Groping with high management costs, the four PSU general insurers — New India Assurance, National Insurance, Oriental Insurance and United India Insurance — are betting on an increase in premium collection to offset high exposure ratios.
The average share of management expenses at the firms has shot up to 24% of gross direct premium collections, much over the stipulated limit.
Under Section 40C of the Insurance Act, the ceiling for management ratio is fixed at 19.5% of the gross direct premium collection. The management ratio is a prescribed cost cap on wages, dividends and commissions. Both the insurance regulator and the finance ministry have been pursuing the insurers to bring these costs down to a comfortable level.
The top brass at the companies admit having high management costs. V Ramasaamy, chairman and managing director, National Insurance told DNA Money, "The management ratio is almost 21% for us and we have been trying to contain it at all costs. But, with fixed costs being almost 85%, there is little that can be tweaked around with 15% of the variable cost. The only way to bring down the cost would be by increasing premiums." He added: "In 2007-08, the decline in premium rates was lower than anticipated, down by almost 60-70%."
National Insurance had appointed PricewaterhouseCoopers as consultant to revamp its process and improve operations. As part of the recommendations from PwC, we are targeting 25-30% growth in health insurance as part of our retail initiative. Various such initiatives would include selling cheap flat and housing insurance at discounted rates for which we are preparing a sales campaign. The company has to look at all avenues to drive higher premiums, he said.
A jittery stock market has added to their woes as investment income, a major contributor to bottom line, has been affected.
Analysts say PSU majors may not feel the immediate heat on expenses like their private counterparts. But, with the complete opening up of the sector and full deregulation, every expense may prove crucial in the coming months.
Source: Nandini Goswami/ DNA MONEY
Wednesday, July 2, 2008
LIC of India plans to add one crore Bima Gold policies
Several divisions, including Visakhapatnam, set a target of 1 lakh Bima Gold policies
Some 400 Satellite Sampark offices to reach out to customers
Sampark offices to be linked to the LIC offices online
A letter sanctioning Rs. 15 lakhs given to the Sankar Foundation, which runs an eye hospital near Simhachalam
The Life Insurance Corporation (LIC) of India aims at adding one crore policies through its Bima Gold policy, launched to mark its golden jubilee last year. It has already crossed 40 lakh policies. LIC’s Zonal manager said the Howrah division had sold 2 lakh policies.
Some of the divisions, including Visakhapatnam, Kadapa, Machilipatnam and Rajahmundry, were likely to sell 1 lakh policies each.
Satellite Sampark offices
LIC with an addition of 2 crore polices recorded a growth of 25 per cent. The highest growth was 27.6 per cent in 1989. In an effort to provide better services to customers, the LIC would launch 400 more Satellite Sampark offices all over the country in the next financial year.
The zone comprising Andhra Pradesh and Karnataka would get 64 of the Sampark offices. The Satellite Sampark offices would be linked to the LIC offices online and would provide information about their policies to customers. LIC is settling 97 per cent claims for policies maturing and no one can boast of such a wonderful record.
It had remained the best brand in service for three years in a row. Visakhapatnam division was complimented for recording a 26 per cent growth.
Bima Gold policies
LIC Visakhapatnam Divisional Manager S. Behera said the division had so far sold 33,000 Bima Gold policies. For each policy sold, Rs. 5 would be contributed to the Prime Minister's Relief Fund and with the target being 1 crore policies, Rs. 5 crores would be the total contribution.
The Visakhapatnam division would get four Satellite Sampark offices. Mr. Chattopadhyay gave away a letter sanctioning Rs. 15 lakhs to the Sankar Foundation, which runs an eye hospital near Simhachalam, for its service activities.
Tara Devi, Principal of Helen Keller School for the Blind, was handed over 100 sticks for distribution among the visually challenged.
Source: insuremagic
Some 400 Satellite Sampark offices to reach out to customers
Sampark offices to be linked to the LIC offices online
A letter sanctioning Rs. 15 lakhs given to the Sankar Foundation, which runs an eye hospital near Simhachalam
The Life Insurance Corporation (LIC) of India aims at adding one crore policies through its Bima Gold policy, launched to mark its golden jubilee last year. It has already crossed 40 lakh policies. LIC’s Zonal manager said the Howrah division had sold 2 lakh policies.
Some of the divisions, including Visakhapatnam, Kadapa, Machilipatnam and Rajahmundry, were likely to sell 1 lakh policies each.
Satellite Sampark offices
LIC with an addition of 2 crore polices recorded a growth of 25 per cent. The highest growth was 27.6 per cent in 1989. In an effort to provide better services to customers, the LIC would launch 400 more Satellite Sampark offices all over the country in the next financial year.
The zone comprising Andhra Pradesh and Karnataka would get 64 of the Sampark offices. The Satellite Sampark offices would be linked to the LIC offices online and would provide information about their policies to customers. LIC is settling 97 per cent claims for policies maturing and no one can boast of such a wonderful record.
It had remained the best brand in service for three years in a row. Visakhapatnam division was complimented for recording a 26 per cent growth.
Bima Gold policies
LIC Visakhapatnam Divisional Manager S. Behera said the division had so far sold 33,000 Bima Gold policies. For each policy sold, Rs. 5 would be contributed to the Prime Minister's Relief Fund and with the target being 1 crore policies, Rs. 5 crores would be the total contribution.
The Visakhapatnam division would get four Satellite Sampark offices. Mr. Chattopadhyay gave away a letter sanctioning Rs. 15 lakhs to the Sankar Foundation, which runs an eye hospital near Simhachalam, for its service activities.
Tara Devi, Principal of Helen Keller School for the Blind, was handed over 100 sticks for distribution among the visually challenged.
Source: insuremagic
LIC wins Nasscom user awards
Life Insurance Corporation of India win the Nasscom IT user award. These awards is given for the best IT usage in Indian businesses. The awards are decided on the basis of a user industry survey conducted in association with IMRB, covering verticals such as banking, financial services and insurance (BFSI), manufacturing, retail, transportation, government, education, energy & utilities, FMCG, pharma, healthcare and ICT. The parameters on which the businesses were assessed include IT policy, state of IT infrastructure, people and processes and IT implementation benefits.
As per Nasscom chairman Som Mittal the IT user survey was intended to assess if there has been an incremental shift in terms of investment and mindshare amongst the user industry about IT usage, and we are glad that the results have been positive.
Mukesh Ambani, chairman, Reliance Industries said that there is a need to leverage technology to link the Old Economy to the New Economy in order to enlarge the use of IT in every sphere of work.
The other winners of the user awards include Glaxo Smithkline (consumer healthcare-pharmaceuticals), ITC (FMCG), Bharat Petroleum (energy & utilities), HDFC Bank (banking), Tata Iron & Steel (manufacturing), WeP Peripherals (information and communication technology), Shopper's Stop (retail), Indian Institute of Technology, Delhi (education) and Aditya Birla Group (best overall IT user).
Source: Insuremagic
As per Nasscom chairman Som Mittal the IT user survey was intended to assess if there has been an incremental shift in terms of investment and mindshare amongst the user industry about IT usage, and we are glad that the results have been positive.
Mukesh Ambani, chairman, Reliance Industries said that there is a need to leverage technology to link the Old Economy to the New Economy in order to enlarge the use of IT in every sphere of work.
The other winners of the user awards include Glaxo Smithkline (consumer healthcare-pharmaceuticals), ITC (FMCG), Bharat Petroleum (energy & utilities), HDFC Bank (banking), Tata Iron & Steel (manufacturing), WeP Peripherals (information and communication technology), Shopper's Stop (retail), Indian Institute of Technology, Delhi (education) and Aditya Birla Group (best overall IT user).
Source: Insuremagic
RYOTS TOLD TO TAKE CROP INSURANCE
Kakinada: The Agriculture Department has called upon the farmers to take crop insurance scheme from this kharif season to obtain compensation in the event of damage of paddy, sugarcane, cotton and plantains during the rainy season.
The extent of crop damage will be assessed by taking a village as unit for the purpose of extending the insurance benefit to farmers, Joint Director of Agriculture T. Nandaiah stated in a press release here on Sunday.
A subsidy of 10 per cent is being given in premium to small and marginal farmers. The scheme will be automatically applicable to farmers who took loans for above crops from commercial, cooperative and regional rural banks and premium amounts will be deducted from loans at time of sanction.
Such farmers should take receipts as proofs of deduction of premiums from the loans.
Farmers who did not take loans so far, have to open bank accounts before July 31, 2008 and pay the premiums to avail themselves of the scheme.
Further details can be known from the mandal level agriculture officers or bankers in the respective service areas.
The rates of premium are: paddy 2.50 per cent, sugarcane 3.15 per cent, cotton 8.55 per cent and plantains 8.10 per cent. Whenever yield loss occurs the compensation will be calculated by the Agriculture Insurance Company of India Limited and the same will be credited to the eligible farmers’ accounts.
Source: The Hindu
The extent of crop damage will be assessed by taking a village as unit for the purpose of extending the insurance benefit to farmers, Joint Director of Agriculture T. Nandaiah stated in a press release here on Sunday.
A subsidy of 10 per cent is being given in premium to small and marginal farmers. The scheme will be automatically applicable to farmers who took loans for above crops from commercial, cooperative and regional rural banks and premium amounts will be deducted from loans at time of sanction.
Such farmers should take receipts as proofs of deduction of premiums from the loans.
Farmers who did not take loans so far, have to open bank accounts before July 31, 2008 and pay the premiums to avail themselves of the scheme.
Further details can be known from the mandal level agriculture officers or bankers in the respective service areas.
The rates of premium are: paddy 2.50 per cent, sugarcane 3.15 per cent, cotton 8.55 per cent and plantains 8.10 per cent. Whenever yield loss occurs the compensation will be calculated by the Agriculture Insurance Company of India Limited and the same will be credited to the eligible farmers’ accounts.
Source: The Hindu
UCO BANK PUTS NON-LIFE INSURANCE BIZ ON BACKBURNER
State-run UCO Bank is putting its proposed non-life insurance business on hold, as it believes time is not appropriate for such a venture. "We are putting the non-life insurance business on hold," bank's chairman and managing director SK Goel said on Monday. Earlier, the bank had decided to form a joint venture company with US-based Liberty for entering into the non-life insurance business this fiscal. It had also proposed to set up a subsidiary with other partners, including another nationalised bank.
Talking to reporters on the sidelines of the 5 th annual general meeting of the bank, Goel said, "We have seen others, who have floated non-life business, are not doing well. We are not going for that now. We will take a relook into the matter by September this year," Goel said. Asked about the possibility of having new partners in the venture, he said:
"We will be continuing with earlier partners. No memorandum of understanding was signed with Liberty. But, we have other partners as well." The bank is planning to come up with a Rs 300-400-crore follow-on public offer in the third quarter of this fiscal. "We are likely to receive Cabinet approval within 10-15 days," a top official of the bank said.
Source: The Financial Express
DLF PRAMERICA LIFE PLANS TO START OPERATION BY SEPT
DLF Pramerica Life Insurance Co Ltd (DPLI), a joint venture between country's leading realty player DLF and US-based Prudential Financial, would start its operation from September.
"We will start our business by September. We are in the process of getting regulatory clearance from the Insurance Regulatory Authority of India for our products," DPLI Chief Executive Officer Kapil Mehta said.
The company would begin its operation with a paid-up capital of Rs 110 crore. Of the total paid-up capital, DLF would contribute 74 per cent and remaining would come from its foreign partner Prudential Financial.
However, the paid-up capital is expected to go up to Rs 1,000 crore in the next 6-7 years, he said. Currently, there are 19 life insurance players in the country, the latest entrant being Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd. The company started its business earlier this month.
Mehta said initially the focus would be Delhi and Punjab region for distribution of policy. The venture would also leverage DLF strength in distribution. "With more than 130 years of experience in delivering insurance and financial products around the world, Prudential Financial is the perfect partner to work with us to establish a market-leading and highly differential life insurance business in India," Mehta said.
Source: The Financial Express
ICICI PRUDENTIAL’S ‘WEB CHAT’
Madurai: ICICI Prudential Life has introduced Web chat service for instant resolution of policy related queries from its customers. According to Ms Anita Pai, Executive Vice-President, ICICI Prudential Life Insurance, the customers can avail themselves of the 24x7 service by logging on to the company’s Web site www.iciciprulife.com with policy details to inform change in address, contact details, seek information on net asset value/f und allocation, premium payment options etc., as also lodge any complaint if any.Source: The Hindu Business Line
INVESTORS TURN TO ULIPS IN A VOLATILE MARKET
New Delhi: As investors duck for cover from a plunging stock market, Indian insurers are plugging unit-linked insurance plans, or Ulips, that promise to protect capital and pay fixed interest rates and assured top-ups to entice customers.
Ulips provide life insurance by investing a part of the premium paid by buyers in stocks, with the policy value depending on the value of their underlying assets. But in a slumping market, investors face the risk of their capital being eroded on the equity portion of their assets, a deterrent to get them to put money in Ulips.
“This is the time of capital guarantee products. It’s a good concept and we aggressively want to market it,” said Gaurang Shah, managing director of Kotak Mahindra Old Mutual Life Insurance Ltd. Kotak’s Safe Investment Plan offers a guaranteed maturity value to policyholders.
“When markets were up nobody looked at these products. But when markets are down it is attracting customers. Our capital guarantee product sales have moved up by 20-25% in the last three-four months,” Shah added.
The Bombay Stock Exchange’s benchmark index, the Sensex, has lost about a third of its value this year in the face of a surge in inflation driven by soaring crude oil and food prices and turmoil on global financial markets. On Monday, it fell 340.62 points, or 2.4%, to close at 13,462.60.
Mutual funds are, however, explicitly prohibited by the Securities and Exchange Board of India (Sebi) from offering capital guarantees, giving Ulips an advantage in turbulent times.
Birla Sun Life Insurance Ltd recently launched its Platinum Plus policy with a guaranteed maturity unit price. It pays the maximum unit price recorded on the 15th of each calendar month until 15 June 2015. Reliance Life Insurance Co. Ltd launched a Ulip that guarantees contribution by the company from 50% in the 10th year to 250% by the 30th year of the paid annualized premiums.
“Gradually we want to increase the share of capital protection plans to 40% from the current size of 20% of the portfolio,” said P. Nandagopal, chief executive officer in Reliance Life Insurance.
However, not all insurance companies see it as a prudent strategy given the absence of hedging tools. Insurers with an excessive portfolio of guaranteed Ulips would be especially vulnerable to an economic slowdown or a stock market crash and would require large reserves to back them up.
“Insurers should consider limiting such products to a percentage of portfolio to avoid getting into considerable risk. Non-availability of appropriate hedging tools for these guarantees in the market exposes the insurance companies to significant downside risk,” said Sunil Kakar, chief financial officer of Max New York Life Insurance Co. Ltd.
“We are planning to come out with such products in near future but one needs to consider terms of guarantee in the absence of appropriate hedges,” Kakar added.
Guaranteed Ulips are longterm products with a lower surrender value and higher fees than non-guaranteed plans. They guarantee premiums (minus front-end charg es), but assured benefits are available only on the completion of the tenure of the policy.
The insurance regulator said guaranteed Ulips are good investment tools for policyholders. At the same time, insurance companies need to have sound asset-liability mechanisms in place.
“Capital protection policy is a very good idea for policyholders,” said said R. Kannan, member actuary of the Insurance Regulatory and Development Authority. “In guaranteed Ulips the issue is to decide on the guaranteed interest rates that need proper risk mitigation tools.” “The regulator has looked into all the parameters and as a regulator we are satisfied with all the risk mitigation techniques offered by the companies,” Kannan added.
While some insurance firms look at capital guarantee products as a potential new growth driver, others still swear by traditional plans. “We never push our customers for any product.
We give them products according to their requirement,” said Joydeep K. Roy, chief distribution officer of Tata AIG Life Insurance Co. Ltd. “We have a slew of traditional products with strong guarantees that promise capital protection along with returns just like guaranteed Ulips,” Roy added.
Source: Teena Jain
Mint
Ulips provide life insurance by investing a part of the premium paid by buyers in stocks, with the policy value depending on the value of their underlying assets. But in a slumping market, investors face the risk of their capital being eroded on the equity portion of their assets, a deterrent to get them to put money in Ulips.
“This is the time of capital guarantee products. It’s a good concept and we aggressively want to market it,” said Gaurang Shah, managing director of Kotak Mahindra Old Mutual Life Insurance Ltd. Kotak’s Safe Investment Plan offers a guaranteed maturity value to policyholders.
“When markets were up nobody looked at these products. But when markets are down it is attracting customers. Our capital guarantee product sales have moved up by 20-25% in the last three-four months,” Shah added.
The Bombay Stock Exchange’s benchmark index, the Sensex, has lost about a third of its value this year in the face of a surge in inflation driven by soaring crude oil and food prices and turmoil on global financial markets. On Monday, it fell 340.62 points, or 2.4%, to close at 13,462.60.
Mutual funds are, however, explicitly prohibited by the Securities and Exchange Board of India (Sebi) from offering capital guarantees, giving Ulips an advantage in turbulent times.
Birla Sun Life Insurance Ltd recently launched its Platinum Plus policy with a guaranteed maturity unit price. It pays the maximum unit price recorded on the 15th of each calendar month until 15 June 2015. Reliance Life Insurance Co. Ltd launched a Ulip that guarantees contribution by the company from 50% in the 10th year to 250% by the 30th year of the paid annualized premiums.
“Gradually we want to increase the share of capital protection plans to 40% from the current size of 20% of the portfolio,” said P. Nandagopal, chief executive officer in Reliance Life Insurance.
However, not all insurance companies see it as a prudent strategy given the absence of hedging tools. Insurers with an excessive portfolio of guaranteed Ulips would be especially vulnerable to an economic slowdown or a stock market crash and would require large reserves to back them up.
“Insurers should consider limiting such products to a percentage of portfolio to avoid getting into considerable risk. Non-availability of appropriate hedging tools for these guarantees in the market exposes the insurance companies to significant downside risk,” said Sunil Kakar, chief financial officer of Max New York Life Insurance Co. Ltd.
“We are planning to come out with such products in near future but one needs to consider terms of guarantee in the absence of appropriate hedges,” Kakar added.
Guaranteed Ulips are longterm products with a lower surrender value and higher fees than non-guaranteed plans. They guarantee premiums (minus front-end charg es), but assured benefits are available only on the completion of the tenure of the policy.
The insurance regulator said guaranteed Ulips are good investment tools for policyholders. At the same time, insurance companies need to have sound asset-liability mechanisms in place.
“Capital protection policy is a very good idea for policyholders,” said said R. Kannan, member actuary of the Insurance Regulatory and Development Authority. “In guaranteed Ulips the issue is to decide on the guaranteed interest rates that need proper risk mitigation tools.” “The regulator has looked into all the parameters and as a regulator we are satisfied with all the risk mitigation techniques offered by the companies,” Kannan added.
While some insurance firms look at capital guarantee products as a potential new growth driver, others still swear by traditional plans. “We never push our customers for any product.
We give them products according to their requirement,” said Joydeep K. Roy, chief distribution officer of Tata AIG Life Insurance Co. Ltd. “We have a slew of traditional products with strong guarantees that promise capital protection along with returns just like guaranteed Ulips,” Roy added.
Source: Teena Jain
Mint
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