COURT PULLS UP INSURANCE FIRMS FOR CHALLENGING COMPENSATION ORDERS

New Delhi: The Delhi High Court on Monday criticised insurance companies that frequently challenge lower court orders of accident compensation and said they were after the victim's blood. Dismissing a petition of Oriental Insurance Company, Justice V B Gupta said the provisions in the Motor Accident Claim Tribunal Act (MACT) were brought in to grant relief to the victim by way of compensation and the insurance companies should not avoid payment of compensation by raising all possible pleas and thereby defeating the object of such provisions. The court also slapped a fine of Rs 10,000 on the company. "Instead of letting the poor victim of the road accident live in peace and have little solace due to the meagre amount of compensation, which has been awarded to him after a protracted trial, the insurance company is after his blood," it observed. It also directed the company to deposit the fine with the court's legal services committee within four weeks. Oriental Insurance had moved an appeal against the MACT order, which awarded compensation to Santosh Kumar Chauhan who was hit by a cab insured with the company. Chauhan, who was severely injured in the accident and suffered permanent disability, claimed Rs 300,000 as compensation. The company in its defence contended that at the time of the incident the vehicle driver was not possessing a valid driving license. But the court rejected the company's submission and said the Tribunal had rightly held that the offending vehicle was being driven under a valid and effective driving licence by the driver and, therefore, the appellant had been rightly held liable to pay the awarded amount.

Source: Hindustan Times

MORE PRODUCERS BREATHE EASY WITH FILM INSURANCE PTISee this story in: The

Mumbai: The film insurance business in the country is gathering momentum and may soon become a good revenue-stream for insurance players, industry officials said.

The demand for risk-cover against unanticipated incidents has led film producers to opt for mechanisms that provide protection to their investments, they said. “Films fall into the broad category of event management and hence like any other event, it can also be insured,” Mr K.N. Bhandari, Honorary Director, Centre of Insurance Studies and Research, National Law University, Jodhpur, told PTI here.

Attributing the growth of the business to an increasing number of corporate entities like Adlabs, Sony Pictures and UTV, amongst others, entering the realm of film-making, Mr Bhandari said, “These corporates prefer to be insured against any unforeseen or unfortunate incidents and this is becoming a big driver of growth”.

But the fall-out of this growth is that as the film insurance business picks up steam, in the next few years, so would institutional financing of film-making. “As film insurance gains in popularity, it will also encourage and promote institutional financing of film-making,” Mr Bhandari said.

Source: PTI, The Hindu Business Line

K N BHANDARI TO RESIGN FROM GIC POST

Mumbai: K N Bhandari, the secretary general of the General Insurance Council (GIC), a self-regulatory body for non-life insurers, has decided to step down, following sharp differences between private and public sector players on a host of issues.

The differences, which were across the spectrum, were showing no signs of receding. “There are differences over administered pricing, market wordings and health insurance, which were hampering the functioning of the council,” a source close to the development said.

Bhandari announced his decision to step down as the secretary general after a council meeting in Hyderabad last week. The meeting, which was convened mainly to discuss a new health insurance cover, which will be portable across companies, ended inconclusive.

The former New India Assurance chairman, however, tried to play down the issue and said: “I want some time for introspection and I have yet to decide on what I propose to do.”

Source: Business Standard

PSU GENERAL INSURERS MAY BE ALLOWED TO TAP MARKETS

Kolkata: A fresh set of reforms for unlocking the value of the nationalised insurance companies may be on the way, with the government considering changes in the General Insurance Business (Nationalisation) Act (GIBNA).

If this happens, the four nationalised companies — New India Assurance, National Insurance Company, Oriental Insurance Company and United India Insurance — may be allowed to tap the market for additional funds.

Although the four nationalised companies command 60% of the business share (this has come down over the years with private players eating into the market share), a deregulated tariff environment and fierce competition will eventually point to the need for larger funds in the future.

Industry sources said that subject to amendments in GIBNA, insurers might get to raise other forms of capital, expand their branch network and enter into various strategic partnerships.

At present, the government holds the entire paid-up capital of the companies, amounting to Rs 550 crore. Even a small dilution of 5-6% could bring about sufficient capital.An official at one PSU general insurer told DNA Money that it is a tough market and management expenses are on the higher side. “But we have family silver in the form of huge reserves. If changes in the Act are brought about, a lot can be done with shareholders’ funds. Right now we cannot use shareholders’ funds for various reasons.”

One source told DNA Money that “much would also depend on the profitability and performance of the company.” Three consecutive years of underwriting profits may also be one of the conditions for a public offering, the source said.

The four PSU general insurers and 10 private players have been in a fierce fight for market share, after the detariff regime came into effect, which saw a sharp drop in premiums as the companies fought for market share.

Last year, the insurance regulator (Irda) asked general insurance companies to maintain a solvency ratio of 150% and report their position every quarter. The general insurance industry which had four nationalised and ten private players have been extremely competitive, especially with the detariff regime or market driven rates being introduced since January 2007. Further deregulation is expected in the coming months.

And while increasing the cap on foreign investment in the sector remains a crucial issue for the government, a small dilution of stake in the nationalised majors could change the dynamics of market.

Source: DNA

LIFE BUSINESS EMBEDDED VALUE ADDITION TO BE BUZZWORD: TORSTEN OLETZKY, CEO, ERGO GROUP

Ergo Insurance, a part of the Munich Re Group, has taken a unique approach to tap the Indian market. The group has three distinct partnerships in India for life, non-life and health, where it has partnered the Hero group, HDFC and Apollo Hospitals, respectively. The Ergo group was formed, following consolidation of various insurance companies active in life, health, property and casualty pensions and legal expenses insurance. The companies were consolidated under Munich Re. The Ergo group is now headed by CEO Torsten Oletzky. At 42, Mr Oletzky is among the youngest heads of an insurance multinational. In an interview with ET, Mr Oletzky speaks of group’s ambition to be among top five in India. But at the same time, he says that he will be uncomfortable with scaling up overnight and recruiting one lakh agents in the first year.

Why have you tied up with different partners for life, non-life and health? Won’t this lead to brand confusion?

DKV is a specialist in health. So, we have approached a specialist organisation — Apollo. But we do not use the Ergo brand in the Apollo DKV venture. The HDFC joint venture gives us the opportunity to engage in a business which is already established and by bringing in the Ergo experience, we can exploit a lot of growth opportunities in non-life. We also use the Ergo brand in the life venture with Hero. Both HDFC and Hero are excellent brands in the Indian market and they combine well with the Ergo brand. The Ergo brand stands for very solid business, high quality distribution and high quality processes and we have looked for partners with the same set of values and business policies. We look for partners who we believe will fit with our management values, because we want to stay together for a long-time. It is not so important which industry they come from.

What feedback have you got from the government on the increase in foreign direct investment in insurance?

We just had a short meeting with the government where we discussed the issue and there was no definite news. But I had the impression that sooner or later this would happen. We have made our business plans with our partners based on the current situation and we will follow the business plans. If there is any change, we will be happy, but our business plans are not dependent on it.

Are there any plans to get into the asset management business in India as well?

We have bundled our asset management activity with Munich Re in a company called MEAG (Munich Ergo Asset Management Group) and we are doing most of our global asset management through this company. MEAG also works for external clients, but its main focus is to perform the asset management function for the insurance operations of Ergo and Munich Re. So, if our insurance business needs the services of an asset management company for the purpose of unit-linked or other situations, it can be provided by MEAG. While the asset management services are not exclusive to group companies, it is not a primary focus of business development.

Many European insurance companies are cutting costs by outsourcing jobs to India. Do you plan to do the same?

Insurance companies are cutting cost, because customers want a good price for their products. We are definitely as strict as our competitors in managing costs. But we have not come to the point where we feel that outsourcing to India will improve our cost in the core European business. Our business is very language-dependent and since our main operations are currently not based in English-speaking markets, we are predominantly operating in German, Polish and Turkish language, among others. So, it is not as easy for us to outsource as it is for companies in the UK.

When do you expect Indian operations to break even?

The ‘problem’ with break-even from an accounting profit point is that it gets delayed when the growth is strong. At the same time, while you are not breaking even in accounting terms, you are building up organisation value in terms of embedded value and making economic profit. As long as we grow, our embedded value in our life business, we can live with a situation where accounting profits take longer to be achieved. Obviously, we want to become a ‘top five’ player over time. But I would rather go a bit slower on topline growth and have high quality in our distribution, organisation and processes which is sustainable so that customers keep coming back.

What are the growth drivers that will help Ergo achieve its five-year growth target?

We come out of a strong German business where we have a 7-8% market share. We will be able to grow our German portfolio in line with the German market, but the German market is relatively mature and is only growing at around 2%. When you look at the rest of Europe, there are some market with higher growth rates in Central and Eastern Europe. This is an important market for us as well. We have a strong presence in Poland. We also have a strong presence in the Baltics and we are entering other CEE countries through bancassurance with Unicredito — one of the leading banks in Europe. We are in Greece and Turkey. But India and China are probably the regions which will see, by far, the highest growth in the next decade. If you obviously want to take part in this growth, you will have to be there.

Multinationals such as AIG, Allianz and Axa have been promoting their brand globally. Would Ergo be doing the same?

We have a slightly different home market situation than Allianz and Axa. We were founded 10 years ago, out of four companies with very distinctive and different strengths and brands. We have a speciality health organisation with DKV. We have a speciality legal protection insurance with DAS and we have two strong multi-line brands with Victoria and Hamburg Mannheimer. Since these are well-known brands to German customers, we decided not to give up these brands for our German customers. Whenever we go to international markets, we try to use the Ergo brand in situations where we are on our own, or with partners. We have leveraged the Ergo brand in Poland. We have it in Turkey. We have it in the Baltics, Italy, Russia and Korea. And we use it in India as well. So, while the Ergo brand is getting stronger, we do, however, not have plans for pushing for one single global brand for Ergo.

Source: The Economic Times