changes at senior management level as people leave on account of opportunities created by new entrants. In addition to the already established partnerships a number of new companies are looking at non-life. These include State Bank of India and the Aditya Birla Group. There are also a number of foreign players such as Ergo, IAG of Australia, Berkshire Hathway and a couple of Japanese insurance companies looking at the Indian market. Lloyds of London is planning to open an office in Mumbai soon. Unlike other companies, Lloyds has a different organisational structure. Lloyds recently opened an office in Shanghai to sell reinsurance. Mr Samant, who will represent Lloyds in India, quit HDFC Chubb after HDFC decided to buy out Chubb . over differences over the two partners’ approach to growth.

Source: Times News Network

there is reliance there is TATA why should birla be behind in general insurance

Aditya Birla group plans foray into general insurance
june 14th economic times
The Aditya Birla group is weighing a foray into general insurance. “We are now considering entering the general insurance sector. While companies from the US, UK and Canada have been approaching us for sometime, it is only now that we are thinking about it,” SK Mitra, director at Aditya Birla Management Corporation said. He was here to launch Birla Sun Life Insurance Co’s (BSLI) new unit-linked policy — Gold-Plus Plan. Mr Mitra, however, clarified that general insurance currently remains at a very preliminary stage, although a proposal for entering into the non-life sector has recently been sent to board of directors of the group. Nevertheless, the group has launched a general insurance broking outfit. The present proposal, however, involves floating a company that will design and sell non-life policies possibly in joint venture with a foreign insurer. “The decision to get into general insurance will be based on the overall plans and programmes of the entire group. The Aditya Birla Group has entered into a few large ventures. The non-life venture will be considered in light of these developments,” Mr Mitra said. Aditya Birla Group’s life insurance venture BSLI is now gearing up to regain some market share it lost to other players in the sector. It is targeting a Rs 2,000-crore first premium income in 2007-08 against Rs 950 crore achieved in the previous fiscal. “Our market share declined from 12% three years ago to 5% now. We are gearing up to get the lost share back,” said Mr Mitra. “The promoters will have to double the equity base of the company. They will be required to infuse fresh equity of about Rs 700 crore into BSLI’s capital in 2007-08,” said Fabien Jeudy, vice-president, chief and appointed actuary at BSLI. Meanwhile, speaking to newspersons in Mumbai, Birla Sun Life Insurance CEO Vikram Mehmi said that Birla Sun Life Insurance has changed its strategy and has decided to pursue aggressive growth even at the cost of delaying its breakeven targets. The company, which has a paid-up capital of Rs 672 crore expects to need further investments from shareholders for two more years. Mr Mehmi said that the insurance industry growth rate has turned out to be higher than expected. “Analysts are now estimating that the industry will record a compounded annual growth rate of 45% for the next three years and we want to grow in line if not faster than the industry,” said Mr Mehmi. To increase its share of the market, BSLI would target the second- and third-rung of customers of its bancassurance partners, including Citibank and Deutsche Bank. The bank was also changing its strategy of seeling to subscribers of Idea telecom — an Aditya Birla Group company. After finding that the pilot not very successful BSLI is coming out with tailor made products which can be sold to telcom subscribers. BSLI is a 74:26 joint venture between the Rs 49,440-crore Aditya Birla group and Canadian major Sun Life Financial. “In order to achieve this growth, BSLI has decided to increase its branch network a few fold — by at least 400 in the current fiscal. Currently, the company has 137 branches. Agency force will simultaneously be enhanced to 1 lakh from 58,000 now,” EN Goveia, senior vice-president, direct sales force, told reporters.

With Rs8,000 cr, LIC remains key player

The country’s largest life insurance company, which follows a very conservative investment policy, is still the market-maker with a kitty that is getting bigger every year

Until about five years ago, when India wasn’t on the radar of many foreign institutional investors (FIIs), the Life Insurance Corp. of India (LIC)—the country’s largest life insurance company—along with the Unit Trust of India (UTI)—the largest mutual fund—used to rule the stock market.
LIC was the market-maker and always ready to cushion any fall in the market by its liberal support, often at the unofficial call of the government.
UTI has since collapsed. But LIC, which follows a very conservative investment policy, continues to be there with a kitty that is getting bigger every year, even if FIIs and hedge funds are the ones moving the markets these days.
“We don’t get tempted by the rise in market and rush to put in money,” said LIC managing director D.K. Mehrotra in an interview with Mint. “We need to respect the trust our policy holders have in us.”
Mehrotra oversees the insurance behemoth’s investment portfolio. The size of LIC’s investment book is Rs6 trillion and it expects to add Rs1.15 trillion to it in 2007-08. LIC has 200 million policyholders and an agency force of 1.1 million.
“Out of Rs1.15 trillion, we expect the unit-linked schemes to garner at least Rs35,000 crore. About 8-10% of the rest Rs80,000 will be invested in equities,” says Mehrotra. That translates into some Rs8,000 crore of LIC money flowing into the Indian equity market this year.
Unit-linked policies are those where investors choose to play in the capital market and are ready to bear the risk.
Under the investment norms of insurance firms, LIC needs to invest 50% of its money in Union and state government bonds and another 15% in infrastructure projects. This means it can use 35% of its funds to invest in equities. That’s not a small amount, considering the fact that last year it mopped up Rs1.25 trillion as premium income, out of which Rs40,000 crore was new premium.
But LIC does not want to play aggressively in the equity market.
“We can’t put all our eggs in one basket. We put money in corporate bonds, give project loans and even long-term working capital loans. About 8-10% of our funds is invested in equities,” says Sushobhan Sarkar, executive director (investment).
The average return from investments in the Indian market over the past five years has been 33.12%.
At LIC, an eight-member investment committee, supported by a 10-member research team, helps India’s largest insurance firm in making investment decisions.
“We do not invest in mid-caps. Our focus is the frontline stocks,” says Sarkar. Thirty frontline stocks form the Sensex, the benchmark index of the Bombay Stock Exchange. LIC primarily focuses on them and, beyond them, the top 200 stocks. It has at least 1% stake in more than 300 top Indian firms.
LIC’s outstanding equity investment is about Rs40,000-45,000 crore, says Sarkar. This is the book value of its investments, or the price at which it has bought shares. The market value could be anywhere above Rs1 trillion. That is roughly a fourth of the assets under management of the entire Indian mutual fund industry.
“We are a long-term investor,” says Mehrotra. Does that mean LIC never sells stocks?
“Of course, we sell and make money. All the money we generate through market operations goes to a pool of surplus and after adjusting for all expenses, 95% of the surpluses are distributed among our policy-holders in form of bonus and 5% goes to the owner, the government,” Mehrotra says. LIC describes its profits as “surplus”.
Technically, it does not book profit in the stock market by selling stocks. It books “appreciation” of stock prices.
Even though it has huge amounts of cash to invest, LIC does not want to play the role of a private-equity player, invest in unlisted firms and hand-hold them to the stock market. “We won’t do that,” says Sarkar, as such investments do not necessarily offer handsome returns.
However, given a choice, the insurance major would like to float a bank. “We have relationship with 28 banks that distribute our policies. Ideally, we should have a bank of our own as it is in sync with our business,” says Mehrotra. It holds 27% in Managalore-based Corporation Bank and close to 10% in Delhi-based Oriental Bank of Commerce. It has recently moved the government to raise its 26.32% stake in UTI Bank to over 50%.

Source: Mint

Life insurance industry grows 49% in April

The life insurance industry clocked 49 per cent growth in new businesses, while general insurance players saw 16 per cent increase in April, the first month of the current financial year.

Strong performance by Life Insurance Corporation, ICICI Prudential and SBI Life helped the 16 player-strong life insurance industry to mop up Rs 2,982 crore in April this year compared with Rs 1,996 crore collected in the same month last year, according to data compiled by the Insurance Regulatory and Development Authority.

However, some life insurers such as Bajaj Allianz, ING Vysya Life and Reliance Life saw a decline in premium collections during the period under review.

The country’s largest life insurer, LIC, saw new premiums grow 57 per cent to Rs 2,134 crore in April by selling 15,89,684 policies against Rs 1,355 crore a year ago. It had a market share of 71.56 per cent in April.

The 15 private players together saw their business grow 32 per cent to Rs 848 crore with a market share of 28.44 per cent.

ON THE RISE

Insurers Premium (Rs cr)

ICICI Prudential 271.00
Bajaj Allianz 124.00
SBI Life 90.00
HDFC Standard 70.00
Max New York Life 69.00
Tata AIG 48.00
Aviva 39.00
Reliance Life 33.00
Birla Sunlife 28.00
Kotak Mahindra Old Mutual 26.00
ING Vysya 22.00
Met Life 19.00
Shriram Life 4.50
Sahara Life 1.70
Bharti Axa Life 0.72

ICICI Prudential topped the private players’ chart with its premium income rising 84.5 per cent to Rs 271 crore and had 9.08 per cent share of the market. Bajaj Allianz, which saw 15 per cent decline in business, collected Rs 124 crore with a market share of 4.16 per cent.

The general insurance industry grew 16 per cent in April, which also saw ICICI Lombard emerging as the second-largest non-life insurance player.

If the robust growth is any indication, private players such as ICICI Lombard, Bajaj Allianz and Reliance General are going to give a tough fight to four established public sector players — New India Assurance, Oriental Insurance, United India and National Insurance — in 2007-08.

The eight private players together have increased their market share to 40.5 per cent in April from 34 per cent in the same month a year ago.

With a modest 8 per cent growth in premium collection at Rs 651 crore, New India retained its number one slot by cornering 20.72 per cent of the market.

ICICI Lombard, a formidable challenger to New India now, grew its new premium 36 per cent to Rs 448 crore and had a market share of 14.28 per cent.

Oriental Insurance was at the third place with a flat growth in premium collection at Rs 413 crore and a market pie of 13.16 per cent.

United India saw a 3 per cent growth in business at Rs 407 crore and had 12.97 per cent of the market.

National Insurance grew premium income 8 per cent to Rs 396 crore and had a market share of 12.6 per cent.

Bajaj Allianz General Insurance collected 215 crore in April, followed by Reliance General (Rs 221 crore), Tata AIG (112 crore), Iffco Tokio (Rs 107 crore), Cholamandalam (Rs 73 crore), Royal Sundaram (Rs 73 crore), HDFC Chubb (Rs 22 crore).

Specialised institutions ECGC and Star Health & Allied Insurance collected Rs 38 crore and Rs 34 crore, respectively, in April.

Source: Business Standard

General insurers may revise rates

Non-life insurers may soon get the freedom in pricing their products with the Insurance Regulatory Development Authority (Irda) asking them to file their revised-base rates along with the discounts they wish to offer to their customers, supported by adequate statistical information justifying the discounts.

When representatives of all the 12 general insurance companies met Irda chairman C S Rao on Monday, they had asked him to do away with caps on discounts. The insurance regulator had capped discounts that general insurers can offer on the base rates when it lifted the price controls with effect from January 1, 2007.

Irda has agreed to give insurers the freedom in pricing their products, CS Rao told Business Standard . Rao further said, “Each insurance company will have to give a rating structure to us as each insurer’s rating philosophy differs. On the base rate filed by an insurance company, there will be a set-off.” Rao noted that six months of detariffing had also helped companies “gain experience” to deal with new market situations.

The Irda has left it to insurers to file their revised rates whenever they are ready with them.

The non-life insurance industry was detariffed from January this year. Though Irda lifted price controls on insurance products (fire, engineering and motor) from January 1 this year, it had put caps on the discounts, fearing a price war between them.

Insurers can give a maximum discount of up to 51.25 per cent of the erstwhile tariff rates on individual rated products (those risks where the sum insured is more than Rs 10 crore), up to 43.75 per cent in case of class-rated products (those risks whose sum insured is less than Rs 10 crore) and 20 per cent on motor own damage for private vehicles.

At the meeting with the Irda chief, insurers also reiterated their demand to advance the second phase of detariffing to January 1, 2008, from March 31, 2008, which was accepted by the regulator.

The second phase of detariffing will allow insurers the freedom to change wordings, terms and conditions of insurance policies. The demand of preponing the second phase is keeping in mind the renewals of major corporate insurance policies which falls on April 1 so as to give insurers a three-month time to prepare.

Rao said, “Insurers will have to identify the revised terms and conditions, flexibility they want in terms of packaging of insurance products, alternative wordings in respect of certain areas. However, in certain conditions there will be no changes in terms and conditions and the interests of the insured will be protected. The initiative has to come from the insurance companies.”

Meanwhile, the General Insurance Council ( a self-regulatory body of all insurers) is working on developing common market wordings that can be used by all insurance companies once Irda allows insurers the freedom to frame their own wordings.

About the demands put forth by insurers at the meeting, an insurance official said, “Let there be competition on product innovation and packaging of insurance policies. The limitations by the Irda are restricting competition. Insurance companies have requested Irda that these restrictions may be dispensed with and they be allowed to rate the policies based on their perception of risks so that the benefits of competition can go to the customer.”

Source: Business Standard

BSLI aims at higher growth

Business premium growth up 36% in 2006-07

Mumbai June 13 Birla Sun Life Insurance will take another three years to break even.
Mr Vikram Mehmi, President and CEO, Birla Sun Life, said the focus of the company this year would be on growth, though break even is three years away.
"Break even is not as important as increasing the value of our business. This year, we plan on growing faster or at least in line with the industry," he said.
Birla Sun Life Insurance registered a growth of 36 per cent in new business premium at Rs 953 crore in 2006-07.
This was, however, much lower than the life insurance industry's growth of 110 per cent in the recently concluded fiscal.

40% CAGR

Mr Mehmi said there was a slowdown last year as there were some delays in launching new products.
The insurance industry was expected to grow at a compounded annual growth rate of 40 per cent in the next few years and that the company's growth would be in tandem with this.
In the past six months, it has launched six products.
The company would introduce new pension, health and micro-insurance plans this year, he said.
The company plans to double its agency force from 50,000 to 1 lakh.
It has a capital base of Rs 672 crore. Mr Mehmi said that more capital would be infused as per the requirements.

New product
The company on Wednesday launched a new product called "Birla Sun Life Insurance - Gold Plus Plan".
The plan offers the convenience of paying for a limited period of three years as well as the flexibility to reduce the premium from the second policy year.
It offers the choice of seven fund options, one of which involves a maximum investment of 100 per cent in equity.
The minimum annual premium for this particular policy is Rs 10,000. The premium allocation charge is 8 per cent.

Source: The Hindu Business Line Bureau

Home insurers kick off price war in Britain

LONDON: Home insurers in the UK are penalising loyal consumers as they vie to pull in new business, according to a report. Financial research company Defaqto said that rather than trying to extend cover and improve services to existing customers, many home insurance providers have launched a price war in an attempt to win business. It found that insurers are increasingly offering large discounts and incentives to new customers, while continuing to charge the same prices to loyal ones. New customers can earn up to £125 by applying through cash-back websites. The average payout has risen some 60% in the last year, with homeowners typically receiving between £30 and £60. Brian Brown, author of the report, said the rise of price comparison sites is forcing insurers to offer larger discount schemes to the detriment of sound underwriting discipline. “It hardly seems in keeping with the Financial Services Authority’s rules for treating customers fairly that two customers with exactly the same risks should pay markedly differing amounts for their policies,” he said. “It would appear that increasingly loyalty never goes unpunished and rewards are only available for the disloyal.” — Reuters Defaqto also predicted that most major insurers would offer some form of ‘iCover’ — insurance for electronic downloaded information — within the next one to two years. Some insurers might also provide data recovery services as part of personal computer cover within the home insurance market. The research company added that environmentalism would also play a greater role in the home insurance market, with insurers looking at ways to encourage customers to be ‘greener’.

Source: http://www.economictimes.com/

Non-life insurers mull life after detariffing

Chennai: With the removal of administered pricing mechanism / detariffing in respect of fire and engineering insurance policies, personal lines of insurance like health insurance re expected to log strong growth.Speaking at a seminar, General Insurance- Life after Detariffing organised by Chennai business magazine Industrial Economist, on 8 June, 2007, Insurance Regulatory and Development Authority (IRDA) chairman C S Rao said, even before detariffing the health insurance business portfolio has moved a rank to third after motor and fire. Prior to the opening up of the sector, health insurance had lagged behind motor, fire and engineering insurance.
According to Rao, all these years Indian non-life insurers did not find the necessity to look at personal lines of business in a serious manner as the corporate sector had been yielding handsome premium. But with the freeing of tariff rates, insurers have to look at other segments for growth, he added.
Agreeing with him, K N Bhandari, secretary general, General Insurance Council, said, hereafter the insurers would adopt the right management practices to accelerate growth. "The objective of detariffing is to minimise cross-subsidisation and end the level of distortion at the market place."
Presenting the theme of the seminar, S V Mony, former chairman, General Insurance Corporation of India, and the secretary general, Life Insurance Council, cautioned policyholders that getting a low premium quotation while selecting their insurers need not imply a higher claims paying ability.
He said the time had come to differentiate between the men from the boys and promoters of non-life companies had to get their act together with more disciplined risk underwriting. He also called upon the industry to give its suggestions to the Standing Committee of Parliament that is going into the amendments proposed to the existing Motor Vehicles Act. He said the suggestions should not be driven by bottomline perspective alone. The industry's suggestions should keep in mind the welfare of the public.

source: domain-b

Non-life insurers allowed to fix region-wise health insurance premium

Chennai: Indian non-life insurers are free to fix region-wise premium for health insurance policies. Speaking on the sidelines of the seminar, General Insurance-Life after Detariffing, here on 8 June, 2007, C S Rao, chairman, Insurance Regulatory and Development Authority (IRDA) said, "Traditionally health insurance is a non-tariff business. The companies are free to decide on differentiated premium rates."
Currently all the non-life insurers follow a uniform pricing pattern across the country for health insurance policy. The net effect is that the rural / semi urban policyholders subsidise the policyholders in bigger cities where the healthcare costs are high resulting in higher claims outgo for the insurers.
If companies adopt region wise pricing pattern then the health insurance policyholders in the eastern region, small towns and rural areas will be benefited from lower premium outgo.
It should be noted that insurers of late are capping the benefits claimable under different heads, hospital room rent, doctor fees and others, on the grounds that the policyholder should also bear some portion of the expenditure and that the hospitals have jacked up their rates.
In the case of motor insurance, insurers charge premium based on the area in which the vehicle plies, in respect of other policies the companies are silent.
According to Rao, general insurance council has been asked to draft a glossary of insurance terms and its meanings so that all the non-life insurers follow a uniform language. "This would help the policyholders to understand their policy condition clearly. "The insurers should also print in the policy condition as to what is covered and what is not covered."
He also said a team of officials would start scrutinising all the insurers to find out whether they have complied with the norms.

Source: Domain-b

Pension fund manager: Request for proposals issued

New Delhi: The Pension Fund Regulatory and Development Authority (PFRDA) has issued request for proposals (RFPs) to four public sector financial institutions which had evinced interest for the role of pension fund managers (PFMs) under the new pension scheme (NPS).
All the four short-listed entities - Life Insurance Corporation of India, State Bank of India, UTI AMC and IDBI Capital — have been given time until July 4 to submit the detailed technical and financial bids.
"All the four companies have collected the RFPs and they have time till July 4 by which they have to give detailed technical and financial parameters they would operate if they were chosen as the fund manager," a PFRDA official, who did not wish to be identified, told Business Line.
The official added that it could well be a tight finish as all the four companies have strong credentials.

Guidelines

Giving brief guidelines on the technical parameters, the official said, "The financial institutions have to submit details on their track record, the exact corpus they managed till now and details on the returns that they have been able to earn in the last couple of years," the official said.
It may be recalled that the companies which managed assets worth more than Rs 10,000 crore were eligible to submit expressions of interest (EoIs), but then need not have stated the exact corpus they managed.
They have also to give details on the IT infrastructure that they have and how they propose to take it forward and details on their back office operations.
In the financial parameters, they have to submit the management fee they would be charging.

RFP evaluation

"Based on the evaluation of the RFPs, we would finally identify 2 or 3 PFMs. The whole process might be completed by July 20," the official said.
The official, however, said that as of now based on the EoI, none of the companies have given details if they would like foreign investments in the new entity that would be formed.

Foreign investment
"We would only know once the proposals are submitted back to us if any of the companies would like to have direct or indirect foreign investment not exceeding 26 per cent of its paid-up share capital. But based on the EoIs none of them have indicated on this issue," the official said.
Once selected, the fund managers will have to offer alternative products to employees including risk-free options under which all funds would be invested in government securities and share-market linked products with variable returns as well.

Source: The Hindu Business Line

Oriental Insurance may drop four intermediaries with rival stakes

Insurer sees these third party administrators as competitors since their parent firms are from the same sector

With private insurance rivals buying equity stakes in third party administrators (TPAs), The Oriental Insurance Co. Ltd is likely to withdraw its business from four TPAs—Family Health Plan Ltd, Paramount Healthcare Management, Medi Assist India Pvt. Ltd and TTK Healthcare Services Pvt Ltd.
These administrators maintain databases of policyholders and handle all post-policy issues, including claim settlements. They were introduced by the insurance regulator to speed up what was typically a very long-drawn-out settlement procedure. With the TPAs, policyholders can use their insurance ID card at authorized hospitals to get cashless treatment and then the TPAs take over the claim settlement process.
A senior official of Oriental, who didn’t want to be named because of company policy, said: “These TPAs are being viewed as competitors since their parent firms are from the health insurance industry and we cannot share our databases with our competitors. The other three general insurance companies have already withdrawn their business from them, we also want to discontinue.” He was referring to the National Insurance Company Ltd, The New India Assurance Co. Ltd and United India Insurance Co. Ltd.
None of the four TPAs were willing to comment.
India’s insurance regulator, Insurance Regulatory and Development Authority (Irda) said insurance companies buying stakes in TPAs was not a major issue.
“Though some of the health insurance companies have tied up with TPAs, we still have sufficient number of 22 registered TPAs for the rest of the insurance companies,” said C.S. Rao, chairman of Irda. “It is well within the rights of insurance companies if they tie up with these insurance intermediaries,” he added.
An executive associated with the insurance business said the move could prompt more insurance companies to depanelize the four TPAs.
“There are high chances that more companies will follow the route of Oriental Insurance and will scrap the services of TPAs who are involved with competitors,” said S.K. Sethi, CEO at Ria Insurance Brokers, a Delhi-based insurance brokerage company.
Last year, the Reliance-Anil Dhirubhai Ambani Group bought a major stake in Bangalore-based Medi Assist. The Apollo Group owns a stake in Family Health Plan, and Munich Re, the world’s largest reinsurance company, has acquired a stake in Paramount. Similarly, Swiss Re, a leading reinsurer, has a stake in TTK Healthcare Services.
Oriental Insurance currently has 16 TPAs in its panel. The removal of four TPAs could mean more business for the remaining ones.
“Policyholders of Oriental will not get affected by the decision, as old policyholders will continue to be served by the depanelized administrators for the next 12 months. However, new policyholders will not get registered with the depanelized administrators,” said the Oriental official.

Source: Teena Jain, Mint

Bajaj Allianz launches new health, life cover

Mumbai June 11 Bajaj Allianz Life has launched a product called `Bajaj Allianz Care First' which provides health as well as life cover.
This plan provides a common sum assured which can be utilised in case of hospitalisation cover for treatment as well as a life cover benefit on the death of the policy holder, said a press release. The sum assured cover ranges from Rs 1 lakh to Rs 7 lakh.
Bajaj Allianz Life Insurance in association with Medicare TPA services will issue photo identity cards to all the insured members, which will facilitate cashless hospitalisation at empanelled hospitals all over India. The cashless treatment is available across 2,000 hospitals in 200 towns.
Individuals between 18 to 56 years can buy this policy, which can be renewed up to the age of 65. All treatment pertaining to critical illness is covered under this plan.

Source: The Hindu Business Line

Barclays ties up with ICICI Lombard

Mumbai: Barclays Bank PLC, which recently launched retail banking services in India, has tied up with ICICI Lombard General Insurance Company Ltd for bancassurance.
ICICI Lombard will provide exclusively designed non-life insurance products for Barclays retail customers.
It will also provide insurance products for Barclays customers who have availed themselves of credit cards, personal loans, SME loans, premier investment services or any other banking product, said a press release.
The insurer has designed health insurance policies for Barclays customers that can also cover check-ups, hospital allowances and ambulance charges.
Personal loan customers will have the option of increasing the loan amount to pay the premium on their policies and repay the amount along with their EMI payments.
Barclays currently has three branches in India, which are in Mumbai, Kanchipuram and Nelamangala, near Bangalore.

Bureau, The Hindu Business Line

Iffco-Tokio General sets modest growth target

Iffco-Tokio General Insurance Company (ITGI), a joint venture promoted by Indian Farmers Fertiliser Cooperative (IFFCO) and Japan's Tokio Marine and Fire Insurance Company, expects its gross written premiums (GWPs) to touch Rs 1,200 crore during the current financial year.

Gross written premiums
The company reported a 28.58 per cent increase in its GWP to Rs 1,152.21 crore for the financial year ended March 31, 2007 against Rs 896.04 crore.
"We have set a conservative growth target looking at the market scenario. Since we are operating in de-tariffed market at the moment, the competition is going to be fierce and the market trends on premiums have changed. So we are looking at having our house in order before looking at high growth targets," Mr Ajit Narain, Managing Director and Chief Executive Officer of Iffco-Tokio General Insurance Company, told Business Line.
He, however, said though the company had set modest targets in its topline growth, it expects the bottomline to maintain the same growth rate as in the past.
ITGI's net profit for the fiscal under review increased 85.69 per cent to Rs 27.13 crore compared with Rs 14.61 crore in 2005-06.
For 2006-07, the retail line contributed approximately 55 per cent (Rs 634.6 crore) to the revenues, of which motor insurance was a substantial chunk at Rs 448.89 crore.
For the current financial year, according to the company's annual report, it is targeting Rs 450 crore from its commercial lines and Rs 750 crore from its retail portfolio.

Vending products
Though the company is not looking at launching new products in the immediate future, Mr Narain said: "We have launched specialised products - for fine arts collectors and galleries, errors and omissions policy for the ITeS sector - now we are looking at marketing these products better."
He said the company was looking at having various combinations of its existing products and also customising it to the needs of a specific area.
"In the last six years, we have invested around Rs 8 crore in upgrading our communication infrastructure and this year this is going to a major focus area and are planning to increase the investments quite substantially," Mr Narain said.

Market share
At the moment, the company has a market share of 4.56 per cent as against 4.4 per cent in 2005-06. "Looking at the anticipated impact of shift from the regulated market to a detariffed market and also expecting a couple of new players, we are looking at maintaining the current market share in the current fiscal also. Apart from this, since we anticipate growth from the retail lines we will enter into suitable understanding with intermediaries, enter into tie-ups with more dealers and banks," he said. Mr Narain also said Iffco-Tokio plans to increase the number of offices from the present 98 to 150 across the country by the end of the current financial year.

Source: Phalguna Jandhyala, The Hindu Business Line

Cyclone Gonu causes $US1b damage in Oman

Source: The age, 09 June, 2007

Audatex software for processing claims online

Mumbai June 10 Motor insurance firms and car companies are signing up for new software that will help them process insurance claims faster.
The turnaround time for settling claims, which now takes a couple of days to a week, could shrink to a few hours. Maruti Udyog Ltd and Tata Motors have signed agreements with Audatex, a division of a US-based company, ADP Private Ltd.
Audatex provides software that allows manufacturers, insurers and repairers to process claims online. Hyundai also plans to implement new software for faster settling of claims. Maruti, Tata Motors and Hyundai account for nearly 80-82 per cent of auto industry sales.
Audatex's software has data of the latest price of auto parts across car models, and the labour time required to repair or replace them. Surveyors submit an online report (including images of the damaged cars), and insurance companies view this online and approve.

Standardisation
"This will reduce turnaround time for claims approval to typically 4 to 6 hours. It will bring in standardisation of repair payout, control the cost of processing claims and record vital statistics to help insurers take claims and underwriting decisions," said Mr Pankaj Kapoor, CEO, Audatex India.
"We are also pushing for a central database to be created, which can be tapped by all insurers to prevent multiple claims break in insurance and other types of malpractices."
"Maruti and Tata Motors plan to have our system implemented across their approved repairer networks. Both have tied up with insurers and they have agreed to use our systems for processing claims of their cars," he said.
Amongst the insurers, New India Assurance, National Insurance company, Tata AIG General, Royal Sundaram, and ICICI Lombard have started using Audatex's software at some locations. These insurers account for the bulk of the motor insurance market.

Claim settlement
Motor insurance, which contributes 40 per cent of the premium of the non-life market, has been facing claims ratios of well above 100 per cent. Analysts say that companies are now focusing on claim-settlement to make motor insurance a more profitable venture.
"Currently, every item of repair of every claim is negotiated, rather haggled. In the future, insurers will have terms profiled into the system and only a small portion, say 15 to 20 per cent, will be negotiated," said Mr Kapoor.
Hyundai Motor India is also conducting pilot tests on software developed by a Malaysian company that will reduce the processing of claims to a few hours.
"Besides reducing turnaround time, we can make a comparison between dealers of the same region and correlate their performance with respect to accident repairs, models and sales," said a senior Hyundai official.
Hyundai currently has tie-ups with ICICI Lombard, Bajaj Allianz, MS Cholamandalam, New India Assurance and United India Insurance.

Source: Radhika Menon & Mayur N. Shah (Business Line)