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| Insurance in India |
Liberty Mutual forms insurance JV with DaburU.S. firm Liberty Mutual will take a minority stake in a general insurance joint venture with Dabur group, the Indian firm said on Monday, joining a growing list of foreign insurers eager to tap India potential. The joint-venture company, Dabur Liberty General Insurance Co, will apply for approval from the Insurance Regulatory and Development Authority by the end of second quarter of this year, the statement said. Dabur said the firm would focus on personal and commercial products such as car, home and personal accident protection. Dabur GI Invest Corp, a unit of the Dabur group with interests in consumer products, will own 74 percent of the joint venture and Liberty Mutual will have 26 percent, the maximum it is allowed to hold under Indian laws. The Dabur group already has a life insurance joint venture in India with UK, Aviva Plc (AV.L: Quote, Profile, Research). The joint venture earned premium income of 12.5 billion rupees ($295 million) in the 2007/08 fiscal year that ended on March 31, an official from the joint venture firm said on Monday. India has 18 life and 18 general insurers and one re-insurer. It also has one of the lowest insurance penetration rates in Asia of 4.8 percent. Escorts offers insurance to farmersTractor manufacturer Escorts Ltd has joined hands with New India Assurance Company to provide insurance cover in the range of Rs 3 lakh to Rs 7 lakh for farmers. The scheme, Humrakshak, would provide insurance scheme for personal accidents to the farmers, who have bought company tractors from May 1, 2008, onwards, Escorts Ltd said in a statement. The Humrakshak initiative would cover all Escorts tractor brands — Powertrac (PT), Farmtrac (FT) and Escort, it added. "Escorts tractors ranging from 27-34 HP, 35-39 HP and 40-60 HP will carry a cover of Rs 3 lakh, Rs 5 lakh and Rs 7 lakh respectively for one year from the date of delivery," the statement said. Under the policy, in case of farmer death or permanent disability, he would be entitled to a cover amount, linked to the tractor model purchased by him. "Humrakshak reaffirms our commitment to continuously enhance our relationship with farmers. By providing a security backing to the farmers, the Humrakshak initiative addresses one of the most important challenges that farmers and their families face in case of an unfortunate accident," Escorts Agri Machinery Group Executive Director and CEO Rohtash Mal said. Rural Landscape Insuring Success of Indian Insurance SectorRural India is providing vast growth opportunities for insurance players, provided they offer innovative, cost effective products and improve distribution channels. The Indian insurance industry has been strongly growing for the last few years, says RNCOS new report, “Emerging Rural Insurance Market in India”, due to the introduction of innovative products, organized distribution channels, rationalized sales system, and targeted marketing and campaigns. The report also says that India has shown huge growth opportunities for the life insurance industry due to fast growing economy and huge middle-class households. Moreover, the Indian life insurance sector is at the nascent stage but has huge growth potential. Besides this, the report also identifies that rising per capita income, insurance awareness and growth in supply-side will help in increasing the penetration of life insurance especially in rural areas where a major part of the Indian population resides. With the entry of private players in the insurance sector and imposition of rural and social sector business obligation by IRDA, the Indian rural areas have seen the launch of several individual and group insurance products by private players. These insurance products feature low premium rates as well as low levels of coverage. Apparently, the rural areas are still largely untapped, offering big growth opportunities for insurers. But insurers have to develop strategies to capitalize on the Indian rural region by focusing on consumer awareness, cost-effective distribution channels, and affordable insurance products. The growth opportunities in the Indian rural region for life insurance players are just a section of “Emerging Rural Insurance Market in India”. Other than this, the report also extensively analyzes the Indian insurance sector in relation with Gross Domestic Product (GDP), Disposable Income, Lending by Financial Institutions, and Non-life Insurance Premium. Tail-wagging policies for pedigreed K9sPet insurance is catching up fast in India. As prices of imported breeds like Pugs, German Shepherds, Dobermans and Labradors go up, insurance companies are gearing up to make a killing. National Insurance Co Ltd, New India Assurance Co Ltd, Oriental Insurance and United India Insurance as well as private sector giants like Bajaj Allianz have launched pet policies. High profile dogs — profile being determined by pedigree and whether they have lifted any trophy in prestigious dog shows — get insured at a higher rate, running into lakhs. Mr. Bharat Bhushan, CEO, Mobileshoppee says that insurance agents are also keen on insuring such dogs. Pets aged between 8 weeks and 8 years can get insurance cover. Dog-owners need to provide documents like veterinary health certificate, kennel club certificate and a photograph. RK Sinha, chairman of SIS, a private security agency, that has the largest kennel in the private sector, says the agency has been importing and insuring dogs for many of their industrialist clients. “We also cover risks such as death by accidental poisoning and loss due to theft,” he adds. Jayesh Mathur of south Delhi-based The Pets Shop says that the tribe of dog lovers is growing fast in big cities. And with people buying dogs that come with a price tag of anything between Rs 2 lakh to Rs 5 lakh, they better have a security blanket for their pet passion. Pension reforms: Retirement savings find way to D-streetNEW DELHI: In an innovative mechanism aimed at kick starting pension reforms, the Invest India Micro Pension Services (IIMPS) will channelise retirement savings of nearly 6.1 crore low-income earners into the capital markets. The company, which works on social security for low wage earners, is expected to have Rs 300 crore of assets under management under the scheme in three years, covering about 15 lakh individuals. The estimated size of the market comprising savings of 6.1 crore workers in this category is pegged at Rs 10,000 crore. Assume, for instance, that a 35-year-old saves for retirement over 25 years. With an average annual retirement savings of Rs 1,550, he will derive an annuity of about Rs 340 per month. If a co-contribution by, say, the government of Rs 1,200 per annum is factored in, his annuity will go up to Rs 610 per month. Of the 14.3 crore paid workers aged between 18 years and 59 years and earning less than $900 per annum, 6.1 crore are willing to immediately join a contributory pension scheme. At present, barely 5% of this group saves for retirement. The scheme will be regulated by RBI, SEBI, IRDA and PFRDA. The company is promoted by Sewa Bank, Friends of World Women Banking, BASIX and Invest India Economic Foundation (IIEF). The company is also in discussions with strategic investors and VC firms for raising additional funds to expand its institutional capacity and coverage over three years. Since a significant percentage of these low-income workers are members of micro-finance institutions, SHGs, cooperatives and worker associations, the promoter agencies are well-placed to collect pool and transfer modest savings and insurance premiums on behalf of their members to well-regulated financial firms, an official said. Individual members will be able to receive co-contributions and other subsidies from the government and donors directly into their individual retirement and insurance accounts. IIMPS director Gautam Bhardwaj said the government is willing to be a co-contributor to the pension scheme. SBI Funds Management is partnering with IIMPS in managing the savings of the low-income workforce under this initiative. Medical insurance claims may cover pre-existing diseases tooMedical insurance policy-holders can now rejoice. Insurance companies are reviewing claims settlement norms in case of preexisting diseases. This means, insurers may soon no longer deprive mediclaim holders for claims under the clause of “non-disclosure of diseases”. Accordingly, policyholders who never underwent treatment nor showed symptoms of a disease before signing a policy document are likely to get the medical policy benefits in future. At present, insurance companies often decline to settle insurance claims in case policyholders are diagnosed to have contracted the disease prior to the signing the mediclaim policy. This is likely to change. The General Insurance Council of India, in consultation with all insurers, is working on the appropriate definition of preexisting diseases. “Policyholders who did not undergo any diagnosis or treatment or show indications of a disease prior to the signing of a contract should not be considered in the know of having any preexisting disease,” said Mr BD Banerjee, a member of the committee, appointed by Insurance Regulatory and Development Authority (IRDA) for examining issues related to health insurance for senior citizens. He was talking to reporters on the sidelines of an interactive session on health insurance, organised by Bengal Chamber of Commerce and Industry here on Saturday. The seven-member committee is likely to submit its report by the first week of November. It is slated to meet in Mumbai from October 9 to 11. The insurance regulator was formed by the committee in May this year in the wake of a over 200% hike in premium for medical insurance policies after September 2006. The insurers increased the premium for senior citizens defying the regulator’s advice not to hike it more than 70%. Mr Banerjee felt “most private insurers turn down health policies to people aged above 60. Among the public sector insurers, only Oriental Insurance as of now does not offer health insurance policies to senior citizens. It has, however, applied for a policy for senior citizens to IRDA. Issues relating to health insurance for the elderly need special focus, as they are more vulnerable and fall in a higher risk category. Foreign insurers to storm Indian marketIts boom time in the general insurance sector. Business is growing by over 22 per cent and a host of foreign insurers are lining up to be a part of the action. MOBILESHOPPEE learns that six new players are all set to storm into the general insurance sector. Generali is entering India in partnership with the Future Group, while AXA is joining hands with Bharti. Sompo of Japan has teamed up with Allahabad Bank, Karnataka Bank and Indian Overseas Bank for its India foray. The US insurance Travelers and Ergo are said to be in talks with HDFC for a tie-up, while Insurance Austrilia Group (IAG) is scouting for partners to make its debut in India. "We will see merger and acquisition activity in the sector soon as the capital requirements go up and also new players will be wanting to consolidate their position," said Verne Baker, Head-General Insurance Consulting Asia Pacific. STIFF COMPETITION Unlike in life insurance where state owned LIC is the market leader by far, private players in general insurance have posed stiff competition for their public sector counterparts. Total premia collections in general insurance is currently pegged at Rs 25,000 crore and industry insiders say that the entry of new players will trigger growth. "The pie is likely to grow as the new players will be looking at bringing in clients and will be investing in building the distribution network," said Rajesh Jain, CFO, ICICI Lombard. This is the first time since insurance was opened up that the sector will see a new set of players coming in. And the coming days could see a spate of mergers and acquisition as new players try to consolidate their position. Indian eyeing PacificINDIAs largest life insurer, the Life Insurance Corporation (LIC), says it is eyeing opportunities to expand in the Asia Pacific region, including the Australian market. Government-owned LIC is under pressure to expand outside of India as its stranglehold on the Indian life market comes under attack from private competitors. LIC was previously a monopoly provider of life insurance in India but is losing market share to foreign-backed rivals as deregulation takes hold in large cities such as Mumbai. Chairamn Mr Thai Vijayan revealed yesterday that one of the company strategies would be to establish insurance operations in other countries. In an interview with India Business Standard newspaper, Mr Vijayan said LIC was planning to enter the Australian market. "LIC has been trying to expand its operations overseas as well, so that its footprints are well spread out around the globe wherever there are non-resident Indians," he told the newspaper. "Both New Zealand and Australia have substantial populations of Indian origin and we would definitely like to operate in these two countries. "As and when we take a decision to enter these markets, we will let you know about it." Australia life market continues to be dominated by AMP which has net policy liabilities of almost $70 billion. However, in the past 12 months AMP has been overtaken by National Australia Bank as the most profitable underwriter of life and general protection policies in Australia. According to research collated by Price Waterhouse Coopers, NAB life businesses generated net earnings of $985 million in 2006 compared to AMPs life result of $531 million. Trade in life insurance productsSecondary market trading in life insurance products was an unknown concept in India until recently, when the Bombay High Court gave a verdict endorsing as legal exchange the transfer of life insurance products in the name of a third party for a money value. Section 38 of The Insurance Act, 1938 clearly states that the life insurance policy rights can be assigned in the favour of a third party for monetary consideration. This serves as the basis for the trade in life insurance policies where third party firms, commonly called the providers, purchase the life insurance policy rights from the policy holders who are willing to get out of the contract. The provision of surrender of the policy to the insurer for a cash value exists in the primary market itself. But the need for a secondary market involving third party firms arises because the surrender value paid by the insurers is not competitive. The insurer cannot pay high cash value as it affects the policy reserve and surplus of the insurance company, in turn affecting the policyholders who retain their policies. Ultimately, the insurer is entitled to pay the claims and maturity to the loyal policyholders! For example in India, the Life insurance Corporation of India can pay cash value of up to 30 to 40% of the sum assured. In the case of other insurance companies, however, the situation is worse because the automatic non-forfeiture clause empowers the company to advance the unpaid premium amount from the policy cash value. In countries like the United States, United Kingdom, Canada and Singapore, the secondary market trading in life insurance products exist since 1980s. The regulators in these countries have recognised the market and provided regulatory framework to prevent malpractices and protect the interest of the policyholders as well as that of the investors. The trading can be classified into the viaticals, the life settlements and the trading in endowment products. Viaticals are those policies where the owner is terminally ill. The policy is an impaired policy, in the sense that the death will occur sooner than originally projected. So, the present value of death benefit increases. At the same time the present value of premium payments decreases because these will not continue for as long as originally projected. In short, the actuarial value of the policy increases in these cases. The policy owners are interested in liquid cash for the purpose of medical treatment. Therefore, they sell their ownership rights. Lawyers may get cover for professional errorsThere is good news for lawyers and companies that make big investment decisions based on their advice.The government is thinking of making it mandatory for lawyers to be insured against claims for damages from their clients who think the service received was not worth the fee given. Mandatory professional negligence insurance exists in other countries for professionals such lawyers, doctors and architects, but is a new concept in India. The law ministry is considering a proposal to introduce this in India. “We are seeking comments from all stake holders on this issue”, said a government official, adding that it might take some time for the proposal to fructify. Such policies usually cover only the negligence of the professional and not any wilful act by the insured. This is essential as the cost of litigation could be high even though the professional is not found responsible for his client’s financial loss due to the advice. “The opinion given by lawyers on big ticket transactions is very valuable and if the client suffers on account of an undisclosed liability, he can only move court in the absence of an insurance cover. Litigation is costly and time consuming and insurance is the best solution in the circumstance”, said Diljeet Titus, senior member, Titus and Company, a law firm that had taken professional liability insurance for a few transactions. Rajiv Luthra, founder and managing partner of law firms Luthra & Luthra said it could enhance accountability among lawyers. Some senior lawyers, however, believe that making it mandatory to have such insurance would be like putting the cart in front of the horse. “In India, there is no strong framework to hold a lawyer accountable for his service, nor awareness about the remedies in law. Before having mandatory insurance, these issues should be addressed”, said a senior Delhi-based lawyer who gives investment advises. Now, a dissatisfied client can approach the Bar Council of India and file a complaint against the lawyer. This could lead to the suspension or cancellation of the lawyer’s license to practice, but does not help the complainant to recover the losses. “The complainant can also move court to claim damages, but there has not been many such cases”, he said. Is India investing in insurance or are fixed deposits the rage of the season?Are Indians investing in insurance, FDs or MFs? A survey of 3000 male respondents across India’s metros carried out by India Net finds a clear tilt towards insurance for investment. 75% say it would be their first option. And yet, 33 % of these respondents are not insured. In other words, they continue to view insurance as an investment rather than protection tool. In the second investment option fixed deposits and mutual funds score high with 75% and 72 % respectively of respondents wanting to opt for these products. Interestingly, direct equity investing is a favoured way of investing accounts only for 3.5% of the respondents that could perhaps largely be triggered due to the volatility in the markets, with investors preferring to hand over their money to professional fund managers Insurance cos plan to hit IPO standsIndia is one of the fastest growing insurance markets with companies clocking in triple digit growth. For most of the players it is the crucial investment stage where they have to pump in money to build their distribution network and also to meet regulatory requirements. So the next time you get an insurance cover you may also get to check its stock price to find out how well it is doing. Many of the private insurance companies are still bleeding but that is not stopping them from dreaming of entering the market with their public offerings. SBI Life Insurance (SBI Life), the only private insurance company generating profits has already started the groundwork for going public. ICICI has recently transferred its stake in insurance business to a holding company as a prelude to get listing. Even the Bajaj group controlled Bajaj Allianz insurance company is also looking at unlocking value in the insurance business. DLF forms JV for life insurance businessThe real estate giant DLF and Prudential Financial, Inc (PFI), one of the biggest US life insurers, on Tuesday announced a tie-up to foray in the life insurance business and invest about Rs 1,000 crore over the next ten years in the venture. As per the agreement, DLF will have 74 per cent stake in the joint venture - DLF Pramerica Life Insurance Company Ltd (DLF Pramerica), while Prudential will hold 26 per cent stake, the maximum permissible for a foreign company. The announcement comes a day after global banking giant HSBC joined hands with Oriental Bank of Commerce and Canara Bank for a life insurance venture. PFI decision to set up base in India follows that of other US and European firms such as AIG, AXA, Prudential of UK and Dutch group ING. The new company will initially have a paid up capital of Rs 100 crore, including Rs 26 crore by Prudential. The two partners plan to scale up investment to 250 million dollars (about Rs 1,000 crore) over the next 10 years, said Kapil Mehta, Chief Representative, India of Prudential Financial. Pramerica is a brand name used in select countries by Prudential Financial, which has about 616 billion dollars of assets under management and operates in the US, Japan, Mexico as well as in many countries of Asia and Latin America. "With more than 130 years of experience in delivering insurance and financial products around the world, PFI is the perfect partner to work with us to establish a market-leading and highly differential life insurance business in India," DLF Vice Chairman Rajiv Singh said in a statement. The company is applying for a licence from the Insurance Regulatory and Development Authority. It would be based in Delhi and hopes to start operations by early 2008. Canara Bank, HSBC and Oriental Bank of Commerce to establish life insurance company in IndiaCanara Bank, HSBC Insurance (Asia-Pacific) Holdings Limited and Oriental Bank of Commerce (OBC) have today signed a non-binding Memorandum of Understanding to jointly establish a life insurance company in India. Canara Bank, HSBC Insurance (Asia-Pacific) Holdings Limited and Oriental Bank of Commerce (OBC) have today signed a non-binding Memorandum of Understanding to jointly establish a life insurance company in India. The new company will have exclusive access to the customer bases of both of the State-owned banks, Canara Bank and OBC, and of HSBC in India. This comprises more than 40 million people and a nationwide network of 3,600 branches. This formidable distribution capability will be used by the company to become a significant player in the country’s rapidly expanding life insurance industry. Under the proposed agreement, Canara Bank will take a 51 per cent stake in the new company, HSBC a 26 per cent interest and OBC the remaining 23 per cent. The new life insurance company will be capitalised at INR3,250 million (approximately US$73 million), of which HSBC will contribute INR1,770 million (approximately US$40 million), Canara Bank INR1,020 million (approximately US$23 million) and OBC INR460 million (approximately US$10 million). Under the terms of the agreement, HSBC will provide a range of management services, which may include providing executives for senior roles. Life insurance premiums in India grew at an annual rate of 21 per cent in the six years following the opening of the market to private players in 1999, exceeding US$20 billion in 2005. From April to November 2006, new life insurance premiums grew by 155 per cent, according to the business figures released by India’s Insurance Regulatory and Development Authority. However, with a penetration rate of only 2.5 per cent in 2005, India’s nascent life insurance market has considerable long-term growth potential. Shri M B N Rao, Chairman and Managing Director, Canara Bank, said: "Canara Bank, which has built up a distinguished track record of performance and service excellence over 100 years, has emerged as a front ranking banking institution in India. Recognised as a financial conglomerate with a strong presence across varied financial markets, the Bank has been providing a wide array of need based banking and financial services to its fast growing cross section clientele. Among others, Canara Bank has already established its presence in Mutual Fund, Factoring, Housing and Venture Capital Financing activities through its subsidiary companies and insurance domain by distributing insurance products – both life and non-life through its network of branches. "The signing of the MoU today to promote a life insurance company with HSBC Insurance and Oriental Bank of Commerce marks a significant step forward for Canara Bank in terms of creating and delivering value added insurance products not only to the existing customers but also to the customers and prospects of our partner institutions. By collaborating with HSBC we shall be in a position to bring the best of international insurance products to the fast growing Indian markets. "I have no doubt indeed that the domain expertise of HSBC with the strong network and presence of the Indian Public Sector Banks augurs well for the success of our alliance." David Fried, Regional Head of Insurance Asia Pacific for HSBC, said: "This is a unique opportunity to expand HSBC’s footprint in one of our major emerging markets and to bring to the partnership considerable insurance experience, product range and our proven bancassurance capabilities. HSBC has an extensive and successful bancassurance operation in over 40 countries around the world serving more than 30 million customers, in both developed and emerging markets. HSBC has been in the insurance business since 1808, employs over 6,000 staff in the manufacturing and sourcing of insurance products globally and has 40,000 staff involved in selling insurance. HSBC Insurance also has a long history in Asia and we are recognised in the industry for our prudent management and high quality of service. In Hong Kong, HSBC Insurance has won industry awards such as Asia Insurance Review’s Life Insurance Company of the Year in 2006, for being a pioneer in product and service excellence as well as for our effective and sound financial management. "The financial services industry in India has seen remarkable development over the past few years and life insurance has been a key part of that success story. Working closely with our two partners, and by bringing our rich experience to India, we believe we can build a significant presence in India’s life insurance industry. The sector has experienced rapid development since it was opened up in 1999 and we expect to see that robust growth continue over the next decade. It is an extremely promising time to be entering this market." Shri Prithviraj, Chairman Oriental Bank of Commerce, said: "OBC has a strong presence in rural and semi-urban areas of northern India with 1,350 branches and extension counters in all important centres across India. Our 14,500 strong work-force is dedicated and committed to exploring new business activities. Around 950 employees have already been handling life and general insurance businesses for the past three years. With this alliance, OBC will augment its revenue streams by improving return on equity after breakeven and commission earnings from premia mobilized. Since OBC understands the needs of the local populace, our input into the design of customer-friendly life insurance products will enable the partners to garner market share. OBC will help formulate products for Inclusive Growth for the needy sectors of society, so as to extend the Social Security net to the deserving." A lowdown on insurance sectorWhat is the reason behind foreign companies making a beeline to enter the insurance business in the country. Its pretty obvious: Insurance in India is only 3.14 per cent of its GDP compared with the global average of 7.52 per cent. And this is expected to rise to only 4 per cent. This means a vast majority of Indian population is left to be covered by insurance. At present, there are 16 companies providing life insurance in the country. In India, insurance is seen with an improper perspective. Insurance products are sold rather than bought, as most people do not realise that insurance is for the security and benefits of their dependants. While the objective of life insurance is to provide a lump sum amount in the eventuality of untimely death of the insured, most Indians buy insurance to save taxes. This is evident from that around 40 per cent of the insurance business of any insurer takes place in March, which marks the deadline for submission of investment details for computation of income-tax liabilities. Now the question is: What if the government withdraws the exemptions on insurance? Are you not going to buy insurance then? The government is currently considering the EET (exempt, exempt, tax) system even for insurance, and in that case, should you stop buying insurance? People must understand that they should buy insurance in their own interests or benefits (of their dependants) and not only as a tax-saving instrument. Apollo to enter health insuranceApollo Hospitals group has decided to make a foray into health insurance field. It has roped in DKV Deutsche Krankenversicherung, a leading private health insurer in Europe. The two have moved the Insurance Regulatory and Development Authority (IRDA) and other statutory authorities seeking approval for their proposed joint venture.Apollo Hospitals Enterprises will hold 20 per cent stake in the joint venture and its associate 54 per cent. The balance will be held by DKV. The promoters are hoping for the business launch of the venture on April 1, 2007. "Due to their different strengths, the two companies will complement one another in an excellent manner," a release quoted Prathap C. Reddy, Chairman of the Apollo Hospitals group, as saying. Apollo Hospitals Group is seeking to be an integrated healthcare player. And, the proposed entry into health insurance is logical as it strives to create an access infrastructure. The new joint venture, the release said, would begin its business with in-patient products as well as travel health insurance products. DKV has offices in nine countries and written premium worth Euro 4.8 billion in 2005. It is a member of Munich Re, one of the worlds largest re-insurers and financial services providers. In insurance, India may be better than USK C MishraWorld over, there are calls for reforms in the American insurance industry. Insurance in the US has changed dramatically since the National Association of Insurance Commissioners (NAIC) was set up in 1871, with growing sophistication in underwriting and risk management. In a backdoor form of protectionism, American reinsurance firms have long benefited from a regulation that requires foreign reinsurers to post more collateral. If you operate outside the US, they don’t trust you one inch. Elsewhere in the insurance world, there are calls for reform of America’s insurance regulations. One loud voice is heard from Lloyd’s, whose syndicates write 38% of America’s reinsurance with huge collateralisation liabilities. The collateral requirement was established because of worries about regulatory standards abroad, and the financial strength of global reinsurers. Today, regulatory standards have been tightened in many foreign markets. A majority of America’s reinsurance cover now comes from firms based abroad, including many that have set up shop in Bermuda. In an abrupt departure from procedures that have been in place since World War II, the NAIC has taken a first step towards scrapping the “full collateral” requirement imposed on non-US insurers to accept reinsurance of US risks. The NAIC, in a face-saver, stressed that the proposal, which would replace collateral requirements with a ratings-based system, was aimed at not only alien, but all reinsurers, based on their financial strength. Often people criticise India’s public office selection process. In the US, it is not political interference, but recognised political intervention. In some states like California, insurance commissioners are elected officials and in some states, the governor of the state, who is elected, appoints insurance commissioners. Like in India, insurance is a fiercely political issue in the US. During the last few years, Congressional support for simplifying the insurance system is gaining ground. Both Houses of Congress are looking at proposals to change the state-based system. Big insurers favour a version that would implement an optional federal charter, allowing them to bypass the state-by-state regulatory process if they choose. A similar system already exists for banks. The Insurance Regulatory and Development Authority may take little pride, at least on this account, as excepting an Andhra public sector co-branded training and educational institution, the regulator is not much contaminated with state or states. The no-changers in the American political space have strongly argued by quoting instances of global tolerance of no reforms in the US. Even under the existing rules, the size of the market has attracted foreign investment. Swiss Re recently purchased General Electric’s reinsurance arm, and Britain’s Aviva is in the process of buying AmerUs, an annuity business, despite selling its property-casualty business in America just a five years ago. Even some consumer groups favour state-based regulation. They believe it keeps premiums lower. Premiums, as a percentage of gross output, are lower in America than in several other countries. Proponents of the changes see more efficiency, an ability to roll out products more quickly nationally and, ultimately, better offerings for consumers as a result. There is a significant differential in accounting standards and methodology between the so-called alien reinsurers and ours. Unless, the alien standards are any short of those within the US, especially since regulators, and more especially Fitch, Moody’s & S&P have amended the basis by which insurers and reinsurers are tested. Without adequate continued regulatory process, this has the ability to become a disaster. The essence of the argument of this powerful US insurance leader is that there should be no reforms in US, particularly if it favours alien insurers. This makes Indian political and regulatory outfit prouder by default. The writer is director, National Insurance Academy, Pune Health insurance policy for old
You can now buy a health insurance policy even if you are 90 years old.
National Insurance plans to launch a senior citizen health insurance policy that will cover the age group of 60 - 90 yrs with out any extra
charges . The policy is expected to launch before the end of this year.
But the company is not the only one, Oriental Insurance has increased the age limit on its policy from 75 to 90 years. But there is a catch it has increased its premium for this age group from Rs 3300 to Rs 7000 per year for a cover of Rs 1 lakh . "Those who came in late will have to pay extra as compared to those who have been there for a long period of time," said VN Bhargava, Senior Divisional Manager at Oriental Insurance New India Assurance is also looking at a series of new health insurance policies. It plans to set a sub-limit on various expenses within the cover and will also be segmenting based on income levels. Sources from the IRDA say other insurers will also follow suit and include a co-payment model for senior citizens, where the customer and the company will share costs of medical procedures. Insurance companies have been grappling with losses from health insurance polices because of rising costs of medical care and larger claims being made by older customers, as denying them a policy is not permissible. So in keeping with higher risk, senior citizens will have to be prepared to shell out more. Oriental Insurance has no room for the agedPublic sector general insurer, Oriental Insurance Company Limited, has resorted to premium loading apart from reduced brokerage to discourage the sale of mediclaim policies to older people.Traditionally, premium loading has been taking place only for group policies based on past experience. So, if the claims ratio is high for a certain group, the premium is loaded by a certain percentage at the time of renewal. Oriental Insurance has informed the broking community that the premium loading for individual policies sold to people aged between 50 and 60 years will be 50 per cent and for persons above 60 years, it will be 100 per cent. Simply put, older people now have to churn out 1.5 to 2 times more for mediclaim policies from Oriental Insurance. The reason for discouraging sale of mediclaim to older people is the high claims ratio of around 180 per cent. However, what is interesting is that Oriental Insurance is the only company which has resorted to such measures. Confirming this, C V Ramana Reddy, principal officer, Helios Insurance Services Private Limited, said Oriental Insurance is looking at reducing its exposure to the higher age-group bracket and hence these measures. On whether any similar intimation has been received from other insurance companies, Reddy answered in the negative. Oriental Insurance has also reduced the brokerage from 17.5 per cent to 12.5 per cent for policies issued to individuals between 45 and 55 years. It is not paying any brokerage for issue of policies to people above 55 years. The brokerage for group policies has also been reduced to 12.5 per cent. The claims ratio tends to be high in this segment as well because parents, who are dependents of employees, also tend to be covered by the policy. According to a broker, these measures may turn disadvantageous for Oriental Insurance, as individuals may turn to other insurance companies for their needs. Incidentally, Oriental Insurance has also applied for a health insurance product to the Insurance Regulatory and Development Authority of India where a higher premium can be charged for older people. The approval is awaited. Principal PNB Life to traverse hinterlandUS-based Principal Financial Group plans to transform the way life insurance products are structured in India when its joint venture with Punjab National Bank kicks off operations.Apart from selling life insurance, it seeks to address other customer needs such as cover for dreaded diseases, accidents and hospitalisation. The life insurance joint venture - Principal PNB Life Insurance Co - also has Vijaya Bank and UK (Berger) Paints as equity partners. Principal Financial already has partnered Vijaya Bank and PNB for asset management, insurance brokerage, mutual funds and insurance advisory company. In an interview with Business Standard, Norman Sorensen, president and CEO, Principal International, said, “Our products will be very innovative addressing customer needs such as life insurance as well as potential dreaded disease, potential accidents and potential hospitalisation type products.” According to him, the company will be a bancassurance-driven life insurance company having a model aimed at penetrating the lower middle and middle class Indian households, which are currently not being fully addressed by life agency operations. The company expects to get a life insurance licence in time for launch by January 2007. THE ORIENTAL INSURANCE COMPANY LTD.The Oriental Insurance Company Limited offers Extended Warranty insurance Cover on New (GSM & CDMA) Mobile Phones for 1 Year from the date of the expiry of manufacturer’s warranty or after 365 days from the date of purchase which ever is earlier.Warranty Asia as Administator has joined hands with Mobileshoppee in effort to promote extended warranty product to mobileshoppee members and further to customers at mobileshoppee members outlets. Mobile phone extended warranty comes in price tag of 0-4000, 4001-6000, 6001-10000, 10001-15000, 15001-25000, 25001-40000. Claim management is handled through all India Toll free no. 1800-117700 Composite insurance may soon be a reality
YOU may soon be able to insure your life as well as your motor pump
by buying a single policy.
The Insurance Regulatory and Development Authority (IRDA) is currently toying with the idea of allowing
insurance companies to issue composite policies for micro-insurance.
In India micro-insurance is defined by the size of the policy (Rs
5,000-Rs 50,000 sum assured) and covers health, household, fire and motor insurance portfolios that are non-commercial or of lower asset
value.In what could be considered the integration of life and general insurance, the IRDA will soon issue broad guidelines authorising composite products for micro-insurance, said an IRDA source. Composite products: As per the new regulation, individual companies will now be allowed to design composite products within broad parameters. They will be branded as micro-insurance products for file and use. A single agency system can sell these packaged composite products. Currently, only in the case of health insurance, a life insurance company can purchase a health rider from a general insurer and attach it to its base product. The new micro-insurance regulations on the anvil allow cross-selling of insurance products by life and general insurance products. According to analysts, the introduction of a composite product with a life and general insurance component, would further cement the tie-up between life and general insurance companies. Tie-ups with LIC: Though the proposed micro-insurance regulation is being awaited, the four public sector general insurance companies are keen on tying up with LIC in the area of micro-insurance. Mr M. Ramadoss, Chairman and Managing Director, Oriental Insurance Company, said it was interested in tying up with LIC. Oriental Insurance has started profiling its agents for the selling of micro-insurance. The company also plans to increase its agency force from 30,000 to 50,000 by the end of the year. Pricing: With respect to the pricing of micro-insurance products, Mr Ramadoss said, "The pricing system will develop over time, especially since a de-tariffed market is coming into place. The issue one needs to consider is how one can integrate a long-term life insurance policy with a general short-term insurance product." A senior official at LIC said that the opportunity of a tie up with a general insurance company was being keenly pursued. "Compared to the non-life business, the agency force is the strength of a life insurance company and could be leveraged in case of a tie up. Mr M.K. Garg, Chairman and Managing Director, United India Insurance Company, said that marketing a composite product would be easier. "We are in talks with several life insurance companies including LIC though we are still awaiting the micro-insurance regulation to come into place." FIR not a must for mobile theft claimNew Delhi: An insurance company, which refused to indemnify the owner of a lost mobile phone merely for the reason that she did not produce an FIR, has been ordered by a consumer court to pay the claim amount of Rs 8,700 along with compensation. The National Insurance Company (NIC) had repudiated Deepika Vermas claim citing an "exclusion clause" that only a "Non-cognisable Report (NCR) was lodged mentioning that the cell phone was taken away by somebody" while the claim covers only "theft through force or violent entry or exit." Rejecting the contention, the Consumer Disputes Redressal Forum (North) said, "It is very clear that the theft took place. Twisting of words will not change the prima facie meaning of the crime. A layman is unable to differentiate between cognisable and non-cognisable offences." "When one informs the police about such incident he or she always thinks that a complaint has been registered," Forum President K K Chopra and Member Neeru Mittal said ordering the college girl a claim of Rs 8,700 and a compensation of Rs 2,000 for the "harassment and mental agony" caused to her. The Forum said that the daily diary entry and the NCR were sufficient to support the claim of the consumer. Somebody snatched Vermas purse, containing her Nokia handset worth Rs 8,700, when she was returning from her college. After lodging an NCR, she registered her claim with the insurance company, which was declined. She then approached the consumer court seeking justice |
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