BANCASSURANCE SEES STEADY, BRISK GROWTH

Hyderabad: The bancassurance segment in the insurance industry has been growing at a steady pace and is competing with the traditional sale of insurance by agents. The growth of this channel is also quite phenomenal in the business of major life insurers such as Life Insurance Corporation of India (LIC) and SBI Life.

“`We are quite happy with the way in which bancassurance is growing. The sales through this channel registered an of about 60 per cent in 2007-08, Mr Surya Roy, Executive Director and Head of Bancassurance at LIC, told Business Line over phone from Mumbai while declining to give exact figures.

In the case of SBI Life, the integrated bancassurance business increased over 100 per cent to Rs 2,000 crore in a total business of Rs 5,6000 crore. ``This year too, we are expecting a similar growth in this segment,” Mr Uday Shankar Roy, CEO and Managing Director, SBI Life Insurance, said.

``In the next two/three years, the share of bancassurance is bound to grow as there is realisation among the banks and insurers that there is untapped insurance potential in the customers of a bank. The keenness of many a bank to augment other income (fee-based income) in view of growing pressure of margins will also drive this,” he said.

Big driver
Agrees Mr R Krishnamurthy, Managing Director of Watson Wyatt Insurance Consulting Ltd, which had conducted a study on bancassurance. ``A key feature of bank sales of insurance policies is that foreign banks and new generation private banks account for 60 per cent of the premium. Public sector banks, which account for three fourth of the banking system, have been slow to realise the benefits of cross selling insurance to customers. They are doing it now and this itself is a big driver,” he said.

ULIPs favoured
The bancassurance premiums are also substantially by sale of unit-linked policies. The proportion of term insurance - the pure protection component of life insurance business - is very low, at less than 10 per cent of the total.

“This reflects that the benefit of banking network in terms of enhancing the insurance penetration levels in the country to the various population segments is yet to be realised to a major extent,” Mr Krishnamurthy observed.

The total new business premium generated by life companies for the year ended March 2008 is about Rs 56,400 crore, of which about 24 per cent or Rs 13,500 crore was generated by bank branches, he added.

Source: The Hindu Business Line

ADITYA NUVO Q1 NET LOSS AT RS 28 CR ON INSURANCE BIZ.

Diversified company Aditya Birla Nuvo, part of the Aditya Birla group, slipped into red as its life insurance business incurred higher losses thereby offsetting the comparatively better performances made in other divisions.

The over Rs 12,000-crore Birla firm posted a consolidated net loss of Rs 28.3 crore for the quarter ended June 30 as against a net profit of Rs 94.7 crore in the corresponding quarter last year. The company, which have its operations in sectors such as telecom, insurance, textiles and BPO, recorded net sales of Rs 3,228.30 crore, up 48 per cent, as compared to Rs 2,184.1 crore last year.

"The fall in net profit was largely due to higher loss in the life insurance business," the company said in a statement.

Source: Business Standard, The Tribune, Deccan Chronicle

PRIVATE INSURERS EAT INTO PSUS’ NON-LIFE SHARE

Mumbai: State-owned non-life insurance companies have lost further market share in the first quarter of 2007-08, as the industry slowly adjusts to a free-pricing market. The slower growth among state-owned companies has resulted in ICICI Lombard displacing public sector Oriental Insurance to become the fourth-largest insurer in India. In the first quarter, non-life insurance has grown 13.4%, taking the total premium to Rs 8,437 crore, up from Rs 7,438 crore in the corresponding quarter last year. The growth has largely come from private companies which have grown 22.4% against public sector companies which have grown much slower at 7.7%.

Unlike life insurance where government presence is through the monolithic Life Insurance Corporation (LIC), the government owns four companies in non-life — New India, Oriental Insurance, National Insurance and United India. The state-owned companies now account for 58% of non-life premium compared with 61% a year ago. Unlike life insurance, which has seen a complete change in the ranking of insurers in terms of topline, the non-life insurance has been steady. Besides, United India and ICICI Lombard, MS Cholamandalam and Royal Sundaram are the only two companies to trade places in the ranking list. The highest growth rates have been recorded by Cholamandalam (35%), followed by Iffco-Tokio (33%), Tata AIG (28.12%) and Bajaj Allianz (27.85%). Reliance General Insurance, which was the fastest growing company last year, has grown slower than the industry with a 5.2% rise in premium income.

State-owned companies have recorded a lower growth because of hectic competition for property insurance which has seen them retain old business at sharply reduced rates. Priavte companies have been very aggressive in acquiring motor insurance business through tie-ups with dealership. Motor together with health insurance have been the drivers of growth in the non-life insurance industry. During the course of the year private companies have made large investments in distribution and intermediaries. Also several new companies have entered the fray. The new companies that have received licence include Future Generali, Universal Sompo, Shriram General Insurance and Bharti Axa General Insurance. HDFC Ergo General Insurance, which fell behind last year as HDFC broke up with erstwhile partner Chubb, is expected to press ahead this year.

Source: The Economic Times

J Hari Narayan IRDA Chairman's first Interview

Insurers will get more options to invest in bonds
Changes in investment norms will ensure better returns for policyholders, IRDA chief Hari Narayan tells Hema Ramakrishnan
J Hari Narayan, the new chairman of Insurance Regulatory and Development Authority (IRDA), takes charge at a challenging phase, when the government is keen on pushing a legislation to increase the Foreign Direct Investment (FDI) in the insurance sector. Given the impressive growth in the life industry, the stage is all set for the next phase of reforms. The non-life industry is also set for a take-off. In his first interview after taking over, Mr Narayan dwelt on a range of issues in the insurance sector and the road ahead.
Do you expect several new entrants in the sector when the cap on FDI in insurance is hiked from 26% to 49%?
A large number of private players are already operating life and general insurance sectors.
Had the size of investment been an inhibiting factor, they would not have come in. I do not
expect several new players to rush for joint venture tie-ups if the cap on FDI in insurance is
raised. But existing players may increase their stake, which, in turn, will enhance FDI inflows.
Capital has so far not been a major constraint for the insurance industry, given the way they
have been expanding their business. Some Indian promoters have restructured their joint
ventures to expand their relative shareholding in the company. This is, perhaps, reflective of
their relative strength. But insurers need capital to meet unexpected claims, expense overruns
and investment losses. And we do see some strain among Indian partners in raising capital
whenever there is a call for greater shareholder funds. A hike in the FDI cap would help then.
Also, comprehensive changes in the insurance legislation will give IRDA flexibility to respond to
emerging market developments.
Promoters of private insurance companies were expected to dilute their shareholding through an initial public offering within 10 years of operations. Is this timeline being reviewed?
The dilution of equity stake would hinge on the final decision on the FDI cap. As the market
matures, the insurance sector would also witness churning in the form of mergers and
acquisitions (M&As). A realistic valuation of companies would be crucial. We need to do some
homework on these issues and are looking at setting up an expert group.
The hike in interest rates and downslide in the stock market have seen a dip in sales of Unit-Linked Insurance Plans. Are you concerned about it?
A rise in yields may yield better returns on fixed income plans. But Ulip sales have dipped,
which is reflected in the first quarter numbers. The data show a drop in the new business
premium of LIC. However, private companies have recorded a higher growth. The average
growth for the life insurance industry is around 14%. But these are dull months. The investment
risks in Ulips are borne entirely by the investor channelling his longterm savings in the equity
market. We will make exposure norms mandatory for Ulips to mitigate the risks arising from
investments in a few companies.
How are you tackling complaints on misselling of Ulips?
We have made it mandatory for companies to give a break-up of the charges in Ulips and the exact amount that will be available for investment during the premium payment period. The policyholder and the marketing official selling the product have to sign the premium-cum-charges statement. Any change in the charges while under-writing or finalising
the deal also has to be approved by the policy holder. We will also codify all complaints from
consumers buying insurance products systematically to have a proper data base.
Are you acting on the recommendations of the panel to provide cheaper mediclaim?

What are the core issues in health insurance?
Voluntary health insurance policies such as mediclaim come up for renewal annually.
Companies can look at a longer-renewal period. Can we have medium and long-term health
insurance products? We also need to look at actuarial issues in the pricing health insurance
products. Can we draw from countries such as Brazil and Chile that have advanced health
insurance schemes?
When will you change the investment regulation norms for insurers?
We are planning to notify the changes in investment norms shortly to give greater flexibility
to insurers to invest in debt and equity instruments. Insurance companies will be given more
options to invest in bonds floated by infrastructure companies. They will also have the leeway to
invest in mortgage-backed securities. The changes will also ensure better returns for
policyholders.
When will general insurers be given the freedom to innovate and offer composite
products?
The issue here is one of tariff wordings. The General Insurance Council (GIC) is ready with
common tariff wordings, but a section of the industry reckons that there could be scope for
misunderstanding in some terms and expressions used. GIC has been asked to take a relook at
this. The new tariff wordings will be ready by the end of this year. We will remove impediments,
if any, to product innovation.
Will you allow banks to have tie-ups with multiple insurers?
Banks are allowed to tie up now only with one company in life and one in general insurance.
One option is to have open architecture which would mean giving banks the flexibility to act as
a corporate agent for multiple insurers. We also need to have more professional insurance
agents to deepen insurance penetration in the country.
Are you looking at a risk-based capital model for the insurance sector?
Insurance companies have to transit to a risk-based model in future. This transition and the
adoption of International Financial Reporting Standards (IFRS) by 2011 have several
commonalities.
It will equip companies to handle future accounting standards and also have proper risk
management systems. When Indian insurers adopt this model, known as Solvency II, they
would have to set aside much less capital than they do now, say, for (Ulips) compared with
traditional insurance products.

Medicare Expands List of ‘No-Pay’ Hospital Conditions

The list of hospital treatments that Medicare won’t pay for is growing, but not by as much as the feds initially suggested it might.

The Centers for Medicare and Medicaid Services said last year it would stop paying to treat certain complications it said were preventable with good care. (We described the initial list in this post.) Earlier this year, CMS said it could add nine more complications to the list.

CMS said yesterday that after considering public comments, it was adding three conditions:

Blood clots in patients after surgery for knee and hip replacements
Surgical site infections after certain elective procedures, including some orthopedic surgeries and bariatric surgery
Certain major problems that result from failing to control blood sugar levels after a patient is hospitalized
It’s pretty easy to agree that Medicare shouldn’t be paying for preventable errors, such as leaving items inside patients during surgery (one of the conditions on the initial no-pay list). But there are arguments from some quarters that the new items on the list aren’t always preventable, and therefore don’t belong on the no-pay list.

For example, even with the best treatment, blood clots remain relatively common in patients after knee and hip replacements, according to the Society of Hospital Medicine, a national group of hospital-based docs. What’s more, the new rules could add incentives for hospitals to over-use blood thinners in an effort to drive rates down, Patrcick Torcson, who chairs the society’s performance and standards committee, told the Health Blog today.

On the other hand, the blood sugar-related conditions are appropriate for the no-pay list because “complications from uncontrolled blood sugars in diabetics can be reasonably prevented” in hospitalized patients, Torcson said.

Source: Health Blog(The Wall Street Journal)