Friday, June 27, 2008

NATIONAL HEALTH INSURANCE SCHEME

Chennai: Nearly 4.7 lakh families living below the poverty line in two districts in the State will be covered by the national health insurance scheme for unorganised workers in the next couple of months.

Inaugurating a State workshop on the Rashtriya Swasthya Bima Yojana (RSBY), Labour Minister T. M. Anbarasan said about Rs.5.5 crore would be spent by the State on the pilot scheme in Kancheepuram and Tirunelveli districts. The premium has been fixed at Rs.512 for a family of five with the State government’s share amounting to Rs.113.

Source: The Hindu

RISING HEALTH INSURANCE TO BOOST TPA BUSINESS

Mumbai: The ongoing focus on health insurance business is expected to provide the much needed boost to the third party administrator (TPA) business. TPAs provide the much needed linkage services to the customers and insurance Companies by managing the claims.

However they are not allowed to market health insurance products.
The business of health insurance which is offered by both life and general insurers are growing at 50% and is being encouraged by the Insurance Regulatory & Development Authority.

By 2012, the Indian TPA industry is expected to grow exponentially to Rs 15,000 crore in size in terms of value of premiums managed. With around 30 players, the current size of the TPA is estimated at Rs 4,400 crore and the business growing at 40%. The top five players have a market share of 60%.

Among the top ranking TPA players are TTK manages around premiums worth Rs 560 crore followed by MediAssist (premiums worth Rs 450 crore approx),and Paramount (with premiums worth Rs 400 crore approx), Raksha (premiums worth Rs 430 crore approx), Family Health Plan (premiums worth Rs 250 crore approx), MD India (premiums worth Rs 350 crore approx).

The life insurance behemoth Life Insurance Corporation(LIC) has now entered the health insurance market and has mobilised premium income of Rs 100 crores in last two months of 2007-08.

Observers say some Third Party Administrators (TPAs) in the Indian health insurance sector are spinning-off separate insurance brokerage firms or looking at strategic alliances with insurance brokers with a focus to improve overall business margins
Also some insurance brokers are looking at diversifying into TPA services or being strategically aligned to TPA service providers. Also some players in the TPA industry do not find the volumes and the fees economically lucrative proposition.

Source: The Financial Express

NEED TO RAISE AWARENESS OF INSURANCE COVER IN FILM INDUSTRY

Chennai: There is a need to raise awareness levels of insurance in the entertainment industry, particularly in the film industry, a section of artists, technicians and producers note.

With more Tamil films boasting of ‘Hollywood-like’ action sequences usually involving a greater degree of risk, the need for safety precautions and insurance is being felt more than ever, say many in the industry.

The passing away of 24-year-old Udaykumar and 26-year-old Sigamani on the sets of ‘Sarvam’ on Monday has brought to focus the issue of lack of awareness of the same.
Pushpa Kandaswamy, managing director of Kavithalaya, says it is certainly worthwhile taking insurance for projects involving very risky action sequences. “However, we have to keep in mind the cost element and perhaps work it out according the budget. We have started this practice,” she says.

G. Srinivasan, chairman and managing director, United India Insurance Company, says not everyone in the industry is aware of the various policies that could be useful in the entertainment industry.

“It is popular only among certain producers but there needs to be more awareness,” he says. The idea is yet to pick up on a large scale, says Krishna Rao, insurance broker. “This industry employs many on a temporary basis. Contractors engage workers as per the requirement in a particular production.”

Taking a workmen’s compensation policy, as is done by many construction companies, would be an appropriate option for them, he says. Insurance cover not only comes in handy in the case of injuries or death during risky action sequences, but also does in other aspects of production, says Sudha Panchapakesan, vice-president, advertisement film company J.S. Films.

“We have taken the Cine Mithra policy. You can choose to cover sets, costumes and also those whose work involves risk. For instance, when we shoot a car racing past at a high speed, we definitely insure the driver. We may insure him at a higher value than someone else whose work does not involve much risk. But yes, insurance is vital,” she adds.

Source: Meera Srinivasan
The Hindu

INDIA’S SHARE OF LIFE INSURANCE GROWTH RISES

Mumbai: India’s share of the world life insurance business market grew marginally during 2007 to 1.97% from 1.68% a year ago. Life insurance premia generated from India amounted to equivalent of $47.1 billion in 2007, up from $37.22 billion in 2006.

Although new life insurance business in India slowed down considerably in 2007-08, the overall business grew by over 36% in dollar terms. This was partly because of the strengthening of the rupee vis-a-vis the US dollar. Also, the absolute growth includes renewal premium. According to a report by Swiss Re, the world life insurance market grew by 12.6% which translated to a real growth of 5.4% after adjusting for inflation. India’s real growth at 14.2% in 2007-08 is more than two-and-half times the world average.

Although, China has a slower growth rate, its market share has grown faster because of its high base. The country now accounts for 2.45% ($58.6 billion) of the world market in 2007, up from 2.04% ($45 billion) a year earlier. According to the latest Swiss Re sigma study, world insurance premium income (life and nonlife) grew 3.3% in real terms in 2007, reaching $4,061 billion. This growth was primarily driven by the life business in industrialised and emerging markets, and to a lesser extent, by the non-life business in emerging markets.

For Asia, insurance premium income reached $841 billion, representing an increase of 4.5% in real terms. India insurance premiums attained double-digit growth of 13% to $54 billion. Life insurance premiums increased 5.4%, which is above the previous 10-year average. Non-life premium growth was robust in the emerging markets (+10%), but decreased in the industrialised countries (0.3%). However, both life and nonlife industries are financially sound despite the challenging economic environment.

Daniel Staib, one of the study’s authors, says, “Despite a macroeconomic environment characterised by marginally slower economic growth and rising inflation, life insurance continued to expand in 2007 with world life insurance premiums increasing by 5.4% to $2,393 billion.” Sales of retirement and other wealth accumulation products spurred growth in the industrialised economies. Life insurance in emerging markets was fuelled by strong economic performance and catch-up potential.

The key driver of growth in life insurance business was the trend toward single premium business and pension and annuity products. According to the report, the insurance industry was shifting one from providing traditional life insurance to these new sectors because of ageing populations and reduction in state social security benefits. The report points out that although there was a severe credit crisis in 2007 which led to turbulence in the financial market insurance, sales were unaffected.

The non-life business continued to be profitable despite slow growth. Global non-life premium growth slowed to 0.7% in real terms, totalling $1,668 billion in 2007. Non-life premium growth continued to follow divergent trends in developed and emerging markets. While premium volume retreated in industrialised markets, growth slowed marginally in emerging markets.

Though downward pressure on premium rates continued in some countries, overall technical results were favourable and profitability remained sound. According to the latest Swiss Re sigma study, world insurance premium income (life and non-life) grew 3.3% in real terms in 2007, reaching $4,061 billion.

Source: The Economic Times

RELIGARE SET TO FORAY INTO NON-LIFE SECTOR

Mumbai: Religare Enterprises (REL), promoted by Malvinder Singh, CEO of Ranbaxy, is proposing to raise Rs 1,075 crore through a combination of either global depository receipt/ American depository receipt/ qualified institutional placement/ foreign currency convertible bonds and equity shares or warrants to promoters or promoter-entities.
A spokesperson for REL, which is one of the largest broking houses in the country, said the fund raised could be used for working capital requirements and will also enhance the firm's net worth.
The board has also approved Religare's entry into the non-life insurance sector and the company has started scouting for partners. KPMG has been given the mandate to look for possible partners.
Malvinder Singh has recently sold the promoter family's stake in Ranbaxy to Japan's Daiichi Sankyo for Rs 19,780 crore. Singh has said that the promoters want to pump money into Religare and Fortis to make them the top firms in their respective sectors. "Healthcare and financial services are two focus areas for us," Singh had said.
Recently, Religare Capital Markets International UK, an indirect subsidiary acquired Hichens, Harrison & Co. Plc. The company has also received the in-principle approval from Sebi for being the sponsor for an asset management JV with Aegon (50:50) and has put in place its core team and will shortly apply for the final license.
The broking house has posted a profit after tax (PAT) of Rs 91.97 crore for 2007-08, up 270 per cent from that in the corresponding period last year. The financial services company has seen its PAT margins grow from 7.77 per cent in FY07 to 10.26 per cent in FY08. The board has recommended a final dividend of 11 per cent, or Rs 1.1 per share, for the face value of Rs 10 each share.
The company has made a loss provision of Rs 13.5 crore for the financial year 2007-08. The provision was made in its subsidiaries Religare Finvest and Religare Securities on account of bad debts arising out of margin funding and client defaults.
With Religare's provision, the total loss provisions by stock brokers in the country has reached Rs 63 crore. Earlier, Prime Securities made the highest provision of Rs 23 crore and J M Financial made a provision of Rs 12 crore. The maximum losses for stock brokers are arising out of the margin funding business, which went for a toss after the market meltdown since the start of 2008.
Meanwhile, the Reserve Bank of India has cancelled the certificate of registration granted to Fortis Financial Services as the company had voluntarily approached for the cancellation of the the NBFC licence.
When contacted, an official spokesperson for the company said ,"We have asked for the cancellation as Fortis Financial Services is changing the line of business to technology."

Source: Business Standard

SMALL PLAYERS DIVERSIFY INTO INSURANCE SERVICES BUSINESS

Mumbai: After the rush of Indian conglomerates and foreign insurers in all segments of the underwriting business, domestic companies, which service these firms in the life and non-life categories, are charting growth strategies in new areas.

A host of family-run companies that were earlier confined to a segment of the insurance services business, are now venturing into other areas. For instance, the Apollo group, promoted by the Reddys, has ventured into the broking segment by acquiring E-Meditek.
Similarly, Bhaichand Amulok group, which has an insurance and reinsurance broking company called Bhaichand Amoluk Consultancy Services, has acquired a 26 per cent stake in another broking firm Willis BA.

Willis BA, one of the largest players in brokerage market, holds shares in a TPA called Health India. A TPA is a specialised health service provider rendering a variety of services, like arranging for hospitalisation and processing and settling claims. On the other hand, an insurance broker's job is to get the best cover with the lowest premium for its corporate clients. There are 30 TPAs registered with Irda, which managed premiums of Rs 4,400 crore in 2007-08.

A host of other promoters, such as Delhi-based Vipul group, Alankit and Safeway, Heritage, are in the TPA segment as well as the broking business. There are many others, such as broking outfit India Insure Risk Management Services, which plan to have a presence in more than one segment of the insurance services market.

While the service providers are venturing into related fields, many in the insurance industry are complaining that regulations prohibit brokers from processing claims. Also, at the time of renewal of big ticket corporate policies, insurance brokers do not disclose the information that they have gathered from TPAs to insurance companies.

Experts said that there is a possible conflict of interest, too, as TPAs, with broking arms, may entertain borderline claims associated with the clients.
An official of the Insurance Regulatory & Development Authority, however, pointed out that while issuing licences, the regulator tries to ensure that there is no common promoter or director.

"If the two companies (the insurance broker and TPA) are within the same group, there should be different directors and different promoters for the two companies," the source said.

Source: Falaknaaz Syed
Business Standard

Thursday, June 26, 2008

Will the insurance company pay up for Salman Khan?

Perhaps the proverbial last straw. A whopping Rs 19 lakh as compensation to the victims of Salman Khan’s reckless driving awarded by the High court has become a hot topic for discussion among insurance company officials.

So what if it is fortunately not the insurance company that has to fork out the amount. The day is not too far when such an instance happens fear insurers when not every motorist is as financially sound as Salman Khan and the onus of paying off the compensation could fall on the insurance company.

In this case a division bench of the Mumbai High court has ordered Salman Khan to pay Rs 10 lakh as compensation to the relatives of the deceased and Rs 3 lakh each to the injured victims. Insurers fear that such high compensation ordered by the court may set a precedent of sorts and encourage motor accident victims to demand high compensation amounts bleeding insurance companies further.

The motor insurance sector has already been reeling under heavy losses with third party claims going even over 200 percent and compensation amounts are in many cases twice or thrice the premiums paid. A cap on third party covers is the need of the hour. But efforts made in this direction meet with stiff resistance from especially the powerful truck owners lobby and insurance companies continue to bear huge losses on third party covers.

The experience of private insurers who took the plunge recently is no different. Consequently, a number of private insurers have become more selective while writing third party covers and quite a few have stopped writing such covers altogether. Of late, to bring down claims private insurers have added more deductibles in policy documents and are known to keep a close tab on costs. Vehicles used as private taxis are not issued risk covers and insurers tie up with auto workshops to limit losses.

Insurers are pressing on the finance ministry to put a cap on motor accident awards which if comes through will hopefully turnaround the fortunes of the sector.

NRIs- the new attraction for insurers

The life insurance companies are turning more dynamic in nature. The insurers are crossing borders to make its reach even for those staying seven seas away. The policies that are offered cater to Laymen, Corporates to High Net Worth Individuals (HNIs). Now, the latest fad that has caught the attention of the insurers is the Non Resident Indians (NRIs). Not only insurance companies but also the financial institutions have turned their attention to them.

The NRIs spread across the world is quite large. It is estimated that there are around 100 million Indians stretched across the world. It serves as a good reason for insurance companies to come up with products aimed specifically for this creamy layer of the country. The reasons could be multiple when an individual decides to leave his/her own motherland and prefer to stay in a foreign country. The reasons for which an individual chooses a foreign land than his own are mainly vocation, business, employment, etc.

Being financially stable, opting for higher insurance cover becomes possible for this elite group. Not only insuring their lives but also the family becomes important. This holds great business potential for the insurance companies. There are some NRIs who intend on sending their children to India for education, etc. Some may even want to settle down in their own country after retirement. Keeping these views in mind, insurance companies have come up with a host of policies for them. Almost all private insurance companies offer policies to NRIs, sometimes treatment given to them also becomes specialised. For example, ICICI Prudential has set its office in Bahrain, which caters exclusively to the needs of the NRI community situated in the region. Saving a considerable amount is usually the central focus in an NRI’s life. The aim on savings and investments makes it easy for them to buy insurance. When they move for vocation, accumulating wealth for future forms a major part of their investment goals.

Keeping their needs in mind, the insurance companies, offer policies ranging from traditional, endowment to unit linked plans. The younger generation has a taste for risk, which is why unit linked plans have attracted the interest of the younger age group. This is mainly because of factors like flexibility, investment in funds that promise good returns, the demand for ULIPs have gone high. Certainly, the number of NRIs opting for insurance is increasing. The insurance mammoth too is not left out in this rat race; the Life Insurance Corporation of India (LIC) offers insurance policies to NRIs as well as the People of Indian Origin (PIO). Now, if you are wondering what PIOs are, they are those who have foreign nationality and reside in foreign countries. A person is considered to be of Indian Origin (excluding countries like Pakistan, Bangladesh or as announced by the state from time to time) if he/she at any time held an Indian passport or he/she or either of his/her parents or any of his/her grandparents was an Indian and a permanent resident in Undivided India at any time. A wife of an Indian Citizen or of a person of Indian Origin is also considered to be of Indian Origin if she may be of non-Indian parentage.

The process of buying an insurance policy is quite simple. Once bought, the person can pay the premiums through cheques drawn on his/her Non-Resident (External) Account or Foreign Currency (Non-Resident) Account with a Bank in India (or Joint Account provided the policyholder is one of the account holders).

NRIs wanting to have financial protection throughout are increasingly opting for insurance. Considering the growing number of NRIs, Life insurance is becoming a popular choice and is being added in the investment portfolios of the Non Resident Indians. In the days to come, there might be more policies that would perhaps be more vibrant in nature that would fit needs more perfectly.

Challenges in rural healthcare

Insurance penetration levels in India are abysmally low, only 22 percent of the insurable population has been tapped and the situation in rural areas is even worse. Educating the rural population about the importance of healthcare and how insurance can help get the best for them at various stages in life is in itself a challenge particularly considering the low literacy levels, the traditional mindset, traditional or local healers, inefficient means of transportation, unaffordability, low importance to healthcare- few of the harsh realities that need to be tackled first.

Low importance to healthcare:

With no means to provide for even the basic necessities, scant regard is given to healthcare. Unless the situation is worse seeking medical help is out of question.

Allopathic cure not considered:

Low educational levels have led to village folks relying on local healers. Their advise is taken at face value and allopathic cure is only taken up as the last resort.

Hospital care is costly:

Access to affordable medical care is absent. Hospitals are located very far off and the cost is unaffordable.

Transportation:

An absence of an efficient means of transport has only worsened the situation. Bullock carts are the usual mode and any other is unaffordable. Hence a patient in need of medical help has to travel long distances to reach the ‘nearest’ health centre.

The following factors will help bring about a change in the situation:

More PHC (Primary health centre):

More primary health care centres need to be set up by the government.

Subsidised local transport:

Local transportation to be arranged for at subsidised rates by the panchayat or the hospital.

Education of village folk:

To spread the message volunteers can build a network of workers who can identify the problem areas and influence the villagers on various issues. Street plays, personal approach on a one to one basis or a group approach will go a long way in educating the rural population.

Tailor made policies:

Insurance companies will have to take into consideration the problem areas, and create tailor made policies.

Marketing:

Marketing in rural India is a different ballgame. Emphasis should be on the traditional media coupled with entertainment. This will go down well with the village folk. LIC used puppets to educate rural masses about Life Insurance. The number of inquires at LIC following the performance was found to be considerably high and the field staff too reported a definite impact on the business.

Womens role:

Awareness building and empowerment of women through income generation projects and literacy activities can help to a large extent.

Private health care centres:

Health care centres set up by private institutions at subsidised rates can ease the problem to a great extent. Insurance companies can play a major role in educating the masses by spreading the message through health care centres.

Insurance Policy updates by SMS in India

International Aviva Life Insurance has recently launched an SMS-based service in India, informing customers about premium payments and the policy status on their cell phones. Updating policyholders about their policies as well as informing them about Aviva Life Insurance products, is another step towards improving customer services.

Source: insuremagic

Reliance Capital to expand life insurance

India's Reliance Capital Ltd. (RLCP.BO: Quote, Profile, Research) plans to invest 20 billion rupees ($493 million) to expand its life insurance business in the next few years, stated Chairman Anil Ambani. The company is also open to a strategic partnership in its business and has been approached by potential partners, Ambani told the firm's shareholders, sending its shares up as much as 3 percent to a record 1,137 rupees.

The company, part of India's Anil Dhirubhai Ambani Group, has interests in asset management and mutual funds, life and general insurance, private equity, stock broking and other activities in the financial sector.

Source: insuremagic

New model for insurers to reduce policy holders’ risk

The insurance industry is set to see more of its capital freed, with the Insurance Regulatory Development Authority (IRDA) recommending transition to a risk-based capital framework for insurers. The proposed framework envisages assessing the capital requirement of insurers based on the underlying risk and volatility of their business. The companies will have to earmark capital for different line of businesses.

This model, known as Solvency II, has been adopted in most developed economies. If Indian insurers were to replicate this, they would have to set aside much less capital than they do now for unit linked insurance plans (ULIPs) compared to traditional insurance products. The recommendation to adopt the new framework was made last week to a high-level panel on the financial sector assessment programme. The panel, comprising senior government officials and regulators, is set to recommend further course of reforms in the financial sector.

Unlike traditional insurance products, the investment risk in ULIPs is borne by the policy holder. The solvency margin requirement for ULIPs is just one third of that for traditional insurance products. Solvency margin is the excess of assets over liabilities that an insurer has to maintain as a prudential measure.

Simply put the risk-based capital framework factors in a lower risk on policy holders’ liabilities. But companies will have to set aside higher capital if there is an asset liability mismatch in their portfolio.

IRDA has so far been hesitant to suggest the new framework mainly due to the uncertainty over investor behavior in a choppy market. Besides, the transition would also require inputs from the actuarial side, both from insurance companies and the regulator.

But there is a shortage of such talent now which needs to be addressed. Even countries that have adopted this model have done so cautiously and over a long span. Fact is the risk-based model gives a clear picture of the financial strength of the insurer and also allows for regulatory intervention, if required. It also helps in making comparisons across companies.

Currently, the minimum capital requirement for a private insurer is Rs 100 crore. Companies need capital to grow. It is also required to meet unexpected claims, expense over-runs and investment losses. The minimum capital prescribed under the new framework will act as a buffer to cushion losses, reckon experts. The IRDA has also made out a case for putting in place corporate governance norms for insurers and greater supervisory powers for the regulator. The latter would require amendments to the insurance legislation. An empowered group of ministers is vetting these proposed amendments along with other changes including a hike in the FDI cap from 26% to 49%.

Meanwhile, the IRDA has also looked at the status of India’s compliance with the insurance core principles (ICP) enunciated by the International Association of Insurance Supervisors (IAIS), a body of regulators and supervisors of over 190 jurisdictions. The principles include, among others, conditions for effective supervision, supervisory system, supervised entity, ongoing supervision, prudential requirements, markets and consumers and anti money laundering. The score card: India has observed or largely observed around 17 out of the 28 odd core principles.

But there are a few gaps. The conditions for effective supervision may not be fully in sync with global standards till changes are made in the legislation. The regulator also does not have complete control either over public sector insurance companies. Comprehensive internal controls are yet to be in place. There is also a case for beefing up on-site supervision.

More importantly, there is a case for enhancing disclosures to the public and having a proper mechanism in place for risk assessment. The IRDA has now set the ball rolling to usher in these reform measures.

Source: Insuremagic

Buy life cover if you have dependents

Sameer felt like he was living a dream, when at 23, he got a campus placement in a multinational company after completing his management studies. Being the only son of well-to-do parents, he didn’t have any immediate family obligations and started spending with élan. Clearly, saving money was the last thing on his mind.

Life went on, until he met Prakash, an old friend who had decided to make a career out of the booming insurance sector. Minutes into their meeting, Prakash started canvassing the merits of life insurance, listing out benefits such as convenience, safety and the various sops offered by existing policies.

He told him how an early start would give him an edge, considering the mortality costs are lesser and hence, the premium, too. Prakash insisted that his friend buy a term cover, which is the cheapest form of insurance, and then think of investing in insurance.

Sameer saw sense in whatever he said, but remained undecided on whether he should opt for a cover right away or wait till he had dependents.

A senior colleague advised him to seek professional help from Vishwas, a well-known financial planner. When Sameer told him of his dilemma and laid out the comparative tables provided by Prakash on the premiums payable now and five years later, Vishwas smiled and agreed that this was a common dilemma that often went unclarified.

Vishwas held that making available a lump sum to one’s dependents to help them overcome the financial loss in his absence was the right perspective to be adopted for life insurance. According to him, Sameer required no life insurance as he had no dependents and that the ideal time for the young MBA to buy a cover would be when he was married, which would be 4-5 years later.

But, what would be the cost of deferring his insurance cover by so many years?

The financial planner laid down a table for easier understanding.

Vishwas pointed out that the decision to defer life insurance by five years would cost him Rs 58,500 for a cover of Rs 25 lakh and Rs 1.17 lakh for a cover of Rs 50 lakh.

“Isn’t that a big amount to lose?” asked Sameer.

“On the face of it, yes. But, you can make it up by starting to invest now,” said Vishwas. “Let us say you put the amount you would have paid as premium, i.e. Rs 6,250 per year, for the next five years. The savings account would fetch you 3.5% per annum interest today. At this rate, your investment of Rs 31,250 would have grown to Rs 33,515 at the end of five years. At that point, you take the insurance policy for a cover of Rs 25 lakh and stop putting money in the savings account. In other words, you let the Rs 33,515 balance in your savings account compound for the next 30 years (the tenure of the policy) at an assumed 3.5% per annum. At the end of your policy period, this amount would have amounted to Rs 94,000, well over the extra Rs 58,500 you pay for starting the policy late.”

“Similarly, you can accumulate Rs 1.88 lakh by depositing Rs 12,500 per year for five years in the savings account and letting it compound thereafter. That would be well in excess of the Rs 1.17 lakh difference you will pay by starting the policy five years hence.”

“I am sure you understand this is an extremely conservative option. The corpus would be much higher if you swapped the savings account with a public provident fund account, which guarantees a return of 8% per year now. By the time your policy matures, you would have accumulated Rs 3.69 lakh and Rs 7.38 lakh, respectively, for the two premium amounts mentioned earlier.”

There are options galore, really. A recurring deposit of Rs 650 per year for 35 years, at an interest of 5% per annum, would accumulate Rs 58,750. Put the same amount in a PPF account every year and you accumulate Rs 1.12 lakh at the end 35 years,” Vishwas explained. “The returns would be exponential if you invested in equities for that long a timeframe.”

This was an eye opener for Sameer. The discussion on insurance had somehow taught him the value of investing early in life so as to reap the benefit of compounding, said to have been described by Albert Einstein as the “the most powerful force in the universe.”

Note: The premium and the coverage figures used above are purely for representation purposes. The premium quotes have been obtained from the website of a leading life insurance company.

Source:
Arvind A Rao / DNA MONEY

Direct agents channel needs to improve: M Ramadoss

Even as the de-tariffing (free pricing of products) move has just begun to take final shape, India's four public sector general insurers have been revamping their corporate structure and business practices.

One of the four — Oriental Insurance — has already kick-started moves to improve operations under the banner of project 'Nayee Disha' (new direction). The pathway to this direction has been laid in consultation with Boston Consultancy Group (BCG).

Three of the four PSU general insurers have hired BCG for the remoulding process. DNA Money's Khyati Dharamsi got a sneak peek into the areas of overhaul that M Ramadoss, chairman and managing director of Oriental Insurance, plans to undertake.

What is the first initiative suggested by BCG?

The study found that our operating officers were spending just 15% of their time in marketing products, while more than 35-45% time was consumed by the claims-settlement process. So we are segregating the claims process to separate offices. We have already established claims service centres in cities where we have more than 7 branches, and have now started focusing on cities where we have more than 5 branches.

What are the other suggestions of BCG apart from enhancing the claims settlement process?

The direct agents channel too needs to improve. Presently, direct agents have to fend for themselves. Even their commissions are delayed and there are no technical inputs, if they need any. There is no one to accompany an agent in case he is dealing with a big client. We need to ensure that he has adequate stationery to clinch a client. To execute all this, we will appoint agent managers. Each will be given 20-25 agents to handle. We have about 35,000 agents and we plan to expand their number.

Any other measures planned?

We plan to set up a centralised office for policy issuance. We also plan to set up a portal for web-based policy issuance. Also, we will enter into more tie-ups with car dealers and manufacturers and add some more distribution channels.

Are the higher commissions offered by life insurance products a hurdle in recruiting agents?

Yes. We cannot offer commissions as high as 40% that life insurance firms can. General insurance commissions are in the range of 5-15%. Moreover, the agent has to ensure that the client renews every year as general insurance products are structured on renewals. In addition, there are several issues when claims are not settled. It is more a regulatory issue. We have asked for an incremental premium. It requires an act amendment.

What has been the effect of de-tariffing on your company?


There was an expectation of an 80-90% fall in premium. But the fall was not to that extent. The fall in premium has been 17%. The fall was offset by people taking extra covers and also as volume rose.

Take for instance an existing 'good' fire policy holder, whose premium was reduced. He was suggested to take extra covers to the extent of which his premium has dropped. In these times, we were more worried about bottom line than top line. The premium on the group policies had gone up. But we lost some premium in the retail segment as competitors offered lower premiums.

Who are the major clients that you clinched this year?

We have entered into a three-and-a-half year deal with Tata Ultra Mega Power Project. We have been able to retain most of our big accounts. IOC is yet to come and we lost Mangalore Refinery and Petrochemical to Iffco-Tokio even though the difference in premium quoted was minor.

What growth are you targeting this year?

We have committed a growth of 8.6%, but we are targeting a growth of 10%.

Any actions that are planned on the third party administrator (TPAs) front?

We are planning to create a separate vertical to handle TPAs to ensure better management. There are operational issues with regards to TPAs. They are not making settlements in time. Our control on them is not very strong. We need to improve this situation to contain losses. Hospitals are losing faith in the organisation.

Some insurers are planning to form a separate division in their own organisation and discard the TPA. Do you have similar plans?

There are no immediate plans to set up a separate division. But it makes sense to do so. Of the total claims settled by TPA, merely 30-35% were cashless, the rest were reimbursements. The huge advantage proposed in having a TPA is not being met. Reimbursement claims are something even our office staff can process.

This year, we will be reviewing the TPAs and then decide what aspect of TPA management can be looked after internally.

What are the new products that you plan to offer?

We are planning to introduce a product in the motor insurance category. We also plan to launch a family floater plan on the health front.

How has the response to the senior citizens mediclaim been?

The response has been good. Agents, who were not getting full commission for selling policies to elderly, have been given full commission. We plan to review the change.

Source:
Khyati Dharamsi/ DNA MONEY

IDBI FORTIS TIES UP WITH MANAPPURAM FINANCE

Kochi: IDBI Fortis Life Insurance Company Ltd and the Thrissur-based Manappuram Finance have announced an alliance to provide wealth building and insurance products to customers in Kerala by signing a distribution agreement here.

Mr G.V. Nagaseswara Rao, MD and CEO of IDBI Fortis, said that the company’s aim is to partner with carefully chosen organisations that enjoy long-term relations with their customers based on trust and sound financial advice.

He said that the wealthassurance foundation plan is a first of its kind combination of comprehensive investment choices, protected by powerful insurance options, all presented with a reasonable charge structure by making it a one-stop solution to a customer’s wealth building plans.

Investment options
Wealthassurance offers investment choices such as Guaranteed Return Funds, Equity Funds and Debt Funds ensuring that the customer would find all his investment requirements satisfied with the one powerful product.

The company had collected a first premium of Rs 35 crore since its launch in March this year and had sold around 10,000 policies, he added. Mr V.P. Nandakumar, CMD of Manappuram Group, said that the company’s customers are always looking to invest in innovative products with comprehensive benefits and this initiative would provide truly customised solutions for wealth creation and protection.

Mr M.Venugopalan, Chairman and CEO of Federal Bank, said that the bank is the promoter and bank assurance partner of IDBI and the alliance with Manappuram would further expand the reach of IDBI Fortis in Kerala.


Source: The Hindu Business Line

INSURANCE STAFF PLEA

Kochi: General Insurance Officers’ All India Association has urged the Kerala government to entrust the proposed health insurance scheme to a public sector general insurance company.

P. P. Mohanan, general secretary of the association, Kerala unit, said in a statement here that PSU general insurers have more than 35 years of experience in the field. Besides, they have offices in all the 14 districts of the State.

Four PSU general insurers have been successfully running Universal Health Insurance Scheme across the country since 2003, the statement said. It said that in January 2006, the previous government had entrusted a private insurer with a health insurance scheme. The company withdrew from the scene even before the scheme started, the statement claimed.

Source:
The Hindu

‘ICICI PRU’S MOBILE PAYMENTS FACILITY A HIT’

Coimbatore: Within two months of enabling its policy holders to pay premiums through their mobile phones, ICICI Prudential Life Insurance observed that this service has turned out to be a boon to its customers.

“The total premia receipt through the mobile has crossed Rs 20 lakh,” its Executive Vice-President, Ms Anita Pai, told Business Line. The company has partnered with mChek, a Visa certified system to enable its policy holders to pay their premium by sending an SMS and using their credit card.

The service is available to Airtel mobile service users only. Stating that the company was not really investing in technology, but facilitating technologically advanced service, she said “even if 10-15 per cent of our three-lakh agent force or six million policy holders use it, it is a large use.”

“The introduction of the webchat service to resolve policy related queries instantly is another hit, especially from a service perspective. The number of persons accessing our site has increased by over 400 per cent between last year and now,” Ms Pai added.

“We figured that a large number of policies were unit linked (NAV based). So we introduced the SMS pull feature, by which a policy holder can get the NAV by sending an SMS and stating his policy number. We receive over two lakh hits every month,” she said.

Source: L.N. Revathy
The Hindu Business Line

LIC TO RELAUNCH THREE POPULAR SCHEMES

Kolkata: The Life Insurance Corporation of India (LIC), which had a market share was 63.64 per cent till March 31, has chalked up plans to revive some of its popular products to further widen its base in the country.

"We have been considering relaunching schemes like 'Jeevan Anand', 'Jeevan Sathi' and 'Jeevan Tarang' in a renewed form in view of these being widely popular and promise higher returns," LIC's Zonal Manager R R Dash said launching Market Plus - 1 scheme here today.

Dash said that LIC's gross investment in 2007-08 was over Rs 1.50 lakh crore, and the income generated from it was Rs 40,655 crore. Stating that company's profit from sale of equity last year was Rs 10,000 crore, he said, "LIC was not affected by fluctuations in the market as its investments were long-term."

He said that LIC's investment in infrastructure development was Rs 11,630 crore last year, while the cumulative figure was Rs 56,691 crore. Investments in the Socially-Oriented Sector last year was Rs 5,635 crore and cumulative investment Rs 32,321 crore, he said.

LIC's loan to the West Bengal government for development projects stood at Rs 1,583.26 crore, which was second highest in the country after the loan given to the Maharashtra government which was at Rs 1,622.58 crore,. He added.

The new scheme launched today is a unit-linked deferred pension plan and one of its highlights is the enhanced limit for investment in the equity market for secured and balanced funds.

Source:
PTI
Business Standard

BAJAJ ALLIANZ INKS BANCASSURANCE DEAL

Mumbai: Bajaj Allianz Life Insurance has tied up with Mumbai District Central Cooperative Bank Ltd to distribute life insurance policies through the bank’s 43 branches and 25 extension counters across the state of Maharashtra.

Source:
Business Standard

Bear-hit stock brokers shift to insurance broking

Bear-hit stock brokers shift to insurance broking
Religare, Edelweiss, Emkay, India Infoline Set Up Insurance Broking Subsidiaries To Escape Adverse Market Conditions
IN A clear bid to insulate themselves from the vagaries of the stock market and offer a basket of financial products to their clients, some stock brokers have got into the insurance broking business. Brokers like Religare, Anand Rathi, Edelweiss, Emkay and India Infoline have set up insurance broking arms, through which they sell both life and non-life insurance products of several companies. While an insurance agent typically can sell products of only one insurance company, an insurance broker can sell products of multiple insurance companies. In India, insurance broking picked up only a couple of years ago, due to stringent norms which made it necessary for the brokers to have a capital of at least Rs 50 lakhs. Besides this, the business needs to be conducted in a separate company, it should have a different office other than the broking office and it should have separate set of employees. Religare Insurance Broking already has 1,300 people on its rolls and it generated premium worth Rs 107 crores for the year ended March 2008. “We aim to expand the business five fold to Rs 500 crore of premium by March 2009,” said Chandan Sinha, president, Religare Insurance Broking. The company has 57 branches across the country, which are in addition to the stock broking branches. Anand Rathi has a team of 100 people with 15 offices across the country. Insurance broking is not easy as one has to interact with as many as 25 different companies for selling products, which could be a daunting task. Besides, training a sales force to sell multiple products is a big challenge, say analysts. However, in a bid to give the best deal to a customer, it is imperative to be an insurance broker. “Insurance (life and non-life) is unaffected by the vagaries of the stock market and it helps derisk the business model,” says Sharekhan senior vice-president, P Saravanan. Sharekhan was till recently a corporate agent of ICICI Prudential Life Insurance. Plans to get into insurance broking in a couple of months are on the anvil, he adds. “Insurance is a sticky business. If I can help my clients in getting the motor claims or mediclaims, I can cross sell other products too,” says Supriya Rathi, principal officer and director, Anand Rathi Insurance Brokers. They generated a premium of Rs 80 crore last year. “The process is currently at a nascent stage. With more value addition, clients realise that the benefits will be manifold and growth will be faster,” says Akhilesh K Singh, head of wealth management, Emkay Shares. With markets falling by about 6,000 points from the peak of January 2008, insurance broking seems to offer a ray of hope. At present, we have about 250 insurance brokers in the country. The biggest in the business are Aon and Marsh, both multinational companies who are also into reinsurance.

Source: Economic Times Mumbai

Saturday, June 21, 2008

ORIENTAL INSURANCE NET DENTED BY ‘TAX BLOW’

Mumbai: Oriental Insurance Company has seen its net profit for 2007-08 shrink to Rs 50 crore, against over Rs 400 crore in the previous year, as it has been dealt a Rs 385-crore tax blow.

The company, which has had to pay the Rs 385 crore as long term capital gains tax from stock sales for two years, has now taken up the issue with the Central Board of Direct Taxes.

Taxed for first time
Mr M. Ramadoss, Oriental Insurance’s Chairman and Managing Director told Business Line, this was the first time that an insurance company was being taxed on profits made from long-term capital gains of stock sales. The Rs 385 crore tax levy has been made on a profit of Rs 560 crore from stock sales.

“The company’s net profit 2007-08 has come down to Rs 50 crore, against around Rs 400 crore in the previous year. We have taken up the issue with CBDT as well as the Revenue department,” Mr Ramadoss said.

In 2007-08 (the first year of the free-price regime), Oriental Insurance reported a gross written premium of Rs 3,855 crore, 1.86 per cent lower than the previous year’s Rs 3,928 crore.

“We have not been chasing topline growth because we were trying to protect our bottomline last year. For instance, we lost a corporate group mediclaim account worth Rs 70 crore because competing insurers quoted lower premium which was unviable from our perspective,” said Mr Ramadoss.

Service centres
The PSU insurance major, however, expects 8-10 per cent growth in gross written premium this year, driven by the big changes the company plans to make in terms of business process re-engineering.

These changes are based on the recommendations of its consultant, the Boston Consulting Group. The corporation plans to launch service centres for claim-settlement in cities which have more than 5 offices. So, to begin with, cities such as Delhi, Mumbai, Hyderabad, Patna and Jaipur will have service centres, which will process motor claims .

The objective is to move the back office work from the operating office as well as reducing the turnaround time for claim-processing.

Claims processing
“We found that our company took around 78 days to process 6,000 claims. We hope to reduce this turn around time to 15 days,” Mr Ramadoss said. The service centre, in course of time will also take care of other functions like policy issuance, third party claims and accounting.

The non-life insurer also hopes to improve its management of Third Party Administrators and increase its tie-ups with auto dealers. It will also have managers to monitor and help its 35,000 agency force.

New products
Mr Ramadoss said that Oriental Insurance would also launch new products in motor insurance and health insurance this year. Mr Ramadoss said the company planned to increase its presence in West Asia by setting up more representative offices. The company is currently present in Kuwait, Dubai and Nepal.


Source: The Hindu Business Line, Daily News & Analysis

LIC EARMARKS $27B FOR BONDS

Mumbai: The Life Insurance Corp (LIC) aims to buy upto Rs 1.15 lakh crore ($27 billion) of bonds in this fiscal year nearly as much as the government’s annual borrowing, said.

Managing director, Mr Thomas Mathew, said in an interview that he expected stagnant profits from LIC’s equity investment because of weak stock markets and growing risk aversion among foreign funds, but would be more than compensated by earnings from bonds.

"Our total investment income would go up this year as we are buying more of debt, which is giving reasonably good returns now," he said on Wednesday. LIC plans to buy Rs 45,000 crore of stocks in 2008-09, compared with Rs 34,000 crore in 2007-08, and Rs 1.10 lakh crore to Rs 1.15 lakh crore of bonds, up 10 to 15 per cent, he said.

"Ten-year yields at around 8.3 per cent are good levels to enter and they are likely to remain around these levels for some time," Mr Mathew said. The 10-year benchmark yield rose 15 basis points last week after a key lending rate increase by the central bank and has gained nearly a percentage point since late January.

The 30-share BSE index has fallen about a quarter this year as foreign funds dumped shares worth $5.7 billion. In 2007, the benchmark had risen 47 per cent on the back of a record $17.4 billion foreign portfolio inflow.

Despite putting in more money in stocks this year, returns from equities are likely to remain around 97,000 billion rupees this year, similar to 2007-08, he said.
He expected the BSE index to reach 17,000-18,000 points by the end of March 2009, compared with 15,644 a year earlier. The benchmark closed down 2.2 percent on Thursday at 15,088.

Source: Reuters, Asian Age, Deccan Chronicle

INSURANCE FIRM CAN'T DENY THEFT CLAIM: CONSUMER PANEL

New Delhi: The Delhi Consumer Commission has said that insurance companies cannot deny theft claim to a consumer on the ground that no FIR was registered in connection with the incident.

"It is a misconceived notion that the insurance policy covering the risk of theft is not indemnifiable unless and until a person produces the copy of FIR," Commission president Justice JD Kapoor said, while dismissing an appeal of United India Insurance Company Ltd against a district forum's order directing it to pay Rs 30,000 as compensation to Delhi resident Subhash Chander Khanna.

The Commission also called for removing 'misconception' from the minds of the public regarding the necessity of registration of the FIR to claim reimbursements in theft cases.

"There is no difference between FIR and a simple complaint made by a person with the police detailing the facts of occurrence," the Commission said. As per the complaint, Khanna, whose wallet was stolen in a cinema hall at Jaipur in 2006, was denied reimbursement as the insurance company suspected that the theft was not committed and asked him to furnish the FIR to substantiate his claim. The complainant instead produced a stamped certificate from Jaipur police stating that the FIR, although registered, was not traceable, but the insurance company rejected it.

Finding no merit in the appeal of insurance firm, the State Commission said, "In view of the attitude of the company in not settling a simple dispute for more than two to three years forcing the insured to approach a consumer forum, the amount of compensation awarded is reasonable and does not call for interference."

Source: The Pioneer

Friday, June 20, 2008

ADAG to float new firm for financial services biz

MUMBAI: After expanding in the domestic market aggressively, the Anil Dhirubhai Ambani Group (ADAG) is now turning inward to further its financial services business. The group is close to launching a wholly-owned subsidiary, Reliance Capital Services (RCS), which would exclusively target the existing customers, shareholders and employees of ADAG companies to sell financial products. RCS would sell insurance and consumer finance products to the target customers that add up to about 17.5 crore, officials from the group said. Speaking to TOI, Sam Ghosh, CEO, Reliance Capital, said that the company is in the process of obtaining permission from a large number customers of ADAG group companies with whom these companies have confidentiality clause because of the nature of the services they offer. Once customer permissions are in place, RSC would approach them with products more suitable for their needs. And ADAG group's customers, shareholders and employees from whom permissions are not required would be approached once the firm becomes operational, Ghosh said. RCS will be a 100% subsidiary under Reliance Capital, ADAG's main arm for the financial services business. ‘‘We have already recruited about 200-300 people. We are planning to launch our operations in July,'' Ghosh said. ADAG is probably the first business group in the country that is tapping its in-house customer, shareholders and employees to expand its businesses through a specialized and exclusive set up. While RCS would sell life and general insurance products, along with consumer finance products like home loan, car loan and personal loans, to this captive customer group, it would not distribute mutual fund and broking services. Ghosh said funds will continue to be sold through the distributor network, while group company Reliance Money is already into broking services. For the ADAG, RCS would be the second company to look at business opportunities within the group. Earlier this year, the group had announced setting up of Reliance HR Services, a human resources company that has plans to recruit about 50 lakh people for the group in the next four years.
Coutesy : TOI
Mohammad Danish Eqbal

Thursday, June 19, 2008

RACE FOR RPL COVER HOTS UP

Mumbai: Faced with cut-throat competition post-detariffing, the country's general insurers are vying to provide the first cover to Mukesh Ambani's Rs 22,000-crore Reliance Petroleum Ltd in Jamnagar.

The race among insurance Companies, which have slashed premia to poach rivals' business in the recent past to corner Reliance's refinery cover, has reached fever pitch. The refinery will be commissioned in December 2008, three years after its inception.

HDFC Ergo General Insurance, a relatively-new entrant in India's recently-privatised insurance industry, has thrown its gauntlet into the ring to bag the account. Ergo, a subsidiary of the world's second-largest reinsurer Munich Re, joined hands with HDFC after US-based Chubb quit an earlier joint venture - HDFC Chubb General Insurance.
HDFC Ergo's new chief executive officer, Ritesh Kumar, has led a top team of Reliance Industries officials and an insurance broker to Munich to seek a special arrangement with Munich Re for providing cover to this mega project.

The country's largest private sector general insurer,
ICICI Lombard General Insurance, is the leader in providing insurance cover to the main projects of Reliance Industries, which has the largest private sector insurable assets in the country. The general insurance company floated by the second largest bank in the country, ICICI Bank, had managed to snatch away the leadership position to provide covers to the RIL's three existing projects from state-owned New India Assurance in 2007-08.

Market sources point out that ICICI Lombard General is definitely in the race to bag the RPL portfolio and would also respond adequately to the emerging competition.
However, observers point out the role of Munich Re in the whole affair. Munich Re, which has been operating as a reinsurer in India and has been providing reinsurance support to Reliance Industries, is now having direct role as a possible insurer to RPL, as Ergo is its own subsidiary. Munich Re while bringing its subsidiary Ergo to India had assured the other insurers which normally have reinsurance arrangement with the company (Munich Re) that it will maintain a firewall against its reinsurance business and insurance business.

But the way HDFC Ergo has led a team of RIL officials to Munich Re's head office indicates that Munich Re is not standing by its own assurance to the Indian market.

Source: The Financial Express

GIC RE TIES UP WITH HANNOVER RE

GIC Re is now joining hands with Hannover Re for development of life reinsurance business in the country. Hannover Re is the 5th largest life reinsure in the world and has global expertise in running this line of business. The partnership would involve technical knowledge transfer from Hannover Re to GIC Re personnel, joint marketing and servicing of business with GIC Re providing the local market knowledge and introduction to the life market players in India.

Source: The Financial Express

MBN RAO TO HEAD CANARA’S INSURANCE JV

MBN Rao, chairman and managing director of Canara Bank, who retires from his post on June 30, will take over his new assignment as the chairman of the bank’s life insurance arm, Canara, HSBC, Oriental Bank of Commerce, Life Insurance, which kicked off its operations on Tuesday. Canara Bank has a 51% stake in the life insurance joint venture (Asia-Pacific) Holdings and Oriental Bank of Commerce have 26% and 23% stake respectively.

Source: The Financial Express

LIC LAUNCHES MARKET PLUS-1

Mumbai: Life Insurance Corporation of India (LIC) has launched its new linked deferred pension plan-Market Plus-1. The plan offers four investment options to customers such as bond fund, secured fund, balanced fund and growth fund, LIC said in a press release issued here on Tuesday.

The fund value will be utilized to provide a pension based on the then prevailing annuity rates and in the event of the death of the policy holder it will be payed as pension, the company said.

The product offers life cover, accident benefit and critical illness benefit as available options and the life option is available within certain limits depending on the age at entry of the life assured.

Though primarily a pension product, the plan offers many attractive features and options by providing enhanced limit for investment in the equity market, the company said.

The minimum amount of critical illness benefit is Rs 50,000 and the maximum is Rs 10 lakh while accident benefit can be taken from Rs 25,000 upto a maximum of Rs 50 lakh, it said.

Premiums can be paid as a single premium and also by monthly, quarterly, half-yearly and yearly modes while the policy holder can also switch from one type of fund to another upto four times a year, LIC said.

Source: The Economic Times, The Hindu

ICICI PRU RECRUITING FRESHERS FOR B-SCHOOL COURSES

Jamshedpur: ICICI Prudential, the biggest private sector life insurance company in the country, has hit upon a unique plan to recruit eligible freshers with adequate industry knowledge. In line with the plan, ICICI has been picking up freshers to send for a one-year insurance-related management course at the B-Schools at its own cost and then place them in the company.

Under the plan, eligible candidates for the course are screened and shortlisted by talent acquisition Companies hired by ICICI Pru before sending them to the B-Schools it has tied up with.

"The contracts with the B-Schools are renewable on a year on basis," said Sanjay Radhakrishnan, vice-president (HR), ICICI Pru, speaking to FE recently. But they are looking forward for 'long-term' relationships, he said.

Started from last year, the insurance major has already sent around 1,500 graduates/postgraduates to 15 different B-Schools in the country to receive insurance-related management courses. The company plans to deploy these potential managers predominantly in the sales function with a few in the training segment.

ICICI Pru will recruit graduates from other B-Schools as 'unit managers' and 'financial services consultants (FSCs)', but the ones undergoing ICICI-sponsored courses, at institutions like XLRI, are likely to be placed a little higher as 'agency managers' in segments like health insurance, direct marketing and rural life insurance.

According to Radhakrishna and Sachin Joglekar, senior vice-president at ICICI Pru, the company, apart from the B-school programme, is also fulfilling its manpower requirement by inducting experienced employees directly from the industry.

Source: Financial Express

INSURANCE BROKING BIZ HEATS UP

Kolkata: The heat in the insurance sector is spilling over to its ancillary businesses.
Next up is insurance broking - a model largely used in the non-life business - which is likely to see significant discounting of rates, once promoter houses of insurance firms float their own broking outfits. The Insurance Regulatory & Development Authority (Irda) had allowed the same in April.

Within the community, the tension is palpable and insurance brokers are worried. Although no broker contacted by DNA Money was willing to go on quote, their feared the Irda move could skew the playing field.

A broking company under the same corporate entity promoting an insurance firm would allow the promoter-owned brokers to discounted prices, they said. Unlike insurance agents, insurance brokers are not tied to any particular insurer, and have a larger role to play as they are also associated with risk management, inspection, premium rating and even claims settlement for their clients.

There are 275 insurance brokers in India, who at present bring in 25% of the business in the non-life sector. But the business is small in scale, especially when compared to developed markets, where big brokers are almost as large as the insurance companies.
The business, many brokers felt, seemed headed to the “next level” without having attained the maturity in its current stage.

“With most of the broking community not too mature, the insurance business does not seem ready for this,” one broker said on condition of anonymity. “There is an element of apprehension for renewal cases, when an in-house insurance broker could prompt its group insurance company to place lower quotes on the account which was structured by another broker a year back.”

Abroad, the broker said, the markets “are extremely mature and are armed with regulations”. Rahul Aggarwal, CEO, Optima Risk Management Services, said, “Changes are good and it is early to predict what will happen. But if we are moving to the next level, the regulator should create a strong monitoring and complaint redressal system for problems which could arise on the issue of discounting rates.”

Source: DNA

Tuesday, June 17, 2008

Rel Life to launch InvestAssure plan

Reliance Life Insurance has set its eyes on the mass market segment. The company will launch the Reliance Super InvestAssure Plan (RSIP), a Ulip with minimum premium as low as Rs 5000, next week.

The plan offers guarantee contributions in case the customers remain invested for at least 10 years. They are targeting the mass-market as the product has a minimum lower premium. The plan is not ideal for high networth individuals.

Source: Insure magic

Insurance products should be simple: Chidambaram

Bangalore: Noting that India is among the under-insured countries, Finance Minister P Chidambaram today said insurance products should be simple and need to reach the rural population where penetration is low.

He was speaking after inaugurating the Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd, a partnership between two of largest nationalised banks and the Asian Insurance arm of the world's largest banking and financial service group.

Applauding the partnership between the three giants— Canara Bank, Oriental Bank of Commerce (OBC) and HSBC Insurance Asia Pacific Holding Ltd— he said the the new firm was the 19th life insurance firm to be launched in India and that there were "six more in the wings."

The growing numbers indicate that India had the capacity to support such a large number of companies and that there existed an "unmet demand" for insurance products in India, he said.

Observing that the insurance penetration in India had been low, he said India was among the under-insured countries. He said insurance products also needed to reach the rural population where penetration was low.

However, as a measure of caution and advice, he said "products should be simple." "Plain vanilla is still the best flavour for an ice-cream," he said quoting an analogy. "People in India are simple folks, who work hard and save. "I believe that simpler the product, better will be the reception.

Source: PTI

Detariffing in general insurance

Detariffing regime is an era whereby general insurance providers offering fire, engineering, mediclaim and motor insurance have been given the freedom to decide the premium to be charged. The cost for an insurance policy was earlier decided by the Tariff Advisory Committee (TAC).

This was implemented in two phases — first started on Januray 1, 2007, when the insurers were permitted to increase or reduce premium by 20% on both sides from their then existing pricing. During this phase the product terms and conditions couldn’t be revised.

In the second phase, which came into effect on March 2008, complete freedom on pricing had been granted, including customisation of product according to each individual.

So, if you are looking for insurance, be ready to be bombarded with questions in the detariffed regime. People seeking fire, engineering and motor cover would be subjected to a rigorous enquiry, before being issued a policy, especially if they have a history of claiming damages.

The premium amount of an insurance policy can be either loaded or discounted, based on several risk factors, as against the earlier norm of fixed premium prices for a particular sum assured in a category.

A Bihar resident asking for coverage against floods would be quoted a higher premium, while a person from Rann of Kutch would be given discount. The reason being, Bihar is geographically at a higher risk of flood as compared with the Rann of Kutch. Thus, the insurance company sees more chances of the Bihar policy holder claiming flood damages.

Similarly, if you want to insure your car, the policy premium would be based on the model, colour and type, apart from your claims history. The premium amount quoted to a person seeking an insurance cover in an accident-prone city is higher.

Therefore, the due diligence process for picking up a general insurance product would become more time consuming, as you would not get a fixed chart of premium amounts.

The insurance company would first ask you to answer a lengthy questionnaire and then provide a premium chart based on your answers and declarations.

Depending on five risk factors, an insurance provider would either ask you to shell out extra bucks for the cover or offer heavy discounts.

However, experts warn consumers to be careful of falling for excessive discounts. “The provider who is offering tempting discounts may later ask you to pay additional costs under the disguise of service charges or investment charges,” said an industry observer.

Instead of just going for discounts, investors should also check for the services an insurance company provides, such as a cashless claims process or a shorter claim-waiting period.

Insurance cost for a dark colour car would be a level higher because such cars are subjected to higher accident risks. Further, insurance companies would hike the premium amount for certain car models, having a low-safety record.

Earlier, you had to pay a fixed premium, but now the premium would differ, based on the model of the car, the colour and the roads that it would hit.

As a result, the due diligence process for picking up a general insurance product would become more time consuming, as you would not get a fixed chart of premium amounts.

The insurance company would first ask you to answer a lengthy questionnaire and then provide a premium chart based on your answers and declarations.

Depending on five risk factors, an insurance provider would either ask you to shell out extra bucks for the cover or offer heavy discounts.

However, experts warn consumers to be careful of falling for excessive discounts. “The provider who is offering tempting discounts may later ask you to pay additional costs under the disguise of service charges or investment charges,” said an industry observer.

Instead of just going for discounts, investors should also check for the services an insurance company provides, such as a cashless claims process or a shorter claim-waiting period.

Source:
Team DNA / DNA MONEY

Why insurance agents hate SIPs with cover

Summakant Shastri is an insurance agent. Be it the wedding of his friend's daughter or a relative's funeral, he never misses a chance to sell a unit-linked insurance plan (Ulip) or two.

Shastri has sold them for years, playing on the twin emotions of fear and greed commonly found in human beings. For those who feared the future, he sold Ulips as insurance. And, for those who wanted their money to multiply, he sold them as investments.

Mutual funds often lost out because Ulips had this liquid-like property, where they took the shape of whatever vessel they were poured into. MFs were rigid — they were purely investment products and did not provide for worldly happenings such as death.

Then, fund houses suddenly woke up. Taking a leaf out of the insurance companies' book, they started offering plans that offered insurance, too. Birla Sun Life Mutual Fund's Century SIP is the latest in that line. It is a systematic investment plan (SIP) that is optional. The plan should not be confused with a mutual fund scheme. While a scheme has a specific investment objective, an SIP is just a mode of investment that can be applied to any of the various schemes offered by a fund house. At present, Century SIP will be available on all 18 open-ended equity schemes offered by the fund house.

To participate in this plan, an investor needs to invest a minimum of Rs 1,000 every month. There is no upper limit for this investment. Under this plan, an MF investor will get insurance cover on his life 45 days after paying the first instalment. While some fund houses charge a fee for this cover, Birla MF is offering it free of charge. In the first 45 days, only accidental deaths will be compensated.

The cover will be available to the investor till he or she turns 55. So the tenure of the cover under Century SIP will be 55 years minus the current age of the investor.

For an investor aged 40 years and five months, the tenure of the Century SIP insurance cover will be 14 years and seven months. Let's say an investor starts an SIP of Rs 5,000 per month. If he dies within the first year of paying his instalments, his nominee is eligible for a cover of 10 times the SIP amount — Rs 50,000. If he dies during the second year of SIP payments, the nominee gets 50 times the SIP amount as the life cover — Rs 2.5 lakh. And if he dies any time in the third year or after that, the nominee gets 100 times the monthly SIP amount-Rs 5 lakh. Here again, the cover is subject to a maximum of Rs 20 lakh.

The cover cannot be claimed if the SIP is discontinued before the completion of three years or if the investor defaults on payments of instalments on two consecutive occasions.

Investors who can afford to set aside at least Rs 1,000 every month for equity investments can take this offer, depending, of course, on the underlying scheme's compatibility with your investment goals. Thus, if none of the Birla schemes fits your needs, you should not take one just because it offers free insurance. But if one does, the Century SIP is a good reason to make that switch.

Shastri still believes only insurance companies can offer good insurance. But, sooner or later, as the trend catches on, be sure even he will come around to seeing sense.

Source: N Sundaresha Subramanian/ DNA MONEY

PSU general insurers face mark-to-market pain

Public sector general insurance companies are feeling the heat of the stock market slide, as their portfolios contain large "fair value change" accounts or mark-to-market investments, which are vulnerable to market downturns.

Although year-end figures of the state-run insurers, which control 60% of over Rs 28,000 crore general insurance market, are yet to be finalised, their investment income might not register gains as high they expected.

Industry sources indicated that the four companies — National Insurance, Oriental Insurance, New India Assurance and United India Insurance — have huge reserves, or what they internally call "family silver," but rely upon investment return to maintain solvency margins.

In fact, their investment portfolios sometimes compensate for relatively weaker underwriting performance.

Top officials of one PSU insurer told DNA Money that solvency is never an issue for the four companies.

But sources said that with the heavy discounting of premiums, profitability of the four firms could be strained. A decline in investment income would only add to their woes.

The Insurance Regulatory & Development Authority (Irda) had expressed concern that extensive price undercutting would impact solvency margins and directed all general insurers to file solvency statements on a quarterly basis.

The idea was to make the insurers focus on capital management and ensure that capital adequacy receives adequate priority when the companies chalk out future plans.

A recent report on global insurance by Moody-Icra said, "The capitalisation levels of public entities in general remain comfortable, supported by their investment books, which have benefited from large gains in their equity portfolios. By contrast, private insurers with much smaller investment portfolios and better underwriting results are less-dependent on investment return to maintain solvency margins."

Analysing the investment portfolios of India's top six insurers, the study says public insurers have fairly strong portfolios, which provide them with considerable liquidity and adds to their financial strength.

Source: Nandini Goswami/ DNA MONEY

BAJAJ ALLIANZ LIFE TO BEEF UP CAPITAL BASE

Mumbai: Bajaj Allianz Life Insurance will receive capital infusion of around Rs 500 crore from its promoters this fiscal. Bajaj Allianz is a joint venture between the Bajaj group (Bajaj Finserv) and Allianz.

Mr Kamesh Goyal, Country Manager Allianz and CEO Bajaj Allianz Insurance, said that the company’s current capital base stood at Rs 1,210 crore which would be further hiked by around Rs 500 crore. .

The company’s focus this year is to maintain its expense ratio by curbing expenditure on hiring new agents and branches. The expense ratio stands at around 14 per cent.
“Our agency force is around 2.3 lakh and we have a branch network of 1,200. This year our focus is more on increasing the productivity of the existing agency force,” Mr Goyal said.

Bajaj Allianz Life made a net loss of Rs 19 crore in the last fiscal and the company hopes to wipe out its earlier losses by bringing down expenses. In terms of new products, the company plans to launch a pension and health insurance plan this fiscal.

On the recent volatility in the stock market, Mr Goyal said that customers in the interiors of the country may now look at switching to traditional products. ULIPs currently contribute 95 per cent of the company’s business and its funds under management stand at Rs 14,000 crore.

Bajaj Allianz Life on Thursday tied up with Thomas Cook for the distribution of life insurance policies. As a corporate agent, Thomas Cook will sell Bajaj Allianz’s products across its 160 retail branches.

Source: Business Standard, Deccan Chronicle, The Tribune, Asian Age, The Statesman, Deccan Herald

NEW IRDA CHIEF FOR THRUST ON RURAL, HEALTH INSURANCE

Hyderabad: Developing an enabling environment for the growth of rural and health insurance tops the agenda of Mr J. Hari Narayana, new Chairman of Insurance Regulatory and Development Authority (IRDA).

“While protection of policy-holders’ interest is paramount to the regulator always, we will also ensure the spread of insurance in rural and health sectors. There is lot of potential in these sectors,” Mr Hari Narayana told Business Line after taking over as the third chairman of IRDA here on Thursday.

The regulator would be happy as long as the prescribed rural and social obligations are met by the companies, he said, adding that the current scenario was satisfactory in that regard.

Various ways and means would be “carefully examined” to ensure the health and penetration of health insurance, the chairman said. “There are some high-level panels which examined various aspects on health insurance and we will take appropriate steps shortly,” he said.

Personally, he felt that one should take health insurance at a younger age itself.
Observing that the growth of insurance industry was “very good” at 13 per cent last year at over Rs 75,000 crore, he said the growth could be 18 per cent this year.

On the significant share of Unit Linked Insurance Plans (ULIPs) in insurance industry and their dependence on a volatile financial market, Mr Hari Narayana said, “There is nothing to worry as Indian investors (holders of insurance policies) are very mature. We will monitor the situation while promoting transparency.”

Source: The Hindu Business Line

Wednesday, June 11, 2008

LIC TARGETS 40 LAKH RURAL MICRO-INSURANCE POLICIES

Mumbai: LIC has set a target of selling 40 lakh micro-insurance policies this year, said Mr T.S. Vijayan, Chairman, LIC. With the establishment of a technology platform and tie-ups with NGOs, micro-finance organisations, co-operative societies and rural banks, the corporation expected to sell 40 lakh micro-insurance policies this year, against 8 lakh policies in the previous year, Mr Vijayan said, speaking at the SKOCH Banking Financial Services and Insurance summit.

LIC’s micro-insurance policy, “Jeevan Madhur” was launched in 2006 and, offers the option of a minimum weekly premium payment of Rs 25. He said the corporation had devised new products, both in terms of payment schedule and delivery, for the rural areas keeping affordability of the rural people in mind.

Mr Vijayan said that distribution costs in the case of micro-insurance policies were high.
“It has been estimated that, if the cost of a policy is Rs 300-400, the cost of distribution is double that,” he said.

He suggested that as in the case of micro-credit, the insurance sector should also have access to technology funds for micro-insurance, “There is a technology infusion fund available with the Reserve Bank of India for micro-credit and another one with Nabard for giving micro-credit. These or some such additional measures should be made available to the insurance sector,” he said

Integrated product
The Chairman also called for all-round pooling of resources of insurance companies to evolve an integrated insurance product covering life, health as well as other areas.
“For this, insurance companies will need to come together as a “virtual corporation” offering a combined micro-insurance face while the technology handles the back-end break-up of who gets to service what part.

A business structuring for a settlement and servicing mechanism can also be worked out,” he said. In the last fiscal, the insurance industry sold over 5 crore policies of which 1.1 crore were sold in rural areas. However, in terms of penetration, urban India remains ahead. Penetration in urban India is 47 per cent, while it is only 27 per cent in rural areas.

Source: The Hindu Business Line

NEW IRDA CHIEF J HARINARAYAN WANTS TO FOSTER COMPETITION


Hyderabad/New Delhi: Jandhyala Harinarayan is the new chairman of the Insurance Regulatory Development Authority of India (IRDA). The government cleared the order for his appointment on Tuesday.

Mr Harinarayan, who was a former chief secretary of Andhra Pradesh, will have a five-year tenure at IRDA. He succeeds CS Rao who retired in May this year. He was chosen for the top job based on the recommendations of a search committee headed by finance secretary D Subba Rao.

“My mission would be to widen and deepen insurance penetration in India and encourage competition among insurers to give a better deal to consumers,” Mr Harinarayan told ET on Tuesday.

According to him, new channels of distribution have helped improve insurance coverage. But more needs to be done. “We need to look at the role of various distributors, including agents and brokers and also encourage direct marketing of retail insurance products,” he said.

Insurance penetration in India is low compared with developed countries such as the UK and Japan. Measured in terms of premium collections, the penetration is close to 4.1% of GDP in life and 0.6% of the GDP in the non-life segment.

Penetration in the non-life segment is expected to improve, with free pricing and product innovation. But IRDA is yet to allow insurers the freedom to design their own products.

Mr Harinarayan reckons there is a case for lowering the premium on mediclaim policies to make it more affordable to consumers. Mediclaim is a voluntary health insurance policy and normally comes up for renewal annually.

“Companies can perhaps look at a longer renewal period. On their part, policy holders should start off with medical insurance schemes as early as possible, as it would mean ammortising risk over a longer period of time,” he said.

Many senior citizens’ organisations have registered complaints with the insurance regulator on surging premiums and denial of fresh insurance covers.

An expert committee that examined these complaints recommended universal coverage for health insurance. It has also made out a case for a health insurance pool, factoring in the high claims ratio in medical insurance. Here again, the regulator is yet to take a view on these suggestions which can help improve insurance penetration.

According to Mr Harinarayan, there is also need to ensure greater transparency in unit-linked insurance plans, a popular savings instrument that offer protection in terms of life cover and flexibility in investments to the policyholder. “IRDA has already initiated work on this, asking insurers to give a break up of the exact amount that will be available for investments during the premium period. But there is no doubt that investors need greater clarity on ULIPs,” he said.

Source: The Economic Times

Monday, June 9, 2008

UCO Bank, Liberty to form non-life JV

There would be another nationalised bank as a partner in the joint venture besides UCO. Liberty will hold 26% as per regulatory norms.

Kolkata: UCO Bank has decided to enter into a joint venture agreement with the US-based Liberty to foray into non-life insurance business during the current financial year.
“After deciding to enter the non-life insurance business, the bank was in talks with several foreign players like the Liberty of US, Engine of Italy and a few other Japanese firms for roping in a foreign partner as per IRDA regulations,” a bank official told PTI.
While UCO would have a minimum stake of 30% in the JV, there would be another nationalised bank as a partner in the joint venture. The foreign company would hold 26% as per regulatory norms.
The official, however, declined to divulge the name of the nationalised bank.
“UCO would take a period at least three months to ink an agreement among the three partners. Then a subsidiary firm would be formed,” the official added.
Restructuring capital
The bank would raise Rs325 crore in the form of perpetual preference cumulative shares during the last week of June.
Although the bank has obtained the Finance Ministry’s nod to restructure its capital, it was yet to get the approval of the Cabinet. ”The Cabinet approval is expected any moment,” the official said.
On getting the Cabinet nod and depending upon the capital market conditions, UCO would go for a follow-on public issue to raise Rs450-500 crore from the market. “We expect the market to improve by September,” the official said.
Post follow-on offer, government holding in the bank would come down to 54%. It had approached the government for restructuring of its capital base in order to reduce the Rs800 crore equity base with a view to enhance EPS.
On the bank’s earlier plans of entering the derivatives market, the official said seeing the experience of other banks, it was not advisable to venture into this area.
At the end of March 2008, Capital Adequacy Ratio (CAR) of the bank stood at 10.09%.
Source: LiveMint 8/6/2008 (PTI)

Friday, June 6, 2008

General insurance industry logs 14% growth in April

The general insurance industry grew by 14 per cent in April led by strong growth in premiums collected by private sector insurers, including Bajaj Allianz and Reliance General.
The 17 non-life insurers collected a total of Rs 3,593 crore premium in April this year, against Rs 3,141 crore during the same period in the previous year, according to the industry data. During the period, the four public sector non-life insurance companies collected Rs 2,015 crore in the reviewed month, against Rs 1,864 crore in the year-ago period. Private players increased their business from Rs 1,278 crore to Rs 1,578 crore during the period, a significant growth of 23 per cent in the month. While growth of public sector firms dropped to 8 per cent in the period. State-run New India Insurance maintains its position at the top with the highest premium collection of Rs 694 crore in April, while ICICI Lombard is at the second slot with premium of Rs 543 crore in the month. Private insurers like Reliance General Insurance and Bajaj Allianz are contesting strongly to grab the second position in the insurance industry. Bajaj Allianz witnessed a growth of 28 per cent in the month with its premium growing to Rs 276 crore from Rs 215 crore in April last year. While Reliance General Insurance, which has been among the fastest growing firms, witnessed an increase of 24 per cent in its premium of Rs 274 crore in the month.
ET

How to make the best use of cashless mediclaims

MUMBAI: Cashless hospitalisation is in today. If cashless were to be efficiently used, you can simply walk into a network hospital, flash your card and undertake treatment without paying a penny. But these “hassle-free” plans can actually end up being more painful for you. Here is a checklist which could come in handy at stressful times. If it’s a planned hospitalisation, talk to your third-party administrator (TPA). Get an estimate of the medical cost for your treatment and choose the hospital from the mentioned network accordingly. n Keep your mediclaim cards handy. Also, keep the contact details of your TPA. Check the list of network hospitals covered under your mediclaim policy along with the room specifications. Check the room details, as some mediclaim policies accommodate only simple air-conditioned rooms as against deluxe rooms, because of rising medical costs. Some policies also have imposed sub-limits. The most common sub-limits imposed by insurers are room rents, doctors’ fees and diagnostics. So, when you sign up for a policy, check if the insurer has assigned a maximum amount for a specific expense. If you have a sum insured of Rs 1 lakh and the insurer has capped your room rent at 1-1.5% of the sum insured, then your room rent cannot exceed Rs 1,000. Similarly, insurers cap the doctor’s fee at 25-30% of the bill amount. If the actual bill amount exceeds any of these sub-limits, then you will have to pay the balance from your pocket. Stay within the sum assured of your mediclaim. If you hail from a small or mid-sized town, you should look at a cover of Rs 2-3 lakh. If you reside in a metro, you should not look at covers less than Rs 4-5 lakh. Finally, cashless mediclaim does not cover OPD consultation/procedure done in pre-hospitalisation period. The recent budget has given an additional deduction of Rs 15,000 year under Section 80 D if you pay medical premiums for your parents. Earlier, you could avail of deduction up to Rs 15,000 per annum on the premium payment for dependent parents, spouse or children. The money should be on its way. Although there are administrative hassles in a cashless product, you can’t rule it out. It’s a must have in your financial kitty today.
ET