INSURERS TO PARTNER MFIS TO EXTEND COVER IN RURAL INDIA

The insurance players are gearing up for an encore in the rural areas. Faced with the imminent relaxation of FDI norms in the sector, they want to get a foothold in the area which has hitherto been slow to respond to their overtures. Tie-ups with microfinance institutions (MFIs) and targeting women are the latest strategies of the private insurance players in this fast-emerging market.
Even after having better distribution networks, private players were unable to crack the rural code to their satisfaction. “We’ve successfully implemented the partner-agent model in the micro-insurance space with micro-finance institutions (MFIs) such as Basix; and believe this to be an effective and reliable channel for reaching out to the people at the bottom of the pyramid. We have covered close to 1.5 million lives through such associations,” says Aviva India corporate initiatives director Monica Agrawal.
A study says that the rural market for insurance products is expected to grow to $1.95 billion by 2015 from $487 million in India. Insurance, combined with micro-credit, is the first step towards financial protection for this market, says Bharati AXA chief marketing and distribution officer Shyamal Saxena. “It provides a firm foundation for insurers to take to the rural markets their other financial protection offerings,” he adds.
Apart from this tie-up with MFIs, the insurance companies are working with women self-help groups to target them. With increasing literacy levels of women, they are wielding more of this power in the rural areas, says ISB, Hyderabad associate professor Shamika Ravi. So, the insurance firms are coming up with products that make it easier to sell to women through MFIs. For example, Aviva has a customised product for women’s self-help groups (SHGs) which are normally made up of 15-20 members, and MFIs. This product forms a comprehensive part of livelihood initiatives run by these groups. “We have seen such groups to be very influential in the household, with higher bargaining power,” says Aviva’s Agrawal.
Shamika Ravi has shown that success of the insurance sector in rural areas is higher as its interaction with MFIs increases, and as the women get more empowered through literacy. Ravi’s study was on 2,79,214 individuals in the rural areas whose health coverage started after May 1, 2006 and half of them are females. The probability of filing claims increases by 8% when female literacy level goes up marginally. “This is very true, and we see this as an empowerment of the women in rural areas,” says Mr Saxena.
“Women in those areas have been stable clients,” says ICICI’s Srivastava, adding that this has also taken the emphasis in insurance from the male member to the female member of the family. Ravi points out one reason for low claims in those areas. “Well, currently microfinance is increasing coverage of insurance by tying it to credit and making it mandatory. So, automatically when people take a loan, they have insurance cover. This is also partly the reason that people don’t understand insurance and treat the premium as an added fee for the loan,” explains Ravi. This, according to her, had reduced the insurance claims.
With more awareness about the insurance products, that has benefited players like ICICI Prudential, Aviva and Bharti AXA, has also come higher claims. Aiding this are the MFIs themselves. Ravi shows how some innovative microfinance institutions like SEWA have started investing in training their clients about insurance; others like BASIX have tied up with agents to help people with filing claims. This has also meant more insurance claims as the rural folk are now clearer about what they are insured against. ICICI Prudential is working with more than 100 such agencies, says ICICI Prudential senior vice-president and head of the rural business Rishi Srivastava. The company does more than Rs 300 crore of business from the rural areas.

Source: The Economic Times

KEY INSURANCE CHANGES ON ANVIL

New Delhi: In a move that is likely to impact insurance companies, the government may delete the provision relating to involvement of employee surveyors for settling claims. A demand to this effect has been made by the Indian Institute of Insurance Surveyors & Loss Assessors (IIISLA). The proposal is under consideration of the group of ministers (GoM) that is evaluating the Insurance Bill, and the Insurance Regulatory & Development Authority (IRDA). The government will have to either incorporate large-scale changes in section 64 UM of the Insurance Act, 1938, or delete the section altogether to implement the proposed changes. "We have made a presentation before the group of ministers and they have given a positive response to our demands," IIISLA president Mahendra J Dhruva told ET. Mr Dhruva said the institute has also got the backing of the IRDA for bringing the proposed changes in the Act. At present, insurance companies are allowed to involve their employees as surveyors or assessors for claims up to Rs 20,000 under section 64 UM of the Insurance Act. However, if the new proposal is accepted, insurance companies will have to take the service of independent loss assessors even for smaller claims. The IIISLA has also proposed more stringent penalty for defaulting insurance agencies. “In many cases, it has been found that insurance companies exceed the limit (under section 64 UM) for appointing the assessors, which is not acceptable. We have asked the Irda to take penal actions against such companies,” Mr Dhruva said. The proposed changes may be incorporated in the new Insurance Bill which is under consideration of the GoM led by external affairs minister Pranab Mukherjee. The GoM, after revising the Bill, would return it to the finance ministry. The ministry would then start the process of presenting the Bill in Parliament after incorporating the changes suggested by the GoM. IILSA is the apex institution of insurance surveyors and loss assessors promoted by the Irda on the recommendations of the Bhandari Committee, which was set up by the finance ministry in 2005. The institute has similar powers as that of the institutes of company secretaries or chartered accountants.

Source: The Economic Times

Reliance gets EPF deal

Anil Ambani's Reliance Capital has been selected along with two other private companies to help manage the employee provident fund which is worth a whooping Rs two lakh 50 thousand crore.
However, the inclusion of Anil Ambani led Reliance Capital as one of the fund managers for the Employee Provident Fund has angered the Left and the Leftist trade unions are alleging foul play.
The CPM alleges the late selection of Reliance Capital is a payback for the trust vote.
Fresh from the victory in the trust vote and with no allies to wave the red flag, the Government seems to have taken the first step in putting the reform process back on track.
The move to allow private fund managers to manage a part of Rs two-lakh fifty thousand crore provident fund corpus has run into controversy.
The CPM and left allied trade union allege that only three players were given the clearance by the committee but it was expanded for a fourth player to enable Anil Ambani owned Relaince capital to co-manage provident funds.
The Government, they allege, was returning the Samajwadi Party a favour - of bailing them out from the crisis.
"It is a political move," says CPI (M) Politburo Member, M K Pandhe.
However, it is not just the politicians who are alleging foul play.
Sources in the mutual fund industry tell CNN-IBN that HDFC and Birla Sunlife had quoted a nil asset management fee in the tender. Tenders usually favour the company that quotes the lowest rates. That apart they also need pass the technical bids.
Sources say bids from HDFC and Birla Sunlife were rejected based on an earlier court judgement that no service can be rendered without consideration.
That left four players in the fray. HSBC quoted the lowest rates, followed by ICICI Prudential and SBI.
And, what was meant to be a best of three, suddenly saw a fourth player in the form of Anil Ambani's Reliance Capital.
The labour ministry has maintained that the entire process has been transparent. But the manner in which a fourth player was squeezed in to manage the graveyard benefits of four crore employees does raise many question marks of credibility and transparency.
Source: CNN IBN

Price cuts help private cos gain share of motor insurance mkt

Private non-life insurance companies have increased their share of motor insurance, following introduction of free pricing. Private insurers’ share of premium from comprehensive insurance of vehicles is 50% for 2007-08 against 41% a year ago. According to data released by insurance regulator Insurance Regulatory and Development Authority (IRDA), private life insurance companies generated a premium of Rs 4,061 crore from sales of motor insurance cover for ‘own damage’. Own damage or comprehensive cover refers to that part of motor insurance that is voluntary and covers the risk of damage to the vehicle. A year ago, private companies had written only Rs 3,115 crore from this segment. Private insurers have been able to wrest market share from state-owned companies because of aggressive price cuts and tie-ups with automobile dealers. Among private companies, growth in this segment was driven by Reliance General Insurance and Bajaj Allianz both companies increased their motor own damage portfolio by 124% and 50%, respectively. Interestingly, largest private life insurer ICICI Lombard went slow in motor and its own damage portfolio actually shrunk 5%. Interestingly, it is not just the profitable own damage segment that private companies have increased market share. Private companies have made inroads into the compulsory third-party liability portfolio as well. Until a couple of years ago, private companies were shunning the third-party liability covers, as rates on this were frozen and claims ratio were too high. However, following revision of the rates in 2006, private companies have slowly increased market share in this segment as well. In 2006-07, private companies wrote third-party business amounting to Rs 1,528 crore which is two-and-a-half times of the Rs 596-crore business they did in 2006-07. The market share of private companies in this segment has gone up to 33% from 19% a year earlier. Private companies have been able to increase their market share in motor insurance, to a much larger extent than they could increase overall market share. Overall private companies accounted for 40% of total business of Rs 28,126 crore in 2007-08, up from their market share of 35% of the total business of Rs 24,998 crore in 2006-07. Motor and health insurance have been the drivers of growth in 2007-08. Property insurance has seen negative growth on account of detariffing which has resulted in fire insurance premium for the industry declining to Rs 3,516 crore from Rs 4,157 crore a year ago. ICICI Lombard and Tata AIG have been the only two companies to have increased their premium from fire insurance in 2007-08.

Source : The Economic Times

Govt to give Rs 1,000 cr more to LIC for Aam Admi Bima Yojana

The government on Thursday decided to provide an additional Rs 1,000 crore to Life Insurance Corporation to cover another one crore rural landless households under the social security scheme 'Aam Admi Bima Yojana'. The scheme will cover an additional one crore landless households by September 30, 2009 under the AABY to provide death and disability benefits to the head of the family or earning members of the family, Information and Broadcasting Minister P R Dasmunsi told reporters after the Cabinet meeting. The scheme, which is being implemented through the LIC, was launched on October 2 last year. The union government bears 50 per cent of the premium of Rs 200 per year per person and the state governments pays the rest of the premium on behalf of the beneficiaries. Besides, the Cabinet also approved giving Rs 500 crore towards Social Security Fund maintained by LIC to provide 50 per cent share of premium Janshree Bima Yojana for all women self help groups credit linked to banks. Dasmunsi said the decision will facilitate providing life and permanent disability cover to 2.5 lakh women SHGs under the scheme by March 31, 2009. Janshree Bima Yojana was launched in August 2000 to provide life insurance protection to the rural and urban poor under various vocational groups. The premium under the scheme is Rs 200 per member per annum, of which 50 per cent premium is paid by beneficiaries of the scheme and the rest pitched in by the government through the fund maintained by LIC. At present, there are 45 vocational or occupational groups covered under the scheme.
Source: The Economic Times