Aid for insurance PSUs to cover HIV+

New Delhi :THE government is working on an insurance scheme for HIV patients by which the government seeks to subsidise public sector insurers to cover HIVpositive patients. The proposal was mooted by finance minister P Chidambaram at the group of ministers meeting on insurance. The move comes at a time when the country is on the brink of becoming the world capital for AIDS with more than five million people diagnosed HIV-positive.

The premium charged by the insurance companies will be much higher than premiums for other health insurance schemes. Analysts said the premiums could be determined by total annual cost of HIV treatment, which is $365 in India, a 10th of what it costs in the US.

According to highly-placed sources in the government, Mr Chidambaram has asked other members to actively consider the issue. The ministry is likely to hold a meeting with various insurance PSU heads next month to arrive at a decision.

A top official at Oriental Insurance Co said, “The government has consulted us on the issue. We feel that HIV cases are uninsurable with no credible statistics available. The disease has already reached pandemic proportions, and the potential of it getting bigger is real. However, the government must consider a subvention of sorts. At least 80% of the claims should be compensated. Globally, insurance companies have tried to address HIV.”

Global consulting & actuarial firm Milliman assistant managing director Alam Singh said, “An insurance scheme for HIV-positive patients will not be a traditional insurance product but more of a disease management programme. The cap on the prices of HIV drugs has already ensured affordability, but the challenge is delivery and financing. In addition, comorbidities require aggressive management. Access and adherence to medication therapy is often the key factor in improving the lifespan of an HIV patient. This is a workable proposition if the initiative is well-designed.”

Earlier this year, the United Nations said India has the highest number of HIV infections in the world at 5.7 million. Experts say the government has understated figures on HIV patients and, on the ground, it could be much more. Though the number of patients is significantly less than 1% of the billion-plus population, in absolute terms, the number of HIV patients is huge. Besides, there is a difference between being diagnosed HIV-positive and having full-blown AIDS.

Meanwhile, labour minister Oscar Fernandes moved the proposal for HIV insurance, which is now learnt to have been taken under serious task by other ministries as well. The GoM has had three rounds of meetings so far. Other members include Planning Commission deputy chairman Montek Singh Ahluwalia, minister of state for labour Oscar Fernandes, minister of social justice & empowerment Meira Kumar and minister of state for urban housing & employment Kumari Shailja.

Source: Economic Times, May 24, 2007 (Rajat Guha & Priti Patnaik)

Foreign reinsurers may get India access

MUMBAI : The government may allow foreign reinsurance companies to set up branch offices in the country with certain regulatory restrictions, according to a senior finance ministry official. “This is one of the areas, where there is a broader political consensus with respect to foreign investment in the insurance sector,” said joint secretary (banking & insurance) GC Chaturvedi after a seminar here on Wednesday. At present, foreign reinsurers are already allowed to set up representative offices in the country. However, these outfits cannot underwrite business, which branches would be in a position to do. The proposal to allow foreign reinsurers is one of the 113 amendments proposed in the IRDA Act and the group of ministers (GoM) looking into this has already met thrice. The GoM is expected to meet again soon, he said. Mr Chaturvedi also clarified that there is no move to allow public sector insurance companies to tap the capital market to meet the fund requirement for their overseas expansion plans. “The general insurance companies have reserves of over Rs 1, 000 crore, which was adequate to meet their overseas expansions plan,” he said. As for Life Insurance Corporation (LIC), the government has given the corporation Rs 160 crore exclusively for its foreign business. However, there could be some revisions to the norms for standalone health insurance companies. There could be differential capital bases and the overall equity cap could be brought down from Rs 100 crore to Rs 50 crore. Earlier, speaking on the trends in the sector, PC James, member of IRDA, said that as the economy is moving from an industrial economy to service economy, the need for risk cover on various services is increasing, which, in turn, makes a strong case for more liability products. Already in FY07, liability products have recorded the fastest growth, he said.

Source: TIMES NEWS NETWORK, MAY 24, 2007

PSU insurance cos may not go public

MUMBAI: The government does not have any plan to allow public sector insurance companies to raise money through the stock market for meeting capital requirements and expansion plans, a senior official said on Wednesday. "We are not considering allowing public sector insurance companies to go public for capital raising. It is not required as they have sufficient reserves," G C Chaturvedi, Joint Secretary (Banking & Insurance) in Ministry of Finance, said. There was no requirement of additional capital, he said. State-run Life Insurance Corporation, the country's biggest insurer, earlier had plans to tap the stock markets for raising funds. On entry of foreign re-insurance companies in India, Chaturvedi said the government was considering allowing these companies to set up branch offices in India with certain regulatory restrictions. "The representative offices of re-insurance companies cannot write business here. The branch offices could be allowed with some regulatory restrictions," he said. The regulatory requirements would be finalised by the Insurance Regulatory and Development Authority, he said. Asked on the amendments to the Insurance Act, Chaturvedi said the Group of Ministers have had three meetings and would meet again shortly to iron out differences. The proposed amendments pertain to increasing the foreign direct investment cap in insurance sector and reduction in the minimum capital base for health insurance companies.

Source: PTI , MAY 23, 2007

Insurance brokers turn launderers

NEW DELHI: As the government enforces new measures to check money laundering, launderers are targeting insurance companies where large premium payments are split over several transactions to avoid suspicion. Brokerage commissions in cash amount to nearly Rs 900 crore in the non-life sector alone. In the non-life business, insurance brokerage is the most popular mode to launder money. Typically, most traders who want to convert black money into white channelise their operations through a brokerage. The broker promises huge discounts to the client on behalf of the insurer and is also paid a hefty commission. In non-life insurance, which is estimated to be worth Rs 22,000 crore, at least 60% of the business comes from the corporate sector. Of the Rs 12,000-crore business in the segment, Rs 6,000 crore is accounted for by the private sector. With brokerage fees touching 30%, it is estimated that half of this is routed through cash, which amounts to Rs 900 crore. The figure is higher for life insurance companies, which handle business worth Rs 35,000 crore. “Using false invoices and bills issued by a dummy of the brokerage company, the money is routed back to the broker,” an industry source said. In the life insurance business, agents are pivotal in laundering money, receiving commissions in cheques and paying clients in cash, he added. “If an agent or a broker can ensure a cash-revenue stream, insurance is the only sector where a money launderer is paid to launder money,” said a risk management consultant, who pleaded anonymity. Industry insiders say insurance companies are unwilling to crack down on money launderers as it will affect business. “There is no incentive for companies to implement anti-money laundering (AML) measures. They will only go so far as the law prescribes and will not do it of their own volition,” he added. Most insurance companies have internal checks and balances that detect the errant cases and deal with them at their level, obviating the need for supervision by Irda. Insurers, on their part, swear by internal regulations and compliance with stringent AML guidelines. Sources at the enforcement directorate feel this could be more of a I-T evasion measure as against a crime listed under the Anti-Money Laundering Act.

Source: PRITI PATNAIK, TNN, THURSDAY, MAY 10, 2007

SBI LIFE INSURANCE IS AIMING TO BE AN LIC ALTERNATIVE

Uday Sankar Roy took over as managing director & CEO at SBI Life Insurance Co. Ltd just two and half months back. After 34 years as a banker with the SBI,. Roy enters the life insurance market at an interesting time when behemoth Life Insurance Corporation (LIC, is actually increasing market share, while several other players are vying for a piece of the pie. The veteran banker, who has marked LIC as his only competition, told C Chitti Pantulu about the challenges and strategy to achieve his goals at SBI Life Insurance. Excerpts:What is your immediate task at SBI Life? The first task is definitely to make our relationship with SBI more intense. We have got substantial business through the SBI linkage, but we have to use the network more effectively and aggressively on a full time basis. The funny thing about life insurance is that everyone is doing business and making losses. Customer acquisition costs are higher in insurance than in banking and that is why we will have to leverage the existing SBI network more effectively. Significantly however it would be worth noting that we were the first private sector company to breakeven in the very first year. How does the Insurance industry look? The market is huge but there are 16 players in life insurance and more will jump into the fray. Four to five more companies are slated to set shop in the next two-three months. The important thing is how many will actually survive. Two to three years down the line there will definitely be a shakeout in the industry. What will it take to survive in this competitive market? Three basic ingredients are needed for survival in the life insurance market, wherewithal to penetrate the market, customers’ trust and selling skills. Starting from scratch is costly and it affects viability as there is a price you pay for reach in this vastly spread out market. And then, while gaining customer confidence or recognition at the least in metros is relatively easy the real challenge is in the tier 2 and 3 centres. Finally, selling insurance is a different ball game that everybody can’t do. Fortunately for SBI none of these are a concern. All we need to bother about is the competition which for us is just the LIC. So how do you plan to beat LIC? We have decided not to copy the LIC model of business to do it. LIC has a history of life insurance and 1.2 million agents country-wide. We are young and have just about 25,000 agents. When LIC started in the business, things were different and the agency model was the only one available. Today, there are many more channels for marketing insurance products. For instance we will use SBI’s Bancassurance more intensively. Now it is extensive. There will be more emphasis on reaching non-customers and leveraging the 14,300 plus State Bank group branches across the country. So we are actually looking at deploying a hybrid distribution channel that is innovatively designed and deployed. Our strength is in the tier 2 and 3 centres and we are working on plans to have this hybrid network in place within a year. What kind of market size and business volume are you targeting over the next few years? Currently SBI Life has a three-four percent of the Indian life market. Unless we get to a 15% plus size, we cannot challenge LIC. Moreover, LIC has got aggressive with the advent of competition and has actually increased its market share to 75%. But I must add that this is a period of experimentation, consolidation and growth for SBI Life. We are likely to close the previous year with a business volume of over Rs 3,000 crore. It is possible to multiply this figure ten fold over the next three to four years. The market has the potential for this and everything depends on how we play our cards. What we have to work on is the huge population beyond the metros which is by and large still untapped. As I said we should be a around the 15% level in three to four years and in a position to be considered a strong alternative to LIC and second in size in the country. Also, there isn’t place enough for too many companies to be making money in a spread out market like this and there is bound to a shakeout soon. However, we are not really looking at the inorganic route to increase our size even though there will be some rich pickings in the market. We have the strength to grow on our own steam.

Source: Daily News & Analysis, April 11, 2007