LIC waiting for IRDA nod for health insurance foray

INDORE: Country's largest life insurance services provider Life Insurance Corporation (LIC) is set enter the health insurance space in about two months as it is awaiting a nod from the IRDA. "The company will soon enter the health insurance sector and has submitted to the Insurance regulator (IRDA) newly- designed quality products in this regard," LIC Managing Director Thomas Mathew told reporters here today. "Once the company receives approval from the regulator, LIC will formally announce its entry," Mathew said, adding the formal launch will take about two months. The company has formed a new subsidiary for taking care of the proposed business, he said after donating cochlear implants of four hearing-disabled children as part of the company's corporate social responsibility. Referring to LIC's growth in view of the entry of number of private players, he said: "LIC is number one in the world in terms of total number of policy holders, 22 crore at present, which is more than the population of many countries." The company's total market share in life insurance sector is above 75 per cent, while the remaining 25 per cent is owned by 15 private players. Of these nine private firms have just one per cent share, he said.

Source: PTI

Hindujas in talks with global majors to drive into insurance

NEW DELHI: The $2-billion Hinduja Group is in talks with a couple of global insurance companies for rolling out its insurance venture here. “The Hinduja group is keen on the insurance sector and we are working on plans for that business. There are quite a few global insurance companies that are not in India yet and are keen to come in. We are exploring various options, but it’s still in the very early stages,” Ashok Leyland vice-chairman Dheeraj G Hinduja told ET. The insurance business, which already has some big automotive names such as Bajaj and Maruti, has been booming in India. Total premium in the insurance sector, which stands at Rs 75,000 crore in 2006-07, witnessed 110% growth over the previous year. Industry experts say the sector will continue to witness similar growth rates for the next 2-3 years. Insurance penetration as a percentage of GDP has risen from 2% a few years ago to 3.2% in 2006-07. Cash-rich auto companies such as Bajaj and Maruti already have a presence in insurance, though in different formats. Bajaj Auto has a JV with German financial company Allianz in which the latter holds 26% with an option to raise it to 49% if the government allows. Maruti, meanwhile, has separate arms that have tie-ups with National Insurance, Bajaj Allianz, New India Assurance and Royal Sundaram. The Hinduja Group has interests in various sectors, including banking, finance, energy, automotive, IT and real estate. IndusInd Bank is the group’s largest company in the financial space. Its foray into insurance will be the group’s second most important venture in the financial sector since the inception of IndusInd Bank. FDI regulations allow foreign investors to hold 26% stake in insurance ventures, with the remaining 74% being held by Indian investors. The insurance foray is part of the group’s new aggression across the sectors it is present in. For instance, Ashok Leyland, India’s second largest truck and bus maker, is open to tying up with an overseas player after long-time partner Iveco moved to Tata Motors as part of its arrangement with parent Fiat. “We are open to a partnership,” said Mr Hinduja. “If someone brings an idea or technology that adds value to Ashok Leyland, we will consider it. But not at the cost of giving up majority control.” Ashok Leyland would also look at acquisitions in the commercial vehicle, auto components and engineering and design space, he said. “We are open to even big-ticket acquisitions in any of these sectors, but only if there are synergies with Ashok Leyland in the markets we want to be in,” Mr Hinduja said. The company is looking for CV acquisitions in Europe and components and engineering/services cherries in the US, he said.

Source: NANDINI SEN GUPTA & GAURIE MISHRA(TIMES NEWS NETWORK)

Banks asked to explain fund source for insurance JVs

Mumbai: The Reserve Bank of India has asked banks which want to start insurance activities to explain how they will organise capital for their proposed joint ventures which need large amount of funds. The central bank's query is in response to applications from a number of Indian banks which have signed MoUs for insurance JVs.
Five JVs have been signed between Indian banks and foreign insurers in the last one year, involving 10 Indian banks. And many more banks are showing interest in the insurance business. Banks say the RBI's concern comes from the fact that in the future banks will require more resources to meet capital norms for Basel II, which will be implemented from 2008.
According to Indian Banks Association, the Indian banking sector will need close to Rs50,000 crore to adhere to the Basel II norms and over and above this banks will require funds to sustain the growing credit demand.
Those banks, which have applied for the RBI's approval to enter the insurance venture, have to convince RBI about how they plan to arrange capital for Basel II and insurance business. There is also a regulatory requirement that banks cannot invest more than 20 pc of their net-owned funds in non-banking activities.
So far, only two large banks — SBI and ICICI Bank — have been allowed to enter the insurance business. Also, recently RBI had approved Allahabad Bank's plans to enter the non-insurance JV with Sompo Japan Insurance.
Source: domain-b

Tata AIG Life plans expansion

KOLKATA: Private insurer Tata AIG Life Insurance Company Ltd today said it planned to expand its footprint in the country by increasing its offices and focus on small towns which offered higher growth prospects. "We are planning to increase our number of offices from 72 to 120 during the year. 10 new branches will be added in the eastern region," Tata AIG Managing Director Trevor Bull said on Friday. He said the sales force would double from 10,000 and the company would move into smaller towns to achieve growth targets. Bull indicated with the sharp rise in offices and sales force during the year, the company was aiming at a quantum jump in premium income. The premium income was Rs 1,367 crore during 2006-07, including new premium of Rs 478 crore. Tata group companies account for two per cent of the total premium earning of Tata AIG Life. Bull said the company would need fresh capital infusion. The present capital of Tata AIG Life was Rs 440 crore. The company said it was looking to launch new products during the current year in health, pension, gratuity and unit linked products.

Source: PTI

Ulips to turn costlier after new Irda fiat

KOLKATA: Prices of unit-linked insurance policies (Ulips) are set to rise, thanks to a clarification issued by Insurance Regulatory Development Authority (Irda) on lapsed policies. Irda has stipulated that if a unit-linked policy lapses during the first three years, the policyholder will be entitled to a surrender value at least from second year onwards, which will become payable only at the end of three years. In case the policyholder expires during the first three years for such lapsed policies, insurers will have to be paid a death benefit that will at least be equal to the fund value. The cash value of an insurance contract, also called the surrender value, is the cash amount offered to the policyowners’ by the insurer in case a policy lapses. Fund value is the amount of money accrued to the policyholder after deducting management expenses. “Guidelines introduced by Irda in July 2006, stipulated that once a policy lapsed there could not be any payouts. A policy lapses if any of the policies are not paid in the first three years,” Sudipto Ghosh, manager, KPMG — advisory services told ET. Explaining the impact, Sam Ghosh, CEO, Bajaj Allianz Life Insurance, said, “On an average as much as 25-30% of unit-linked policies lapse for the industry. The funds from the lapsed policies are supposed to go to the shareholders’ funds after a period that is yet to be notified by Irda. In any case, currently, we are holding such funds indefinitely and they are invested along with the other policyholders’ funds.” “Now that Irda has asked us to pay off the surrender value or the fund value, this is likely to affect the policyholders’ funds because these will get withdrawn from the fund which will deplete by an equal amount. It will also affect bottomline as well as the shareholders’ funds as it will now be withdrawn and companies will not be allowed to retain them,” he added.“While designing policies and their profitability, actuarial take it for granted that a certain percentage of policies sold will lapse within the first three years. Profitability of companies with large lapse ratio may actually be significantly affected as a result of this Irda clarification. Hence, these insurers may revise their prices for Ulips,” said an insurance analysts with a private insurers.

Source: DEBJOY SENGUPTA(TIMES NEWS NETWORK)

DLF/prudential in life insurance soon

Real Estates Major, DLF has entered into an agreement with US-based Prudential Insurance to set up a joint venture company to sell life insurance products in India. The company, which would be coming up with one of the country's largest IPO to net Rs.9,625 crore, in its red herring prospectus, said it was exploring various business opportunities, including hospital properties, A S Minocha, Chairman, DLF Commericial Developers, a group company, told reporters here today. He said the company had got the Centre's approval for setting up five special economic zones and was awaiting approval for two more, including one here. Of the proceeds from IPO, the company proposed to spend Rs.3,500 crore to increase its land bank, besides spending Rs.3493 crore for development and construction costs of the existing projects and the remaining part to clear the debts,he said.

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