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