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 Standard
Showing posts with label Regulations. Show all posts
Showing posts with label Regulations. Show all posts
Friday, January 23, 2009
Tuesday, July 1, 2008
IRDA ISSUES NEW LICENCES
Chennai: The Insurance Regulatory Development Authority (Irda) has issued licences for two new life insurance companies and one non-life insurance company. With these entrants, the number of life and non-life insurance companies in India has gone up to 21 and 20 respectively. Aegon Religare Life Insurance Company, and Netherlands DLF Pramerica Life Insurance Company were granted licences. Bharti Axa General Insurance Company has been registered as a general insurance company.Source: Business Standard
Thursday, June 26, 2008
New model for insurers to reduce policy holders’ risk
The insurance industry is set to see more of its capital freed, with the Insurance Regulatory Development Authority (IRDA) recommending transition to a risk-based capital framework for insurers. The proposed framework envisages assessing the capital requirement of insurers based on the underlying risk and volatility of their business. The companies will have to earmark capital for different line of businesses.
This model, known as Solvency II, has been adopted in most developed economies. If Indian insurers were to replicate this, they would have to set aside much less capital than they do now for unit linked insurance plans (ULIPs) compared to traditional insurance products. The recommendation to adopt the new framework was made last week to a high-level panel on the financial sector assessment programme. The panel, comprising senior government officials and regulators, is set to recommend further course of reforms in the financial sector.
Unlike traditional insurance products, the investment risk in ULIPs is borne by the policy holder. The solvency margin requirement for ULIPs is just one third of that for traditional insurance products. Solvency margin is the excess of assets over liabilities that an insurer has to maintain as a prudential measure.
Simply put the risk-based capital framework factors in a lower risk on policy holders’ liabilities. But companies will have to set aside higher capital if there is an asset liability mismatch in their portfolio.
IRDA has so far been hesitant to suggest the new framework mainly due to the uncertainty over investor behavior in a choppy market. Besides, the transition would also require inputs from the actuarial side, both from insurance companies and the regulator.
But there is a shortage of such talent now which needs to be addressed. Even countries that have adopted this model have done so cautiously and over a long span. Fact is the risk-based model gives a clear picture of the financial strength of the insurer and also allows for regulatory intervention, if required. It also helps in making comparisons across companies.
Currently, the minimum capital requirement for a private insurer is Rs 100 crore. Companies need capital to grow. It is also required to meet unexpected claims, expense over-runs and investment losses. The minimum capital prescribed under the new framework will act as a buffer to cushion losses, reckon experts. The IRDA has also made out a case for putting in place corporate governance norms for insurers and greater supervisory powers for the regulator. The latter would require amendments to the insurance legislation. An empowered group of ministers is vetting these proposed amendments along with other changes including a hike in the FDI cap from 26% to 49%.
Meanwhile, the IRDA has also looked at the status of India’s compliance with the insurance core principles (ICP) enunciated by the International Association of Insurance Supervisors (IAIS), a body of regulators and supervisors of over 190 jurisdictions. The principles include, among others, conditions for effective supervision, supervisory system, supervised entity, ongoing supervision, prudential requirements, markets and consumers and anti money laundering. The score card: India has observed or largely observed around 17 out of the 28 odd core principles.
But there are a few gaps. The conditions for effective supervision may not be fully in sync with global standards till changes are made in the legislation. The regulator also does not have complete control either over public sector insurance companies. Comprehensive internal controls are yet to be in place. There is also a case for beefing up on-site supervision.
More importantly, there is a case for enhancing disclosures to the public and having a proper mechanism in place for risk assessment. The IRDA has now set the ball rolling to usher in these reform measures.
Source: Insuremagic
This model, known as Solvency II, has been adopted in most developed economies. If Indian insurers were to replicate this, they would have to set aside much less capital than they do now for unit linked insurance plans (ULIPs) compared to traditional insurance products. The recommendation to adopt the new framework was made last week to a high-level panel on the financial sector assessment programme. The panel, comprising senior government officials and regulators, is set to recommend further course of reforms in the financial sector.
Unlike traditional insurance products, the investment risk in ULIPs is borne by the policy holder. The solvency margin requirement for ULIPs is just one third of that for traditional insurance products. Solvency margin is the excess of assets over liabilities that an insurer has to maintain as a prudential measure.
Simply put the risk-based capital framework factors in a lower risk on policy holders’ liabilities. But companies will have to set aside higher capital if there is an asset liability mismatch in their portfolio.
IRDA has so far been hesitant to suggest the new framework mainly due to the uncertainty over investor behavior in a choppy market. Besides, the transition would also require inputs from the actuarial side, both from insurance companies and the regulator.
But there is a shortage of such talent now which needs to be addressed. Even countries that have adopted this model have done so cautiously and over a long span. Fact is the risk-based model gives a clear picture of the financial strength of the insurer and also allows for regulatory intervention, if required. It also helps in making comparisons across companies.
Currently, the minimum capital requirement for a private insurer is Rs 100 crore. Companies need capital to grow. It is also required to meet unexpected claims, expense over-runs and investment losses. The minimum capital prescribed under the new framework will act as a buffer to cushion losses, reckon experts. The IRDA has also made out a case for putting in place corporate governance norms for insurers and greater supervisory powers for the regulator. The latter would require amendments to the insurance legislation. An empowered group of ministers is vetting these proposed amendments along with other changes including a hike in the FDI cap from 26% to 49%.
Meanwhile, the IRDA has also looked at the status of India’s compliance with the insurance core principles (ICP) enunciated by the International Association of Insurance Supervisors (IAIS), a body of regulators and supervisors of over 190 jurisdictions. The principles include, among others, conditions for effective supervision, supervisory system, supervised entity, ongoing supervision, prudential requirements, markets and consumers and anti money laundering. The score card: India has observed or largely observed around 17 out of the 28 odd core principles.
But there are a few gaps. The conditions for effective supervision may not be fully in sync with global standards till changes are made in the legislation. The regulator also does not have complete control either over public sector insurance companies. Comprehensive internal controls are yet to be in place. There is also a case for beefing up on-site supervision.
More importantly, there is a case for enhancing disclosures to the public and having a proper mechanism in place for risk assessment. The IRDA has now set the ball rolling to usher in these reform measures.
Source: Insuremagic
Tuesday, June 17, 2008
Insurance products should be simple: Chidambaram
Bangalore: Noting that India is among the under-insured countries, Finance Minister P Chidambaram today said insurance products should be simple and need to reach the rural population where penetration is low.
He was speaking after inaugurating the Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd, a partnership between two of largest nationalised banks and the Asian Insurance arm of the world's largest banking and financial service group.
Applauding the partnership between the three giants— Canara Bank, Oriental Bank of Commerce (OBC) and HSBC Insurance Asia Pacific Holding Ltd— he said the the new firm was the 19th life insurance firm to be launched in India and that there were "six more in the wings."
The growing numbers indicate that India had the capacity to support such a large number of companies and that there existed an "unmet demand" for insurance products in India, he said.
Observing that the insurance penetration in India had been low, he said India was among the under-insured countries. He said insurance products also needed to reach the rural population where penetration was low.
However, as a measure of caution and advice, he said "products should be simple." "Plain vanilla is still the best flavour for an ice-cream," he said quoting an analogy. "People in India are simple folks, who work hard and save. "I believe that simpler the product, better will be the reception.
Source: PTI
He was speaking after inaugurating the Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd, a partnership between two of largest nationalised banks and the Asian Insurance arm of the world's largest banking and financial service group.
Applauding the partnership between the three giants— Canara Bank, Oriental Bank of Commerce (OBC) and HSBC Insurance Asia Pacific Holding Ltd— he said the the new firm was the 19th life insurance firm to be launched in India and that there were "six more in the wings."
The growing numbers indicate that India had the capacity to support such a large number of companies and that there existed an "unmet demand" for insurance products in India, he said.
Observing that the insurance penetration in India had been low, he said India was among the under-insured countries. He said insurance products also needed to reach the rural population where penetration was low.
However, as a measure of caution and advice, he said "products should be simple." "Plain vanilla is still the best flavour for an ice-cream," he said quoting an analogy. "People in India are simple folks, who work hard and save. "I believe that simpler the product, better will be the reception.
Source: PTI
NEW IRDA CHIEF FOR THRUST ON RURAL, HEALTH INSURANCE
Hyderabad: Developing an enabling environment for the growth of rural and health insurance tops the agenda of Mr J. Hari Narayana, new Chairman of Insurance Regulatory and Development Authority (IRDA).
“While protection of policy-holders’ interest is paramount to the regulator always, we will also ensure the spread of insurance in rural and health sectors. There is lot of potential in these sectors,” Mr Hari Narayana told Business Line after taking over as the third chairman of IRDA here on Thursday.
The regulator would be happy as long as the prescribed rural and social obligations are met by the companies, he said, adding that the current scenario was satisfactory in that regard.
Various ways and means would be “carefully examined” to ensure the health and penetration of health insurance, the chairman said. “There are some high-level panels which examined various aspects on health insurance and we will take appropriate steps shortly,” he said.
Personally, he felt that one should take health insurance at a younger age itself.
Observing that the growth of insurance industry was “very good” at 13 per cent last year at over Rs 75,000 crore, he said the growth could be 18 per cent this year.
On the significant share of Unit Linked Insurance Plans (ULIPs) in insurance industry and their dependence on a volatile financial market, Mr Hari Narayana said, “There is nothing to worry as Indian investors (holders of insurance policies) are very mature. We will monitor the situation while promoting transparency.”
Source: The Hindu Business Line
“While protection of policy-holders’ interest is paramount to the regulator always, we will also ensure the spread of insurance in rural and health sectors. There is lot of potential in these sectors,” Mr Hari Narayana told Business Line after taking over as the third chairman of IRDA here on Thursday.
The regulator would be happy as long as the prescribed rural and social obligations are met by the companies, he said, adding that the current scenario was satisfactory in that regard.
Various ways and means would be “carefully examined” to ensure the health and penetration of health insurance, the chairman said. “There are some high-level panels which examined various aspects on health insurance and we will take appropriate steps shortly,” he said.
Personally, he felt that one should take health insurance at a younger age itself.
Observing that the growth of insurance industry was “very good” at 13 per cent last year at over Rs 75,000 crore, he said the growth could be 18 per cent this year.
On the significant share of Unit Linked Insurance Plans (ULIPs) in insurance industry and their dependence on a volatile financial market, Mr Hari Narayana said, “There is nothing to worry as Indian investors (holders of insurance policies) are very mature. We will monitor the situation while promoting transparency.”
Source: The Hindu Business Line
Wednesday, June 11, 2008
NEW IRDA CHIEF J HARINARAYAN WANTS TO FOSTER COMPETITION
Hyderabad/New Delhi: Jandhyala Harinarayan is the new chairman of the Insurance Regulatory Development Authority of India (IRDA). The government cleared the order for his appointment on Tuesday.
Mr Harinarayan, who was a former chief secretary of Andhra Pradesh, will have a five-year tenure at IRDA. He succeeds CS Rao who retired in May this year. He was chosen for the top job based on the recommendations of a search committee headed by finance secretary D Subba Rao.
“My mission would be to widen and deepen insurance penetration in India and encourage competition among insurers to give a better deal to consumers,” Mr Harinarayan told ET on Tuesday.
According to him, new channels of distribution have helped improve insurance coverage. But more needs to be done. “We need to look at the role of various distributors, including agents and brokers and also encourage direct marketing of retail insurance products,” he said.
Insurance penetration in India is low compared with developed countries such as the UK and Japan. Measured in terms of premium collections, the penetration is close to 4.1% of GDP in life and 0.6% of the GDP in the non-life segment.
Penetration in the non-life segment is expected to improve, with free pricing and product innovation. But IRDA is yet to allow insurers the freedom to design their own products.
Mr Harinarayan reckons there is a case for lowering the premium on mediclaim policies to make it more affordable to consumers. Mediclaim is a voluntary health insurance policy and normally comes up for renewal annually.
“Companies can perhaps look at a longer renewal period. On their part, policy holders should start off with medical insurance schemes as early as possible, as it would mean ammortising risk over a longer period of time,” he said.
Many senior citizens’ organisations have registered complaints with the insurance regulator on surging premiums and denial of fresh insurance covers.
An expert committee that examined these complaints recommended universal coverage for health insurance. It has also made out a case for a health insurance pool, factoring in the high claims ratio in medical insurance. Here again, the regulator is yet to take a view on these suggestions which can help improve insurance penetration.
According to Mr Harinarayan, there is also need to ensure greater transparency in unit-linked insurance plans, a popular savings instrument that offer protection in terms of life cover and flexibility in investments to the policyholder. “IRDA has already initiated work on this, asking insurers to give a break up of the exact amount that will be available for investments during the premium period. But there is no doubt that investors need greater clarity on ULIPs,” he said.
Source: The Economic Times
Tuesday, June 3, 2008
Ceiling on insurance premia
Sec. 80C(3) places a ceiling of 20 per cent of the sum assured as available for benefit of Sec. 80C. Sec. 80C is easily applicable for endowment policies where there is a specific sum assured. There are other policies where there is no specific sum assured as in the case of Bhima Plus. Since the ceiling with reference to the assured sum is not possible, I presume that the entire premium should be deductible.
Sec. 80C(3) applies for an insurance policy other than a contract for deferred annuity. Insurance policy for purposes of Sec. 80C has to be on the life of a person. Merely because the sum assured may include an element of profit or part of it is returned in instalments or subject to any other variation instead of payment of an assured sum on death or maturity of the policy, it does not mean that the ceiling is inapplicable for policies other than endowment policies. It can be presumed that in all cases of single premium payment, there can be no deduction of more than 20 per cent of such amount in the case of any life policy.
Any other view would not be consistent either with the letter or the spirit of the section.
Source: The Hindu
Sec. 80C(3) applies for an insurance policy other than a contract for deferred annuity. Insurance policy for purposes of Sec. 80C has to be on the life of a person. Merely because the sum assured may include an element of profit or part of it is returned in instalments or subject to any other variation instead of payment of an assured sum on death or maturity of the policy, it does not mean that the ceiling is inapplicable for policies other than endowment policies. It can be presumed that in all cases of single premium payment, there can be no deduction of more than 20 per cent of such amount in the case of any life policy.
Any other view would not be consistent either with the letter or the spirit of the section.
Source: The Hindu
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