NO LIFE IN NON-LIFE

The government’s concern over the poor performance of four state-owned general insurance companies is understandable—the government is a major shareholder and these companies, once market leaders, are losing market share steadily. The thing is that the decline is perhaps irreversible and the government, as of now, doesn’t politically have the option of getting out before its shareholding takes more knocks.

Until recently, it didn’t even have the option for passing a plain vanilla bill like raising the FDI limit in insurance. Private sector general insurers had cornered 26.3% of the gross premium underwritten in the non-life sector before detarrification of the industry in 2006-07. They continue to poach more business away despite the widely-held belief that detarrification would allow public sector insurers to offer more competitive pricing and therefore get more custom.

The share of gross premium underwritten by public sector insurers continues to decline while that of the 10 private sector general insurance companies has shot up—to 34.9% in 2006-07 and to 39.9% in 2007-08. One telling data explains this: salary and employee benefits account for nearly four-fifths of total operating expenses of state insurers compared to between one-fifth and two-fifths for private insurers. Another example of public sector management: ratio of net incurred claims to premiums is around 85% as compared to 68% for private insurers.

Indeed, the problem with general insurance is there’s too little private enterprise. India is doing better, in terms of global norms, in life than non-life insurance. Life insurance penetration ratio (the ratio of premium paid to GDP) for India has steadily gone up from 2.53% in 2004 to 4.1%, very close to the global average. But non-life insurance penetration ratio has gone down from 0.65% to 0.60% during the same period and is just about one fifth the global average.

Clearly, the sector needs a boost from fresh participants. Passing the insurance FDI bill may be the incentive needed for getting more players. India, by the way, has had an experience of hosting a large number of non-life insurers. In 1972, prior to nationalisation, there were 107 general insurance companies. Imagine the business opportunities in an economy unrecognisably bigger and better than it was in 1972.

Source: The Financial Express

NON-LIFE INSURERS RIDE ON HEALTH & MOTOR INSURANCE

Mumbai: Motor third-party insurance and health — two portfolios that non-life insurers have been avoiding due to low margins — have been responsible for the 12% growth recorded by the industry in 2007-08. Motor third-party grew close to 50% while health insurance grew 55% in a year which saw property insurance market shrink due to intense competition.

In 2007-08, non-life insurers wrote business amounting to Rs 28,126 crore — an increase of Rs 3,128 crore over last year. This increase was despite premium from fire insurance shrinking 15% to Rs 3,516 crore. Fire was not the only business which saw lower collections. Aviation insurance, which is driven by the international reinsurance market, declined by 28% to Rs 303 crore despite large-scale fleet expansion by airline companies.

According to industry sources, insurance rates for airlines have been at the softest level for nearly a decade. The industry has managed to grow despite such intense competition because of motor and health. In motor third-party (where rates continue to be administered), industry premium rose 50% to Rs 4,617 crore. Health insurance grew 55% to Rs 4,969 crore.

Another revealing feature of last year’s business data is that the public sector account for 67% of motor third party liability and 63% of health insurance even though its overall share has declined to 60%. New India continues to be the largest health insurer with a premium of Rs 1,209 crore or 24.3% of the market followed by ICICI Lombard which has a 17.7% of the market share.

In 2007-08, health insurance in India grew to be a billion dollar business for the first time. If the Rs 164 crore business done by specialised health insurance is taken into account the industry premium amounts to Rs 5,133 crore ($1.2 billion). Fire insurance business was not the only portfolio to be hit by competition. Motor own-damage portfolio grew only 7.9% to Rs 8,186 crore — a growth that does not even match the rise in car sales. This was because own-damage premium rates also shrunk because of competition.

As a result of the sharp growth in health and decline in fire insurance, the dynamics of non-life insurance business in India has changed. Health insurance is now the single largest business after motor insurance, accounting for a little below 18% of overall business as against 13% last year. Fire (property) insurance, which at one time was the mainstay of non-life insurers, now accounts for a mere 12.5% of business down from 16.6% last year. What this means for the industry is that no company that wants to be a significant player in India can ignore health or motor insurance. Motor insurance and health now account for 63% of all non-life premium in India as against 55.3% a year ago.

Source: Mayur Shetty
The Economic Times

‘FUTURE SANJEEVANI’ LAUNCHED

Future Generali, the insurance venture of Future Group of Italy that has acquired 1,00,000 costumers in a record time thought its Mallassurance, launched its First ULIP called Future Sanjeevani.

Source: The Financial Express

IDBI FORTIS EXPANDING IN NORTH

New Delhi: IDBI Fortis Life Insurance Co Ltd on Tuesday kickstarted its expansion drive in the North with the inauguration of its first branch at Gurgaon. The company plans to add 28 more branches in the North by the end of this year, its Chief Executive and Managing Director, Mr G.V.Nageswara Rao, said.Besides the tied agency network, IDBI Fortis is also using the bancassurance networks with IDBI Bank and Federal Bank. IDBI Fortis is a recently launched three-way joint venture between IDBI Bank, Federal Bank and European Banking and Insurance giant, Fortis.

On whether being a late entrant to the industry was a disadvantage, Mr Rao replied in the negative. “It is certainly not a disadvantage. We think by providing value-added products to the customer, we can gain their acceptability,” he said, adding that premium income of Rs 50 crore in the first four months of operations was definitely good start for the company.

IDBI Fortis is looking to expand agency network from the current level of 30 to 100 by the end of the year. In the coming days, Mr Rao sees significant demand for the company’s products from markets such as Western India.

Source: The Hindu Business Line, The Statesman

TATA AIG SET TO OFFER INSURANCE SOLUTIONS TO FAMILY CREDIT CUSTOMERS

Mumbai: Tata AIG Life insurance company on Tuesday said that it will offer insurance solutions to the customers of Family Credit, the consumer finance organisation of Societe Generale. Through this partnership, Tata AIG life will provide personal loan insurance, a group insurance package for small-ticket personal loan (STPL) customers of Family Credit, an official release stated. Family Credit Life has a network of 35 branches and this will provide Tata AIG Life a ready-made platform to access Family Credit Life’s client base with its insurance solutions.

Personal loan insurance will provide effective cover against death of the customer due to any reason classified as natural, accident, sickness or illness, the release said. A customer-friendly feature of this plan is the waiver of medical tests up to a limit of Rs 5-lakh and till the age of 55 years. The product also has the flexibility of allowing the premium amount to be bundled with the loan amount. Tata AIG Life’s chief distribution officer Joydeep Roy said: “Even as we anticipate customer needs while designing insurance products, we are looking at associations with

companies like Family Credit to reach them.” “Partnering with Family Credit, is another step in that direction. Tata AIG Life focuses on understanding needs of different client segments and fine-tunes its offerings to provide value to customers,” Mr Roy added.

Source: The Economic Times, Deccan Chronicle, Business Standard

AVIVA LIFE TO RAMP UP AGENCY FORCE

On camp at Madrid, Spain Aviva Life Insurance Company, among the pioneers of the bancassurance model in India, will be focussing on a balanced distribution model, Mr Bert Paterson, Managing Director & CEO, said on Tuesday.

He was speaking at the AvivaLife Insurance Summit at Madrid, where a team of journalists from India were taken by the company.

Explaining further, Mr Paterson said that the company would be ramping up its direct sales force (agents) this year. It would be doubling the force to 66,000 this year from 31,974 agents in 2007.

He said that the contribution of the agency force to the premium income had increased from around 30 per cent in 2004 to about 40 per cent in 2008. The company hopes to increase this to 50 per cent soon.

He added that the focus would be on improving the quality of manpower. The last year had seen an explosive growth in the agency force in the industry. All private players had added nearly 5 lakh to the agency force, representing an increase of 128 per cent over the previous fiscal.

Mr Paterson pointed out that the market share of the market leader, Life Insurance Corporation of India (LIC), had fallen by 15 percent and had gone below 50 per cent for the first time in 2007-08.

He said that the private players had gained market share at the expense of LIC. He said that the industry, which had 19 players in the field now, would double in 5 years.

Bancassurance trends Talking about key trends in bancassurance, Mr Paterson said that banks were becoming manufacturers from being distributors earlier.

This was a reference to the fact that many banks were entering the insurance industry directly rather than only functioning as distribution arms of other insurance players. He said that there were few banks which remained for tie-ups and this would lead to an increase in entry costs for bancassurance partnerships.

Mr Paterson said that the cap on foreign direct investment in insurance at 26 per cent would have to increase in order that the insurance industry had sustained growth. He said private players need over Rs 10,000 crore to maintain the current growth rate.

Later Mr Paterson also announced the launch of Aviva’s foray into health insurance with the launch of a new product ’Aviva Health Plus’ as well as two other unit-linked insurance plans - Aviva Sachin Century Plan and Aviva Lifeline plan.

Source: The Hindu Business Line

AVIVA TO GET INTO HEALTH BIZ

Madrid: Aviva Life Insurance, the world’s fifth largest insurer, on Tuesday announced its foray in the Indian health insurance market. Aviva is already present in the Indian life insurance market, in a joint venture with Dabur. Aviva on Tuesday launched a product that guarantees maturity benefits regardless of any claims made during the term of the policy. This is supposed to be the first health insurance plan to offer such a benefit.

Speaking at the Aviva annual insurance summit here, Aviva India MD and CEO, Mr Bert Paterson, said, ¨This product has all benefits that would help policyholders to be prepared for contingencies at any point during the term.¨

He said that India’s health insurance market is largely untapped and the company, which is bullish on India hopes to be amongst the top five insurers. Aviva Investors, the company’s global fund has a corpus of £315 billion and is interested in entering India, Mr Paterson said. Aviva Life Insurance is currently present in India in a joint venture with Dabur, which owns a 74 per cent stake in the venture. Aviva says it has over 40 million customers globally. It has more than £364 billion of assets under management.

Aviva has recently signed a £505 million deal for managed IT outsourcing. The nine-year deal was sealed with WNS, an Indian managed IT outsourcing provider, which will provide business process services to the insurer.

Source: Deccan Chronicle, Asian Age, The Telegraph

AVIVA LIFE TO LEVERAGE TENDULKAR BRAND

Madrid: Sachin Tendulkar, brand ambassador of Aviva Life Insurance, has helped the company improve its brand awareness among customers, Mr Paterson said.

Asked about the relationship with Tendulkar, in the backdrop of recent news reports that he had been dropped by other products as their brand ambassador, Mr Paterson said that they would leverage the Tendulkar brand in a big way.

The contract was for a period of 3 years, he said, and they were in the middle of it.
What would happen after the end of the contract was for the future. But their surveys had shown that brand awareness score had increased from 79 per cent in 2006 to 89 per cent in 2007, he said.

Source: The Hindu Business Line

SUVIDHHA INFOSERVE TIES-UP WITH LIC

Mumbai: Suvidhaa Infoserve, on Tuesday announced its tie-up with Life Insurance Corporation (LIC) to help policyholders pay their insurance premium at all Suvidhaa points called S-Commerce kiosks.

"We are delighted to tie-up with LIC that will help enhance our customer-servicing capabilities," Suvidhaa Infoserve's Managing Director, Paresh Rajde, said in a press release issued here.

Suvidhaa kiosks are connected to LIC's central server using state-of-the-art technology to update the collection on a real-time basis.

The policy-holders can pay their premiums across the country for policies issued from any LIC branch.

Source: PTI, The Economic Times

INSURANCE FIRMS FIND OPEN OFFER PRICE ATTRACTIVE

Mumbai: Insurance companies, which hold a substantial chunk of Ranbaxy Laboratories, feel the open offer price of Rs 737 a share is quite attractive and will trim their stake in the company.

LIC is one of the biggest shareholders in Ranbaxy Laboratories with a 15.84 per cent stake. GIC holds 1.44 per cent in the company.

LIC Managing Director Thomas Mathew said Ranbaxy's open offer price is "very attractive considering the current share price of Ranbaxy". LIC will soon take a final call on how much it should divest," he said

GIC Chairman and MD Yogesh Lohiya also said that the price is indeed attractive and the company would take a final call within two days. The open offer will begin from August 8 and close on August 27.

Going by the share price of Ranbaxy as of, LIC's investment in the company is valued at Rs 2420 crore. At the open offer price of Rs737, the investment value will almost double, at Rs 4357 crore.

LIC with 15.84 per cent, Deutsche Securities Mauritius (3.17 per cent), Merrill Lynch(1.13 per cent) and General Insurance Corporation of India (1.44 per cent), together hold 21.58 per cent stake in Ranbaxy.

Nippon based Daiichi Sankyo, which entered into a deal with Ranbaxy promoter Malvinder Singh and his family to buy their entire 34.8 per cent stake in Ranbaxy in a deal valued at $4.6 billion, had announced an open offer to acquire a further 20 per cent from other shareholders.

Source: Business Standard