AXA-BHARTI WILL ENSURE YOUR ART TREASURE’S SECURED

Mumbai: The speciality business of art insurance will come to India, with French insurer Axa participating in a general insurance joint venture with Bharti. Axa of France owns UK-based Axa Art Insurance — the largest specialist art insurance company in the world.
On Thursday, Bharti Axa General Insurance announced its commencement of operations. Although the main focus of the non-life company will be the tradition lines of business, it has received some informal enquires on art insurance from brokers. Bharti Axa Life has been promoted by Sunil Mittal’s Bharti Telecom in association with the French company. The two partners have already floated a life insurance company and an asset management company.
Speaking to ET, Bharti Axa General CEO Milind Chalisgaonkar said that the company would not launch a product based on one-off enquiries, as this would make it difficult to spread the risk. “We will use this enquiries to gauge the market demand for the product and then devise a product,” he said. Insuring art is a challenge for domestic insurers because of the lack of expertise available. This includes the shortage of valuation experts. In India, art owners have had bad experience with conventional insurers who have rejected claims for minor damages to art work on ground that there is no financial loss.
In the past, multinationals, which have set up shop in India, have brought in speciality products where they have a stronghold world over. For instance, German insurer Allianz, which owns a credit insurance company Gerling has brought the credit insurance product through Bajaj Allianz General Insurance. Tata AIG has introduced into the Indian market AIG’s speciality liability covers, including the directors & officers policy.
According to Bharti Axa General CEO Kim-Soon Chua, the company would leverage the distribution network of its affiliate Bharti Axa Life Insurance. He added that the company was in the process of shortlisting third-party administrator for servicing its health insurance products. For motor insurance, the company would be tying up with garages for servicing of claims. He added that once insurance companies were given the freedom to develop new products, Bharti Axa would use the expertise of Axa’s actuarial modelling centre in Singapore to develop new products.

Source: The Economic Times

ANOTHER JUDGE REFUSES TO HEAR PF SCAM CASE

New Delhi: The Supreme Court, hearing a petition against sitting and retired High Court and District Judges, said to be involved in a Rs 26 crore provident fund scam in Ghaziabad, witnessed an unruly scene on Thursday with Justice BN Agrawal being the second judge in a span of ten days who refused to hear the case being upset over comments by senior advocate Shanti Bhushan.

On July 30, Chief Justice KG Balakrishnan had refused to hear the case any further after Bhushan challenged an administrative order given by the Chief Justice instructing the SSP of Uttar Pradesh police to send its queries of what was sought to be asked from the judges. Bhushan, who argued on behalf of NGO Transparency International criticised that such a practice was 'unheard of' and sought to challenge its correctness, forcing the Chief Justice to constitute another bench headed by Justice BN Agrawal, the second senior-most judge.

The argument commenced on August 1 before a three-judge bench headed by Justice Agrawal and proceeded for two and a half days. On Thursday, Bhushan commenced arguments by stating that the orders passed by the court give an impression that 'this court is giving protection to corrupt judicial officers.' The Bench warned him to refrain from making such 'contemptuous' remarks. Bhushan, however, refused to apologise stating he accepted to be hauled for contempt instead.

The matter then proceeded when he decided to withdraw his comment and proceeded with the arguments in the case. The hearing was marred by intermittent stops caused by disagreement on the arguments made from the Bench. At one point, when Bhushan sought to explain the power of the police to arrest being restricted, Justice Agrawal took umbrage and said, "We don't know how you being an eminent lawyer of this country is arguing in this manner" and later compared his arguments to that of a 'street urchin'.

The argument before the court was on the crucial aspect of which investigating agency, whether the CBI or the state police are well-equipped to handle a scandal of this huge dimension involving judges. But the argument went on a different tangent, as the nitty-gritty of criminal investigation became the subject of debate.

Things were under control till Prashant Bhushan got up and charged the Bench of pushing his father against the wall. Enraged by the Court's quizzing his father, Prashant said, "You are again and again putting words in the mouth of the senior counsel."

This added the necessary spark with both the judge and the lawyer crossing swords. Alarmed by the backlash, the Bench remarked, "What business has Shanti Bhushan to shout at judges. He has conducted professional misconduct. We would have initiated contempt proceedings, but we wont do it out of respect for the senior counsel." Ruing the precedent set by him, the judge said, "The way in which Bar is behaving we are sorry. You are only here to abuse the judiciary. If this is the state of affairs, we cannot hear the case."

Source: The Pioneer

BHARTI AXA GENERAL PLANS CAPITAL INFUSION OF RS 645 CRORE

Mumbai: Bharti AXA General Insurance, the latest entrant in the general insurance business in the country, is planning capital infusion of Rs 645 crore over the next five years. Announcing the commencement of its operations here today, Milind Chalisgaonkar, chief executive officer said the general insurance market in India has strong growth potential. He said the two joint venture partners, namely, Bharti Enterprises which has 74 per cent stake in the company and AXA, a major insurance player internationally holding 26 per cent stake have already invested Rs 130 crore in the venture. The insurance regulations require minimum capital of only Rs 100 crore. Responding to queries on the quantum of business the company is targetting, he said he would not like to make forward looking statement. He also pointed out there is no formula that a company could generate a certain level of business based on the capital invested. He, however, indicated a company could possibly generate business which is four to five times the capital. There are 25 crore middle class people. The parent company Bharti has 72 million consumers and Bharti group's reach would be leveraged to grow business, he said. He said the company will offer products to cover property, motor, health, personal accident across rural, urban and commercial segments. It is the third JV Bharti has entered into with AXA. Earlier, the company had entered into JV with AXA for life insurance and for an asset management company.

Source: PTI, The Economic Times, Asian Age, The Hindu Business Line, The Hindu, The Telegraph, The Statesman, Business Standard, Deccan Chronicle, Daily News & Analysis

ORIENTAL INSURANCE EYES 10% GROWTH IN PREMIUM

Bangalore: Oriental Insurance Company, a state-owned general insurance firm, has stated that it plans to grow its premium collections by 10 per cent during the current financial year as against the nominal growth recorded in the last fiscal, which reported a collection of Rs 3,900 crore.

The company is actively implementing comprehensive proposals on business process re-engineering advised by the Boston Consulting Group in an effort to stave of increased competition from private players. During the first quarter of the current financial year, the company has reported collections of Rs 1,100 crore.

“We are cautious. The premium rates are falling and there is a maddening rush to maintain the top line growth. Last year, there was hardly any growth and we intend to improve our performance during the year,” Chairman and Managing Director M Ramadoss said.

Ramadoss was in Bangalore to launch a series of initiatives aimed at retaining its customers. The company launched a service through which a car-owner, insured by Oriental, if stranded with a break-down on a highway, can access various TVS Group’s authorised garages to have the vehicle repaired, at no cost to the customer.

“This is one of the steps we are taking to face competition. During the last quarter, our average settlement claim in certain markets was brought down to 15 days from the earlier 78 days. This exercise will be expanded across India, through which we anticipate that the renewals will be higher,” Ramadoss said.

These initiatives are much needed for this general insurer as during the first quarter of the current fiscal, it was displaced from its fourth position by ICICI Lombard, a private insurer. On an average, Oriental writes in close to a crore policies.

Oriental Insurance, which currently has a Rs 8,000-crore investment portfolio, invests 55 per cent of the portfolio in unregulated investments such as equities (18 per cent) and mutual funds. Explaining his company’s investment outlook for the bearish market, Ramadoss said, “Given the current (state of the) equities market, we are now focusing on investing in bonds.”

Ramadoss once again reiterated his stand that the central government should allow state-owned general insurers to go public.

Source: Business Standard, Deccan Chronicle

MNYL TO GET RS 3,600 CR INFUSION

Mumbai: Max New York Life Insurance (MNYL) has clocked a first year premium of Rs 1195 crore. The assets under management (AUM) have increased to over Rs 4138 crore on July 31, 2008, compared with Rs 2271 crore in the year-ago period.

The insurer plans to significantly expand its distribution footprint by opening more than 250 new offices every year for the next three to four years. During the period, the number of agent advisors is expected to touch 3,00,000 from current 46,800, while the company’s capital base will increase to Rs 3,600 crore from current equity base of Rs 1,232 crore.

This year alone, MNYL has launched more than 100 new offices. It has a presence in 212 cities through 311 offices. The rural business of MNYL started its hub-and-spoke operations in Haryana and Punjab.

The company has entered into a distribution tie-up with four corporate agents, five broking houses and bancassurance through eight referral tie-ups with banks.
During January-July 2008, MNYL has added more than 5,000 employees and now has over 11,000 employees.

“We have acquired around 27 lakh policies since inception and have moved to number three position among private life insurers in terms of number of policies sold (YTD June),” said Rajesh Sud, deputy managing director, MNYL.

Source: Business Standard

APONLINE TO MARKET LIC PRODUCTS

APOnline, the digital portal for citizens of AP, has become a Corporate Agency of LIC India to market its insurance products in the state of Andhra Pradesh. APOnline has been selected because of its wide and well established network of franchisees across AP.

It has been successfully providing insurance premium collection services to LIC for the last 8 months in the state of Andhra Pradesh. This new service will add greater value to the citizens as insurance policies will now be available across all APOnline kiosks in every locality.

APOnline has over 1100 Franchisees spread over 21 Districts and these franchisees have a customer base of around 10 lakhs. Leveraging the network of APOnline, LIC of India will be able to reach its products and services to the rural population in Andhra Pradesh.
Apart from enabling better governance, APOnline has also provided franchisees with another means of livelihood and has become a big success in rural areas.

Source: The Hindu Business Line

LIC CAPITAL BASE MAY SWELL TO RS 100 CRHema Ramakrishnan/Mayur Shetty

Hyderabad/Mumbai: The government, which is pushing the legislation to hike the cap in foreign direct investment in insurance from 26% to 49%, is also set to usher in reforms in India’s largest financial institution, Life Insurance Corporation (LIC). It is vetting a proposal to make changes in the LIC Act to enhance the capital base of the corporation from Rs 5 crore to Rs 100 crore. The move will help LIC to comply with the minimum capital prescribed by the Irda Act, which states that no insurer can do business without a paid-up capital of Rs 100 crore. All insurance companies registered by the regulator have paid-up capital above Rs 100 crore. As their business grows, private insurers are required to bring in more capital to meet their solvency requirements. “A hike in the paid-up capital for LIC is aimed at providing a level playing field with private insurers,” said a senior government official. It is not clear whether the new capital will come from the government or from LIC’s own reserves. So far, LIC has been setting aside part of its surplus to build up the prescribed solvency market requirements. However, the moot question is whether a higher paid-up capital would mean that LIC no longer enjoys the government guarantee and some of the relaxations it current enjoys. At present, there is no clarity on this. LIC has not been able to plough back capital as it distributes its entire surplus in the life fund to policyholders and its sole shareholder, the government, in a 95:5 ratio. Its policies are also guaranteed by the government. As LIC does not have funds of its own, it has some relaxations on debt and equity exposures to a single company. It can invest up to 30% of its portfolio in a single company. In fact, LIC dipped into policyholder funds to pick up over 27% in Corporation Bank a few years ago after special permission from the government. Private insurers, on the other hand, can invest only up to 10% of their portfolio in a single company. The government is looking at changes in the investment regulations to remove the differential treatment between public and private sector insurers. Some years ago, consultancy firm Deloitte had suggested that the government guarantee for the liabilities of Life Insurance Corporation was in the form of quasi-capital, and ideally, this should be replaced with real capital. In the absence of a substantial shareholders’ fund, LIC has to turn to the government for funds to expand overseas operations.

Source: The Economic Times

OLD AND YOUNG, ALL ARE UNDER-INSURED: AJAY BAGGA, CEO, LOTUS INDIA AMC

Financial illiteracy remains a global problem, with the economically disadvantaged facing even more hurdles due to their situation and station in life. India suffers even more — as an emerging economy, as a victim of colonialism and as a poor nation with a huge population and limited resources.

However, any analysis needs to start with an acceptable definition. I define financial education as the ability to make informed judgements and take effective action regarding the management of money across the entire cycle of earning, spending, saving, investing, budgeting and passing it on. Opinions differ on how to define it, but there is consensus that financial education remains central to and is critical in achieving life goals of individuals.

India at present sees several unique challenges to the financial well being of its citizens. There are over 90 million senior citizens in India and a small proportion have fixed pensions that are inadequate in an inflationary environment. On the other hand, the 320 million strong young workforce needs and gets investment options that their parents generation never had in a closed economy.

All these combine to make the price of financial illiteracy huge. In fact, John Bryant, the founder of the financial education initiative ‘Operation Hope’ in the US described the roots of the subprime crisis thus: “Take the greed and the financial misrepresentation out of it, and the root of this crisis is massive levels of financial illiteracy.” The write-off bill is already $492 billion as on August 5, 2008 and is projected to rise to as high as $2 trillion even before this crisis works out of the financial systems worldwide.

In fact, from corporate treasurers and chief financial officers to bankers, financial advisors and retail investors, all segments, all strata have shown deep financial illiteracy. In India, the foreign derivatives write-offs have highlighted the financial illiteracy of corporate officers, boards of directors, bankers as well as auditors. At an individual level, the older segments face the risk of outliving their savings, of landing in ‘retirement poverty’.

A grim portent of this is that 50 per cent of those aged 65 today will be hospitalised before their demise, yet a miniscule proportion has any medical insurance. The young run the biggest risk of dying or getting disabled too soon, yet they are massively underinsured. The situation is the same with financial products penetration, with 60 million rural households having no access to formal banking credit, and hence being in the clutches of usurious moneylenders. Financial literacy at a national level will go a long way in fixing many of these problems.

Source: Hindustan Times

BILL SOON TO ENABLE PUBLIC INSURERS TO RAISE CAPITAL

Bangalore: The government is expected to take up the insurance amendment Bill seeking to increase the capitalisation of the public sector insurers. Amendments to the General Insurance Business (Nationalisation) Act (GIBNA) of 1972 have remained in cold storage since 2004, as long as the Left parties were part of the ruling coalition. With the exit of the Left parties from the ruling coalition, highly placed sources said, the passage for making amendments to the Act was now clear.

The proposal was to insert an enabling provision in GIBNA that would allow PSU insurers to raise capital either in the form of equity or long-term subordinated bonds. The provision would also allow for dilution of government equity in the insurance companies to either 74 or 51 per cent.

Bonds issue
Insurers are currently not allowed to issue bonds, though globally insurers raise capital through such bonds. The sources said that the amendments to GIBNA were now before the Group of Ministers. Currently, the Government holds the entire paid-up equity capital amounting to Rs 550 crore in the four non-life insurance companies, after General Insurance Corporation transferred its holdings in 2004.

The sources said that insurers have for long been pushing for improving the capitalisation, either through direct induction of equity from the government or through an enabling provision in the statute.

The sources said that this was essential for them to raise their solvency. Although all the 4 PSU insurers - New India Assurance Company Limited, National Insurance Company Limited, Oriental Insurance Company Limited and the United India Insurance Company Limited - are well within the prescribed solvency margin, most of them had been hit by the decline in premium collections during the last few months.

The prescribed solvency margin is currently 150 per cent. Solvency margin implied the excess of capital (equity plus general reserves) and the value of assets over the insured liabilities. Besides, sources also said that proposals to improve their capital through sell-off of equity assets had been shelved , after the equity markets dropped sharply.

Divestment
Consequently, the strongest of the four insurance companies was likely to be picked up for divestment this financial year itself. One divestment was also expected serve as a price discovery mechanism for general insurance companies for the rest of the PSU insurers. Currently, there are no insurance companies listed on the domestic stock exchanges.

The sources said that divestment would help the companies raise their solvency ratios to above 200 per cent. The improved solvency margin would in turn allow the companies to aggressively pursue a premium growth of at least 10 per cent per annum. Besides, the sources said, the capitalisation would also help reduce the reliance on foreign reinsurance, for meeting the solvency.

Sources said that this year, with the PSU insurers switching focus from top line to bottom line, private sector insurers had increased their market share to about 42 per cent in the first quarter of this financial year. Besides, private sector companies such as ICICI Lombard have shifted from corporate and big ticket insurance business to retail business where the loss ratios were low. The consequent high retentions made retail lines highly profitable, where PSU insurers are not yet large players.

Source: The Hindu Business Line

Pirate’s Work Injuries

After many years at sea, a pirate decided to retire. Since he had suffered injuries on the job, he thought that he should collect on his worker’s compensation insurance. He had a wooden leg, a hook where his right hand should be and a patch over his right eye. The agent assured him that he would be compensated if the injuries were work related.
“How did you get the wooden leg?” asked the agent.
In a booming voice the pirate replied, “Me and me mates were on the high seas when the boom swang ’round and knocked me into the sea where a shark bit off me leg.”
The agent replied, “That is certainly work related. How did you lose your hand?”
“Well matey, me and me mates were on the high seas when the boom swang ’round and knocked me into the sea where a shark bit off me hand,” said the pirate.
“That’s also work related. Now how did you lose your eye?” asked the agent.
The pirate replied, “Well matey, I was laying on the deck one balmy day catching some rays when this seagull flew by and dropped his duty right in me eye!”
“What does that have to do with the loss of your eye?” said the agent.
“It were the first day with me hook!”

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