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
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