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)

LIC to pare real estate exposure

Life Insurance Corporation of India is reducing its exposure to real estate stocks, taking a cue from the banking regulator, the Reserve Bank of India (RBI), which has warned of an asset bubble building up in the sector.
“We have taken a conscious decision to go slow on the real estate industry as we think at present the real estate stocks are overstretched,” Managing Director D K Malhotra said here today.
LIC is one of the biggest investers in the stock markets with its financial year 2008 investments expected to cross Rs 8,500 crore. It picks up stake in the initial public offers (IPOs) as an institutional investor and from the secondary market.
The corporation would have investible funds of as high as Rs 115,000 crore by this fiscal-end. Of this, the LIC would invest 8 per cent to 10 per cent in the equities alone after scooping out a separate corpus worth Rs 35,000 crore for the unit-linked insurance schemes.
Even in the past, Malhotra said the insurance giant was very selective about investing in real estate stocks. But following the RBI advice to the banks to increase risk weightage on the real estate sector, the LIC has become more selective in the real estate stock investments.
Malhotra clarified that they have not received any instructions as yet from the insurance regulator, the Insurance Regulator and Development Authority (Irda) about cutting down on investments in the realty sector.
Malhotra said like the global financial giants, Fidelity which insists on high corporate governance standards in the companies they invest, LIC would demanding similar higher corporate governance standards.
The LIC would be investing more in those companies which have good corporate governance records. “Our nominee directors have been told to be more vigilant on the corporate governance issues as better governed companies fetch higher valuations in the stock markets,” he added The Indian real estate sector is witnessing an unprecedented boom with real estate prices touching a record high.
Riding on the boom, many Indian real estate companies went public and its valuations shot up soon after the listing of the shares.
In fact, the Delhi-based real estate firm DLF has lined up a Rs 9,500 crore IPO which would open for subscription by next week.
Malhotra said the LIC has not taken a decision as yet on the investments to be made in the DLF IPO.
The real estate prices have doubled in the last two years and the stock prices of real estate companies are up by almost 80 per cent in the last one year.
A booming economy and higher salaries are creating a demand for new houses, offices and shopping malls.
But due to successive interest rates hikes, the real estate prices are now cooling down with some experts predicting a price correction in the next two quarters.

Source: Dev Chatterjee, (Business Standard)

Insurers gear up for full detariffing

As soon as general insurers are freed from the shackles of standard products, they could offer a motor insurance policy that provides for settlement of full claims amount without any deductions for depreciation as per the current practice.

General insurers would also reimburse travel expenses or make available a rent-a-car service for the period the insured motor car remains in a garage for repairs.

Currently, insurers settle motor insurance claims with deductions as high as 40 per cent.

These and many more features are being mulled for inclusion in policies when the Insurance Regulatory and Development Authority (IRDA) lifts controls on policy wordings and terms and conditions on general insurance policies from March 31, 2008.

General insurers are also toying with the idea of providing a service whereby it would arrange for towing a failed motor car to a garage for repairs and get it delivered at the doorstep of the customer.

At present, non-life insurers have to use standard policy wordings and terms and conditions. Thus, there are standard insurance products in the market and customers do not have much of a choice. Similar flexible covers would also be made available in fire and engineering insurance availed of by companies.

For example, a corporate customer now can buy an industrial all-risk policy only if the minimum sum insured is Rs 100 crore.

After insurers are freed to structure policies according to customised needs, they could even provide the all-risk cover for smaller sums insured, which would ensure fire, marine, engineering and miscellaneous covers need not be bought separately.

In a free market, insurance companies will also be able to introduce fire policies without the under-insurance clause or the first loss clause. This would mean, if a company buys a Rs 50 crore policy for a Rs 100-crore plant, then the insurer would pay 100 per cent of the claim if it is less than the sum insured.

Currently, insurers settle claims in the proportion of the insurance cover taken to the market value or the reinstatement value of the plant.

Insurers have started the exercise of relooking at the present wordings, getting feedback from brokers, agents, intermediaries and customers to develop their own wordings.

Besides, the General Insurance Council (a self-regulatory body of all general insurance companies) is working on developing common market wordings that can be used by insurance companies once the Irda allows insurers the freedom to frame their own wordings, terms and conditions for insurance policies. These wordings would have to be approved by the Irda.

The market wordings being prepared by GIC will have all possible clauses. If a corporate customer wants a clause other than the standard market wordings, then insurance company would have to get the Irda’s approval.

At present, the IRDA has partially freed up pricing from January this year.

Under this partial detariffed phase, insurers are allowed to reduce rates up to 51.25 per cent of the erstwhile tariffs. From March 31 2008, IRDA will lift the tariff wordings, terms and conditions. That means insurance companies will be able to use their own wordings.

With each insurance company framing its own terms, conditions, it will lead to confusion for the individual and the corporate customer.

Explaining the rationale behind the General Insurance Council developing market wordings, KN Bhandari, secretary general of GIC said, “The move is to bring uniformity in wordings for insurance companies. Uniformity in wordings will help customers compare pricing of different insurance companies, avoid legal hassles and reduce mis-selling.”

Source: Falaknaaz Syed, (Business Standard)

Pvt cos’ growth push gives health insurance a leg-up

It’s a money spinner that leaves a trail of angry consumers. But, despite a mountain of client complaints, it is also the fast-growing insurance business. Health insurance grew by nearly 44% in 2006-07, which is double the growth of the entire non-life business last year. An interesting aspect of last year’s growth was the aggressive push by the private sector. Private non-life companies accounted for 38% of health insurance in India on March 2007 against 24% a year ago. As of end-March, the largest private insurance player, ICICI Lombard General Insurance, was only Rs 30 crore behind India’s largest non-life insurer New India Assurance. During the year, ICICI Lombard grew its non-life business 168% to Rs 735 crore. As against this, New India’s health business grew only 14% to Rs 765 crore. In the private sector, there is a clear segmentation. Over 80% of private health insurance is concentrated in four of the eight companies. These are ICICI Lombard, Bajaj Allianz, Royal Sundaram and Iffco Tokio. Reliance General Insurance, which is a later entrant, is turning out to be a strong contender. The Anil Dhirubai Ambani Group Company has sold over one lakh policies in the past few months and has grown its health portfolio from an insignificant Rs 8.6 crore in 2005-06 to Rs 67.7 crore in 2007-08 capturing a 2.1% market share. The private sector’s ability to handle high volume claims in this highly service-intensive business has not been fully tested. Most of them use the same third-party administrator network hired by the public sector. Some like Bajaj Allianz manage it internally through their health administration teams. The government companies have not been pushing health products and tapping the full potential of the market as they have been hit by large losses. Part of the reason for the losses is adverse selection as senior citizens are increasingly realising the need for health insurance. It is also this segment where claims have been high. The PSUs have responded by sharply increasing premium rates for senior citizens. A significant part of the growth, this year, has been on account of rate hikes. Private companies, on the other hand, have been aggressively pushing health insurance as they see this product as a `door opener’ for their agents. The feedback that non-life insurers have received is that health insurance is the only non-statutory cover that individuals are most likely to buy. Private insurers have also been aggressive in group accounts last year. Sources say the growth in health insurance may accelerate this year despite the higher base for three reasons. First, three health insurance companies are set to expand across the country increasing the market for this product. Second, the full effect of rate hikes is expected to kick in during the current fiscal which will increase realisations this year. Thirdly, PSUs are expected to fight back this year with a number of new products being lodged with the regulator. New India has recently received clearance from IRDA for a new health plan. The new scheme has sub-limits for various expenses such as room charges and surgery and is expected to help the company manage its claims better. The health insurance sold by non-life insurers does not represent entire universe of private health insurance in the country. From last year, life insurance companies, too, have started providing health insurance. ICICI Prudential has already launched its standalone product and has more schemes lined up. The biggest impact would be when LIC, with its distribution force of over one million agents launches its health plan some time this year. The corporation has already set up a health division and is now awaiting regulatory approval for products.

Source: Mayur Shetty, Times News Network

BoM eyes 15% in Shriram-Sanlam non-life venture

PUNE\CHENNAI: Bank of Maharashtra (BoM) is eyeing a 15% stake in the non-life venture promoted by Chennai-based Shriram group and Sanlam of South Africa. The proposed joint venture is awaiting the Insurance Regulatory Development Authority’s (IRDAs) nod. The Pune-based bank has proposed to chip in with around Rs 15 crore towards the Rs 100 crore equity of the insurance JV, said MD Mallya, chairman & managing director, BoM. The Shriram group through its holding company would hold a majority stake, with Sanlam picking up 26%. “We are still reviewing the Shriram Group’s application for its non-life venture due-diligence needs to be done by the regulators. As far as BoM’s participation is concerned, it is for RBI to take a decision,” IRDA chairman CS Rao told ET. Shriram Group chairman R Thyagarajan said the company was hopeful of getting a response within the next 15-20 days. “The delay in issuing a licence is not unusual in our case, as there are different regulators involved.” He said that the group considered a couple of banks for joining the venture and finally opted for BoM as a partner. The new venture will be based in Jaipur. The minimum capital requirement in a non-life venture is Rs 100 crore. Under the existing regulations, a foreign partner can hold up to 26% equity stake, while a state-owned bank can contribute up to 50%. For the Shriram group, this will be the second venture with the South Africa-based Sanlam Group. It already has a tie-up with this group in the life segment: Shriram Life was launched in 2006. Besides life insurance, the Sanlam group operates in areas of group schemes, retirement funds, asset management and other financial services. At the end of December 2006, it had over $60 billion assets under management. Currently, BoM only has bancassurance tie-up with United India Insurance for distributing general insurance products. The proposed non-life joint venture with the Shriram group is expected to provide a good opportunity to the bank to cross sell insurance along with the traditional banking products. If the proposal is cleared by the regulator, BoM will be the second public sector bank after Allahabad Bank to foray into the non-life segment. IRDA has cleared the R1 application for Allahabad Bank, which has partnered with Sompo Japan Life Insurance, Indian Overseas Bank, Karnataka Bank and Dabur Investment Corporation. BoM is targeting a 25% growth in the total business in FY08, comprising of a 23% growth in deposits and 28% growth in advances. In absolute terms, it is projecting a total business of around Rs 77,000 crore for this fiscal.

Source: Hema Ramakrishnan & Chandra Rangnathan, Times News Network

Medical Insurance: Get wise about health

Last year, Ranjeet Deshmukh decided to quit his job in Mumbai and re-locate to Pune. He had planned a month-long vacation before joining the new company. But just a week into the vacation, Deshmukh suffered a stroke and underwent brain surgery. He was hospitalised for a week, re-admitted about a month later with complications for a couple of weeks more. The hospital and the doctors who had treated Deshmukh soon began sending notices, demanding payment. His family suddenly realised that since he was between jobs, the health insurance cover from his earlier company was no longer valid. This meant that the entire bill had to be borne by his family, with him having been out of action for almost a year. Deshmukh’s is not a one-off case. Health insurance is probably the last thing on people’s priority list. The attitude is normally, ‘Oh my company has a cover for me’. However, there are plenty of questions that never get asked. For example, what happens when you quit your job? What happens if the cover is not enough? What kinds of illnesses are covered under the policy? Here are a few myths debunked:

Do I need a standalone health policy?

No matter what your company offers as health benefits, you need to get yourself a standalone policy, says Kartik Jhaveri, director, Transcend Consulting. Especially for the young and healthy, the prospect of keeping aside money for premiums and going without any sort of coverage is a very tempting option. By all accounts it’s not a good idea. Simply because illness and accidents don’t come with a prior appointment! With premiums as low as Rs 100 a month, just skip a couple of lattes a month, and you should be able to get yourself a good enough health cover.

What kinds of policies are available?
The six main types of policies you could consider are, health (or medical) insurance policies, critical illness policies, personal illness, accident policies, hospital care policies and surgical assistance policy. These are mainly offered by non-life insurance companies, in the public as well as private sectors. Some of these policies also come as add-ons with life insurance policies. For instance, critical illness cover comes as an add-on with some life insurance products. It’s a good idea though, to get yourself a standalone medical insurance policy from a general insurer. The IRDA website (www.irdaindia.org) is a good place to start for more information on the insurers.

Cashless policy is even better
A lot of people are confused, with good reason, about what policy is good for them. The answer is not easy and does not come in ‘one size fits all’. Every individual will need a different type of cover depending on various factors such as age, health condition and such. One of the first questions to ask is whether the policy gives you a cashless facility. With cashless policy, you get a card that states the name of a few hospitals where you can get yourself treated without having to pay any money. The insurance company will settle your bills on your behalf. This type of policy is better than one where you need to pay money up front and get your claims settled later.

Check reputation of hospitals and TPAs
The second question you need to ask is how many reputed hospitals does your insurance company have tie-ups with. And how many of these hospitals are within easy reach for you? If the list is not good enough, just scratch the company off your list at the start itself. Another important factor to consider is the TPAs (Third Party Administrators). These are the middlemen who bridge the gap between you, the insurance company and the hospitals.

Select a policy that suits you the best
Jhaveri advises that you should realistically evaluate which benefits you need before you shop for individual coverage. “A single man may not need maternity coverage and may be able to save by choosing a plan that doesn’t offer such a benefit,” he say. Similarly, at a young age—unless you have a family history of some critical illness—you normally need not go for a special critical illness policy. A general all-purpose health insurance policy from general companies is good enough.

Read the fine print
Don’t just go by the name of the company, say analysts. Instead, you should read the fine print very closely while shopping for a policy. Niyati Raina, a Mumbai-based homemaker, was up for a rude shock when her critical illness policy refused her claim when she underwent treatment for first stage Leukemia—this despite the fact that the disease was listed in the policy. “They told me we will pay for treatment only after the third stage. That’s when I am almost dead, so what’s the point!” fumes Raina. We come across plenty of such funny clauses, says Zankhana Shah, a certified financial planner. For example, pregnancy is normally not covered. Then there are times when they have different definitions for disability. “There was a client who had broken a leg in an accident, and could barely move the other leg, but his policy denied his claim saying that he can still move the other leg,” says Shah. “Therefore make sure you read the fine print carefully before you sign up for a policy. In fact, since the policy document is so full of jargon, it is best you consult your physician, especially when you take a critical illness policy, just to be sure of the clauses in it,” adds Shah.

Declare your existing conditions
Another mistake that people make is not declaring pre-existing diseases. For instance, Praveen Mehra, a Mumbai-based electronics engineer, was declined a treatment for liver transplant, simply because he had forgotten to mention his anaemic condition while he signed on for a policy. With some conditions, it is difficult to get a policy. But investigate to see whether you can still get a cover by paying a higher premium. “You may be able to purchase an insurance plan that has a high premium and may disallow benefits relating to your specific condition but will still offer you protection against unknown health risks,” says Shah.

How much cover do I need?
There is no right answer for this one. For example, a Rs 2 lakh cover is good when you are between 20-30 with no family history of illness. But with a history of disease, you might need to insure yourself for up to Rs 5 lakh. Another thumb rule, says Jhaveri, is to enhance your cover with age. The older you get, the bigger your coverage should be. Also, as with all other insurance policies, the sooner you get the policy, the less you pay in terms of premiums. So begin early.

Source: Kavita Kukday, Times News Network

Insurers may get to innovate before april

NEW DELHI: The general insurance industry is likely to get flexibility to introduce innovative products much earlier than the April 2008 deadline set by the insurance regulator. Indications are that the current freeze on innovation would be scrapped by the end of this year. The industry has been asked to prepare a draft by September this year on the changes that should be introduced to make the policy regime more liberal. Once the new norms are approved, insurers will be able to make changes to the terms and conditions of products offered by them. This is expected to result in lower premia for customers. “We have asked general insurance companies to formulate a draft of the standardisation of clauses. The industry is of the view that they should now be able to make changes to products other than just pricing. After examining their recommendations, we may consider advancing the date from April 2008,” Insurance Regulatory & Development Authority (Irda) chairman CS Rao said. After free-pricing was allowed in January this year, policies were driven solely by pricing decisions. The costs of policies have come down and are expected to fall further once insurers get leeway to issue customised policies. The general insurance industry feels it is ready for the next stage in detariffing. But analysts feel companies are still in the process of building their databases. Companies will have a better idea of pricing risks by examining the claims ratio based on the databases of the recent past. Pricing, rather than underwriting, is raking in volumes under the free-pricing regime. This will change after product innovation is allowed. “Prices are expected to fall further, when each company gets more innovative with the terms and conditions of policies. It will require companies to have a thorough understanding of the risks they will be underwriting. It will not be an open-and-shut case of giving discounts to woo policyholders,” an industry insider said. After detariffing, Irda restricted discounts to 20% for fire and engineering, and 10% for motor rates for the first month till filed rates were approved. The bands prescribed further allowed an additional 25% discount on new rates. So the effective rate of discount is up to 45% on the old rates. While sections of the Rs 22,000-crore industry have been critical of Irda’s prescription by capping discounts, the regulator had only exercised caution to avoid a price war.
Source: Economic Times