Public sector general insurance companies are feeling the heat of the stock market slide, as their portfolios contain large "fair value change" accounts or mark-to-market investments, which are vulnerable to market downturns.
Although year-end figures of the state-run insurers, which control 60% of over Rs 28,000 crore general insurance market, are yet to be finalised, their investment income might not register gains as high they expected.
Industry sources indicated that the four companies — National Insurance, Oriental Insurance, New India Assurance and United India Insurance — have huge reserves, or what they internally call "family silver," but rely upon investment return to maintain solvency margins.
In fact, their investment portfolios sometimes compensate for relatively weaker underwriting performance.
Top officials of one PSU insurer told DNA Money that solvency is never an issue for the four companies.
But sources said that with the heavy discounting of premiums, profitability of the four firms could be strained. A decline in investment income would only add to their woes.
The Insurance Regulatory & Development Authority (Irda) had expressed concern that extensive price undercutting would impact solvency margins and directed all general insurers to file solvency statements on a quarterly basis.
The idea was to make the insurers focus on capital management and ensure that capital adequacy receives adequate priority when the companies chalk out future plans.
A recent report on global insurance by Moody-Icra said, "The capitalisation levels of public entities in general remain comfortable, supported by their investment books, which have benefited from large gains in their equity portfolios. By contrast, private insurers with much smaller investment portfolios and better underwriting results are less-dependent on investment return to maintain solvency margins."
Analysing the investment portfolios of India's top six insurers, the study says public insurers have fairly strong portfolios, which provide them with considerable liquidity and adds to their financial strength.
Source: Nandini Goswami/ DNA MONEY
Tuesday, June 17, 2008
BAJAJ ALLIANZ LIFE TO BEEF UP CAPITAL BASE
Mumbai: Bajaj Allianz Life Insurance will receive capital infusion of around Rs 500 crore from its promoters this fiscal. Bajaj Allianz is a joint venture between the Bajaj group (Bajaj Finserv) and Allianz.
Mr Kamesh Goyal, Country Manager Allianz and CEO Bajaj Allianz Insurance, said that the company’s current capital base stood at Rs 1,210 crore which would be further hiked by around Rs 500 crore. .
The company’s focus this year is to maintain its expense ratio by curbing expenditure on hiring new agents and branches. The expense ratio stands at around 14 per cent.
“Our agency force is around 2.3 lakh and we have a branch network of 1,200. This year our focus is more on increasing the productivity of the existing agency force,” Mr Goyal said.
Bajaj Allianz Life made a net loss of Rs 19 crore in the last fiscal and the company hopes to wipe out its earlier losses by bringing down expenses. In terms of new products, the company plans to launch a pension and health insurance plan this fiscal.
On the recent volatility in the stock market, Mr Goyal said that customers in the interiors of the country may now look at switching to traditional products. ULIPs currently contribute 95 per cent of the company’s business and its funds under management stand at Rs 14,000 crore.
Bajaj Allianz Life on Thursday tied up with Thomas Cook for the distribution of life insurance policies. As a corporate agent, Thomas Cook will sell Bajaj Allianz’s products across its 160 retail branches.
Source: Business Standard, Deccan Chronicle, The Tribune, Asian Age, The Statesman, Deccan Herald
Mr Kamesh Goyal, Country Manager Allianz and CEO Bajaj Allianz Insurance, said that the company’s current capital base stood at Rs 1,210 crore which would be further hiked by around Rs 500 crore. .
The company’s focus this year is to maintain its expense ratio by curbing expenditure on hiring new agents and branches. The expense ratio stands at around 14 per cent.
“Our agency force is around 2.3 lakh and we have a branch network of 1,200. This year our focus is more on increasing the productivity of the existing agency force,” Mr Goyal said.
Bajaj Allianz Life made a net loss of Rs 19 crore in the last fiscal and the company hopes to wipe out its earlier losses by bringing down expenses. In terms of new products, the company plans to launch a pension and health insurance plan this fiscal.
On the recent volatility in the stock market, Mr Goyal said that customers in the interiors of the country may now look at switching to traditional products. ULIPs currently contribute 95 per cent of the company’s business and its funds under management stand at Rs 14,000 crore.
Bajaj Allianz Life on Thursday tied up with Thomas Cook for the distribution of life insurance policies. As a corporate agent, Thomas Cook will sell Bajaj Allianz’s products across its 160 retail branches.
Source: Business Standard, Deccan Chronicle, The Tribune, Asian Age, The Statesman, Deccan Herald
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
LIC TARGETS 40 LAKH RURAL MICRO-INSURANCE POLICIES
Mumbai: LIC has set a target of selling 40 lakh micro-insurance policies this year, said Mr T.S. Vijayan, Chairman, LIC. With the establishment of a technology platform and tie-ups with NGOs, micro-finance organisations, co-operative societies and rural banks, the corporation expected to sell 40 lakh micro-insurance policies this year, against 8 lakh policies in the previous year, Mr Vijayan said, speaking at the SKOCH Banking Financial Services and Insurance summit.
LIC’s micro-insurance policy, “Jeevan Madhur” was launched in 2006 and, offers the option of a minimum weekly premium payment of Rs 25. He said the corporation had devised new products, both in terms of payment schedule and delivery, for the rural areas keeping affordability of the rural people in mind.
Mr Vijayan said that distribution costs in the case of micro-insurance policies were high.
“It has been estimated that, if the cost of a policy is Rs 300-400, the cost of distribution is double that,” he said.
He suggested that as in the case of micro-credit, the insurance sector should also have access to technology funds for micro-insurance, “There is a technology infusion fund available with the Reserve Bank of India for micro-credit and another one with Nabard for giving micro-credit. These or some such additional measures should be made available to the insurance sector,” he said
Integrated product
The Chairman also called for all-round pooling of resources of insurance companies to evolve an integrated insurance product covering life, health as well as other areas.
“For this, insurance companies will need to come together as a “virtual corporation” offering a combined micro-insurance face while the technology handles the back-end break-up of who gets to service what part.
A business structuring for a settlement and servicing mechanism can also be worked out,” he said. In the last fiscal, the insurance industry sold over 5 crore policies of which 1.1 crore were sold in rural areas. However, in terms of penetration, urban India remains ahead. Penetration in urban India is 47 per cent, while it is only 27 per cent in rural areas.
Source: The Hindu Business Line
LIC’s micro-insurance policy, “Jeevan Madhur” was launched in 2006 and, offers the option of a minimum weekly premium payment of Rs 25. He said the corporation had devised new products, both in terms of payment schedule and delivery, for the rural areas keeping affordability of the rural people in mind.
Mr Vijayan said that distribution costs in the case of micro-insurance policies were high.
“It has been estimated that, if the cost of a policy is Rs 300-400, the cost of distribution is double that,” he said.
He suggested that as in the case of micro-credit, the insurance sector should also have access to technology funds for micro-insurance, “There is a technology infusion fund available with the Reserve Bank of India for micro-credit and another one with Nabard for giving micro-credit. These or some such additional measures should be made available to the insurance sector,” he said
Integrated product
The Chairman also called for all-round pooling of resources of insurance companies to evolve an integrated insurance product covering life, health as well as other areas.
“For this, insurance companies will need to come together as a “virtual corporation” offering a combined micro-insurance face while the technology handles the back-end break-up of who gets to service what part.
A business structuring for a settlement and servicing mechanism can also be worked out,” he said. In the last fiscal, the insurance industry sold over 5 crore policies of which 1.1 crore were sold in rural areas. However, in terms of penetration, urban India remains ahead. Penetration in urban India is 47 per cent, while it is only 27 per cent in rural areas.
Source: The Hindu Business Line
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
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