Life protection has become far more affordable. The cost of life insurance has come down by up to 40%, with Insurance Regulatory and Development Authority (IRDA) reducing the capital that insurance companies need to sell term policies. For the second time since the liberalisation of the insurance industry in 2000, there has been a dramatic reduction in term-insurance rates, making life protection a great deal cheaper. Term policies are purely life covers as against endowment policies, which have a sizeable savings component. While the premium for endowment policies will also soften, the benefit will be more apparent on term covers. Among private life insurance companies, Kotak Life has announced new rates, while newcomer Aegon Religare has announced term rates, which, the company says, are the lowest in the industry. Largest private life insurance company ICICI Prudential Life Insurance is in the process of lodging new rates. The chief of Life Insurance Corporation of India (LIC), the largest insurer in the country, said the Corporation may review its term rates.
Life Insurance managing director Gaurang Shah said: “Two developments have led us to reduce our rates. First, we had the opportunity to review our own claims experience, since we introduced preferred term for non-smokers six years ago. Also, the revised solvency margin requirement introduced by IRDA in March has brought down capital requirement by almost two-thirds, which has helped bring down rates.” Aegon Religare Life Insurance, which launched operations earlier this month, has decided to use competitive pricing on term rates as an edge. “We had decided to introduce a product with the lowest rate, which is also supported by our campaign. Given our pricing, it is possible for a 30-year old to get a Rs 10-lakh cover at only Rs 166 a month,” said Aegon Religare Life Insurance CEO Rajiv Jamkhedkar. When contacted, LIC chairman TS Vijayan said LIC was constantly reviewing its term rates to retain its competitive advantage and any improvement in mortality was always passed on in the form of lower term rates. In a statement issued here, Kotak Mahindra Old Mutual Life Insurance said the new rates were almost 40% lower than the old rates. “The rate reduction is partly as a result of the reduced solvency margin requirements laid down by IRDA. A key player in both the group term life and individual term life businesses, Kotak Life Insurance is among the first life insurance companies to pass on this benefit to the consumer,” the statement said. However, agents of insurance companies said it is not always possible to get the standard rates. It is very rare for a person to get standard rates above the age of 40 with a few private companies, since these companies have a very narrow range for various parameters defining good health. These parameters include weight, blood pressure and abdominal girth, among other things.
Friday, August 29, 2008
Life cover for 40% less
DELAY IN OPENING PF OFFICE HITS PENSIONERS
Nagercoil: A sub-regional office of the Employees’ Provident Funds Organisation is a long-cherished dream of the provident fund pension account holders of Kanyakumari district. According to sources, after much protracted correspondences by various trade unions, political parties, different members of Parliament and a follow up struggle by the present member of Lok Sabha, A.V. Bellarmine, the EPF organisation accepted the demands of the working class and a year ago on August 28, 2007, when the people of the district were celebrating Onam, a grand function was organised by the EPF organisation at Raja Towers near Ozhuganaserri here to inaugurate a service centre of EPF organisation as a first step towards opening of a sub-regional office.
A host of officers from EPF organisations also attended the programme. The member of the Central Board of EPF trustees, who advocated the sub-regional office at Kanyakumari on behalf of the working mass, was also present on the occasion. The Minister of State for Labour, Oscar Fernandez, who inaugurated the service centre said the centre would be upgraded to a sub-regional office within the short span of the time. The Central Commissioner of EPF in his address announced that the service centre, which started functioning would have the facility of claim processing and within a period of two months, it would have the facility to issue cheques and within a period of one year the office would be converted into a full-fledged sub-regional office. A year later, nothing happened. No facility was provided in the already existing district office except to know status of the claim applications.
A host of officers from EPF organisations also attended the programme. The member of the Central Board of EPF trustees, who advocated the sub-regional office at Kanyakumari on behalf of the working mass, was also present on the occasion. The Minister of State for Labour, Oscar Fernandez, who inaugurated the service centre said the centre would be upgraded to a sub-regional office within the short span of the time. The Central Commissioner of EPF in his address announced that the service centre, which started functioning would have the facility of claim processing and within a period of two months, it would have the facility to issue cheques and within a period of one year the office would be converted into a full-fledged sub-regional office. A year later, nothing happened. No facility was provided in the already existing district office except to know status of the claim applications.
Source: The Hindu
EXEMPT FUNDS PLAY SAFE, SETTLE FOR LOWER RETURNS
New Delhi: Here’s an interesting revelation about exempt pension funds: it may not just be the negative attitude of the EPFO board against investment in the capital markets that held them back thus far from such investments. Investment in private sector bonds was permitted for exempt fund, for instance, as far back as 1998-99.
However, they had to carry an investment rating from at least two credit rating agencies. Despite the freedom to invest in bonds of the private sector, exempt funds did not choose to do so and government guaranteed bonds were considered safer. After the closing of the SDS, investments shifted towards securities of state governments and government enterprises.
A majority of exempt fund investment is still held in PSU bonds and central government securities. Exempt and excluded pension funds together account for Rs 110,000 crore; of this, pension sector observers peg exempt funds at Rs 70,000 crore.
Exempt funds have a smaller corpus but are more in number. Excluded funds, on the other hand, may be fewer but are much bigger in size. Company-run excluded funds, which are not EPFO regulated, but are set up with the approval from the resident income tax commissioner, look after all investments and the fund management themselves; also, they are not required to follow the government-mandated investment pattern. These funds have so far been able to pay out reasonable returns to their employees.
In 2006, however, the Finance Bill proposed that unless excluded funds were recognized by the EPFO, they would not be recognized by the IT department. In short, for claiming tax exemptions or benefits, excluded funds would have to be recognized by the EPFO. But the moment they apply for recognition, they become EPFO-governed funds and lose their excluded status. Thus, swelling the EPFO numbers and increasing its deficit.
The investment preferences of exempt funds against the riskier private sector are obvious in the trends of the 1994 and 2003 period. Investment of exempt funds in Central government securities grew from only 11% of the gross investment to as high as 25% in 2003. There was an exponential jump in percentage of investment in this category in 2000, when it went up to 22.5% compared to only 17.8% in the previous year.
Annual reports of the EPFO disclose that investment in state government securities in the same period went up from only 3.5% in 94 to 25.17% in 2001 and then dropped to 21.11% in 2003. The closing down of the Special Deposit Scheme (in which Rs 53,570 crores of EPF funds are deposited) and falling yields of central government securities created problems for these funds, both in the private and public sector,with regard to meeting the declared payout rate to employees as they did for organizations governed by the EPFO.
The percentatge of investments in this category dipped from 85% in 94 to 17.21% in 2003. In tandem, the investment in the PSU bonds went up from 16.99% in 97 to a high 36.79% in 2003.
Consequently, the number of organisations that failed to credit the declared interest rate went up over the period although, overall, those who paid out less than the statutory rate fell. By and large, studies show, exempt funds too managed to credit the declared rate of interest to employees only by dipping into past surpluses. Some India Pension Research Founda tion studies also indicated that some exempt funds invested in junk bonds or those with lower credit ratings to pay out high rates, impacting on their viability Being exempt from the EPFO alone, clearly, has not guaran teed better returns on invest ments. Overall, exempt funds account for 0.8% of the total es tablishments and around 35% plus of the EPF funds. Close to 40% of exempt funds, about 2,600 (2,589 up to March 2007 countrywide out of a total of 471,678 establishments, are concentrated in Maharashtra Karnataka and West Bengal Tax benefits on withdrawal of money from exempt funds are the same as in the case of those under the EPF Act. But the real benefits, in the case of in-house managed funds, are that these are processed much quicker Exempt funds must go through a strict procedure to earn that exemption.
However, they had to carry an investment rating from at least two credit rating agencies. Despite the freedom to invest in bonds of the private sector, exempt funds did not choose to do so and government guaranteed bonds were considered safer. After the closing of the SDS, investments shifted towards securities of state governments and government enterprises.
A majority of exempt fund investment is still held in PSU bonds and central government securities. Exempt and excluded pension funds together account for Rs 110,000 crore; of this, pension sector observers peg exempt funds at Rs 70,000 crore.
Exempt funds have a smaller corpus but are more in number. Excluded funds, on the other hand, may be fewer but are much bigger in size. Company-run excluded funds, which are not EPFO regulated, but are set up with the approval from the resident income tax commissioner, look after all investments and the fund management themselves; also, they are not required to follow the government-mandated investment pattern. These funds have so far been able to pay out reasonable returns to their employees.
In 2006, however, the Finance Bill proposed that unless excluded funds were recognized by the EPFO, they would not be recognized by the IT department. In short, for claiming tax exemptions or benefits, excluded funds would have to be recognized by the EPFO. But the moment they apply for recognition, they become EPFO-governed funds and lose their excluded status. Thus, swelling the EPFO numbers and increasing its deficit.
The investment preferences of exempt funds against the riskier private sector are obvious in the trends of the 1994 and 2003 period. Investment of exempt funds in Central government securities grew from only 11% of the gross investment to as high as 25% in 2003. There was an exponential jump in percentage of investment in this category in 2000, when it went up to 22.5% compared to only 17.8% in the previous year.
Annual reports of the EPFO disclose that investment in state government securities in the same period went up from only 3.5% in 94 to 25.17% in 2001 and then dropped to 21.11% in 2003. The closing down of the Special Deposit Scheme (in which Rs 53,570 crores of EPF funds are deposited) and falling yields of central government securities created problems for these funds, both in the private and public sector,with regard to meeting the declared payout rate to employees as they did for organizations governed by the EPFO.
The percentatge of investments in this category dipped from 85% in 94 to 17.21% in 2003. In tandem, the investment in the PSU bonds went up from 16.99% in 97 to a high 36.79% in 2003.
Consequently, the number of organisations that failed to credit the declared interest rate went up over the period although, overall, those who paid out less than the statutory rate fell. By and large, studies show, exempt funds too managed to credit the declared rate of interest to employees only by dipping into past surpluses. Some India Pension Research Founda tion studies also indicated that some exempt funds invested in junk bonds or those with lower credit ratings to pay out high rates, impacting on their viability Being exempt from the EPFO alone, clearly, has not guaran teed better returns on invest ments. Overall, exempt funds account for 0.8% of the total es tablishments and around 35% plus of the EPF funds. Close to 40% of exempt funds, about 2,600 (2,589 up to March 2007 countrywide out of a total of 471,678 establishments, are concentrated in Maharashtra Karnataka and West Bengal Tax benefits on withdrawal of money from exempt funds are the same as in the case of those under the EPF Act. But the real benefits, in the case of in-house managed funds, are that these are processed much quicker Exempt funds must go through a strict procedure to earn that exemption.
Source: The Economic Times
NOW, BUY GENERAL INSURANCE COVER AT KIRANA SHOPS
Chennai: A small photo studio in T Nagar, Chennai, sold more than 50 general insurance policies in the last months alone. All that a person had to furnish was his name, address and the nominee’s name. The policy document will be issued in 15 minutes, shop owner M Raju Mani said.
With the general insurance penetration at a dismal 0.60 per cent (measured as a percentage of GDP), many companies feel that selling the policies through photo studios, grocery stores and even telephone booths would help improve the figure.
“We need to think outside the box and need alternative channels. If telecom companies are able to use grocery stores, petty shops and other small outlets, why not insurance companies?” said an Irda official.
The Committee on Distribution Channels, headed by LIC ex-chairman N M Govardhan, in its report recommended that one of the biggest challenges for the general insurance companies was getting agents to sell their products. The report noted that people are not interested in becoming general insurance agents as the commission is quite low.
In 2005-06, around 40,551 agents were licensed by the general insurance companies compared to 7,21,696 agents employed by the life insurance companies. The committee was constituted by the Insurance Regulatory and Development Authority (Irda).
Private insurers have already gone ahead and started exploring such channels. Bajaj Allianz General Insurance Company has introduced point-of-sale concept on a pilot basis to sell its products.
The point-of-sale concept started in Delhi, where the company’s agent will go to the customers’ homes along with a handy gadget like a blackberry to issue policies on the spot, said Swaraj Krishnan, chief executive officer, Bajaj Allianz General Insurance Company.
The company is also talking to some medical pharmacy chains to sell its health and home insurance products. For motor insurance, the company is in talks with oil companies to sell its products through their retail outlets across the country, he added.
The gadget costs about Rs 50,000. The company wants to supply the gadgets to all its branches, but there is shortage of these machines since there are only two Korean suppliers.
Similarly, ICICI Lombard General Insurance sells its health and motor policies through photo studios and malls. The photo studio in Chennai is selling both the policies.
With the general insurance penetration at a dismal 0.60 per cent (measured as a percentage of GDP), many companies feel that selling the policies through photo studios, grocery stores and even telephone booths would help improve the figure.
“We need to think outside the box and need alternative channels. If telecom companies are able to use grocery stores, petty shops and other small outlets, why not insurance companies?” said an Irda official.
The Committee on Distribution Channels, headed by LIC ex-chairman N M Govardhan, in its report recommended that one of the biggest challenges for the general insurance companies was getting agents to sell their products. The report noted that people are not interested in becoming general insurance agents as the commission is quite low.
In 2005-06, around 40,551 agents were licensed by the general insurance companies compared to 7,21,696 agents employed by the life insurance companies. The committee was constituted by the Insurance Regulatory and Development Authority (Irda).
Private insurers have already gone ahead and started exploring such channels. Bajaj Allianz General Insurance Company has introduced point-of-sale concept on a pilot basis to sell its products.
The point-of-sale concept started in Delhi, where the company’s agent will go to the customers’ homes along with a handy gadget like a blackberry to issue policies on the spot, said Swaraj Krishnan, chief executive officer, Bajaj Allianz General Insurance Company.
The company is also talking to some medical pharmacy chains to sell its health and home insurance products. For motor insurance, the company is in talks with oil companies to sell its products through their retail outlets across the country, he added.
The gadget costs about Rs 50,000. The company wants to supply the gadgets to all its branches, but there is shortage of these machines since there are only two Korean suppliers.
Similarly, ICICI Lombard General Insurance sells its health and motor policies through photo studios and malls. The photo studio in Chennai is selling both the policies.
Source: The Hindu Business Line
IFFCO-TOKIO PLANS TRAVEL INSURANCE PRODUCT
Kolkata: Iffco-Tokio General Insurance (ITGI), was planning to come up with the first of kind product in travel insurance for the domestic market and could move to seek the Insurance Regulatory & Dvelopment Authority(IRDA) in about three month's time.
ITGI, a joint venture between The Indian Farmers Fertiliser Cooperative (IFFCO) and its associates and Tokio Marine and Nichido Fire Group, already had a travel insurance product for the international traveller called the ITGI Travel Protector Policy.
The travel business accounted for around 2 per cent of ITGI's net premium collection, said Prantik Mitra, business head, ITGI. Its net premium revenue for 2007-08 was Rs1254 crore. The new product would also have a built-in health cover component during travel like the old one.
ITGI sold its current travel insurance product mainly through corporate tie-ups and recently tied up with Kaizen Leisure & Holidays Ltd (KLHL), an associate company of the Peerless Group, to sell its products.
It already had a tie-up with the Peerless Group to sell its health, motor, shop and home insurance policies and did business worth Rs2.5 crore last fiscal through the tie-up. "We would make it mandatory for all travellers to take a travel insurance", said Jayanta Roy, director, corporate planning and strategy, KLHL.
He could not share the details of the total number of tourists KLHL had handled last year.
The company enjoyed a 34 per cent market share in the East where the travel & tourism market was pegged at Rs460 crore.
KLHL announced three more tie-ups with Make My Trip travel portal, Budget Rent a Car Systems and Emergency Rescue Card (ERC). Through the strategic tie-up with ERC, KLHL would offer the service of transferring the customer to a better medical facility in case of an emergency during travel.
KLHL registered a turnover of Rs9 crore last fiscal and was eying a revenue of Rs15 crore this year with all the four tie-ups in place.
ITGI, a joint venture between The Indian Farmers Fertiliser Cooperative (IFFCO) and its associates and Tokio Marine and Nichido Fire Group, already had a travel insurance product for the international traveller called the ITGI Travel Protector Policy.
The travel business accounted for around 2 per cent of ITGI's net premium collection, said Prantik Mitra, business head, ITGI. Its net premium revenue for 2007-08 was Rs1254 crore. The new product would also have a built-in health cover component during travel like the old one.
ITGI sold its current travel insurance product mainly through corporate tie-ups and recently tied up with Kaizen Leisure & Holidays Ltd (KLHL), an associate company of the Peerless Group, to sell its products.
It already had a tie-up with the Peerless Group to sell its health, motor, shop and home insurance policies and did business worth Rs2.5 crore last fiscal through the tie-up. "We would make it mandatory for all travellers to take a travel insurance", said Jayanta Roy, director, corporate planning and strategy, KLHL.
He could not share the details of the total number of tourists KLHL had handled last year.
The company enjoyed a 34 per cent market share in the East where the travel & tourism market was pegged at Rs460 crore.
KLHL announced three more tie-ups with Make My Trip travel portal, Budget Rent a Car Systems and Emergency Rescue Card (ERC). Through the strategic tie-up with ERC, KLHL would offer the service of transferring the customer to a better medical facility in case of an emergency during travel.
KLHL registered a turnover of Rs9 crore last fiscal and was eying a revenue of Rs15 crore this year with all the four tie-ups in place.
Source: Business Standard, The Financial Express
MAX NY LIFE UNVEILS NEW BRAND POSITIONING
New Delhi: Max New York Life Insurance Co Ltd plans to expand aggressively in the South this fiscal, a top company official has said. “We already have well dispersed presence in North and Western India. Bulk of the expansion will happen in South this year. By the end of the year, we will be in 75 towns with 125 offices”, Mr Debhasis Sarkar, Senior Director & Chief Marketing Officer, MNYLI, told Business Line, after unveiling the company’s new consumer-oriented brand positioning here.
MNYLI currently has 366 offices in 223 cities and aims to expand presence to 1,000 cities with about 1,600 offices by 2012. The company has coined a new tagline “Karo Zyaada ka Iraada” to represent an ambitious and assertive India that is ready to compete for more, demand more, dream more and live more to create a better and brighter tomorrow.
Studies conducted by Mckinsey Global Institute and demographic research by Max New York Life Insurance point to the modern Indian consumer as predominantly young and more confident than ever before, willing to take risks and unabashedly ambitious. This radical change in the thought process of the consumer has inspired MNYLI to revamp the brand and change the tagline from “Your Partner for Life” to “Karo Zyaada Ka Iraada”, Mr Sarkar said.
MNYLI currently has 366 offices in 223 cities and aims to expand presence to 1,000 cities with about 1,600 offices by 2012. The company has coined a new tagline “Karo Zyaada ka Iraada” to represent an ambitious and assertive India that is ready to compete for more, demand more, dream more and live more to create a better and brighter tomorrow.
Studies conducted by Mckinsey Global Institute and demographic research by Max New York Life Insurance point to the modern Indian consumer as predominantly young and more confident than ever before, willing to take risks and unabashedly ambitious. This radical change in the thought process of the consumer has inspired MNYLI to revamp the brand and change the tagline from “Your Partner for Life” to “Karo Zyaada Ka Iraada”, Mr Sarkar said.
Source: The Hindu Business Line, The Hindu, Business Standard
SBI LIFE RANKED THIRD GLOBALLY AT MDRT
Mumbai: SBI Life on Tuesday said it has been ranked third globally in terms of number of Million Dollar Round Table (MDRT) members. The MDRT membership is an exclusive honour that is achieved by less than one per cent of the world's life insurance and financial services advisors, a press release issued here said. "Our global ranking is a testimony to the capabilities and potential of the Indian life insurance industry. Strong brand equity coupled with a highly productive sales force will enable us to scale greater heights in the future," SBI Life's Managing Director and CEO, U S Roy, said. Of the 40,000 SBI Life insurance advisors, 1,662 have qualified for the prestigious MDRT membership. Among these, 124 qualified for Court of Table (COTs) and 20 for Top of Table (TOTs).
Source: PTI, The Economic Times, Daily News & Analysis
WHENEVER A MARKET CRASH ATTENTION SHIFTS TO LIC
One notion about Life Insurance Corporation of India persisting in the public mind is that of a government hotline. It is widely believed that every time the stock market sees a historic crash, the phone rings at the investment department with instructions to support the market. Indeed, in various Black Mondays witnessed by the equity markets, when the Sensex crashed several hundred points, LIC was the only buyer. What irks Sushoban Sarker, CEO of LIC MF Asset Management, is that LIC is not being given enough credit for diligently following the age-old strategy of buying cheap and selling dear. “If you get an opportunity to buy an asset for Rs 750 which was until now selling for over Rs 1,000 what would you do?” asks Mr Sarker in an attempt to explain LIC’s strategy. He points out that legendary investors like Benjamin Graham and Warren Buffett have made their mark by buying value stocks during economic downtrends. While in a market crash attention immediately shifts to LIC, what has gone almost unnoticed is that the corporation made a killing selling bluechips when the Sensex crossed 20,000. Besides this simple home truth, LIC’s other investment philosophy has been to ensure that there are always some self-defined ground rules, even when there is freedom from regulation. Completely unrestricted fund management is the hallmark of hedge funds which have been in the news for losing investors’ money.
Mr Sarker brings these values into his new job at LIC Mutual Fund where he took charge in April. Mr Sarker, a direct recruit at LIC of the 1977 batch, has close to a decade’s experience in investment. Immediately before taking charge, he was executive director in charge of investment department at LIC. He has overseen LIC’s investment in diverse financial instruments including equities, government securities and corporate bonds. After graduating with honours in physics, Mr Sarker went on to acquire a post-graduate degree in financial management from Jamnalal Bajaj Institute of Management Studies, University of Mumbai. He has been on various committees, including those constituted by the government, RBI and the Insurance Regulatory and Development Authority. Though the Rs 18,000 crore-odd assets under management of LIC MF are significant, compared to LIC’s assets of close to Rs 8,00,000 crore they may appear small. But there is a lot of excitement in the fund business. On the cards is a proposed joint venture with Japan’s Nomura. The fund ranks No.11. Mr Sarker aims to improve the rankings and bring LIC MF to the 5th or 6th position. The mutual fund has so far done well in liquid and debt schemes. He wants to diversify a bit more into equity. Although in recent months life insurers and mutual funds have been fighting a bitter turf war, Mr Sarker, who has made the transition from insurance to asset management, feels there is no inherent conflict. On the contrary, he feels there is scope for LIC MF to work closer with its parent and use the distribution network to offer fund products to high net worth customers.
Mr Sarker brings these values into his new job at LIC Mutual Fund where he took charge in April. Mr Sarker, a direct recruit at LIC of the 1977 batch, has close to a decade’s experience in investment. Immediately before taking charge, he was executive director in charge of investment department at LIC. He has overseen LIC’s investment in diverse financial instruments including equities, government securities and corporate bonds. After graduating with honours in physics, Mr Sarker went on to acquire a post-graduate degree in financial management from Jamnalal Bajaj Institute of Management Studies, University of Mumbai. He has been on various committees, including those constituted by the government, RBI and the Insurance Regulatory and Development Authority. Though the Rs 18,000 crore-odd assets under management of LIC MF are significant, compared to LIC’s assets of close to Rs 8,00,000 crore they may appear small. But there is a lot of excitement in the fund business. On the cards is a proposed joint venture with Japan’s Nomura. The fund ranks No.11. Mr Sarker aims to improve the rankings and bring LIC MF to the 5th or 6th position. The mutual fund has so far done well in liquid and debt schemes. He wants to diversify a bit more into equity. Although in recent months life insurers and mutual funds have been fighting a bitter turf war, Mr Sarker, who has made the transition from insurance to asset management, feels there is no inherent conflict. On the contrary, he feels there is scope for LIC MF to work closer with its parent and use the distribution network to offer fund products to high net worth customers.
Source: Economic Times
HYBRID CAPITAL BENEFIT LIKELY FOR INSURERS
New Delhi: Insurance companies may soon be allowed to raise capital through several means which are normally used by commercial banks. The government is considering an amendment in the insurance law for allowing insurers to have hybrid capital. This would help the insurers meet their expansion plans while fulfilling solvency norms. The new norms would be applicable for both public and private insurers. “We are planning to allow insurance companies to raise resources through hybrid capital so as to help them meet their capital requirements,” a senior finance ministry official said, adding there was huge capital requirement for expansion of the life insurance business and the government needed to facilitate the expansion plans of the companies. Almost all the life and non-life insurers are in the need of additional capital for meeting their requirements. In fact, insurance companies were demanding that the government and the regulator should either ease the solvency norms or allow them to raise resources through multiple sources. Presently, Insurance Regulatory and Development Authority (Irda) norms require an insurance company to keep solvency margin at 150%. Insurers wanted it to be brought down to 100%. Funds injected by promoters for adhering to the solvency norms go into the insurer’s shareholders funds. Solvency of an insurance company corresponds to its ability to pay claims. An insurer is considered insolvent if its assets are not adequate (over indebtedness) or cannot be disposed of in time (illiquidity) to pay the claims. A 100% margin means that insurers are adequately placed to pay claims. The capital requirement of non-life insurers has also gone up substantially in the recent past. They need additional capital with de-tariffing of the fire, marine and engineering insurance products, which hitherto proved to be quite profitable.
Source: The Economic Times
INSURANCE PREMIUM FROM NEW POLICIES TAKES A 23% KNOCK
New Delhi: The Insurance sector in India has seen a significant slowdown in growth in the first quarter of the current fiscal. Premium from new policies has fallen 23%, according to the latest Insurance Regulatory and Development Authority (IRDA) report.
The figures show that the industry witnessed 15% growth between April and June this financial year as against 38% in the corresponding period last year. The total Annual Premium Equivalent (APE), which depicts new premium coming in every year, stood at Rs 9,611 crore during the first three months of FY- 09. LIC has witnessed a decline of 27% in its APE from Rs 4,927 crore in April-June last year to Rs 3,575 crore this year.
The slowdown in the economy and high inflation have forced banks to make lendings dearer, which inturn have dampened investments in the insurance sector. Insurance is not a top priority when it comes to consumer spends or investments. With less disposable income, insurance sales would be tougher. “With the uncertainty in the economy, people are spending less on insurance products which are considered major tax saving tools,” said a source. “Although the industry hasn’t faced any negative growth so far, there certainly has been a deceleration of growth in the industry,” said ICICI Prudential managing director Shikha Sharma.
According to sources, it is not just the sale of life and general insurance products which has been impacted by the volatility in the stock market. The demand for Unit Linked Plans (ULIP) also witnessed a drop in demand. The industry has seen a marginal shift away from ULIP to traditional products. “It is just a temporary phase. ULIPs will continue to be the preferred alternative for investors who are not interested in the shortterm market fluctuation,” said Ms Sharma.
Last year, the insurance sector witnessed about a 100% growth. This is even as the insurance perpetration in India is still at a low level at 4.1% of the GDP as compared to 8-10% of the GDP in some of the developed economies and the Asian markets. So far, 24% of the Indian households own life insurance policies and the average sum assured per household is just Rs 1,14,450 among the owner households.
The figures show that the industry witnessed 15% growth between April and June this financial year as against 38% in the corresponding period last year. The total Annual Premium Equivalent (APE), which depicts new premium coming in every year, stood at Rs 9,611 crore during the first three months of FY- 09. LIC has witnessed a decline of 27% in its APE from Rs 4,927 crore in April-June last year to Rs 3,575 crore this year.
The slowdown in the economy and high inflation have forced banks to make lendings dearer, which inturn have dampened investments in the insurance sector. Insurance is not a top priority when it comes to consumer spends or investments. With less disposable income, insurance sales would be tougher. “With the uncertainty in the economy, people are spending less on insurance products which are considered major tax saving tools,” said a source. “Although the industry hasn’t faced any negative growth so far, there certainly has been a deceleration of growth in the industry,” said ICICI Prudential managing director Shikha Sharma.
According to sources, it is not just the sale of life and general insurance products which has been impacted by the volatility in the stock market. The demand for Unit Linked Plans (ULIP) also witnessed a drop in demand. The industry has seen a marginal shift away from ULIP to traditional products. “It is just a temporary phase. ULIPs will continue to be the preferred alternative for investors who are not interested in the shortterm market fluctuation,” said Ms Sharma.
Last year, the insurance sector witnessed about a 100% growth. This is even as the insurance perpetration in India is still at a low level at 4.1% of the GDP as compared to 8-10% of the GDP in some of the developed economies and the Asian markets. So far, 24% of the Indian households own life insurance policies and the average sum assured per household is just Rs 1,14,450 among the owner households.
Source: The Economic Times
IRDA REVISES INVESTMENT NORMS FOR INSURERS
Hyderabad: The Insurance Regulatory and Development Authority (IRDA) has amended the regulations on investment of insurance companies. The definition of investments in infrastructure by the insurance companies is now aligned with current norms prescribed by the Reserve Bank of India. This would “bring in better cohesion and facilitate smooth flow of funds into this important sector”, Mr C.R. Muralidharan, Member (Finance and Investments), IRDA said in a release.
The revised regulations also extend the exposure norms to investments of Unit Linked Insurance Plans (ULIPs) premium to enhance policy-holders’ protection and rationalise the norms for both private and public insurers.
The insurers could now adopt rating criteria as prescribed for categorising certain instruments as approved investments by the authority, including rated mortgage backed securities that can be reckoned towards the housing sector for the purpose of pattern of investment, the release said.
The aim of the changes is to bring more flexibility to the insurers, address certain aspects of risk management in ULIP business and investment management in general, among others, it added.
The revised regulations also extend the exposure norms to investments of Unit Linked Insurance Plans (ULIPs) premium to enhance policy-holders’ protection and rationalise the norms for both private and public insurers.
The insurers could now adopt rating criteria as prescribed for categorising certain instruments as approved investments by the authority, including rated mortgage backed securities that can be reckoned towards the housing sector for the purpose of pattern of investment, the release said.
The aim of the changes is to bring more flexibility to the insurers, address certain aspects of risk management in ULIP business and investment management in general, among others, it added.
Source: The Hindu Business Line
Thursday, August 28, 2008
‘ESI SEEN AS INEFFECTIVE HEALTH SCHEME’
Bangalore: Employee State Insurance (ESI) is seen as an ineffective health insurance scheme for the organised sector temporary employees. In a study by staffing solutions company, TeamLease Services, nearly 70 per cent of temporary employees view the ESI deduction as a form of tax for which they get no or very poor return.
The report says that only 30 per cent of the two per cent who used ESI facilities were satisfied with the facilities and this was because of the poor and dilapidated conditions of the ESI facilities.
Another reason the report cited for poor usage of the facilities was the complex functioning of the ESI scheme that makes it ‘almost incomprehensible to the employee who pays for it.’ Only 15 per cent of the employees surveyed knew how the scheme functioned.
The report says that despite ESI Corporations’ revenues of Rs 2,400 crore in fiscal 2005-06 and an operating surplus of Rs 1,130 crore, the ESI infrastructure is way below WHO standards.
ESIC has a just one bed for 1,882 people to be served, which when benchmarked against bed availability in other countries, the ratio is ‘embarrassingly inadequate and needs to be improved at the least by a factor of 3.’
Mr N. Venkataraman, CFO, TeamLease Services, said about the study, “Our research points to an immediate need to revisit the fundamentals of the ESI scheme to address the radically changed employment scenario in the country. ESI reforms need to be prioritised because of the poor value for money, poor design and lack of consumer choice.”
The report says that only 30 per cent of the two per cent who used ESI facilities were satisfied with the facilities and this was because of the poor and dilapidated conditions of the ESI facilities.
Another reason the report cited for poor usage of the facilities was the complex functioning of the ESI scheme that makes it ‘almost incomprehensible to the employee who pays for it.’ Only 15 per cent of the employees surveyed knew how the scheme functioned.
The report says that despite ESI Corporations’ revenues of Rs 2,400 crore in fiscal 2005-06 and an operating surplus of Rs 1,130 crore, the ESI infrastructure is way below WHO standards.
ESIC has a just one bed for 1,882 people to be served, which when benchmarked against bed availability in other countries, the ratio is ‘embarrassingly inadequate and needs to be improved at the least by a factor of 3.’
Mr N. Venkataraman, CFO, TeamLease Services, said about the study, “Our research points to an immediate need to revisit the fundamentals of the ESI scheme to address the radically changed employment scenario in the country. ESI reforms need to be prioritised because of the poor value for money, poor design and lack of consumer choice.”
Source: The Hindu Business Line
FUTURE GENERALI CUSTOMERS
Using its mallassurance channel, Future Generali, the Insurance Venture of future group of India and Generali Group of Italy, ahs acquired over 2 lakh customers in just 5 days through its ‘Maha Insurance’ initiative at Big Bazaar’s ‘Maha Bachat’ promotion from August 13-07.
Source: The Financial Express
INSURANCE BROKERS SEE BIG MONEY
Mumbai: Insurance broking has a potential to reach Rs 10,000 crore in non-life insurance premia from the current Rs 3,000 crore, a broker said. The insurance broking industry, which was given permission to operate by Insurance Regulatory Development Authority in October 2002, is growing by 15-30% for the past 4 years, brokers said.
Unlike insurance agents, who represent the insurance agency, a broker represents the client, often corporates, who are looking for the best deals in non-life policy. At present, there are over 370 brokers in the country. V Ramakrishna, managing director of India Insure Risk Management Services, one such broking firm, said, “Brokers can target about Rs 10,000 crore of non-life insurance premia, out of which they currently get only Rs 3,000 crore.”
Though brokers have made a considerable dent in the Indian insurance market, it is still largely agent-driven. “Most of our clients are from the manufacturing and service sectors,” said Ramakrishna, whose firm has about Rs 300 crore in annual premia and is into composite broking, involving both direct broking and reinsurance broking.
Though the opportunities in life insurance are “mind-boggling”, he said brokers mostly avoid that space because it’s predominantly retail. While some big companies manage insurance in-house, small and medium enterprises are still hesitant to hire brokers. But attitudes are changing.
Unlike insurance agents, who represent the insurance agency, a broker represents the client, often corporates, who are looking for the best deals in non-life policy. At present, there are over 370 brokers in the country. V Ramakrishna, managing director of India Insure Risk Management Services, one such broking firm, said, “Brokers can target about Rs 10,000 crore of non-life insurance premia, out of which they currently get only Rs 3,000 crore.”
Though brokers have made a considerable dent in the Indian insurance market, it is still largely agent-driven. “Most of our clients are from the manufacturing and service sectors,” said Ramakrishna, whose firm has about Rs 300 crore in annual premia and is into composite broking, involving both direct broking and reinsurance broking.
Though the opportunities in life insurance are “mind-boggling”, he said brokers mostly avoid that space because it’s predominantly retail. While some big companies manage insurance in-house, small and medium enterprises are still hesitant to hire brokers. But attitudes are changing.
Source: DNA
UBI, TATA AIG LIFE LAUNCH RETIREMENT SOLUTIONS
Bangalore: United Bank of India (UBI) and Tata AIG Life Insurance (Tata AIG Life) on Monday announced the launch of 'United Retirement Solutions' - a customised package of three retirement products from Tata AIG Life for customers of UBI. The solutions includes - InvestAssure Future, Nirvana Plus Pension Policy and Easy Retire which offer comprehensive retirement benefits and financial protection. InvestAssure Future is a unit linked insurance plan designed to help the customer meet his needs of capital accumulation to plan for a secure retired life.
Nirvana Plus Pension Policy is a powerful retirement solution which helps the customer build a corpus for his golden years and get sound financial protection for his dependents in the event of any unfortunate event like accidental or natural death, said the company. Easy retire is an immediate annuity plan which is the ideal solution to convert the policy holder's corpus into regular income.
Nirvana Plus Pension Policy is a powerful retirement solution which helps the customer build a corpus for his golden years and get sound financial protection for his dependents in the event of any unfortunate event like accidental or natural death, said the company. Easy retire is an immediate annuity plan which is the ideal solution to convert the policy holder's corpus into regular income.
Source: Deccan Chronicle
LIFE INSURERS' VALUATIONS DIP ON LOWER SALES GROWTH
Mumbai: slower growth in sales of new insurance policies has affected the valuation of life insurance companies by up to 40 per cent. An international investment bank has lowered the valuation of ICICI Prudential Life Insurance by over 41 per cent to $9.2 billion compared with that of $15.7 billion assigned in February this year. In both the cases, the valuation was for 2009-10. ICICI Prudential Life was valued between $12 billion and $17 billion a year ago by most international investment banks.
“We have assigned lower multiples to growth as we see a moderation in growth,” said an analyst at the investment bank, which did not want to be identified, saying the report was meant for private circulation.
An analyst at another global investment bank, which is finalising a similar report, added that stocks of the promoters of life insurance companies too have been re-rated due to the current market volatility. In addition, he pointed out that the growth rate for new business and margins on the business also dipped, resulting in lower valuations. In addition, the depreciation of the rupee against the dollar is affecting valuations.
“Inflation is at 12.63 per cent, crude oil price is rising, money market is tightening, interest rates are rising, the international market scenario is not encouraging, the GDP growth (forecast) has been scaled down to 8 per cent, therefore the perception of the analysts about the future growth prospects over the next 12 months has been impacted,” said SBI Life Managing Director and CEO U S Roy.
During the year ended March 2008, the first year premium income of life insurers rose by 74 per cent to Rs 33,800 crore, while the growth in 2006-07 was 90 per cent. With stock markets continuing to be volatile, investors are no longer thronging to buy unit-linked insurance plans (Ulips) the way they did in the past.
When stock markets were booming, Ulip sales accounted for 75-90 per cent of new sales. In addition, HDFC Standard Life Managing Director and CEO Deepak Satwalekar said the economic slowdown and higher inflation were affecting savings of individuals.
Valuations will have an impact on public offers lined up by companies like SBI Life and HDFC Standard Life, which intend to list next year. “No doubt, lower valuations will impact our price at listing. However, the real value will be to see how the market and the growth pan out in the next one year,” said Satwalekar.
ICICI Prudential Executive Director N S Kannan, however, said the depreciation of the rupee during the last month or so has not been factored in by the investment bank that has dished out lower valuations for life insurers. “ICICI Prudential has grown 50 per cent during the first quarter, its new business achieved a profit of Rs 240 crore. However, what multiples the analysts assign to a company’s earnings depend on their outlook on which I cannot comment.”
Source: Business Standard
“We have assigned lower multiples to growth as we see a moderation in growth,” said an analyst at the investment bank, which did not want to be identified, saying the report was meant for private circulation.
An analyst at another global investment bank, which is finalising a similar report, added that stocks of the promoters of life insurance companies too have been re-rated due to the current market volatility. In addition, he pointed out that the growth rate for new business and margins on the business also dipped, resulting in lower valuations. In addition, the depreciation of the rupee against the dollar is affecting valuations.
“Inflation is at 12.63 per cent, crude oil price is rising, money market is tightening, interest rates are rising, the international market scenario is not encouraging, the GDP growth (forecast) has been scaled down to 8 per cent, therefore the perception of the analysts about the future growth prospects over the next 12 months has been impacted,” said SBI Life Managing Director and CEO U S Roy.
During the year ended March 2008, the first year premium income of life insurers rose by 74 per cent to Rs 33,800 crore, while the growth in 2006-07 was 90 per cent. With stock markets continuing to be volatile, investors are no longer thronging to buy unit-linked insurance plans (Ulips) the way they did in the past.
When stock markets were booming, Ulip sales accounted for 75-90 per cent of new sales. In addition, HDFC Standard Life Managing Director and CEO Deepak Satwalekar said the economic slowdown and higher inflation were affecting savings of individuals.
Valuations will have an impact on public offers lined up by companies like SBI Life and HDFC Standard Life, which intend to list next year. “No doubt, lower valuations will impact our price at listing. However, the real value will be to see how the market and the growth pan out in the next one year,” said Satwalekar.
ICICI Prudential Executive Director N S Kannan, however, said the depreciation of the rupee during the last month or so has not been factored in by the investment bank that has dished out lower valuations for life insurers. “ICICI Prudential has grown 50 per cent during the first quarter, its new business achieved a profit of Rs 240 crore. However, what multiples the analysts assign to a company’s earnings depend on their outlook on which I cannot comment.”
Source: Business Standard
LIFE COS SAY COVER SALE BY MFs AFFECT DISTRIBUTION INFRASTRUCTURE
Mumbai: Life companies have expressed concern that sale of insurance cover by mutual funds could undermine the distribution infrastructure of life companies. They have also complained to the regulator that such a move would end up violating guidelines of the insurance regulator. This is the latest in the ongoing turf war between the mutual fund and the life insurance industry. Mutual funds have been attacking insurers over the lack of transparency and high charges in unit-linked insurance plans — insurance products that mimic mutual funds. Insurers have responded saying they are only exploiting the failure of the mutual fund industry to build a distribution force to sell to retail. Mutual funds have decided to get back at insurers by introducing systematic investment plans (SIPs) with a built-in life insurance cover. The insurance covers on the SIP were small and given away without any charge to the investor. Now, the mutual funds have submitted a proposal where they will sell insurance cover against which premium will be collected. Speaking to ET, Life Insurance Council chief executive SB Mathur said: “Insurance companies are spending hundreds of crores on training agents to sell insurance. If mutual fund distributors are allowed to sell insurance without adequate training, the sanctity of the training would be lost.” According to Mr Mathur, so far the insurance cover has been restricted to the target investment value (the total amount expected to be saved under a systematic investment plan). However, if mutual funds were given too much flexibility in the level of insurance cover, it could weaken the quality of underwriting and safeguards followed by life insurance companies. Insurers also point out that according to IRDA guidelines, any buyer of insurance should be made aware of the name of the company from which he is buying insurance. In the past, the regulator had barred people from naming products in such a manner that it is identified predominantly with the distributor. The other issue raised by life insurers is that of the social obligation of insurance companies. The directive to sell over a fifth of their policies in the rural sector has forced companies to invest in rural areas where costs are averaged out because of sales in urban areas. Mutual funds have no such obligation and sell largely in urban areas. Insurers say allowing them to distribute insurance can lead to cherry-picking by mutual funds.
source: The Economic Times
LIC TO SEEK REVIEW OF NEW IRDA NORMS
The new investment guidelines issued by the Insurance Regulatory & Development Authority (Irda) may have spread cheer among private sector insurers, but it has caught the country’s largest insurer, the Life Insurance Corporation (LIC), off-guard. LIC is also the country’s largest institutional player, with a staggering Rs 7.5 lakh crore of investments.
Finding itself in a quandary after Irda issued its new norms last week, LIC is now planning to approach the ministry of finance and Irda over the implementation of these norms which will have a wide-ranging impact on not only the insurance companies but also the equity and debt markets.
“We are still studying Irda’s new norms and carefully finding out the exact implications of these on our corporation. We will go back to the government and the regulator for a review of certain sections of these regulations,’’ said a senior official of LIC, requesting that he be not named.
The regulations have been gazetted, but that would not preclude a review if it is seen necessary to do so, said the official. Though Irda had consulted LIC while preparing the new set of guidelines, the revamped regulations as announced by it have caught LIC on the wrong foot.
Irda, in its latest notification aimed at removing the differential treatment of provisions applicable to public sector and private sector insurers, has mandated that no insurer can hold more than 10% equity in any company. The norms have also been broadened to include Ulips.
The new guidelines say, “10% of outstanding shares (face value) or 10% of fund size, whichever is lower, can be invested in equity shares of investee company. A sum of 10% of subscribed share capital, free reserves and debentures / bonds of investee company or 10% of fund size, whichever is lower, can be invested in debt instruments of investee company.’’ LIC, the country’s largest institutional player, has major investments in many listed companies and in many companies such investment exceeds 10% .
Earlier, in certain instances, LIC has sought special permission from Irda to invest more than 20% in some companies. The new norms also set out and review exposure criteria for investments in mutual funds, IPOs and debt instruments and also in money market instruments.
These norms give private sector life insurers more freedom to invest in larger avenues. Predictably, they have no problems with the new Irda guidelines. Puneet Nanda, executive vice-president and chief investment officer of ICICI Prudential Life Insurance, India’s largest private sector insurance company, said the new norms have given higher investment flexibility while focusing on better risk management. “This will potentially translate into higher risk adjusted returns for policyholders,’’ he said. The new guidelines will increase the private sector life insurers’ flexibility to invest in initial public offerings further.
On whether the new norms will allow more investments in the stock market, Nanda said: “Not necessarily. The extent of stock investments depends on various factors like customer goals and preference, horizon, risk appetite, product structure and investment strategy of the company.”
Ironically, only recently, the government eased the norms for investments in equity by non-government provident funds, allowing equity investments up to 15%.
Finding itself in a quandary after Irda issued its new norms last week, LIC is now planning to approach the ministry of finance and Irda over the implementation of these norms which will have a wide-ranging impact on not only the insurance companies but also the equity and debt markets.
“We are still studying Irda’s new norms and carefully finding out the exact implications of these on our corporation. We will go back to the government and the regulator for a review of certain sections of these regulations,’’ said a senior official of LIC, requesting that he be not named.
The regulations have been gazetted, but that would not preclude a review if it is seen necessary to do so, said the official. Though Irda had consulted LIC while preparing the new set of guidelines, the revamped regulations as announced by it have caught LIC on the wrong foot.
Irda, in its latest notification aimed at removing the differential treatment of provisions applicable to public sector and private sector insurers, has mandated that no insurer can hold more than 10% equity in any company. The norms have also been broadened to include Ulips.
The new guidelines say, “10% of outstanding shares (face value) or 10% of fund size, whichever is lower, can be invested in equity shares of investee company. A sum of 10% of subscribed share capital, free reserves and debentures / bonds of investee company or 10% of fund size, whichever is lower, can be invested in debt instruments of investee company.’’ LIC, the country’s largest institutional player, has major investments in many listed companies and in many companies such investment exceeds 10% .
Earlier, in certain instances, LIC has sought special permission from Irda to invest more than 20% in some companies. The new norms also set out and review exposure criteria for investments in mutual funds, IPOs and debt instruments and also in money market instruments.
These norms give private sector life insurers more freedom to invest in larger avenues. Predictably, they have no problems with the new Irda guidelines. Puneet Nanda, executive vice-president and chief investment officer of ICICI Prudential Life Insurance, India’s largest private sector insurance company, said the new norms have given higher investment flexibility while focusing on better risk management. “This will potentially translate into higher risk adjusted returns for policyholders,’’ he said. The new guidelines will increase the private sector life insurers’ flexibility to invest in initial public offerings further.
On whether the new norms will allow more investments in the stock market, Nanda said: “Not necessarily. The extent of stock investments depends on various factors like customer goals and preference, horizon, risk appetite, product structure and investment strategy of the company.”
Ironically, only recently, the government eased the norms for investments in equity by non-government provident funds, allowing equity investments up to 15%.
Source: The Financial Express, The Indian Express, Business Standard
MINISTRY OF STATISTICS OFFERS TO SHARE DATA WITH INSURERS
Hyderabad: The Union Ministry of Statistics and Programme Implementation, is ready to share vital data with the insurance companies and provide consultancy, according to Dr Pronab Sen, Chief Statistician and Secretary of the Ministry.
“Though our primary task is to provide data on various aspects to the Planning Commission, we do possess lot of figures, which will be useful for the insurance and other financial services providers,” Dr Sen told Business Line here recently.
We have all data
On the specific data that can be shared with the financial sector, he said it depends on what a company is looking for. “From demographic patterns to income levels, all data will be with us,” he added.
The collection and accessing of data in the banking sector is easy due to the long history of banking in India and role of the Reserve Bank of India. The insurance industry still suffers from absence of data, which is crucial in product designing and marketing strategies, he pointed out.
“Unfortunately, nobody approaches us for data on insurance/banking even though we are sitting on a large data base,” Dr Sen said, adding that there was a tendency to pick up only supportive data by the corporates to suit their beliefs and needs. The relationship between data-generators and data-users should be based on two separate platforms for accuracy of inferences, he added.
Consultancy too
“If there is a dialogue between us and the insurance industry, we can guide them to the right data base. We are ready to provide consultancy if asked,” Dr Sen said.
“Though our primary task is to provide data on various aspects to the Planning Commission, we do possess lot of figures, which will be useful for the insurance and other financial services providers,” Dr Sen told Business Line here recently.
We have all data
On the specific data that can be shared with the financial sector, he said it depends on what a company is looking for. “From demographic patterns to income levels, all data will be with us,” he added.
The collection and accessing of data in the banking sector is easy due to the long history of banking in India and role of the Reserve Bank of India. The insurance industry still suffers from absence of data, which is crucial in product designing and marketing strategies, he pointed out.
“Unfortunately, nobody approaches us for data on insurance/banking even though we are sitting on a large data base,” Dr Sen said, adding that there was a tendency to pick up only supportive data by the corporates to suit their beliefs and needs. The relationship between data-generators and data-users should be based on two separate platforms for accuracy of inferences, he added.
Consultancy too
“If there is a dialogue between us and the insurance industry, we can guide them to the right data base. We are ready to provide consultancy if asked,” Dr Sen said.
Source: The Hindu Business Line
BANKS, INSURANCE FIRMS CUSHION FII SALES IN Q1
Banks, financial institutions and insurance (BFI) companies provided the much-required cushion to the equity markets in the first quarter of FY09. While foreign institutional investors (FIIs) sold a hefty $4 billion of equities in the quarter, the BFI investors together bought $2.6 billion of equities, a study by ENAM, titled “India Inc Shareholding – June 2008” shows.
The study analyses in detail the shareholding patterns and trends of the BSE-500 companies, and finds the mutual funds, including UTI, had also sold to the tune of $231 million during the quarter.
In sector-wise analysis, the study shows that FIIs sold banking and financial services stocks, and were also sellers in engineering and realty sectors, while they bought IT services stocks during the first quarter.
FIIs were underweight in sectors like oil and gas, IT and fast-moving consumer goods, while they were overweight in banking and financial services, pharma and realty. On the other hand, the BFI sector showed quite the opposite trend to that of the FIIs.
The BFI investors bought banking and financial services stocks, and also those in engineering, energy and oil and gas sectors. They sold IT services stocks during the quarter. The BFI institutions were overweight in metals, auto and FMCG, and underweight in IT services, banking and oil and gas.
Mutual funds, including UTI, on the other hand were sellers in banking and financial services, mirroring similar investment sentiment in some ways as that of FIIs, and also sold oil and gas stocks. They bought IT services, telecom and engineering stocks. MFs were overweight in engineering, pharma and FMCG, and underweight on IT services, oil and gas and banking and financial services, the study shows.
The study also does a concentration analysis, which shows BSE-100 stocks account for as much as 80% plus of BFI and FII holdings and 73% of mutual fund holdings. The holding pattern analysis shows promoters hold 57% in BSE-500 stocks in Q1, while foreign investors hold 17%, BFI 6%, mutual funds 4% and individuals 9% in these companies. Of the benchmark BSE-30 companies, promoters hold 51%, foreign investors 22%, BFIs 7%, MFs 4% and individuals 9%.
Sectorwise, the FII portfolio was skewed towards banking and financial services, oil and gas and IT services, with these three sectors together accounting for about 50% of the FIIs’ portfolio. Telecommunications, metals and mining, engineering and FMCG were the next preferred sectors for FIIs in terms of their holdings.
On the other hand, MFs, including UTI, favoured engineering, banking and financial services and oil and gas sectors which together comprise about 40% of their portfolio. FMCG, metals/mining, IT services and telecommunications were the next preferred sectors for mutual funds.
BFI companies leaned on oil and gas, banking and financial services and metals sectors which together comprised about 43% of their portfolio in the first quarter. Engineering, FMCG, energy and auto were the next on their holdings priority list.
Among individual stocks, the study shows Reliance Industries, HDFC and Bharti Airtel were the favourite top three stocks for FIIs, dominating the portfolio weights during the June quarter. For BFI investors, once again Reliance Industries topped the portfolio weight, followed by ITC and L&T. For the MFs, including UTI, L&T topped the weightages, followed by ITC and RIL.
Sectorally, the study shows that banking and financial services, infrastructure, retail, cement and engineering sector stocks saw a decline in FII holdings during the quarter. FMCG, IT and textiles sectors saw a rise in MF holdings during the quarter, whereas auto, diversified, media and cement saw a fall in MF holdings during the same period.
BFI investors increased their holdings in the banking and financial services, cement, FMCG and engineering sectors during the quarter, the ENAM study says.
The study analyses in detail the shareholding patterns and trends of the BSE-500 companies, and finds the mutual funds, including UTI, had also sold to the tune of $231 million during the quarter.
In sector-wise analysis, the study shows that FIIs sold banking and financial services stocks, and were also sellers in engineering and realty sectors, while they bought IT services stocks during the first quarter.
FIIs were underweight in sectors like oil and gas, IT and fast-moving consumer goods, while they were overweight in banking and financial services, pharma and realty. On the other hand, the BFI sector showed quite the opposite trend to that of the FIIs.
The BFI investors bought banking and financial services stocks, and also those in engineering, energy and oil and gas sectors. They sold IT services stocks during the quarter. The BFI institutions were overweight in metals, auto and FMCG, and underweight in IT services, banking and oil and gas.
Mutual funds, including UTI, on the other hand were sellers in banking and financial services, mirroring similar investment sentiment in some ways as that of FIIs, and also sold oil and gas stocks. They bought IT services, telecom and engineering stocks. MFs were overweight in engineering, pharma and FMCG, and underweight on IT services, oil and gas and banking and financial services, the study shows.
The study also does a concentration analysis, which shows BSE-100 stocks account for as much as 80% plus of BFI and FII holdings and 73% of mutual fund holdings. The holding pattern analysis shows promoters hold 57% in BSE-500 stocks in Q1, while foreign investors hold 17%, BFI 6%, mutual funds 4% and individuals 9% in these companies. Of the benchmark BSE-30 companies, promoters hold 51%, foreign investors 22%, BFIs 7%, MFs 4% and individuals 9%.
Sectorwise, the FII portfolio was skewed towards banking and financial services, oil and gas and IT services, with these three sectors together accounting for about 50% of the FIIs’ portfolio. Telecommunications, metals and mining, engineering and FMCG were the next preferred sectors for FIIs in terms of their holdings.
On the other hand, MFs, including UTI, favoured engineering, banking and financial services and oil and gas sectors which together comprise about 40% of their portfolio. FMCG, metals/mining, IT services and telecommunications were the next preferred sectors for mutual funds.
BFI companies leaned on oil and gas, banking and financial services and metals sectors which together comprised about 43% of their portfolio in the first quarter. Engineering, FMCG, energy and auto were the next on their holdings priority list.
Among individual stocks, the study shows Reliance Industries, HDFC and Bharti Airtel were the favourite top three stocks for FIIs, dominating the portfolio weights during the June quarter. For BFI investors, once again Reliance Industries topped the portfolio weight, followed by ITC and L&T. For the MFs, including UTI, L&T topped the weightages, followed by ITC and RIL.
Sectorally, the study shows that banking and financial services, infrastructure, retail, cement and engineering sector stocks saw a decline in FII holdings during the quarter. FMCG, IT and textiles sectors saw a rise in MF holdings during the quarter, whereas auto, diversified, media and cement saw a fall in MF holdings during the same period.
BFI investors increased their holdings in the banking and financial services, cement, FMCG and engineering sectors during the quarter, the ENAM study says.
Source: The Financial Express
A MILLION COVER FOR INDIA INC’S PAREKHS & KAMATHS
Mumbai: Key-Person insurance is catching up in a big way in the country, with banks, IT and pharma firms spending millions on insuring their indispensable employees. In fact, according to industry sources, executives like ICICI Bank MD & CEO KV Kamath and HDFC chairman Deepak Parekh could well be insured for a few thousand crore rupees. And it’s not just top officials of multinational corporations who are being insured by their employees; insurance brokers claim that key-person insurance requests from start-up IT firms are on the rise as well.
According to Naveen K Midha, senior vice-president and head of the employee benefits vertical at Willis India Insurance Brokers, a general thumb rule for key-person insurance followed over the world recommends that a key person in an organisation be insured for at least five times the net profit of the company over the past three years. So with both ICICI Bank and HDFC consistently turning in annual profits in excess of Rs 1,000 crore for the past few years, the premium figures are not hard to fathom.
“People like KV Kamath and Deepak Parekh are synonymous with their respective organisations, and big bucks being spent on them is understandable,” explains Mr Midha. But while big firms have the luxury of a strong brand name, smaller start-ups rely on their core team for acquiring business. “The need for key-person insurance is more acute in smaller firms,” he added. Interestingly, key-people for an organisation might not just be their MDs and CEOs but also technical support staff with special knowledge of the firm’s systems and even brand ambassadors.
Key-person insurance protects the company against the untimely death, disability or retirement of the insured. The insured-sums obviously vary from company to company and region to region. Also, key factors like the employees remuneration and propensity to jump jobs are taken into consideration while the policies are framed. Such schemes are also being used by some companies as an effective retention tool. Unlike life or medical insurance schemes undertaken by employers, premiums paid by companies in this case are treated as business expenses and do not attract fringe-benefit taxes either.
Willis is one of the world’s largest insurance brokerages, which has been represented in India for the past three years. According to, Willis Asia MD James Quirk; Indian companies have increasingly started adopting a host of relatively new insurance products, like cover for trade and political risks, and insurance for mergers and acquisitions. Such products have gained prominence in India of late, given the rising number of outbound acquisitions and the volatility in the international economic conditions.
According to Naveen K Midha, senior vice-president and head of the employee benefits vertical at Willis India Insurance Brokers, a general thumb rule for key-person insurance followed over the world recommends that a key person in an organisation be insured for at least five times the net profit of the company over the past three years. So with both ICICI Bank and HDFC consistently turning in annual profits in excess of Rs 1,000 crore for the past few years, the premium figures are not hard to fathom.
“People like KV Kamath and Deepak Parekh are synonymous with their respective organisations, and big bucks being spent on them is understandable,” explains Mr Midha. But while big firms have the luxury of a strong brand name, smaller start-ups rely on their core team for acquiring business. “The need for key-person insurance is more acute in smaller firms,” he added. Interestingly, key-people for an organisation might not just be their MDs and CEOs but also technical support staff with special knowledge of the firm’s systems and even brand ambassadors.
Key-person insurance protects the company against the untimely death, disability or retirement of the insured. The insured-sums obviously vary from company to company and region to region. Also, key factors like the employees remuneration and propensity to jump jobs are taken into consideration while the policies are framed. Such schemes are also being used by some companies as an effective retention tool. Unlike life or medical insurance schemes undertaken by employers, premiums paid by companies in this case are treated as business expenses and do not attract fringe-benefit taxes either.
Willis is one of the world’s largest insurance brokerages, which has been represented in India for the past three years. According to, Willis Asia MD James Quirk; Indian companies have increasingly started adopting a host of relatively new insurance products, like cover for trade and political risks, and insurance for mergers and acquisitions. Such products have gained prominence in India of late, given the rising number of outbound acquisitions and the volatility in the international economic conditions.
Source: The Economic Times
IRDA TO INSURERS: SET UP RISK MGMT SYSTEMS
The Insurance Regulatory & Development Authority (Irda) has asked insurers having assets under management of over Rs 500 crore to personally see that someone acts as fund manager and dealer. “The investment system should have separate modules for front and back office,” said Irda in a notification.
Transfer of data from front to back office should be electronic without manual intervention, that is, without re-entering data at the back office. The insurer may have multiple data entry systems, but all such systems should be seamlessly integrated without manual intervention. The front office shall report to the CEO, through the chief investment officer.
Transfer of data from front to back office should be electronic without manual intervention, that is, without re-entering data at the back office. The insurer may have multiple data entry systems, but all such systems should be seamlessly integrated without manual intervention. The front office shall report to the CEO, through the chief investment officer.
Source: The Financial Express
RISK FIRMS GET MORE INVESTMENT AVENUES
Mumbai: After a two-year wait, the Insurance Regulatory and Development Authority (Irda) has notified new investment norms that provide more flexibility to insurance companies for parking funds in debt instruments offered by banks and allows more money to flow into initial public offers (IPOs).
At the same time, it has put in place group and individual company exposure norms for unit-linked insurance plans (Ulips) that did not face any such restrictions so far. Exposure to any group of companies has been capped at 25 per cent, while it has been restricted to 10 per cent each for equity and debt instruments for one company.
Investment in fixed deposits is, however, outside the 25 per cent ceiling. In addition, the revised guidelines issued on Friday evening, have stipulated that 5 per cent of the investible corpus can be parked in immovable property.
With Ulips emerging as the largest selling product in a life insurer’s portfolio, these companies have become the biggest qualified domestic institutional investor in recent months. Ulips constitute anywhere between 75 per cent and 90 per cent of the business premium for insurance companies. Of the funds raised through Ulips, more than 90 per cent flows into the stock markets.
To ensure that insurers invest in safe instruments, Irda has specified that at least 75 per cent of debt investments, other than government and other approved securities, should enjoy AAA or an equivalent rating. These norms are also applicable to Ulips.
As part of Irda’s drive to expand the investment basket, mortgage-backed securities (MBS) have been included under the ‘approved investments’ group as part of exposure to the housing sector.
Besides, securities such as bonds and debentures issued by companies and financial institutions that enjoy a minimum AA or an equivalent rating will be part of the ‘approved investments’ group. In case of downgrades, they will be shifted to ‘other investments’ group. Government securities and liquid mutual funds are also ‘approved investments’.
Under the norms, insurers have to invest up to 35 per cent of their funds in approved investments. Of this, at least 15 per cent has to be invested in housing and infrastructure and asset-backed securities with underlying housing loans.
In case of venture capital, Irda has said that life insurers can now invest up to 3 per cent of their investible corpus and general insurers 5 per cent of the investment fund, or 10 per cent of the VC fund size, whichever is lower.
While the exposure limit for financial and banking sector is 25 per cent of the investment assets, Irda has provided flexibility by specifying that investment in fixed deposits, terms-deposits and certificate of deposit of scheduled banks will not be categorised into the group if the bank is not a promoter of the insurance company.
The criterion on the minimum size of the IPO including ‘offer for sale’ for investment by insurers has been reduced to Rs 200 crore from Rs 500 crore earlier. For life insurers, the maximum bid amount for IPO investment has to be less than 10 per cent of the subscribed capital of the investee company or 10 per cent of the fund or assets in case of a general insurer.
Insurance companies had sought relaxations saying that they represent individual investors and should not be treated at par with other institutional players.
At the same time, it has put in place group and individual company exposure norms for unit-linked insurance plans (Ulips) that did not face any such restrictions so far. Exposure to any group of companies has been capped at 25 per cent, while it has been restricted to 10 per cent each for equity and debt instruments for one company.
Investment in fixed deposits is, however, outside the 25 per cent ceiling. In addition, the revised guidelines issued on Friday evening, have stipulated that 5 per cent of the investible corpus can be parked in immovable property.
With Ulips emerging as the largest selling product in a life insurer’s portfolio, these companies have become the biggest qualified domestic institutional investor in recent months. Ulips constitute anywhere between 75 per cent and 90 per cent of the business premium for insurance companies. Of the funds raised through Ulips, more than 90 per cent flows into the stock markets.
To ensure that insurers invest in safe instruments, Irda has specified that at least 75 per cent of debt investments, other than government and other approved securities, should enjoy AAA or an equivalent rating. These norms are also applicable to Ulips.
As part of Irda’s drive to expand the investment basket, mortgage-backed securities (MBS) have been included under the ‘approved investments’ group as part of exposure to the housing sector.
Besides, securities such as bonds and debentures issued by companies and financial institutions that enjoy a minimum AA or an equivalent rating will be part of the ‘approved investments’ group. In case of downgrades, they will be shifted to ‘other investments’ group. Government securities and liquid mutual funds are also ‘approved investments’.
Under the norms, insurers have to invest up to 35 per cent of their funds in approved investments. Of this, at least 15 per cent has to be invested in housing and infrastructure and asset-backed securities with underlying housing loans.
In case of venture capital, Irda has said that life insurers can now invest up to 3 per cent of their investible corpus and general insurers 5 per cent of the investment fund, or 10 per cent of the VC fund size, whichever is lower.
While the exposure limit for financial and banking sector is 25 per cent of the investment assets, Irda has provided flexibility by specifying that investment in fixed deposits, terms-deposits and certificate of deposit of scheduled banks will not be categorised into the group if the bank is not a promoter of the insurance company.
The criterion on the minimum size of the IPO including ‘offer for sale’ for investment by insurers has been reduced to Rs 200 crore from Rs 500 crore earlier. For life insurers, the maximum bid amount for IPO investment has to be less than 10 per cent of the subscribed capital of the investee company or 10 per cent of the fund or assets in case of a general insurer.
Insurance companies had sought relaxations saying that they represent individual investors and should not be treated at par with other institutional players.
Source: Business Standard
VC FUNDS BULLISH ON IRDA'S MOVE
Mumbai: The Insurance Regulatory and Development Authority’s (Irda) move to allow insurance companies to invest in venture capital (VC) funds could help them raise money more easily, but it could take up to 12 months for insurers to start investing.
On Friday, Irda allowed life insurers to invest 3 per cent of their total investible corpus in VC funds or 10 per cent of the fund’s size, whichever is lower. For general insurers, the limit is 5 per cent of their investment assets or 10 per cent of the fund size, whichever is lower. Based on life insurers’ assets under management of Rs 700,000 crore, potentially over Rs 21,000 crore can flow from this segment alone.
Canaan Partners CEO Alok Mittal said the move is a good beginning, but does not translate into immediate gains. “Insurance companies will have a good opportunity to be a part of the growing VC market in India. Over a period of time, more and more insurance companies will invest as they look at it as a part their asset management exercise,” added Vishal Tulsiyan, director and CEO, Motilal Oswal Ventures.
“Worldwide, insurance companies, pension funds, sovereign funds and government funds are investing in VC funds. The key thing is that there is a lot of capital flowing from outside than inside in our domestic market. Insurance funds will provide a boost to VCs” said Sudhir Sethi, CEO, JDG Ventures.
Frontline Strategy, a Mumbai-based VC fund, said the norms would help broaden the pool of money available for domestic funds. “It will take six to 12 months before the funds starts flowing from the insurers,” added Supratim Basu, a director of an early-stage fund. While the options for VC funds increase, Sidbi Venture Capital CEO Ajay Kumar Kapur said insurers are already investing and the cap will hold back some of the flows.
VC funds have invested $340 million in 51 deals in the first half of 2008. Although high valuations are a worry for VC funds, they are confident about the investment flow for the year ahead.
On Friday, Irda allowed life insurers to invest 3 per cent of their total investible corpus in VC funds or 10 per cent of the fund’s size, whichever is lower. For general insurers, the limit is 5 per cent of their investment assets or 10 per cent of the fund size, whichever is lower. Based on life insurers’ assets under management of Rs 700,000 crore, potentially over Rs 21,000 crore can flow from this segment alone.
Canaan Partners CEO Alok Mittal said the move is a good beginning, but does not translate into immediate gains. “Insurance companies will have a good opportunity to be a part of the growing VC market in India. Over a period of time, more and more insurance companies will invest as they look at it as a part their asset management exercise,” added Vishal Tulsiyan, director and CEO, Motilal Oswal Ventures.
“Worldwide, insurance companies, pension funds, sovereign funds and government funds are investing in VC funds. The key thing is that there is a lot of capital flowing from outside than inside in our domestic market. Insurance funds will provide a boost to VCs” said Sudhir Sethi, CEO, JDG Ventures.
Frontline Strategy, a Mumbai-based VC fund, said the norms would help broaden the pool of money available for domestic funds. “It will take six to 12 months before the funds starts flowing from the insurers,” added Supratim Basu, a director of an early-stage fund. While the options for VC funds increase, Sidbi Venture Capital CEO Ajay Kumar Kapur said insurers are already investing and the cap will hold back some of the flows.
VC funds have invested $340 million in 51 deals in the first half of 2008. Although high valuations are a worry for VC funds, they are confident about the investment flow for the year ahead.
Source: Business Standard
Tuesday, August 26, 2008
NEW NORMS TO DIVERSIFY INSURANCE COS RISK
Hyderabad/Mumbai: Insurers investing in initial public offerings (IPO) of private sector companies will enjoy more freedom that could help policy holders garner higher returns from equities post-listing.
They can also invest in fixed-income instruments such as mortgage-backed securities (MBS) and bonds floated by developers of SEZs. Insurers will get greater leeway in their investments in mutual funds and venture funds as well.
Insurance regulator Irda on Friday notified major changes in the investment norms for insurers that will help companies diversify risks and lower the strain on capital. For policy holders, it would also mean higher yield on investments.
“The new regulations provide more flexibility to insurers that will help generate better returns. The control framework has also been tightened as a result of which risk management will be more robust,” ICICI Prudential Life Insurance chief investment officer Puneet Nanda said. The control framework includes exposure limits that are more conservative than those applicable to mutual funds.
Currently, insurers can invest in an IPO of a private sector company if the minimum issue size is Rs 500 crore. The amount is significantly lower at Rs 100 crore for investment in IPOs of public sector companies. The regulator has now fixed a uniform minimum issue size of Rs 200 crore.
However, safeguards are in place to ensure that companies maintain their solvency margins and are able to pay claims to consumers. The investment in equity shares will have to comply with the prudential and exposure norms . Insurance companies can invest up to 10% of the face value of the company or 10% of their fund size as application money. In a choppy market, the changes will ensure that investments are made only in good quality paper,” CIO of a private insurance company said.
The investment basket for insurers has also been widened to include MBS-structured loan instruments where cash flows from home loans are pooled together and converted into marketable securities. MBS will qualify as investments under the housing sector, but subject to industry exposure norms. This means insurance companies can only invest up to 10% of their portfolio in MBS under the approved investment category.
They can also invest in bonds of SEZ developers, with Irda aligning the definition of infrastructure with that of the banking regulator. The regulations will make investments for life insurers, who have Rs 8,00,000 crore assets under management. The housing finance and infrastructure finance industry will also benefit from the regulations that allow for investments in securitised paper from these sectors.
The insurers’ investment in liquid mutual funds will fall under approved investments. However, the instruments should not be used as long-term investments. They can be a maximum 5% of their investment portfolio in liquid mutual funds. The fund size is Rs 50,000 crore for a life company and Rs 2,000 crore for a nonlife company. “The new norms provide more clarity on investments in mutual funds,” a senior insurance industry official said.
It has also aligned the exposure norms of public and private sector insurers. This means LIC can invest only 10% of its portfolio in a single company against 30% earlier. For the first time, exposure norms have been made mandatory for unit-linked insurance plans (Ulip), which are akin to mutual funds in design and have an added insurance cover. The move is aimed at mitigating the risks arising from investments in a few companies.
The investment norms for insurers are stipulated in the insurance legislation. Now, an overhaul has been undertaken without taking recourse to legislative amendments.
At present, life insurance companies are allowed to invest 50% of their investible assets in government and other approved securities. Additionally, they can invest at least 15% in infrastructure instruments that qualify as approved instruments.
They can also invest in fixed-income instruments such as mortgage-backed securities (MBS) and bonds floated by developers of SEZs. Insurers will get greater leeway in their investments in mutual funds and venture funds as well.
Insurance regulator Irda on Friday notified major changes in the investment norms for insurers that will help companies diversify risks and lower the strain on capital. For policy holders, it would also mean higher yield on investments.
“The new regulations provide more flexibility to insurers that will help generate better returns. The control framework has also been tightened as a result of which risk management will be more robust,” ICICI Prudential Life Insurance chief investment officer Puneet Nanda said. The control framework includes exposure limits that are more conservative than those applicable to mutual funds.
Currently, insurers can invest in an IPO of a private sector company if the minimum issue size is Rs 500 crore. The amount is significantly lower at Rs 100 crore for investment in IPOs of public sector companies. The regulator has now fixed a uniform minimum issue size of Rs 200 crore.
However, safeguards are in place to ensure that companies maintain their solvency margins and are able to pay claims to consumers. The investment in equity shares will have to comply with the prudential and exposure norms . Insurance companies can invest up to 10% of the face value of the company or 10% of their fund size as application money. In a choppy market, the changes will ensure that investments are made only in good quality paper,” CIO of a private insurance company said.
The investment basket for insurers has also been widened to include MBS-structured loan instruments where cash flows from home loans are pooled together and converted into marketable securities. MBS will qualify as investments under the housing sector, but subject to industry exposure norms. This means insurance companies can only invest up to 10% of their portfolio in MBS under the approved investment category.
They can also invest in bonds of SEZ developers, with Irda aligning the definition of infrastructure with that of the banking regulator. The regulations will make investments for life insurers, who have Rs 8,00,000 crore assets under management. The housing finance and infrastructure finance industry will also benefit from the regulations that allow for investments in securitised paper from these sectors.
The insurers’ investment in liquid mutual funds will fall under approved investments. However, the instruments should not be used as long-term investments. They can be a maximum 5% of their investment portfolio in liquid mutual funds. The fund size is Rs 50,000 crore for a life company and Rs 2,000 crore for a nonlife company. “The new norms provide more clarity on investments in mutual funds,” a senior insurance industry official said.
It has also aligned the exposure norms of public and private sector insurers. This means LIC can invest only 10% of its portfolio in a single company against 30% earlier. For the first time, exposure norms have been made mandatory for unit-linked insurance plans (Ulip), which are akin to mutual funds in design and have an added insurance cover. The move is aimed at mitigating the risks arising from investments in a few companies.
The investment norms for insurers are stipulated in the insurance legislation. Now, an overhaul has been undertaken without taking recourse to legislative amendments.
At present, life insurance companies are allowed to invest 50% of their investible assets in government and other approved securities. Additionally, they can invest at least 15% in infrastructure instruments that qualify as approved instruments.
Source: The Economic Times
HSBC TO MANAGE UP TO 33% OF EPFO MONEY
New Delhi: The Employees’ Provident Fund Organisation finalised the fund allocation to the four successful bidders in an order that is inversely proportional to their financial bids. The lowest bidder HSBC will get the highest amount to manage followed by ICICI Prudential AMC and then Reliance Capital AMC and State bank of India.
“We have taken a decision on who will manage which fund and accordingly the funds will be allocated,” said a government official close to the development. The annual incremental accretion amounts approximately to Rs 30,000 crore. It is divided into two funds — the pension money and the provident fund money.
The management has decided to give the full pension money amounting between Rs 9,000 crore and Rs 10,000 crore to HSBC, said the official. ICICI Prudential AMC will get 40 per cent of the balance Rs 20,000 crore in the provident fund and 30 per cent each will go to Reliance Capital AMC and State Bank of India.
The funds will be allocated to the fund houses by September 1, he added.
Earlier, HSBC offered to manage the fund at a fee of 0.0063 per cent followed by ICICI Prudential AMC’s quote of 0.0075 per cent. Reliance Capital and SBI quoted their bids at 0.01 per cent.
“We have taken a decision on who will manage which fund and accordingly the funds will be allocated,” said a government official close to the development. The annual incremental accretion amounts approximately to Rs 30,000 crore. It is divided into two funds — the pension money and the provident fund money.
The management has decided to give the full pension money amounting between Rs 9,000 crore and Rs 10,000 crore to HSBC, said the official. ICICI Prudential AMC will get 40 per cent of the balance Rs 20,000 crore in the provident fund and 30 per cent each will go to Reliance Capital AMC and State Bank of India.
The funds will be allocated to the fund houses by September 1, he added.
Earlier, HSBC offered to manage the fund at a fee of 0.0063 per cent followed by ICICI Prudential AMC’s quote of 0.0075 per cent. Reliance Capital and SBI quoted their bids at 0.01 per cent.
INSURANCE SCHEMES ARE NOT IN THE PINK OF HEALTH
New Delhi: How do you provide health care to handloom weavers, who occupy among the poorest segments in the unorganised sector? There are 6.5 million of them scattered across the country and are not always fixed in their occupation.
For the textile ministry that oversees their welfare, the answer was insurance cover — with a private company underwriting the risk. It was seen as a daring move when the scheme was launched three years ago, and has since become something of a trendsetter.
The Health Insurance Scheme for Weavers, launched in 2005, has a number of firsts to its credit. It provides medical assistance for a wide range of common ailments, which means Out Patient Department (OPD) is covered, and also allows beneficiaries to use alternative systems of medicine.
According to an official of ICICI Lombard, which put in the winning bid, the scheme is path-breaking and not just because of its geographical spread. Says Sanjay Pande, head of the insurance firm Financial Inclusion Solutions Group, which deals with government schemes: “There were so many firsts in the scheme that we were petrified.”
Progress, however, has been slow. So far 1.77 million weavers have been covered, but, given the challenges, it is “a hugely successful scheme”, claims Meenu Kumar, chief enforcement officer with the Handloom Development Commissioner’s office, who oversees the project. Among the tougher challenges: selling the scheme to the weavers and putting together a network of rural clinics and hospitals to meet the requirements of the scheme where 70 per cent of the treatment is cashless.
Because of malpractices and shortcomings, close to half of the 3,500 hospitals and clinics that were empanelled have been de-listed. A more controversial issue though is the amount of the insurance cover: beneficiaries are entitled to treatment amounting to just Rs 15,000, a pittance compared to what other government schemes offer. Textile ministry officials tend to bristle at such criticism, with one ministry functionary claiming that “the amount may seem very little but is in fact a big improvement for weavers”. A comparative analysis of health insurance schemes shows that the premium is by far the highest in the weavers’ scheme compared to the benefits offered.
Yeshasvini, the pioneering scheme launched in 2003 for cooperative farmers in Karnataka, charges just Rs 120 annually for insurance cover of Rs 1,00,000. Farmers are entitled to treatment for everyday problems in the rural areas, such as snake bites, electric shocks and farm accidents, and for sophisticated heart surgeries at the best cardiac hospitals in the state. S R Naik, CEO of the Yeshasvini Cooperative Farmers Healthcare Trust, claims with some justification that “there is no such scheme in the whole world”.
For one, it does not have an insurance company underwriting the risk and, for another, it does not use a single rupee from the premium for establishment costs. A small room with just a couple of tables and cupboards is the office of the trust where Naik, a retired official of the department of cooperatives, runs the show, backed by the machinery of the department and a third party administrator (TPA), Family Health Plan Ltd, which implements the scheme.
The TPA is paid a flat sum of Rs 50 lakh a year. But the fact is that the scheme cannot run without government support. The subsidy has been increasing sharply and this year the Karnataka government’s contribution (Rs 40 crore) has outstripped the premium collected so far (Rs 33.45 crore).
Numbers are crucial for health insurance schemes to remain viable. Pande maintains that ICICI Lombard is yet to make money on the weavers’ scheme but hopes to do so when it reaches critical mass. Fortunately for the company, it was able to clinch the subsequent tender (2007-09) also, and the higher volumes are expected to provide profits in the fourth year of operations.
Companies though are willing to pay a price for their learning experience. ICICI Lombard claims it lost heavily on other projects, such as the one for Punjab cooperative farmers (premium collected Rs 5.2 crore, claims paid Rs 28 crore) and in Jammu & Kashmir (premium income Rs 7.2 crore, pay-outs Rs 41 crore). Yet, it is, like other companies in the business of health insurance, jockeying hard for a piece of the action. Most of the contracts for government schemes are said to be hard-fought battles with very narrow differences in the bids.
Says R Sasi Ganapathy, chief operating officer of Star Health and Allied Insurance Co, which covers the risk for AP’s Rajiv Aarogyasri: “There are no big profits in this business just now. In Aarogyasri, we make very little money even though it’s the largest of its kind in the world. For us, it is a stepping stone because the experience is helping us to gain a foothold in other states.”
Star Health, India’s first stand-alone health insurance firm, has invested around Rs 14 crore in Aarogyasri. This may seem a large investment for a small firm but is small beer compared to the business it is expected to garner. The company has won the health insurance tender for three million state government employees in Tamil Nadu and is expecting more business from neighbouring states.
“The brand equity of Aarogyasri is very high and our costing will be tough for other companies to match,” asserts Ganapathy. All the same, it may not be a cakewalk in other states, where the lack of data could make risk-profiling difficult. The big battles will be over the labour ministry’s Rashtriya Swasthya Bima Yojana (RSBY). This is being put to tender on a pilot basis, and so far just three states have awarded contracts for some districts. There is big business in the offing as 16 other states are preparing to seek bids.
Source: Business Standard
For the textile ministry that oversees their welfare, the answer was insurance cover — with a private company underwriting the risk. It was seen as a daring move when the scheme was launched three years ago, and has since become something of a trendsetter.
The Health Insurance Scheme for Weavers, launched in 2005, has a number of firsts to its credit. It provides medical assistance for a wide range of common ailments, which means Out Patient Department (OPD) is covered, and also allows beneficiaries to use alternative systems of medicine.
According to an official of ICICI Lombard, which put in the winning bid, the scheme is path-breaking and not just because of its geographical spread. Says Sanjay Pande, head of the insurance firm Financial Inclusion Solutions Group, which deals with government schemes: “There were so many firsts in the scheme that we were petrified.”
Progress, however, has been slow. So far 1.77 million weavers have been covered, but, given the challenges, it is “a hugely successful scheme”, claims Meenu Kumar, chief enforcement officer with the Handloom Development Commissioner’s office, who oversees the project. Among the tougher challenges: selling the scheme to the weavers and putting together a network of rural clinics and hospitals to meet the requirements of the scheme where 70 per cent of the treatment is cashless.
Because of malpractices and shortcomings, close to half of the 3,500 hospitals and clinics that were empanelled have been de-listed. A more controversial issue though is the amount of the insurance cover: beneficiaries are entitled to treatment amounting to just Rs 15,000, a pittance compared to what other government schemes offer. Textile ministry officials tend to bristle at such criticism, with one ministry functionary claiming that “the amount may seem very little but is in fact a big improvement for weavers”. A comparative analysis of health insurance schemes shows that the premium is by far the highest in the weavers’ scheme compared to the benefits offered.
Yeshasvini, the pioneering scheme launched in 2003 for cooperative farmers in Karnataka, charges just Rs 120 annually for insurance cover of Rs 1,00,000. Farmers are entitled to treatment for everyday problems in the rural areas, such as snake bites, electric shocks and farm accidents, and for sophisticated heart surgeries at the best cardiac hospitals in the state. S R Naik, CEO of the Yeshasvini Cooperative Farmers Healthcare Trust, claims with some justification that “there is no such scheme in the whole world”.
For one, it does not have an insurance company underwriting the risk and, for another, it does not use a single rupee from the premium for establishment costs. A small room with just a couple of tables and cupboards is the office of the trust where Naik, a retired official of the department of cooperatives, runs the show, backed by the machinery of the department and a third party administrator (TPA), Family Health Plan Ltd, which implements the scheme.
The TPA is paid a flat sum of Rs 50 lakh a year. But the fact is that the scheme cannot run without government support. The subsidy has been increasing sharply and this year the Karnataka government’s contribution (Rs 40 crore) has outstripped the premium collected so far (Rs 33.45 crore).
Numbers are crucial for health insurance schemes to remain viable. Pande maintains that ICICI Lombard is yet to make money on the weavers’ scheme but hopes to do so when it reaches critical mass. Fortunately for the company, it was able to clinch the subsequent tender (2007-09) also, and the higher volumes are expected to provide profits in the fourth year of operations.
Companies though are willing to pay a price for their learning experience. ICICI Lombard claims it lost heavily on other projects, such as the one for Punjab cooperative farmers (premium collected Rs 5.2 crore, claims paid Rs 28 crore) and in Jammu & Kashmir (premium income Rs 7.2 crore, pay-outs Rs 41 crore). Yet, it is, like other companies in the business of health insurance, jockeying hard for a piece of the action. Most of the contracts for government schemes are said to be hard-fought battles with very narrow differences in the bids.
Says R Sasi Ganapathy, chief operating officer of Star Health and Allied Insurance Co, which covers the risk for AP’s Rajiv Aarogyasri: “There are no big profits in this business just now. In Aarogyasri, we make very little money even though it’s the largest of its kind in the world. For us, it is a stepping stone because the experience is helping us to gain a foothold in other states.”
Star Health, India’s first stand-alone health insurance firm, has invested around Rs 14 crore in Aarogyasri. This may seem a large investment for a small firm but is small beer compared to the business it is expected to garner. The company has won the health insurance tender for three million state government employees in Tamil Nadu and is expecting more business from neighbouring states.
“The brand equity of Aarogyasri is very high and our costing will be tough for other companies to match,” asserts Ganapathy. All the same, it may not be a cakewalk in other states, where the lack of data could make risk-profiling difficult. The big battles will be over the labour ministry’s Rashtriya Swasthya Bima Yojana (RSBY). This is being put to tender on a pilot basis, and so far just three states have awarded contracts for some districts. There is big business in the offing as 16 other states are preparing to seek bids.
Source: Business Standard
IDBI FORTIS BRANCH IN VIJAYAWADA
Hyderabad: IDBI Fortis Life Insurance Co Ltd has opened its second branch in Andhra Pradesh in Vijayawada in addition to its branch in the State Capital. It is also planning to open four more new branches in the State during the year, Ms R.M. Vishakha, President – Bancassurance, IDBI Fortis Life Insurance Co Ltd, said after inaugurating the branch, according to a release.
Source: The Hindu Business Line
MAKEOVER TIME AT BAJAJ ALLIANZ
Kolkata: Having suffered a severe downslide in growth in premium during the first quarter of the current fiscal, Bajaj Allianz Life Insurance is going in for a rejig of its operations.
It is devising a new range of unit-linked policies to compensate for the chunk of premium that came from a category of products that were discontinued since last year. It is also looking at controlling expenses.
Bajaj Allianz grew 13% in the first quarter of the current year, one of the lowest in the industry. Although the company has the second highest market share of 12.20% in the private life space, the growth has been low compared to most of the other players in the industry.
Kamesh Goyal, CEO, Bajaj Allianz told DNA Money, “Yes, there has been a low growth, mainly on account of some categories of businesses that we have almost stopped. We are not doing single premium and hardly doing group business plans. Moreover, we have discontinued the clutch of actuarially funded products. All this contributed 40-50% of the portfolio.”
Bajaj Allianz, which has one of the largest geographical spread in the industry, may not go in for much expansion in the current year. “The greatest challenge will be to manage costs while building a market share. Currently, we are well positioned, with costs comprising 14-15% of the gross written premium. But this has to be lower in a few years. This will be done by increasing market share and increasing productivity per employee,” Goyal said.
As part of its thrust on new policies, the insurer just introduced a new unit linked plan - Fortune Plus. The company also recently launched a family floater as part of its health insurance initiatives.
Commenting on the company’s growth, Rajeev Varma, analyst with Merrill Lynch said in a recent report, “Bajaj Life’s slowdown a worry. While a concern, it is too early to take a call. We expect the growth to bounce back as it scales up distribution in the coming months.”
Enam India Research analysts Punit Srivastava and Sumit Agarwal, point out, “The company has seen a moderating growth after a high growth phase. Market share of the company has seen substantial improvement.”
It is devising a new range of unit-linked policies to compensate for the chunk of premium that came from a category of products that were discontinued since last year. It is also looking at controlling expenses.
Bajaj Allianz grew 13% in the first quarter of the current year, one of the lowest in the industry. Although the company has the second highest market share of 12.20% in the private life space, the growth has been low compared to most of the other players in the industry.
Kamesh Goyal, CEO, Bajaj Allianz told DNA Money, “Yes, there has been a low growth, mainly on account of some categories of businesses that we have almost stopped. We are not doing single premium and hardly doing group business plans. Moreover, we have discontinued the clutch of actuarially funded products. All this contributed 40-50% of the portfolio.”
Bajaj Allianz, which has one of the largest geographical spread in the industry, may not go in for much expansion in the current year. “The greatest challenge will be to manage costs while building a market share. Currently, we are well positioned, with costs comprising 14-15% of the gross written premium. But this has to be lower in a few years. This will be done by increasing market share and increasing productivity per employee,” Goyal said.
As part of its thrust on new policies, the insurer just introduced a new unit linked plan - Fortune Plus. The company also recently launched a family floater as part of its health insurance initiatives.
Commenting on the company’s growth, Rajeev Varma, analyst with Merrill Lynch said in a recent report, “Bajaj Life’s slowdown a worry. While a concern, it is too early to take a call. We expect the growth to bounce back as it scales up distribution in the coming months.”
Enam India Research analysts Punit Srivastava and Sumit Agarwal, point out, “The company has seen a moderating growth after a high growth phase. Market share of the company has seen substantial improvement.”
Source: DNA
BUY YOURSELF A REAL INSURANCE COVER
Mumbai: A popular life insurance advertisement shows a husband asking his wife, “Mere bina jee paogi tum?” when she wants him to sign papers subscribing to a life insurance policy.
The wife, taken aback, replies: “Nahin.” “What will you do with all the money you will get from the life insurance in case I die?” he asks again. She then makes him understand that his signing the papers would guarantee their daughter’s education, his retirement and their overall future. “Sab guarantee matlab no tension aur tension ke bina aadmi zyaada jeeta hai na? Toh apni lambi umar ke liye... ...sign kar do,” she says. The husband signs the papers with an ironic remark: “Yaani ki lambi umar tak jhelna padega tumhe.”
The underlying theme in most life insurance advertisements is more or less similar.
As Tyler Cowen, an economist at George Mason university in the US, writes in the book, Discover your Inner Economist - Use Incentives to Fall in Love, Survive Your Next Meeting and Motivate Your Dentist, “Often, buying insurance is about investing in a story about who we are and what we care about; insurance salesmen have long recognised this fact and built their pitches around it.”
A recent insurance advertisement, which is very different from the typical life insurance advertisements, has the ‘thinking’ woman’s sex symbol, talking about people suffering from - K.I.L.B or kam insurance lene ki bimari. Never before has an insurance advertisement talked about the real problem so directly.
Most of us do not have the right level of life insurance cover. And who is to be blamed for this? To some extent our ignorance and to a large extent, life insurance companies and their agents, who are more interested in selling investment products masquerading as insurance as these fetch higher margins.
That explains why pure insurance covers (or term insurance as it is popularly known) forms a very minuscule percentage of the total amount of life insurance being sold in the country.
The first financial decision that any working professional who has a dependant family should take is get himself is a term insurance policy. In a term insurance policy, in case of death of the policyholder during the term of the policy, the nominee gets the ‘sum assured’ (or the life cover). But if the policyholder survives the period of the policy, he does not get anything.
One reason people don’t like term insurance is the fact that if they were to survive the term of the policy, they feel, the premium paid is wasted. However, what they don’t realise is that they are ‘insuring’ themselves by paying a premium and not investing. Term plans have the lowest premium among all the different insurance plans. And as we shall see, if the individual calculates the right amount of insurance cover and opts for it, the cheapest way to get it is by buying a term insurance cover.
So, how is the right amount of insurance cover calculated?
A thumb rule going is that the insurance cover of an individual should be at least 5-7 times his annual income. Going by this, if a 30-year-old earns Rs 6 lakh per annum, he should have an insurance cover of Rs 42 lakh. But this approach, though better than having no insurance cover at all, is not the only or the best way to approach the problem.
Another way to calculate the right amount of insurance cover is the human life approach. Under this, someone earning Rs 6 lakh per year is taken to be earning Rs 50,000 per month. Assume that his own expenditure per month is at Rs 10,000. The remaining Rs 40,000 goes towards meeting the family expenditure and savings. If something were to happen to him, his family, which is dependant on him, would need Rs 40,000 per month to maintain a similar standard of living. Now, to earn an income of Rs 40,000 per month at a rate of return of 8% per year, he would require an investment of Rs 60 lakh, which is the amount of insurance cover he should have. Thus, had he followed the thumb rule, he would have been underinsured.
The human life approach to calculating the amount of insurance cover is also not perfect. It does not take into account the rate of inflation. A term insurance cover of Rs 60 lakh for a period of 35 years for a 30-year-old would involve a premium of around Rs 23,000 per year. On the other hand, an endowment policy with a similar cover would require a premium payment of nearly Rs 1.6 lakh per annum, which is seven times that and clearly beyond the means of someone who earns Rs 6 lakh per year.
The other thing to keep in mind is to get a term cover for as long as possible. If in the example taken above the individual had taken a policy for 25 years, he would have needed another policy once this policy expired. At 55, he would have found it very difficult to get an insurance cover and even if he did, he would have to pay an exorbitant premium for it.
The wife, taken aback, replies: “Nahin.” “What will you do with all the money you will get from the life insurance in case I die?” he asks again. She then makes him understand that his signing the papers would guarantee their daughter’s education, his retirement and their overall future. “Sab guarantee matlab no tension aur tension ke bina aadmi zyaada jeeta hai na? Toh apni lambi umar ke liye... ...sign kar do,” she says. The husband signs the papers with an ironic remark: “Yaani ki lambi umar tak jhelna padega tumhe.”
The underlying theme in most life insurance advertisements is more or less similar.
As Tyler Cowen, an economist at George Mason university in the US, writes in the book, Discover your Inner Economist - Use Incentives to Fall in Love, Survive Your Next Meeting and Motivate Your Dentist, “Often, buying insurance is about investing in a story about who we are and what we care about; insurance salesmen have long recognised this fact and built their pitches around it.”
A recent insurance advertisement, which is very different from the typical life insurance advertisements, has the ‘thinking’ woman’s sex symbol, talking about people suffering from - K.I.L.B or kam insurance lene ki bimari. Never before has an insurance advertisement talked about the real problem so directly.
Most of us do not have the right level of life insurance cover. And who is to be blamed for this? To some extent our ignorance and to a large extent, life insurance companies and their agents, who are more interested in selling investment products masquerading as insurance as these fetch higher margins.
That explains why pure insurance covers (or term insurance as it is popularly known) forms a very minuscule percentage of the total amount of life insurance being sold in the country.
The first financial decision that any working professional who has a dependant family should take is get himself is a term insurance policy. In a term insurance policy, in case of death of the policyholder during the term of the policy, the nominee gets the ‘sum assured’ (or the life cover). But if the policyholder survives the period of the policy, he does not get anything.
One reason people don’t like term insurance is the fact that if they were to survive the term of the policy, they feel, the premium paid is wasted. However, what they don’t realise is that they are ‘insuring’ themselves by paying a premium and not investing. Term plans have the lowest premium among all the different insurance plans. And as we shall see, if the individual calculates the right amount of insurance cover and opts for it, the cheapest way to get it is by buying a term insurance cover.
So, how is the right amount of insurance cover calculated?
A thumb rule going is that the insurance cover of an individual should be at least 5-7 times his annual income. Going by this, if a 30-year-old earns Rs 6 lakh per annum, he should have an insurance cover of Rs 42 lakh. But this approach, though better than having no insurance cover at all, is not the only or the best way to approach the problem.
Another way to calculate the right amount of insurance cover is the human life approach. Under this, someone earning Rs 6 lakh per year is taken to be earning Rs 50,000 per month. Assume that his own expenditure per month is at Rs 10,000. The remaining Rs 40,000 goes towards meeting the family expenditure and savings. If something were to happen to him, his family, which is dependant on him, would need Rs 40,000 per month to maintain a similar standard of living. Now, to earn an income of Rs 40,000 per month at a rate of return of 8% per year, he would require an investment of Rs 60 lakh, which is the amount of insurance cover he should have. Thus, had he followed the thumb rule, he would have been underinsured.
The human life approach to calculating the amount of insurance cover is also not perfect. It does not take into account the rate of inflation. A term insurance cover of Rs 60 lakh for a period of 35 years for a 30-year-old would involve a premium of around Rs 23,000 per year. On the other hand, an endowment policy with a similar cover would require a premium payment of nearly Rs 1.6 lakh per annum, which is seven times that and clearly beyond the means of someone who earns Rs 6 lakh per year.
The other thing to keep in mind is to get a term cover for as long as possible. If in the example taken above the individual had taken a policy for 25 years, he would have needed another policy once this policy expired. At 55, he would have found it very difficult to get an insurance cover and even if he did, he would have to pay an exorbitant premium for it.
Source: DNA
HIGH INSURANCE LOADING DESPITE IRDA DIRECTIVE
How effective is the Insurance Regulatory and Development Authority (IRDA) directive over loading (increase) of premium during health insurance policy renewal? Despite the March 2008 instructions to public sector general insurance companies to cap loading at 75% of previous year's rates and to set up a grievance cell for the category, complaints from senior citizens continue to pour in. A high-ranking insurance official, who does not wish to be identified, says "these half-hearted measures don't work" as the regulation was issued more in the form of an advisory than a notification. In March again, P N Ojha of Mumbai-who has held a family health policy with New India Assurance Company for 19 years without making a single claim-was in for a shock when his policy went up for renewal. He was asked to pay a premium of Rs 29,401, which amounted to an over 100% loading over the previous year's Rs 14,485. New India Assurance CMD B Chakrabarti, though, says this lapse could be the result of "some operational problem" and asks the consumer to write in to get it rectified. Ojha's grouse, though, does not end here. "I received the renewal letter just days before the policy's expiry, so there was no room for discussion or negotiation. Since I am 74, I had to accept the terms. If I were to approach another insurer, they would not have accepted my application." (The insurance official says insurance companies are "very careful" with applicants who have crossed 65 years of age. An industry observer had earlier noted in this column that insurance agents are also discouraged from bringing in senior citizens). Kirti Bhatt, director, legal, at Ahmedabad's Consumer Education & Research Centre, thus emphasises that seniors cannot afford to remain without a policy. He advises them to pay the premium and only then dispute the loading. "If there is a break, an insurer will consider the new application as a fresh policy and exclude existing diseases under the pre-existing diseases clause." That is, if the insurer accepts the application in the first place. Ojha, who paid the renewal premium, has a bigger grouse with IRDA itself. He had written to the regulator's cell, which attends to senior citizens' grievances, with his case details. "Four months passed without a reply." When contacted, the new IRDA chairman Jandhyala Harinarayan asks the consumer to write in again. "We are here to help out," he assures. In another interesting twist to this case, a few days ago, Ojha received an envelope from the insurer. It contained a premium refund intimation voucher of Rs 4,028, saying "it is hereby agreed and decided to refund excess premium to insured persons above 60 years who have renewed their policies between August 16, 2007 and April 9, 2008". Ojha adds that even with this discount, the loading on his premium remains slightly above 75%. Meanwhile, K S (Kaka) Samant, general secretary at the General Insurance Pensioners' Association (western zone), advises senior citizens, whose complaints continue to languish at the IRDA, to approach the ministry of finance.
Source: The Times of India
Hyderabad: The Insurance Regulatory and Development Authority (IRDA) has constituted a committee to examine the requirements for International Financial Reporting Standards (IFRS) compliance by the insurance industry.
The 12-member panel is headed by Dr R. Kannan, Member (Actuary), IRDA. It would examine the requirements of IFRS, current availability of various requirements including accounting standards, identify gaps and suggest various measures required to fill the gaps to enable the industry move towards IFRS compliance by 2011. The panel would submit its report by March 31, 2009.
The Institute of Chartered Accountants of India had earlier announced that the accounting practice should move towards IFRS by 2011. “The accelerated globalisation of business and the internationalisation of capital markets have lent greater urgency to the drive towards more standardised reporting system. One of the important developments in the financial sector is the preparation for moving towards IFRS compliance,” IRDA said in a release.
The 12-member panel is headed by Dr R. Kannan, Member (Actuary), IRDA. It would examine the requirements of IFRS, current availability of various requirements including accounting standards, identify gaps and suggest various measures required to fill the gaps to enable the industry move towards IFRS compliance by 2011. The panel would submit its report by March 31, 2009.
The Institute of Chartered Accountants of India had earlier announced that the accounting practice should move towards IFRS by 2011. “The accelerated globalisation of business and the internationalisation of capital markets have lent greater urgency to the drive towards more standardised reporting system. One of the important developments in the financial sector is the preparation for moving towards IFRS compliance,” IRDA said in a release.
Source: The Hindu Business Line
IRDA LOOKS AT BANKING NORMS TO CLASSIFY INVESTMENT PORTFOLIOS
New Delhi: The insurance regulator will set up a committee to draw up guidelines to classify the investment portfolios of insurance companies, a move that could require them to value their investments and make necessary provisions according to prevailing market conditions.
Life insurers are allowed to link policyholders’ funds to market prices, such as in the case of unit-linked policies (Ulips), but they can’t do so with the funds they are mandated by law to maintain to meet potential liabilities.
Currently, they invest such funds in debt securities and record the investment at book value, or the price at which they were bought. This method does not require the firms to provide for the loss if the value of investment falls, or makes a profit if the market prices rise.
The Insurance Regulatory and Development Authority, or Irda, plans to implement the norms in line with those for banks. The Reserve Bank of India, allows classification of investments in three categories—held to maturity (HTM), held for trading (HFT) and available for sale (AFS).
Under HTM, debt securities are held till maturity. These are recorded at the initial cost and are not affected by market movements. HFT securities are subjected to active trading for the purpose of profit taking, while AFS securities are not traded or held till maturity but are recorded at market value.
“The proposal for classifying investments of insurance companies into different components would help in developing well-understood guidelines of valuation and provisioning requirements for the investments made by the insurers,” said C.R. Muralidharan, the regulator’s member for finance.
Irda usually requires the government to effect changes in insurance laws through Parliament. In this case, Muralidharan said, the regulatory and operational issues involved would be examined shortly through Irda’s standing committee on accounting issues, which could meet sometime in early September. “Regulatory changes required would be examined only thereafter.” Irda is yet to decide on the composition of the panel that would work on the guidelines.
Last week, in the absence of any classification guidelines, Irda deferred its decision that required all companies to value their debt securities, set aside for the purpose of com putation of solvency margins, at the lower of the acquisition cost and the market value.
Currently, the entire investment portfolio of non-life companies is treated as HTM, said Sanjeev Chanana, director and general manager, Oriental Insurance Co. Ltd.
“The classification of investment portfolio into held to maturity, held for trading and available for sale categories will have far-reaching implications for the insurance companies,” he said. “If the classification comes into effect, in case of debt portfolio, there will be greater incentive to invest in tradeable securities.
Thus the insurance companies will be able to earn a better yield from their debt portfolio—not only from interest income but also from sale of such securities,” he added.
“As far as the tax implication goes, in the first year when this classification comes into effect due to mark to market, we will need to pay about 35% tax at the current tax levels. Further we will be taxed for short-term capital gain.” Mark to market is a term to account for investments based on prevailing market prices.
Under this, companies will have to record a mark-to-market gain or loss depending on the changes in the market value of their investments.
Life insurers are allowed to link policyholders’ funds to market prices, such as in the case of unit-linked policies (Ulips), but they can’t do so with the funds they are mandated by law to maintain to meet potential liabilities.
Currently, they invest such funds in debt securities and record the investment at book value, or the price at which they were bought. This method does not require the firms to provide for the loss if the value of investment falls, or makes a profit if the market prices rise.
The Insurance Regulatory and Development Authority, or Irda, plans to implement the norms in line with those for banks. The Reserve Bank of India, allows classification of investments in three categories—held to maturity (HTM), held for trading (HFT) and available for sale (AFS).
Under HTM, debt securities are held till maturity. These are recorded at the initial cost and are not affected by market movements. HFT securities are subjected to active trading for the purpose of profit taking, while AFS securities are not traded or held till maturity but are recorded at market value.
“The proposal for classifying investments of insurance companies into different components would help in developing well-understood guidelines of valuation and provisioning requirements for the investments made by the insurers,” said C.R. Muralidharan, the regulator’s member for finance.
Irda usually requires the government to effect changes in insurance laws through Parliament. In this case, Muralidharan said, the regulatory and operational issues involved would be examined shortly through Irda’s standing committee on accounting issues, which could meet sometime in early September. “Regulatory changes required would be examined only thereafter.” Irda is yet to decide on the composition of the panel that would work on the guidelines.
Last week, in the absence of any classification guidelines, Irda deferred its decision that required all companies to value their debt securities, set aside for the purpose of com putation of solvency margins, at the lower of the acquisition cost and the market value.
Currently, the entire investment portfolio of non-life companies is treated as HTM, said Sanjeev Chanana, director and general manager, Oriental Insurance Co. Ltd.
“The classification of investment portfolio into held to maturity, held for trading and available for sale categories will have far-reaching implications for the insurance companies,” he said. “If the classification comes into effect, in case of debt portfolio, there will be greater incentive to invest in tradeable securities.
Thus the insurance companies will be able to earn a better yield from their debt portfolio—not only from interest income but also from sale of such securities,” he added.
“As far as the tax implication goes, in the first year when this classification comes into effect due to mark to market, we will need to pay about 35% tax at the current tax levels. Further we will be taxed for short-term capital gain.” Mark to market is a term to account for investments based on prevailing market prices.
Under this, companies will have to record a mark-to-market gain or loss depending on the changes in the market value of their investments.
Source: Mint
Thursday, August 21, 2008
LONG-TERM REVENUE VISIBILITY SEEN
Bartronics’ Rs 400-crore contract win from the Employees State Insurance Corporation (ESIC) enhances its strong domestic presence; India already contributes over 50 per cent of the company’s revenues.
The size of the contract is approximately 1.5 times its 2007-08 revenues and adds to long-term revenue visibility. Bartronics derives around 45 per cent of its revenues from the smart cards (cards with chips embedded such as credit card, PAN card etc) business and this order will substantially increase this proportion.
The company has its own manufacturing facility to produce smart cards, which was recently enhanced to a capacity of 80 million cards. Such deal wins would mean that the company would be able to achieve near 100 per cent utilisation from 65 per cent levels sooner.
The present contract involves providing smart cards across 609 districts in the country under the Rashtriya Swasthya Bhima Yojna. The revenue inflow is likely to be over several years from this contract.
This deal may pave the way for Bartronics to win more complex and larger projects from the Government, which has proposals to issue national identity smart cards. The company is already doing pilot runs on this project.
The size of the contract is approximately 1.5 times its 2007-08 revenues and adds to long-term revenue visibility. Bartronics derives around 45 per cent of its revenues from the smart cards (cards with chips embedded such as credit card, PAN card etc) business and this order will substantially increase this proportion.
The company has its own manufacturing facility to produce smart cards, which was recently enhanced to a capacity of 80 million cards. Such deal wins would mean that the company would be able to achieve near 100 per cent utilisation from 65 per cent levels sooner.
The present contract involves providing smart cards across 609 districts in the country under the Rashtriya Swasthya Bhima Yojna. The revenue inflow is likely to be over several years from this contract.
This deal may pave the way for Bartronics to win more complex and larger projects from the Government, which has proposals to issue national identity smart cards. The company is already doing pilot runs on this project.
Source: The Hindu Business Line
‘WE LEARNT A LOT FROM OUR VENDORS’: CATHRYN RILEY, AVIVA GLOBAL SERVICES CHAIRPERSON
Earlier this month, in one of the more complex transactions concluded in recent times, UK insurance major Aviva that was running some of its insurance and back-office processes through build-operate-transfer contracts with three vendors in India, sold the entire operations to WNS Global Services for a consideration of $228 million. In addition, WNS also received a commitment from Aviva that is expected to generate $1 billion in revenues over a 100-month period.
In an interview Aviva Global Services chairperson and Norwich Union Life COO, Cathryn Riley, talks about why Aviva decided to sell the operations rather than run them itself, and its future plans with WNS.
You initially transferred two of your facilities, one in Sri Lanka from WNS and one in Bangalore from 24x7. Why did you decide to sell instead of transferring the rest?
Let me go back in time to when we first set up in India about five years back under the build-operate-transfer model. The model enabled us to have a low-risk rapid entry and also benefit from the expertise of established partners over here. That has been a very successful venture but a lot has changed both in our market and in the BPO (business process outsourcing) market since. Over the last five years, we have seen the benefits of a hybrid-operating model because some facilities were with our partners and some, we had transferred. We felt it would be right to do a strategic review of the best model we should have for the next 5-10 years.
Was the review also part of the original plan or did something trigger it?
It came about later. Any sensible company takes the opportunity to step back and think about what the strategy should be after a period of five years. It’s a good, sensible business practice. When we started out on our journey, we had an open mind. We didn’t start the strategic review with the intention of doing this.
There have been a couple of studies talking about the high costs of captives and captives not being as efficient as third-party operations. Did some of these factors influence your review?
As part of the review, we looked at what was going on in the marketplace with our competitors — we looked at costs but not only at that. This wasn’t only about whether we could run this as efficiently as WNS, there were other factors as well. But I think it’s fair to say we’ve seen the benefit WNS’ expertise. They’ve been helping us over the last few years to run an efficient operation and help us manage our processes — that was one of the considerations. There were others: financial, customers, people...
What are the kind of services you’ve been doing from India and what will it be going ahead?
They range from finance and accounting, actuarial services, customer service, claims, and back office administration. We don’t intend changing that. We are looking to develop Bangalore as a centre of excellence for liability claims and Pune for motor claims. We’ll see more of a trend towards centres of excellence in line with what is happening in UK. The sale to WNS in no way changes our commitment to offshoring. Signing a 100-month deal (with WNS), in fact, underlines our commitment.
Do you expect outsourcing in insurance to pick up? Compared to the rest of banking and financial services, insurance is still small.
Do you expect outsourcing in insurance to pick up? Compared to the rest of banking and financial services, insurance is still small.
I don’t think insurance is different from any other industry. You’re right; banking has been a hit, which is fairly typical. Many of our UK competitors are now here. But one of the things that’s differentiated us is the way we’ve jointly managed our relationships. From day one, we’ve had very strong partnerships, whereas some other companies have been more hands off. It’s not just about coming here but how we’ve operated that’s given us competitive advantage. That has enabled our partners to understand what is it we want, what our strategic imperatives are, and to be able to keep pace with processes, practices, and changes at all levels. That marks us out from the competition.
Has there been a rise in the backlash against outsourcing in the US or the UK?
There has been some backlash over call centre operations, not so much in other areas. We as a company have been in the forefront of offshoring. We’ve been very public about our offshoring and very proud of it. The fact is, service speaks for itself. We continue to seek and listen to our customers’ feedback and work accordingly but I think the perception of the noise in UK is greater than what it really is.
What is the amount of offshoring you’ve done in the last five years?
We have around 6,000 employees here. The market was very different then from what it is now. It was a relatively immature market. We weren’t able to come in and say, this vendor is the best. We selected vendors we felt we could work in a partnership with to build something. No one vendor had one particular process. It was a low risk model for us and we were able to learn a lot from each of those of vendors. Now we’ve got something that we’re very proud of and something we intend to build on in the future.
Did you look at the option of outsourcing BPO work to your IT services vendors, Wipro and Tata Consultancy Services?
We looked into it. But we were more comfortable with the existing arrangement. We had a very successful model and we wanted to build on it. I know that is the trend to combine business outsourcing with IT, but it is more the trend in thought than in practice. I’m not sure how successful that’s been yet. But it’s something we’re aware of and which we’ll keep in mind.
Source: Shivapriya/P P Thimmaya, The Economic Times
ICICI PRU EXTENDS TIE UP
Mumbai: ICICI Prudential Life has extended its corporate agency tie up with the Muthoot Group in 6 additional States for the distribution of its insurance products. ICICI Prudential Life has partnered with the Muthoot Group for the past six years in Kerala, said a press release. The partnership with the Kerala- based NBFC will now be extended to States such as Delhi and NCR, Rajasthan, West Bengal, Punjab, Gujarat and Maharashtra where it has a strong presence.
Source: The Hindu Business Line
Source: The Hindu Business Line
BAJAJ ALLIANZ LAUNCHES 'BAJAJ ALLIANZ FORTUNE PLUS'
Mumbai: Private sector life insurance company, Bajaj Allianz Life Insurance, has announced the launch of its wealth-creating ULIP, 'Bajaj Allianz Fortune Plus'. The product would be the first ULIP to offer Zero Surrender Charges and high allocation from day one, a press release issued here said. It would be available at affordable premiums to masses starting at Rs 15,000 per annum only. "This is the best investment plan for the Indian masses, it provides unmatched flexibility, high allocation, zero surrender charges and unlimited top-ups," Allianz's Country Manager and CEO, Bajaj Allianz Life Insurance, Kamesh Goyal," said. \ The product also offers Asset Allocation Fund wherein Bajaj Allianz Life Insurers professional fund managers hedge market instruments to maximise returns. It is available for three terms of 10, 15 and 20 years. Bajaj Allianz Life Insurance has a presence in over 950 towns and has sold over 7.5 million policies.
Source: PTI, The Economic Times, The Financial Express
Source: PTI, The Economic Times, The Financial Express
COURT PULLS UP INSURANCE FIRMS FOR CHALLENGING COMPENSATION ORDERS
New Delhi: The Delhi High Court on Monday criticised insurance companies that frequently challenge lower court orders of accident compensation and said they were after the victim's blood. Dismissing a petition of Oriental Insurance Company, Justice V B Gupta said the provisions in the Motor Accident Claim Tribunal Act (MACT) were brought in to grant relief to the victim by way of compensation and the insurance companies should not avoid payment of compensation by raising all possible pleas and thereby defeating the object of such provisions. The court also slapped a fine of Rs 10,000 on the company. "Instead of letting the poor victim of the road accident live in peace and have little solace due to the meagre amount of compensation, which has been awarded to him after a protracted trial, the insurance company is after his blood," it observed. It also directed the company to deposit the fine with the court's legal services committee within four weeks. Oriental Insurance had moved an appeal against the MACT order, which awarded compensation to Santosh Kumar Chauhan who was hit by a cab insured with the company. Chauhan, who was severely injured in the accident and suffered permanent disability, claimed Rs 300,000 as compensation. The company in its defence contended that at the time of the incident the vehicle driver was not possessing a valid driving license. But the court rejected the company's submission and said the Tribunal had rightly held that the offending vehicle was being driven under a valid and effective driving licence by the driver and, therefore, the appellant had been rightly held liable to pay the awarded amount.
Source: Hindustan Times
Source: Hindustan Times
MORE PRODUCERS BREATHE EASY WITH FILM INSURANCE PTISee this story in: The
Mumbai: The film insurance business in the country is gathering momentum and may soon become a good revenue-stream for insurance players, industry officials said.
The demand for risk-cover against unanticipated incidents has led film producers to opt for mechanisms that provide protection to their investments, they said. “Films fall into the broad category of event management and hence like any other event, it can also be insured,” Mr K.N. Bhandari, Honorary Director, Centre of Insurance Studies and Research, National Law University, Jodhpur, told PTI here.
Attributing the growth of the business to an increasing number of corporate entities like Adlabs, Sony Pictures and UTV, amongst others, entering the realm of film-making, Mr Bhandari said, “These corporates prefer to be insured against any unforeseen or unfortunate incidents and this is becoming a big driver of growth”.
But the fall-out of this growth is that as the film insurance business picks up steam, in the next few years, so would institutional financing of film-making. “As film insurance gains in popularity, it will also encourage and promote institutional financing of film-making,” Mr Bhandari said.
Source: PTI, The Hindu Business Line
The demand for risk-cover against unanticipated incidents has led film producers to opt for mechanisms that provide protection to their investments, they said. “Films fall into the broad category of event management and hence like any other event, it can also be insured,” Mr K.N. Bhandari, Honorary Director, Centre of Insurance Studies and Research, National Law University, Jodhpur, told PTI here.
Attributing the growth of the business to an increasing number of corporate entities like Adlabs, Sony Pictures and UTV, amongst others, entering the realm of film-making, Mr Bhandari said, “These corporates prefer to be insured against any unforeseen or unfortunate incidents and this is becoming a big driver of growth”.
But the fall-out of this growth is that as the film insurance business picks up steam, in the next few years, so would institutional financing of film-making. “As film insurance gains in popularity, it will also encourage and promote institutional financing of film-making,” Mr Bhandari said.
Source: PTI, The Hindu Business Line
Wednesday, August 20, 2008
K N BHANDARI TO RESIGN FROM GIC POST
Mumbai: K N Bhandari, the secretary general of the General Insurance Council (GIC), a self-regulatory body for non-life insurers, has decided to step down, following sharp differences between private and public sector players on a host of issues.
The differences, which were across the spectrum, were showing no signs of receding. “There are differences over administered pricing, market wordings and health insurance, which were hampering the functioning of the council,” a source close to the development said.
Bhandari announced his decision to step down as the secretary general after a council meeting in Hyderabad last week. The meeting, which was convened mainly to discuss a new health insurance cover, which will be portable across companies, ended inconclusive.
The former New India Assurance chairman, however, tried to play down the issue and said: “I want some time for introspection and I have yet to decide on what I propose to do.”
The differences, which were across the spectrum, were showing no signs of receding. “There are differences over administered pricing, market wordings and health insurance, which were hampering the functioning of the council,” a source close to the development said.
Bhandari announced his decision to step down as the secretary general after a council meeting in Hyderabad last week. The meeting, which was convened mainly to discuss a new health insurance cover, which will be portable across companies, ended inconclusive.
The former New India Assurance chairman, however, tried to play down the issue and said: “I want some time for introspection and I have yet to decide on what I propose to do.”
Source: Business Standard
PSU GENERAL INSURERS MAY BE ALLOWED TO TAP MARKETS
Kolkata: A fresh set of reforms for unlocking the value of the nationalised insurance companies may be on the way, with the government considering changes in the General Insurance Business (Nationalisation) Act (GIBNA).
If this happens, the four nationalised companies — New India Assurance, National Insurance Company, Oriental Insurance Company and United India Insurance — may be allowed to tap the market for additional funds.
Although the four nationalised companies command 60% of the business share (this has come down over the years with private players eating into the market share), a deregulated tariff environment and fierce competition will eventually point to the need for larger funds in the future.
Industry sources said that subject to amendments in GIBNA, insurers might get to raise other forms of capital, expand their branch network and enter into various strategic partnerships.
At present, the government holds the entire paid-up capital of the companies, amounting to Rs 550 crore. Even a small dilution of 5-6% could bring about sufficient capital.An official at one PSU general insurer told DNA Money that it is a tough market and management expenses are on the higher side. “But we have family silver in the form of huge reserves. If changes in the Act are brought about, a lot can be done with shareholders’ funds. Right now we cannot use shareholders’ funds for various reasons.”
One source told DNA Money that “much would also depend on the profitability and performance of the company.” Three consecutive years of underwriting profits may also be one of the conditions for a public offering, the source said.
The four PSU general insurers and 10 private players have been in a fierce fight for market share, after the detariff regime came into effect, which saw a sharp drop in premiums as the companies fought for market share.
Last year, the insurance regulator (Irda) asked general insurance companies to maintain a solvency ratio of 150% and report their position every quarter. The general insurance industry which had four nationalised and ten private players have been extremely competitive, especially with the detariff regime or market driven rates being introduced since January 2007. Further deregulation is expected in the coming months.
And while increasing the cap on foreign investment in the sector remains a crucial issue for the government, a small dilution of stake in the nationalised majors could change the dynamics of market.
If this happens, the four nationalised companies — New India Assurance, National Insurance Company, Oriental Insurance Company and United India Insurance — may be allowed to tap the market for additional funds.
Although the four nationalised companies command 60% of the business share (this has come down over the years with private players eating into the market share), a deregulated tariff environment and fierce competition will eventually point to the need for larger funds in the future.
Industry sources said that subject to amendments in GIBNA, insurers might get to raise other forms of capital, expand their branch network and enter into various strategic partnerships.
At present, the government holds the entire paid-up capital of the companies, amounting to Rs 550 crore. Even a small dilution of 5-6% could bring about sufficient capital.An official at one PSU general insurer told DNA Money that it is a tough market and management expenses are on the higher side. “But we have family silver in the form of huge reserves. If changes in the Act are brought about, a lot can be done with shareholders’ funds. Right now we cannot use shareholders’ funds for various reasons.”
One source told DNA Money that “much would also depend on the profitability and performance of the company.” Three consecutive years of underwriting profits may also be one of the conditions for a public offering, the source said.
The four PSU general insurers and 10 private players have been in a fierce fight for market share, after the detariff regime came into effect, which saw a sharp drop in premiums as the companies fought for market share.
Last year, the insurance regulator (Irda) asked general insurance companies to maintain a solvency ratio of 150% and report their position every quarter. The general insurance industry which had four nationalised and ten private players have been extremely competitive, especially with the detariff regime or market driven rates being introduced since January 2007. Further deregulation is expected in the coming months.
And while increasing the cap on foreign investment in the sector remains a crucial issue for the government, a small dilution of stake in the nationalised majors could change the dynamics of market.
Source: DNA
LIFE BUSINESS EMBEDDED VALUE ADDITION TO BE BUZZWORD: TORSTEN OLETZKY, CEO, ERGO GROUP
Ergo Insurance, a part of the Munich Re Group, has taken a unique approach to tap the Indian market. The group has three distinct partnerships in India for life, non-life and health, where it has partnered the Hero group, HDFC and Apollo Hospitals, respectively. The Ergo group was formed, following consolidation of various insurance companies active in life, health, property and casualty pensions and legal expenses insurance. The companies were consolidated under Munich Re. The Ergo group is now headed by CEO Torsten Oletzky. At 42, Mr Oletzky is among the youngest heads of an insurance multinational. In an interview with ET, Mr Oletzky speaks of group’s ambition to be among top five in India. But at the same time, he says that he will be uncomfortable with scaling up overnight and recruiting one lakh agents in the first year. Why have you tied up with different partners for life, non-life and health? Won’t this lead to brand confusion?
DKV is a specialist in health. So, we have approached a specialist organisation — Apollo. But we do not use the Ergo brand in the Apollo DKV venture. The HDFC joint venture gives us the opportunity to engage in a business which is already established and by bringing in the Ergo experience, we can exploit a lot of growth opportunities in non-life. We also use the Ergo brand in the life venture with Hero. Both HDFC and Hero are excellent brands in the Indian market and they combine well with the Ergo brand. The Ergo brand stands for very solid business, high quality distribution and high quality processes and we have looked for partners with the same set of values and business policies. We look for partners who we believe will fit with our management values, because we want to stay together for a long-time. It is not so important which industry they come from.
What feedback have you got from the government on the increase in foreign direct investment in insurance?
We just had a short meeting with the government where we discussed the issue and there was no definite news. But I had the impression that sooner or later this would happen. We have made our business plans with our partners based on the current situation and we will follow the business plans. If there is any change, we will be happy, but our business plans are not dependent on it.
Are there any plans to get into the asset management business in India as well?
We have bundled our asset management activity with Munich Re in a company called MEAG (Munich Ergo Asset Management Group) and we are doing most of our global asset management through this company. MEAG also works for external clients, but its main focus is to perform the asset management function for the insurance operations of Ergo and Munich Re. So, if our insurance business needs the services of an asset management company for the purpose of unit-linked or other situations, it can be provided by MEAG. While the asset management services are not exclusive to group companies, it is not a primary focus of business development.
Many European insurance companies are cutting costs by outsourcing jobs to India. Do you plan to do the same?
Insurance companies are cutting cost, because customers want a good price for their products. We are definitely as strict as our competitors in managing costs. But we have not come to the point where we feel that outsourcing to India will improve our cost in the core European business. Our business is very language-dependent and since our main operations are currently not based in English-speaking markets, we are predominantly operating in German, Polish and Turkish language, among others. So, it is not as easy for us to outsource as it is for companies in the UK.
When do you expect Indian operations to break even?
The ‘problem’ with break-even from an accounting profit point is that it gets delayed when the growth is strong. At the same time, while you are not breaking even in accounting terms, you are building up organisation value in terms of embedded value and making economic profit. As long as we grow, our embedded value in our life business, we can live with a situation where accounting profits take longer to be achieved. Obviously, we want to become a ‘top five’ player over time. But I would rather go a bit slower on topline growth and have high quality in our distribution, organisation and processes which is sustainable so that customers keep coming back.
What are the growth drivers that will help Ergo achieve its five-year growth target?
We come out of a strong German business where we have a 7-8% market share. We will be able to grow our German portfolio in line with the German market, but the German market is relatively mature and is only growing at around 2%. When you look at the rest of Europe, there are some market with higher growth rates in Central and Eastern Europe. This is an important market for us as well. We have a strong presence in Poland. We also have a strong presence in the Baltics and we are entering other CEE countries through bancassurance with Unicredito — one of the leading banks in Europe. We are in Greece and Turkey. But India and China are probably the regions which will see, by far, the highest growth in the next decade. If you obviously want to take part in this growth, you will have to be there.
Multinationals such as AIG, Allianz and Axa have been promoting their brand globally. Would Ergo be doing the same?
We have a slightly different home market situation than Allianz and Axa. We were founded 10 years ago, out of four companies with very distinctive and different strengths and brands. We have a speciality health organisation with DKV. We have a speciality legal protection insurance with DAS and we have two strong multi-line brands with Victoria and Hamburg Mannheimer. Since these are well-known brands to German customers, we decided not to give up these brands for our German customers. Whenever we go to international markets, we try to use the Ergo brand in situations where we are on our own, or with partners. We have leveraged the Ergo brand in Poland. We have it in Turkey. We have it in the Baltics, Italy, Russia and Korea. And we use it in India as well. So, while the Ergo brand is getting stronger, we do, however, not have plans for pushing for one single global brand for Ergo.
Source: The Economic Times
Source: The Economic Times
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