SBI LIFE EMERGES NO 2 DOMESTIC LIFE INSURERS IN Q1

The domestic life insurance industry, in the first quarter, has seen some reshuffling in the rankings of top private sector players. While ICICI Prudential Life Insurance, with a total premium mobilisation of Rs 1,590. 27 crore, retained its top slot, Bajal Allianz Life Insurance, with premium income of Rs 829.24 crore, has lost its number two position to SBI Life Insurance, subsidiary of the country’s largest bank State Bank of India.
SBI Life has recorded a 170% jump in its premium income to Rs 1,148 crore during the period. Reliance Life, with a total premium income of Rs 557 .33 crore, is the fourth largest private sector player in the industry. Birla Sunlife and Max New York Life ended the quarter with almost similar numbers.
Birla Sunlife has earned a premium of Rs 501.53 crore while Delhi-based Max New York Life has mobilsied Rs 501.61 crore during the period. However, life insurance subsidiary of Housing Development Finance Corporation, HDFC Standard Life, which was in the top five in 2007-08 lost heavily market share and has become the seventh largest private sector in the Q1 2008-09.
The company has earned a premium of Rs 490 crore during the period. The total pemium of Life Insurance Corporation (LIC) is estimated at Rs 7,524.56 crore, down 12% over the corresponding period of last year.
Source: The Financial Express

INSURANCE LAW CHANGES MAY BRING RELIEF TO PROMOTERS

Amendments may ease norms for mandatory listing. There is more to the amendment to insurance laws than an increase in the foreign investment cap from 26 per cent to 49 per cent prescribing mandatory listing after 10 years. Sources said with the life insurance companies pushing for easing – if not doing away with – of this clause, the government is set to propose an amendment when it moves the Bill. Many cash-rich Indian promoters are keen on staying as majority shareholders in life insurance ventures.
In addition, the comprehensive amendments to insurance laws will also seek to allow public sector general insurance companies to raise capital from the market to finance their expansion.
With the Left withdrawing support to the Manmohan Singh government, the finance ministry is hopeful of pushing through key reform proposals, including amendment to the Insurance Act, 1938, and other laws governing the public sector general insurers and Life Insurance Corporation (LIC).
While it was ready with the amendments as far as 36 months ago, the government was unable to introduce a Bill in the Parliament as the Left parties were opposed to the move. At that point of time, the UPA did not want to be seen as seeking the Opposition’s support to push through key economic legislations.
Insurance companies have been pushing for a relaxation of the foreign investment limit as they are governed by stringent solvency margin norms and continuously need capital infusion to support business growth.
Many Indian promoters are constrained to chip in with their 74 per cent share every few months due to pressure for capital from other businesses. The increase in FDI is urgently required for creating additionala capacity, flow of technical know-how from overseas and better customer service, the CEO of a life insurance company said.
While mooting 49 per cent FDI in insurance, the finance ministry has also proposed to remove restrictions on Indian promoters, who were required to bring down their holding to 26 per cent after the tenth year of commencing business.
In addition, the Insurance Act, 1938, does not permit foreign re-insurers to function independently in the country and they can hold a maximum of 26 per cent stake in a local joint venture with a minimum paid-up capital of Rs 200 crore.
Even though the insurance sector was opened up since 2000, public sector General Insurance Corporation (GIC) continues to be the only re-insurers in the country as foreign reinsurers have stayed away from having a presence that is bigger than a branch office. The absence of an amendment to the law prompted the Lloyd’s syndicate to withdraw its key India representative recently.
With industrial risks rising, it is proposed to allow foreign re-insurers, like Lloyd’s of London, to open branches in India. This will result in lower cost of re-insurance and such branches will create a hub for the Asian reinsurance business in India.

Source: Business Standard

NOW, PERSONAL COVER AGAINST TERROR

In every disaster lies an opportunity, seems to be the motto of insurance companies in the time of terror attacks. Insurance companies and broking firms are now seriously planning to enter the largely under-insured sector of exclusive terror insurance cover for individuals. New India Insurance company has tied up with click2insure.com , an online insurance broking firm, and is providing free terrorism insurance cover up to Rs 1 lakh to one lakh policy holders on a promotional basis. "Our online site has already got around 5,000 registrations in the last two months. We're getting overwhelming response, especially after the Ahmedabad blast," Rahul Agarwal, CEO of Delhi-based click2insure.com , said. The broking firm hit upon this concept after the Jaipur blasts, when reports that hundreds of people who were injured had to wait for weeks together for compensation to arrive from the government. "We have been getting a great response from cities like Mumbai, Bangalore and Hyderabad as the threat perception levels there have gone up tremendously," Agarwal said. Insurance companies normally provide comprehensive fire policy cover for households and commercial establishments which also include cover for terror attacks. 'Huge market for terror insurance' "As of now, insurance firms do not provide exclusive terrorism insurance cover for individuals as a stand-alone policy. This is part of the inbuilt personal accident policy cover for most life insurance firms. But we are planning to propagate this terrorism insurance policy cover as there is a huge market for this," Rahul Agarwal, CEO of Delhi-based click2insure.com , said. Says Neelkant Jain, who has a jewellery showroom at Mumbai's Zaveri Bazaar, "I asked all my employees to take this cover after hearing about the Ahmedabad blast. These days everything in life is so uncertain and anything can happen to anyone," Jain said. New India Assurance executives said that the insurance broking firm will be paying the premium to the insurance firm, though the initial one lakh policy holders will be getting it free of cost. "For the terror insurance cover, we will be charging an annual premium of Rs 18 per lakh. We have kept the premium very low as the claim ratio will be very less as compared with personal accident cover," said B S Baga divisional manager, New India Assurance.
The insurance companies had a few years ago come together to set up a common terrorism pool to offset huge losses due to insurance claims on property damaged by terror attack. "But for individual compensation, there is no such common pool and the insurance company will have pay the compensation from its kitty," Baga said. Meanwhile, the funds collected from the premium on terrorism cover have swelled from Rs 250 crore to Rs 450 crore in the last three years. "The common terrorism pool has over Rs 1,000 crore and is set to touch the Rs 2,000 crore marks. This shows that people do anticipate terror attacks," an insurance official said.

Source: The Times of India

RUSH FOR ULIPS MAY SLOW DOWN

The Reserve Bank of India’s (RBI) monetary measures, which have pushed up interest rates and depressed the stock market, will hit sales of unit-linked insurance plans (ULIPs). With the benchmark BSE Sensex falling by a third after touching its peak of over 21000 points in January 2008, those who have invested in ULIPs in the third quarter of 2007-08 have seen an erosion of their savings.
Insurance companies have managed to record a decent growth because of an expanded distribution network, but sales appear to be easing. Until early 2008, ULIPs have been the main channel for retail investment in the stock market.
“The measures could see a marginal shift from ULIPs to traditional products. A small shift would be good for us because we have been wanting to reduce the share of premium from ULIPs to around 70% from 85% in 2007-08,” said Life Insurance Corporation of India managing director DK Mehrotra.
For private companies, the share of ULIPs is even higher, although most do sell traditional products as well. According to Mr Malhotra, LIC has products on the drawing board that will provide policyholders the opportunity to take advantage of the rise in yields.
According to Aviva India Life Insurance chief investment officer Anil Sahgal, the rise in yields has also given an earning opportunity on the fixed income side. He said that investors do turn cautious about equity investments, when the market turns volatile. But there are income funds under ULIPs as well. “But the long-term structural platform of unit-linked investment plans remains intact. And for those not concerned about the short-term volatility in stocks, it is the right time to buy,” he said. He also pointed out that there were balanced schemes with capital guarantee and minimum return guarantees.
Premium from new policies has fallen close to 7% for the life insurance industry. This has been largely on account of a decline in sales by LIC. Private companies have grown at over 50%, but their growth has seen a moderation from last year. Private companies are, however, confident that investments in ULIPs will continue to grow. ULIPs account for 90% of the portfolio of ICICI Prudential Life insurance and bulk of the investments are in equity-linked plans.

Source: The Economic Times

LIC LAUNCHES POLICY FOR WOMEN

LIC has launched an insurance policy designed exclusively for women called Jeevan Bharati-I. The policy is essentially a money back policy with a term of 15 or 20 years. Besides critical illness and accident benefit riders, it offers a congenital-disability benefit rider, which ensures the payment of 50 per cent of the rider’s sum assured to the woman policy holder, in the event that she gives birth to a child with congenital disabilities.
This benefit is available on the birth of two such congenitally-disabled children during the term of the rider. At the time of maturity, the balance sum assured (after payment of survival benefits already availed) is payable along with reversionary bonuses and final additional bonuses (if any). This policy is available to women in the age group of 18-55 years and the minimum sum assured is Rs 50,000.
Source: The Hindu Business Line

INSURERS TO PARTNER MFIS TO EXTEND COVER IN RURAL INDIA

The insurance players are gearing up for an encore in the rural areas. Faced with the imminent relaxation of FDI norms in the sector, they want to get a foothold in the area which has hitherto been slow to respond to their overtures. Tie-ups with microfinance institutions (MFIs) and targeting women are the latest strategies of the private insurance players in this fast-emerging market.
Even after having better distribution networks, private players were unable to crack the rural code to their satisfaction. “We’ve successfully implemented the partner-agent model in the micro-insurance space with micro-finance institutions (MFIs) such as Basix; and believe this to be an effective and reliable channel for reaching out to the people at the bottom of the pyramid. We have covered close to 1.5 million lives through such associations,” says Aviva India corporate initiatives director Monica Agrawal.
A study says that the rural market for insurance products is expected to grow to $1.95 billion by 2015 from $487 million in India. Insurance, combined with micro-credit, is the first step towards financial protection for this market, says Bharati AXA chief marketing and distribution officer Shyamal Saxena. “It provides a firm foundation for insurers to take to the rural markets their other financial protection offerings,” he adds.
Apart from this tie-up with MFIs, the insurance companies are working with women self-help groups to target them. With increasing literacy levels of women, they are wielding more of this power in the rural areas, says ISB, Hyderabad associate professor Shamika Ravi. So, the insurance firms are coming up with products that make it easier to sell to women through MFIs. For example, Aviva has a customised product for women’s self-help groups (SHGs) which are normally made up of 15-20 members, and MFIs. This product forms a comprehensive part of livelihood initiatives run by these groups. “We have seen such groups to be very influential in the household, with higher bargaining power,” says Aviva’s Agrawal.
Shamika Ravi has shown that success of the insurance sector in rural areas is higher as its interaction with MFIs increases, and as the women get more empowered through literacy. Ravi’s study was on 2,79,214 individuals in the rural areas whose health coverage started after May 1, 2006 and half of them are females. The probability of filing claims increases by 8% when female literacy level goes up marginally. “This is very true, and we see this as an empowerment of the women in rural areas,” says Mr Saxena.
“Women in those areas have been stable clients,” says ICICI’s Srivastava, adding that this has also taken the emphasis in insurance from the male member to the female member of the family. Ravi points out one reason for low claims in those areas. “Well, currently microfinance is increasing coverage of insurance by tying it to credit and making it mandatory. So, automatically when people take a loan, they have insurance cover. This is also partly the reason that people don’t understand insurance and treat the premium as an added fee for the loan,” explains Ravi. This, according to her, had reduced the insurance claims.
With more awareness about the insurance products, that has benefited players like ICICI Prudential, Aviva and Bharti AXA, has also come higher claims. Aiding this are the MFIs themselves. Ravi shows how some innovative microfinance institutions like SEWA have started investing in training their clients about insurance; others like BASIX have tied up with agents to help people with filing claims. This has also meant more insurance claims as the rural folk are now clearer about what they are insured against. ICICI Prudential is working with more than 100 such agencies, says ICICI Prudential senior vice-president and head of the rural business Rishi Srivastava. The company does more than Rs 300 crore of business from the rural areas.

Source: The Economic Times

KEY INSURANCE CHANGES ON ANVIL

New Delhi: In a move that is likely to impact insurance companies, the government may delete the provision relating to involvement of employee surveyors for settling claims. A demand to this effect has been made by the Indian Institute of Insurance Surveyors & Loss Assessors (IIISLA). The proposal is under consideration of the group of ministers (GoM) that is evaluating the Insurance Bill, and the Insurance Regulatory & Development Authority (IRDA). The government will have to either incorporate large-scale changes in section 64 UM of the Insurance Act, 1938, or delete the section altogether to implement the proposed changes. "We have made a presentation before the group of ministers and they have given a positive response to our demands," IIISLA president Mahendra J Dhruva told ET. Mr Dhruva said the institute has also got the backing of the IRDA for bringing the proposed changes in the Act. At present, insurance companies are allowed to involve their employees as surveyors or assessors for claims up to Rs 20,000 under section 64 UM of the Insurance Act. However, if the new proposal is accepted, insurance companies will have to take the service of independent loss assessors even for smaller claims. The IIISLA has also proposed more stringent penalty for defaulting insurance agencies. “In many cases, it has been found that insurance companies exceed the limit (under section 64 UM) for appointing the assessors, which is not acceptable. We have asked the Irda to take penal actions against such companies,” Mr Dhruva said. The proposed changes may be incorporated in the new Insurance Bill which is under consideration of the GoM led by external affairs minister Pranab Mukherjee. The GoM, after revising the Bill, would return it to the finance ministry. The ministry would then start the process of presenting the Bill in Parliament after incorporating the changes suggested by the GoM. IILSA is the apex institution of insurance surveyors and loss assessors promoted by the Irda on the recommendations of the Bhandari Committee, which was set up by the finance ministry in 2005. The institute has similar powers as that of the institutes of company secretaries or chartered accountants.

Source: The Economic Times