Mumbai: The four public sector non-life insurers – New India Assurance, Oriental Insurance, United India Insurance, and National Insurance – are mulling floating a third party administrator (TPA) company to take advantage of the healthy volumes in the health insurance segment. “There is a case for the four public sector non-life insurers to come together to set up a third party administrator for health insurance due to good volumes in the segment,” said Mr M. Ramadoss, Chairman and Managing Director, Oriental Insurance Company.
An insurance company takes the help of TPA to manage its claims processing and hospital networks. Delhi-headquartered Oriental Insurance Company is planning to set up separate offices to cater exclusively to the needs of brokers, large corporate accounts, retail accounts, bancassurance and dealer tie-ups. The existing offices are being re-designated depending on which business is more dominant in that office. “We are focussing our attention on various segments of the market. Brokers are an important distribution channel and we have set up separate offices to cater to this segment. By March, we should have at least 10 offices catering to the broker segment,” Mr Ramadoss said. The company has also started its first centralised claims service centre in Chennai to service motor-own damage claims.
During the nine months ended December 31, 2008, Oriental’s gross premium has grown by 2.7 per cent to Rs 2,978 crore. It is focusing on reducing its underwriting losses, especially in health insurance claims and motor third-party claims. “We aim to reduce our third party claims in health and motor by 10 per cent and 5 per cent respectively by March-end 2009,” he said. The company is hoping to collect gross premium of Rs 4,000 crore by March 31, 2008.
Friday, January 23, 2009
HEALTH CLAIMS: NON-LIFE INSURERS PLAN THIRD PARTY ADMINISTRATOR
ORIENTAL INSURANCE PLANS TO EXPLORE UNTAPPED AREAS
Coimbatore: In order to tide over the declining growth rate of insurance companies, Oriental Insurance is planning to explore the untapped areas to balance the falling growth rate, said M. Ramadoss, Chairman and Managing Director of The Oriental Insurance Company Limited, New Delhi. He was speaking at the function organised for the inauguration of the new premises of the Coimbatore Regional Office.
S. Surenther, Financial Advisor and General Manager were present. The economic slow down had resulted in the growth rate plummeting during the current fiscal from two to three per cent in October, it fell to one per cent in November and till December the overall growth rate had been only three per cent. Mr.Ramadoss said that the overall growth at the end of the fiscal was expected to stagnate at 10 to 12 per cent.
The fall in premium revenue and the resultant drop in growth rate were also because of the review of pricing and de-tariff measures in the premium rates done in April 2007. In the automobile insurance sector, Oriental was planning to come up with premium products such as depreciation free claim, alternate vehicle replacement policy during the period between accident and restoration of the vehicle.
The Commercial vehicle production had plummeted from 55,000 to 17,000 showing a drastic fall in the premium revenue graph. The health insurance sector alone was growing at a rapid pace. Growth in the health insurance sector stood at 55 per cent last year and it had already crossed more than 25 per cent. Out of the Rs 4,000 crore premium income per annum, Rs 550 crore came from health insurance segment alone and this was expected to touch a Rs 850 crore mark during the current fiscal or next, he said. The focus of the insurance industry would be more on this sector, he said.
However, expressing concern at the fraudulent practices, Mr.Ramadoss said that insurance sector was continuously asking the health ministry to standardise treatment procedures at the private hospitals. In the health insurance and motor vehicle insurance sector, the loss ratio incurred in terms of claims settlement was at Rs 120 crore. Owing to sustained efforts to tame the loss, it fell by 10 per cent this year and was expected to fall by another 10 per cent.
Oriental Insurance was also considering the setting up of a centralised claims processing centre which would be assisted by a panel of surveyors. Personal accident policy, house hold insurance policy, burglary protection cover besides inculcating the habit of insurance among younger generation and focusing on untapped rural areas could help balancing the fall in growth, Mr. Ramdoss said. Oriental Insurance has 900 offices and new regional offices are being opened at Hubli, Vizag and Raipur. An overseas branch is being opened at Doha in Middle East, he said.
S. Surenther, Financial Advisor and General Manager were present. The economic slow down had resulted in the growth rate plummeting during the current fiscal from two to three per cent in October, it fell to one per cent in November and till December the overall growth rate had been only three per cent. Mr.Ramadoss said that the overall growth at the end of the fiscal was expected to stagnate at 10 to 12 per cent.
The fall in premium revenue and the resultant drop in growth rate were also because of the review of pricing and de-tariff measures in the premium rates done in April 2007. In the automobile insurance sector, Oriental was planning to come up with premium products such as depreciation free claim, alternate vehicle replacement policy during the period between accident and restoration of the vehicle.
The Commercial vehicle production had plummeted from 55,000 to 17,000 showing a drastic fall in the premium revenue graph. The health insurance sector alone was growing at a rapid pace. Growth in the health insurance sector stood at 55 per cent last year and it had already crossed more than 25 per cent. Out of the Rs 4,000 crore premium income per annum, Rs 550 crore came from health insurance segment alone and this was expected to touch a Rs 850 crore mark during the current fiscal or next, he said. The focus of the insurance industry would be more on this sector, he said.
However, expressing concern at the fraudulent practices, Mr.Ramadoss said that insurance sector was continuously asking the health ministry to standardise treatment procedures at the private hospitals. In the health insurance and motor vehicle insurance sector, the loss ratio incurred in terms of claims settlement was at Rs 120 crore. Owing to sustained efforts to tame the loss, it fell by 10 per cent this year and was expected to fall by another 10 per cent.
Oriental Insurance was also considering the setting up of a centralised claims processing centre which would be assisted by a panel of surveyors. Personal accident policy, house hold insurance policy, burglary protection cover besides inculcating the habit of insurance among younger generation and focusing on untapped rural areas could help balancing the fall in growth, Mr. Ramdoss said. Oriental Insurance has 900 offices and new regional offices are being opened at Hubli, Vizag and Raipur. An overseas branch is being opened at Doha in Middle East, he said.
Source: The Hindu
NSURANCE FIRMS BET BIG ON CHILD COVER
Bangalore: Child insurance is one of the biggest growth areas for the insurance business in India, driven by the rising cost of education and parents' desire to secure a good future for their children. At ING Life, children's plans contribute over 20% of the total business currently, up from about 8% a year ago. At HDFC Standard Life, children's plans are a third of the total business. Max New York Life Insurance (MNYL) says the number of consumers opting for children's plans grew by about 50% in 2007-08, compared to the year before. The annual growth rate till then was about 10%-15%. Insurance companies say that in the last one year, most parents buying children's policies did so mainly to fund their children's higher education. Education is one of the most certain needs that cannot be deferred unlike other needs. "Providing good education, establishing a professional career or even doing a modest wedding is expensive. Every parent needs significant savings to support their children to take these important steps in life," says Sanjay Tripathy, executive head (marketing) in HDFC Standard Life. Manik Nangia, head of product management in MNYL, says child insurance has become more easy to market compared to regular endowment plans. He attributes this to higher levels of awareness and the rising costs of education. According to the MNYL-NCAER India Financial Protection survey, 85% of the addressable households save for children's education. Parents normally choose a term that coincides with the child turning 18-25 years of age. This varies depending on the targetted milestones -- child's graduation, higher education, marriage. The plans offered by insurance companies help to build a fund for your child's education, and offer an insurance cover alongside. There are several concerns that determine which plan you should go for, including how much you would need for your child, the level of security. Wealth advisors say savings for children must be fairly protected. The chosen plan could offer payouts at critical milestones of the child's career, followed by a lumpsum payout when it matures. "The insured can be either the parent or the child. In case of death of the parent, a lumpsum amount is made available to the child and future premiums are waived off," said Amit Gupta, marketing director in ING Vysya Life Insurance. ING has a unit linked savings plan that gives education payouts of 20%, 30% and 50% of the fund value during key milestones of a child's higher education. MNYL's children's plans also offer cover against dread diseases. "This is because even a critical illness can impair one's earning ability and financial well being," said Nangia. Financial planners suggest that if you are a conservative investor, you should go for a traditional insurance product with a mutual fund SIP (systematic investment plan) for a longer period.
Source: The Times of India
LIC NOT AVERSE TO STAKE SALE IN SATYAM
New Delhi: Keeping an eye on engineering giant L&T's moves on the Satyam front, government-run life insurance major LIC, which has equity investment and board representation in both the companies, on Thursday said the IT firm was still valua ble and could be revived with right leadership. “We have an investment there (Satyam). If better returns come from a sale, then we (will) go for a sale,'' LIC Chairman told PTI but added that he would not give any instruction to two nominees that the insurer has on L&T board on the issue. The country 's top life insurer, which has over four per cent stake in Satyam, however, ruled out joining the race for acquiring the troubled IT firm, either alone or with L&T.
“We don't have the expertise to run an IT company. We are clear on Satyam issue that we are an investor... We are not interested in controlling the company. We are interested in the prosperity of the company as our money is still there,'' Vijayan said. Asked given its position as the single largest investor in L&T with about 18 per cent stake, LIC would want the engineering major to take over the IT firm. “We are the single largest shareholder, but L&T is a board-driven company. It is not proper for me to discuss.''
On its suggestion to LIC nominees on L&T board, he said that the insurer had two members on L&T board, but their brief was to focus on proposals made at the meeting and the issues arising out of those. When asked what LIC would prefer between a takeover or revival of Satyam, Vijayan said, “If somebody is taking over and giving us a better return, then we will do it
Source: PTIS, The Hindu Business Line, The Indian Express, Deccan Chronicle, The Pioneer, The Statesman
LIC'S NEW POLICY WON'T BE SUBSIDIZED BY POLICYHOLDERS: CHAIRMAN
Chennai: Existing Life Insurance Corp (LIC) policyholders will not have to subsidise holders of the insurer's new guaranteed return product Jeevan Aastha, LIC chairman T.S. Vijayan has said. Launched for 45 days, the scheme closed Wednesday and is expected to fetch LIC around Rs.90 billion (Rs.9,000 crore). "There is no question of robbing Peter (existing policyholders) to pay Paul (Jeevan Aastha holders)," Vijayan told IANS over phone from Delhi. "The funds collected under Jeevan Aastha will be kept separately and investments will be made from that. A triple A rated corporate bond gets a return of 11 percent. We will soon be locking the investments," he added. Vijayan said he was confident the fund will generate sufficient surplus to pay not only the guaranteed return but also the loyalty bonus. The single premium policy guarantees a return of Rs.90 and Rs.100 for every Rs.1,000 of sum assured for a five-year and a 10-year tenure, respectively. However, this has made competition to raise doubts as to how LIC is going to pay such high returns, as the compounded rate of interest works out around eight percent. An official of a private life insurer preferring anonymity said: "In the case of a guaranteed return policy, 50 percent of the premium collected will have to be invested in government securities and the balance in triple A rated corporate securities." "The return on government securities is around six percent and 8.5 percent in the case of corporate bonds. After factoring in expenses like agents commission and administrative costs, LIC's margin will be around seven percent. The question is how LIC will bridge the shortfall as similar products sold by private players offer lower returns." But according to Vijayan, LIC has taken sufficient precaution to avoid any asset-liability mismatch. "The policy will be for two periods, five years and 10 years, and the scheme closed on Wednesday. In a couple of days we will know the amount collected selling Jeevan Aastha." According to sources close to LIC, the product does not leave much margin for LIC.
Source: The Economic Times
ECGC NOT TO HIKE PREMIUM ON INSURANCE COVERAGE
Kolkata: Export Credit Guarantee Corporation (ECGC) has no plans to hike premium on its insurance coverage in near future. The coverage is offered to Indian exporters and bankers to protect them against payment defaults by overseas buyers. In a related move to make insurance coverage more attractive among exporters, the Corporation has resolved to expedite claim settlements on payment defaults against exports of Indian goods and services.
In the next MoU with the government, ECGC will make a commitment to settle 50% of the total claims within seven days, instead of ten days being taken now to do the job. The balance claims will be cleared in 50 days in case of micro, small and medium exporters (MSME) and 55 days for general category exporters. The existing time span is about 60 days. The next MoU, due for 2009-10, is expected to be signed at the beginning of the year.
“Exporters are increasingly becoming aware about the benefit of taking risk coverage for their exports, especially after the outbreak of financial turmoil and economic slowdown in the global space. This tendency is being more noticed among pharmaceutical, ready-made garments, and gems and jewellery exporters who have been hit hard due to the meltdown in markets like the US and the UK,” ECGC executive director S Prabhakaran told ET.
Already, claims against non-receipt of payments have started pouring in from those sectors. For instance, the insurer has cleared an insurance claim of Rs 23.5 crore, which was raised by a jewellery exporter from the eastern region for not getting back export receivables from a buyer in Hong Kong. With the ready-made garment exporters facing problems in getting their payments from the US market, ECGC has settled claims of Rs 95 crore last month against payment defaults by two American buyers.
Even as claims against payment defaults are expected to go up this year, it would not have any adverse impact on ECGC’s income. This is reflected in the growth of premium income in the current year, which grew 14% to Rs 571 crore till mid-January.
In the next MoU with the government, ECGC will make a commitment to settle 50% of the total claims within seven days, instead of ten days being taken now to do the job. The balance claims will be cleared in 50 days in case of micro, small and medium exporters (MSME) and 55 days for general category exporters. The existing time span is about 60 days. The next MoU, due for 2009-10, is expected to be signed at the beginning of the year.
“Exporters are increasingly becoming aware about the benefit of taking risk coverage for their exports, especially after the outbreak of financial turmoil and economic slowdown in the global space. This tendency is being more noticed among pharmaceutical, ready-made garments, and gems and jewellery exporters who have been hit hard due to the meltdown in markets like the US and the UK,” ECGC executive director S Prabhakaran told ET.
Already, claims against non-receipt of payments have started pouring in from those sectors. For instance, the insurer has cleared an insurance claim of Rs 23.5 crore, which was raised by a jewellery exporter from the eastern region for not getting back export receivables from a buyer in Hong Kong. With the ready-made garment exporters facing problems in getting their payments from the US market, ECGC has settled claims of Rs 95 crore last month against payment defaults by two American buyers.
Even as claims against payment defaults are expected to go up this year, it would not have any adverse impact on ECGC’s income. This is reflected in the growth of premium income in the current year, which grew 14% to Rs 571 crore till mid-January.
Source: The Economic Times
IRDA REVISES NORMS FOR OVERSEAS REP OFFICES
Mumbai: With global insurance companies taking a hit due to the economic recession, the Insurance Regulatory and Development Authority (Irda) has asked domestic insurance companies to provide information on the business gathered through the representative or liaison office, expenditure incurred, details of complaints received and redressed. The regulator has asked insurers to submit reports on a quarterly basis and at the close of a financial year in the annual report.
Source: Business StandardSATYAMITES LOSE HEALTH INSURANCE COVER
Hyderabad: Thousands of Satyam employees working across the country are set to lose their health insurance cover from as the beleaguered IT giant has failed to renew the premium. The company did not pay the approximately the Rs 30 crore outstanding premium “despite repeated requests” to Iffco-Tokio General Insurance Company on Wednesday which is the last date for payment, according to reliable sources.
The personnel from the Third Party Administrator (TPA) – TTK Health Care Pvt. Ltd – also tried to reach Satyam top brass in vain. While the lower-level staff replied that a decision would be taken at the top level, none of them took any measures to pay the premium, the source said. “When we asked them for the payment a couple of days ago, we were told that the first priority was to run the office and pay the salaries but not health insurance,” the source said.
The immediate implication for the employees is loss of health cover. “Unlike life insurance there is no provision to pay later with fine. The company has to take a fresh policy. Till then no health claims would be valid,” he said. The limit of health insurance cover for Satyam employees varies at different levels beginning from Rs 2 lakh. The average claim size of Satyam has been between Rs 12,000 and Rs 15,000, according to data available with TTK Health Care.
Employees shocked
When contacted, some Satyamites were shocked to know that the premium was not paid.
“This is very painful as our life has already been ridden with uncertainities over the job itself. I see this as an indication of future shocks. I hope, I don’t lose my job by the month-end,” Mr A. Janardhan, a Satyam staffer, said.
Top brass under cover
Paradoxically, the top brass of Satyam still enjoy insurance cover (other than health) as on date under the D&O policy which protects the personal fortunes of individual directors and officers, in respect of personal liabilities arising out of their wrongful acts such as breach of duty, breach of trust, neglect, error, misstatement or misleading statement.
“As on date the insurance cover for Satyam top brass under Directors and Officers (D&O) and Errors and Omissions (E&O) policies is very much in force,” an official from ICICI Lombard said while refusing to give details about renewal date and premium dues.
Sources: The Hindu Business Line
The personnel from the Third Party Administrator (TPA) – TTK Health Care Pvt. Ltd – also tried to reach Satyam top brass in vain. While the lower-level staff replied that a decision would be taken at the top level, none of them took any measures to pay the premium, the source said. “When we asked them for the payment a couple of days ago, we were told that the first priority was to run the office and pay the salaries but not health insurance,” the source said.
The immediate implication for the employees is loss of health cover. “Unlike life insurance there is no provision to pay later with fine. The company has to take a fresh policy. Till then no health claims would be valid,” he said. The limit of health insurance cover for Satyam employees varies at different levels beginning from Rs 2 lakh. The average claim size of Satyam has been between Rs 12,000 and Rs 15,000, according to data available with TTK Health Care.
Employees shocked
When contacted, some Satyamites were shocked to know that the premium was not paid.
“This is very painful as our life has already been ridden with uncertainities over the job itself. I see this as an indication of future shocks. I hope, I don’t lose my job by the month-end,” Mr A. Janardhan, a Satyam staffer, said.
Top brass under cover
Paradoxically, the top brass of Satyam still enjoy insurance cover (other than health) as on date under the D&O policy which protects the personal fortunes of individual directors and officers, in respect of personal liabilities arising out of their wrongful acts such as breach of duty, breach of trust, neglect, error, misstatement or misleading statement.
“As on date the insurance cover for Satyam top brass under Directors and Officers (D&O) and Errors and Omissions (E&O) policies is very much in force,” an official from ICICI Lombard said while refusing to give details about renewal date and premium dues.
Sources: The Hindu Business Line
HEALTH INSURANCE SCHEME FOR THE POOR THIS YEAR
Chennai: The government will launch an insurance scheme for the poor and low- income groups to get the best medical treatment in government and private hospitals, Governor Surjit Singh Barnala said on Wednesday. It would benefit about one crore families. The insurance cover would be up to Rs.1 lakh.
In his address to the Assembly, Mr. Barnala said the government was aware that it was not possible for the poor to pay the cost of treatment in private hospitals, especially for cancer, heart diseases, kidney failure, brain and spinal problems and life-threatening accidents.
“Considering these facts, a new scheme, the Chief Minister’s Insurance Scheme for Life Saving Treatments, will be launched this year.” It would enable the poor to get treatment in government as well as private hospitals for serious ailments. “Each family will be insured for availing itself of free treatment up to Rs.1 lakh. The government will bear the entire premium.”
The State government would further increase the minimum support price for sugar cane. “On the basis of requests, the government has decided to raise it to Rs.1,100 a tonne. In addition, by bearing Rs.90 towards transport charges and providing, on an average, Rs.30 as recovery-based incentive,” the per tonne realisation for farmers would be Rs.1,220.
Mr. Barnala said that after the damage caused by the rain, the government had given farmers Rs.388 crore in relief. The relief distributed to the affected, spread across 12 districts, amounted to Rs.1,027 crore. He urged the Centre to provide, at the earliest, the financial assistance the State government needed to fully restore the affected areas and disburse adequate relief.
On the plight of Sri Lankan Tamils, he said the government had urged the Centre “to take, without delay, appropriate alternative measures like dialogue so as to establish peace, and thus protect the Sri Lankan Tamils who are suffering.”
The government welcomed the law enacted to create a National Investigation Agency, but said it should “operate without interfering with the powers of State governments or affecting individual liberty.” Speaker R. Avudaiappan read out the Tamil version of the Governor’s address.
Source: The Hindu
In his address to the Assembly, Mr. Barnala said the government was aware that it was not possible for the poor to pay the cost of treatment in private hospitals, especially for cancer, heart diseases, kidney failure, brain and spinal problems and life-threatening accidents.
“Considering these facts, a new scheme, the Chief Minister’s Insurance Scheme for Life Saving Treatments, will be launched this year.” It would enable the poor to get treatment in government as well as private hospitals for serious ailments. “Each family will be insured for availing itself of free treatment up to Rs.1 lakh. The government will bear the entire premium.”
The State government would further increase the minimum support price for sugar cane. “On the basis of requests, the government has decided to raise it to Rs.1,100 a tonne. In addition, by bearing Rs.90 towards transport charges and providing, on an average, Rs.30 as recovery-based incentive,” the per tonne realisation for farmers would be Rs.1,220.
Mr. Barnala said that after the damage caused by the rain, the government had given farmers Rs.388 crore in relief. The relief distributed to the affected, spread across 12 districts, amounted to Rs.1,027 crore. He urged the Centre to provide, at the earliest, the financial assistance the State government needed to fully restore the affected areas and disburse adequate relief.
On the plight of Sri Lankan Tamils, he said the government had urged the Centre “to take, without delay, appropriate alternative measures like dialogue so as to establish peace, and thus protect the Sri Lankan Tamils who are suffering.”
The government welcomed the law enacted to create a National Investigation Agency, but said it should “operate without interfering with the powers of State governments or affecting individual liberty.” Speaker R. Avudaiappan read out the Tamil version of the Governor’s address.
Source: The Hindu
OIC EYES RS 4,200 CR PREMIUM
Mumbai: State-run non-life insurer, Oriental Insurance Company (OIC), is looking at a premium growth of 4-5% by the fiscal-end, up from 2.7% recoded a year ago. The company achieved the gross premium collection of Rs 2975 crore as on December, 2008 and was expecting the figure to be at Rs 4200 crore by the end of the fiscal.
Speaking to reporters after inaugurating first broker divisional office of his company in Mumbai on Wednesday, M Ramadoss, chairman and managing director, OIC, said, "Based on various recommendations made by the BCG for the restructuring of the company, we are working a hosts of innovations. First of all, the company has appointed a separate cell for segments like health and motor claims, which were the fastest growing sectors currently.''
The cell is being headed by an official in the rank of a general manager. The idea is to ensure growth and bring down the claims in these portfolios. Also, OIC was looking at opening a separate wing for corporate accounts, which would be headed by an official whose job would be to take care of the agents. Next to come in line will be the dealer tie-up. OIC has also centralized all the existing motor claims through service centres.
The company was planning to make motor claim settlement to merely less than 20 days, said Ramadoss. The OIC was planning to open 10-15 brokers' offices during current fiscal. Coming on business procurement by agents, the company had plans to bring additional business of Rs 5-6 lakh through each agent per month.
While business procurement by agents has grown by 50% during past 5-6 months the number of claims have come down at each service centre of the company. In Mumbai alone, the claim ratio has come down to 25% in motor until December, 2008.
Source: The Financial Express
Speaking to reporters after inaugurating first broker divisional office of his company in Mumbai on Wednesday, M Ramadoss, chairman and managing director, OIC, said, "Based on various recommendations made by the BCG for the restructuring of the company, we are working a hosts of innovations. First of all, the company has appointed a separate cell for segments like health and motor claims, which were the fastest growing sectors currently.''
The cell is being headed by an official in the rank of a general manager. The idea is to ensure growth and bring down the claims in these portfolios. Also, OIC was looking at opening a separate wing for corporate accounts, which would be headed by an official whose job would be to take care of the agents. Next to come in line will be the dealer tie-up. OIC has also centralized all the existing motor claims through service centres.
The company was planning to make motor claim settlement to merely less than 20 days, said Ramadoss. The OIC was planning to open 10-15 brokers' offices during current fiscal. Coming on business procurement by agents, the company had plans to bring additional business of Rs 5-6 lakh through each agent per month.
While business procurement by agents has grown by 50% during past 5-6 months the number of claims have come down at each service centre of the company. In Mumbai alone, the claim ratio has come down to 25% in motor until December, 2008.
Source: The Financial Express
TATA AIG LIFE LAUNCHES INVESTASSURE INSTA
Tata AIG Life Insurance Company Limited has announced the launch of Tata AIG Life InvestAssure Insta, an easy-to-understand and customer-friendly unit-linked insurance plan. Tata AIG Life InvestAssure Insta is designed to help the policyholder obtain valuable protection enhanced by the benefit of getting the most out of his investment and the growth potential through high allocation rates and further supplement it with a guaranteed maturity bonus. The customer can choose from a spread of five fund options depending upon his risk taking appetite.
Source: Business Standard
Source: Business Standard
INVESTORS KEEP FAITH IN LIC'S JEEVAN AASTHA
Mumbai: Despite the turmoil in the financial markets, Life Insurance Corporation’s Jeevan Aastha policy is on course to break the record for premia collection by a scheme in a single month. The policy has been lapped up by celebrities and middle-class investors alike during the 45-day window it was open for sale. The policy, which closed on Wednesday, is expected to collect over Rs 8,000 crore. But some insiders said the collection could be higher. “The exact amount will take some time to collate. Some large proposers have deposited only a token amount as they did not want to lock their funds in case they did not clear the medical underwriting,” said an official. Although the corporation had said it was targeting Rs 25,000 crore, this was seen as a marketing gimmick and not a real target. Sources said the applicants include a host of big-ticket names. A sportsperson is understood to have put in Rs 35 crore, while a leading film actor has invested Rs 8 crore and a little-known business family has invested Rs 50 crore. In addition, thousands of applications have been received for Rs 1-crore policies, said sources. For high net worth individuals, the tax free earnings were a major attraction while for the middle class, there was the additional benefit of tax savings under section 80 CCC. In the past, many of LIC’s guaranteed high-return schemes have seen runaway sales towards their closing date. These include Bima Nivesh and Jeevan Shree. But there are several differences between Jeevan Aastha and other high-return schemes. Aastha is largely an urban phenomenon, with money coming in from large cities. Unlike other products, where a sudden turn in interest rates tipped money into the schemes, Jeevan Aastha was a combination of clever structuring, planning and timing. Understanding investors’ preference for guaranteed returns, LIC structured a product by first buying huge quantities of bonds when triple A companies were borrowing at 11-12%. The corporation then obtained permission from the industry regulator IRDA for a guaranteed return product where subscriptions would be open for only 45 days. The insurer delayed the launch of the scheme to time it closer to the third quarter, as rates were seen to be coming down. The sheer distribution strength of LIC also played a big role in pushing the product. The policy has helped to boost LIC’s flagging market share and has enabled several offices in metro centres to achieve their premium targets for the whole year in January itself. Despite the success, the scheme has its limitations. Jeevan Aastha is more of a bond and less of an insurance policy. Although the sum insured is five times the premium in the first year, the cover amount declines to two times from the second year. Smaller investors, who were not all that savvy in reading the fine print, were sold the policy with a promise of 10% return. But the actual returns are likely to be much lesser.
Source: The Economic Times
Source: The Economic Times
NIC TO HIKE PREMIUM FOR DIRECTORS’ RISK POLICIES
Kolkata: Faced by a rising demand for Directors and Officers (D&O) liability policies after the Satyam scam, the National Insurance Company Ltd is looking at increasing the premium rate by over 30 per cent, according to NIC sources. The public sector insurer may also formulate more restrictive clauses for D&O, for example, exclusion of all claims in case of criminal offence by the directors, a senior NIC official told Business Line.
D&O liability policies offer cover against any loss or defence-cost that an organisation may incur on account of mistaken actions taken by the directors and officers in pursuance of their duties.
Satyam, an eye-opener
“The Satyam incident has been an eye-opener for us in considering formulation of more restrictive clauses and restructuring the premium pricing of liability policies,” he said. The decision has also been influenced by an overall lack of confidence on corporate governance affairs , he added.
The decision to increase premium has also been influenced by an overall lack of confidence on corporate governance affairs after the recent scam, he pointed out. The annual premium on liability policies varies between 0.15 to and 0.30 per cent of the indemnity limit depending upon the risk attached to a company. After the hike in premium, it may range anywhere between 0.2 and to 0.6 per cent of the risk cover, he said.
NIC’s premium income from liability insurance constitutes a mere 2 two per cent of its total premium income. The concept was introduced in the country only in the last two-three years and is yet to be tapped significantly. The total premium collection by the general insurance industry in the countryIndia till October, 2008 from liability policies was to the tune of Rs 386 crore, of which NIC collected over Rs 25 crore. The segment has been growing year on year at over 30 per cent for the industry, according to IRDA data.
“There is a huge growth opportunity in the D&O liability segment, particularly in the current volatile economic conditions. We, however, need to price the product optimally as the downturn also attaches higher risk of litigation against executives,” the officer said.
Source: The Hindu Business Line
D&O liability policies offer cover against any loss or defence-cost that an organisation may incur on account of mistaken actions taken by the directors and officers in pursuance of their duties.
Satyam, an eye-opener
“The Satyam incident has been an eye-opener for us in considering formulation of more restrictive clauses and restructuring the premium pricing of liability policies,” he said. The decision has also been influenced by an overall lack of confidence on corporate governance affairs , he added.
The decision to increase premium has also been influenced by an overall lack of confidence on corporate governance affairs after the recent scam, he pointed out. The annual premium on liability policies varies between 0.15 to and 0.30 per cent of the indemnity limit depending upon the risk attached to a company. After the hike in premium, it may range anywhere between 0.2 and to 0.6 per cent of the risk cover, he said.
NIC’s premium income from liability insurance constitutes a mere 2 two per cent of its total premium income. The concept was introduced in the country only in the last two-three years and is yet to be tapped significantly. The total premium collection by the general insurance industry in the countryIndia till October, 2008 from liability policies was to the tune of Rs 386 crore, of which NIC collected over Rs 25 crore. The segment has been growing year on year at over 30 per cent for the industry, according to IRDA data.
“There is a huge growth opportunity in the D&O liability segment, particularly in the current volatile economic conditions. We, however, need to price the product optimally as the downturn also attaches higher risk of litigation against executives,” the officer said.
Source: The Hindu Business Line
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