NO LIFE IN NON-LIFE

The government’s concern over the poor performance of four state-owned general insurance companies is understandable—the government is a major shareholder and these companies, once market leaders, are losing market share steadily. The thing is that the decline is perhaps irreversible and the government, as of now, doesn’t politically have the option of getting out before its shareholding takes more knocks.

Until recently, it didn’t even have the option for passing a plain vanilla bill like raising the FDI limit in insurance. Private sector general insurers had cornered 26.3% of the gross premium underwritten in the non-life sector before detarrification of the industry in 2006-07. They continue to poach more business away despite the widely-held belief that detarrification would allow public sector insurers to offer more competitive pricing and therefore get more custom.

The share of gross premium underwritten by public sector insurers continues to decline while that of the 10 private sector general insurance companies has shot up—to 34.9% in 2006-07 and to 39.9% in 2007-08. One telling data explains this: salary and employee benefits account for nearly four-fifths of total operating expenses of state insurers compared to between one-fifth and two-fifths for private insurers. Another example of public sector management: ratio of net incurred claims to premiums is around 85% as compared to 68% for private insurers.

Indeed, the problem with general insurance is there’s too little private enterprise. India is doing better, in terms of global norms, in life than non-life insurance. Life insurance penetration ratio (the ratio of premium paid to GDP) for India has steadily gone up from 2.53% in 2004 to 4.1%, very close to the global average. But non-life insurance penetration ratio has gone down from 0.65% to 0.60% during the same period and is just about one fifth the global average.

Clearly, the sector needs a boost from fresh participants. Passing the insurance FDI bill may be the incentive needed for getting more players. India, by the way, has had an experience of hosting a large number of non-life insurers. In 1972, prior to nationalisation, there were 107 general insurance companies. Imagine the business opportunities in an economy unrecognisably bigger and better than it was in 1972.

Source: The Financial Express

NON-LIFE INSURERS RIDE ON HEALTH & MOTOR INSURANCE

Mumbai: Motor third-party insurance and health — two portfolios that non-life insurers have been avoiding due to low margins — have been responsible for the 12% growth recorded by the industry in 2007-08. Motor third-party grew close to 50% while health insurance grew 55% in a year which saw property insurance market shrink due to intense competition.

In 2007-08, non-life insurers wrote business amounting to Rs 28,126 crore — an increase of Rs 3,128 crore over last year. This increase was despite premium from fire insurance shrinking 15% to Rs 3,516 crore. Fire was not the only business which saw lower collections. Aviation insurance, which is driven by the international reinsurance market, declined by 28% to Rs 303 crore despite large-scale fleet expansion by airline companies.

According to industry sources, insurance rates for airlines have been at the softest level for nearly a decade. The industry has managed to grow despite such intense competition because of motor and health. In motor third-party (where rates continue to be administered), industry premium rose 50% to Rs 4,617 crore. Health insurance grew 55% to Rs 4,969 crore.

Another revealing feature of last year’s business data is that the public sector account for 67% of motor third party liability and 63% of health insurance even though its overall share has declined to 60%. New India continues to be the largest health insurer with a premium of Rs 1,209 crore or 24.3% of the market followed by ICICI Lombard which has a 17.7% of the market share.

In 2007-08, health insurance in India grew to be a billion dollar business for the first time. If the Rs 164 crore business done by specialised health insurance is taken into account the industry premium amounts to Rs 5,133 crore ($1.2 billion). Fire insurance business was not the only portfolio to be hit by competition. Motor own-damage portfolio grew only 7.9% to Rs 8,186 crore — a growth that does not even match the rise in car sales. This was because own-damage premium rates also shrunk because of competition.

As a result of the sharp growth in health and decline in fire insurance, the dynamics of non-life insurance business in India has changed. Health insurance is now the single largest business after motor insurance, accounting for a little below 18% of overall business as against 13% last year. Fire (property) insurance, which at one time was the mainstay of non-life insurers, now accounts for a mere 12.5% of business down from 16.6% last year. What this means for the industry is that no company that wants to be a significant player in India can ignore health or motor insurance. Motor insurance and health now account for 63% of all non-life premium in India as against 55.3% a year ago.

Source: Mayur Shetty
The Economic Times

‘FUTURE SANJEEVANI’ LAUNCHED

Future Generali, the insurance venture of Future Group of Italy that has acquired 1,00,000 costumers in a record time thought its Mallassurance, launched its First ULIP called Future Sanjeevani.

Source: The Financial Express

IDBI FORTIS EXPANDING IN NORTH

New Delhi: IDBI Fortis Life Insurance Co Ltd on Tuesday kickstarted its expansion drive in the North with the inauguration of its first branch at Gurgaon. The company plans to add 28 more branches in the North by the end of this year, its Chief Executive and Managing Director, Mr G.V.Nageswara Rao, said.Besides the tied agency network, IDBI Fortis is also using the bancassurance networks with IDBI Bank and Federal Bank. IDBI Fortis is a recently launched three-way joint venture between IDBI Bank, Federal Bank and European Banking and Insurance giant, Fortis.

On whether being a late entrant to the industry was a disadvantage, Mr Rao replied in the negative. “It is certainly not a disadvantage. We think by providing value-added products to the customer, we can gain their acceptability,” he said, adding that premium income of Rs 50 crore in the first four months of operations was definitely good start for the company.

IDBI Fortis is looking to expand agency network from the current level of 30 to 100 by the end of the year. In the coming days, Mr Rao sees significant demand for the company’s products from markets such as Western India.

Source: The Hindu Business Line, The Statesman

TATA AIG SET TO OFFER INSURANCE SOLUTIONS TO FAMILY CREDIT CUSTOMERS

Mumbai: Tata AIG Life insurance company on Tuesday said that it will offer insurance solutions to the customers of Family Credit, the consumer finance organisation of Societe Generale. Through this partnership, Tata AIG life will provide personal loan insurance, a group insurance package for small-ticket personal loan (STPL) customers of Family Credit, an official release stated. Family Credit Life has a network of 35 branches and this will provide Tata AIG Life a ready-made platform to access Family Credit Life’s client base with its insurance solutions.

Personal loan insurance will provide effective cover against death of the customer due to any reason classified as natural, accident, sickness or illness, the release said. A customer-friendly feature of this plan is the waiver of medical tests up to a limit of Rs 5-lakh and till the age of 55 years. The product also has the flexibility of allowing the premium amount to be bundled with the loan amount. Tata AIG Life’s chief distribution officer Joydeep Roy said: “Even as we anticipate customer needs while designing insurance products, we are looking at associations with

companies like Family Credit to reach them.” “Partnering with Family Credit, is another step in that direction. Tata AIG Life focuses on understanding needs of different client segments and fine-tunes its offerings to provide value to customers,” Mr Roy added.

Source: The Economic Times, Deccan Chronicle, Business Standard