In order to increase the persistency or continuity of life insurance policies by policyholders, the Insurance Regulatory and Development Authority (IRDA) has suggested agents sell more policies per year.
In an exposure draft on persistency of life insurance policies, the IRDA has suggested a series of measures, including asking them to procure a minimum of 20 polices per year and a minimum first year premium income of Rs.150,000.
Where an agent falls short of achieving either of the above, they would have to achieve proportionately more in either one to make up for the shortfall.
According to the exposure draft, an agent's licence may not be renewed where the persistency ratio (policy renewal ratio) is less than 50 per cent. Further, there shall be a disincentive for lapsation in the form of commission clawback by the insurer, on a proportionate basis.
Alternatively, a part of the first year commission shall be withheld and be paid based on persistency in later years, the draft suggests.
In an attempt to curb dummy agents, the IRDA has also suggested that spouses and close relatives of employees of insurers shall not be engaged as agents by insurers.
Reacting to IRDA's proposals, R Ramakrishnan, a member of the Malhotra Committee on insurance reforms said, "Let the regulator prescribe the persistency ratio of the insurer and not the productivity norms for agents. It is for the insurers to prescribe the productivity norms for their agents."
According to him, IRDA is trying to micromanage the sector which it should not do.
The regulator has called for comments from Life Insurance Council, General Insurance Council, consumer organisations and general public by July 31, 2010 while excluding the agents.
Interestingly the 61 month persistency ratio of individual agency channel for private life insurers for the three year period 2004-05 to 2006-07 is around 50 per cent much higher than that of corporate agents (just below 45 per cent), brokers (less than 40 per cent). The persistency of bancassurance channel (policies sold by banks) is above 50 per cent.
Sunday, July 25, 2010
Irda's fiat on insurance agents finds many supporters
Insurance Regulatory and Development Authority’s (Irda) latest proposal to make life insurance agents more responsible while selling policies has elicited mixed reactions from life insurers.
While some are of the opinion that the move is a step in the right direction and will bring in much-needed accountability, others feel the conditions prescribed are too stringent, resulting in many agents winding up their businesses.
The insurance regulator’s proposal, which was placed in the public domain last week, proposes to de-license agents who fail to achieve a persistency ratio of at least 50%. Persistency is defined as the proportion of policies remaining in force at the end of the period, out of the total policies in force at the beginning of the period. It is an indicator of the number of policyholders who have chosen to renew their policies, broadly signifying their satisfaction with the product sold to them.
The move follows widespread complaints of mis-selling by agents who carry out their task with an eye on commissions rather than policyholders’ needs, eventually leading to the latter deserting policies, which typically entail a tenure of more than 10 years, mid-way.
“The move is aimed at ensuring that the agency force acts more responsibly while selling policies. In that direction, we support it. The interests of insurers, distributors and customers have to be aligned, and persistency is a key factor here,” said Max New York Life MD and CEO Rajesh Sud. “The emphasis on persistency will be approved by one and all — agency as well as industry bodies. In our case, we already follow this principle,” added Reliance Life president and executive director Malay Ghosh.
In addition, Irda has put forth certain other recommendations as well. If the draft norms are implemented, an agent will have to sell a minimum of 20 policies every year and bring in a first year premium income of at least Rs 1.5 lakh. Should they fail to fulfil either of the criteria, they will have to achieve proportionately more in either one to make up for the shortfall in the other, states the proposal.
“Agents in India are not full time as most of them enter the agency force as a stop-gap arrangement and the successful ones stay on. After the revision in charge structure, commissions have come down and it has become even more difficult for an individual to earn aliving as an agent,” said the CEO of a life company on condition of anonymity.
In India, the commission paid to banks and corporate agents are in many cases higher than the commission paid to individual agent. The proposed guidelines will leave individuals at the mercy of banks and corporate agents who have a bad track record in terms of mis-selling. The new guidelines will hurt the agency channel,” he added.
“Some of the conditions seem harsh, considering that nearly 30-35% of agents in the country are unable to sell even 12 policies in a year. If these norms come into play, many agents could go out of business,” pointed out GN Agarwal, chief actuary of Future Generali Life Insurance.
Some also feel that since many agents do not meet the requirements at present, the regulator needs to allow a reasonable transition period to enable companies to train agents and boost their productivity. Irda has set July 31 as the deadline for receiving comments and suggestions on the draft norms from the general public, life insurers and other stakeholders.
L&T General Insurance gets regulatory nod to start businress
L&T General Insurance Company has received final approval from the insurance regulator to commence business. The company is promoted by the $9.8-billion engineering company, L&T, which controls 100% equity in the non-life company.
The company, which will be headed by CEO Joydeep Roy, already has 100 employees on board and plans to increase its headcount to 300 by the end of the financial year. Mr Roy, who was formerly with Tata AIG Life Insurance, said the company will launch standard non-life products in the next 60-80 days. The company has already designed 20 products, which it will soon lodge with Irda for approval.
Mr Roy said the company will commence operations with a paid-up capital of Rs 175 crore against the statutory requirement of Rs 100 crore. Most of the additional capital will be invested in building up an information technology backbone. The company would use technology to lower its cost of operations. “We are starting our operations with 10 branches and will gradually extend our network to tier-II and tier-III centres, added Mr Roy.
He said health would be a major focus area for the company and L&T Insurance would eventually have its own health claim management team. For the short-term, however, it would outsource claims management to third-party administrators until its own infrastructure was in place.
L&T has a presence in the financial services sector through its three wholly-owned subsidiaries — L&T Finance (LTF), L&T Infrastructure Finance (LTIF) and L&T Mutual Fund, which was acquired from Cholamandalam. “Given the size and the opportunity, L&T considers financial services as an important business in its portfolio. We are very confident of building a world class insurance business in India,” said YM Deosthalee, whole-time director & chief financial officer, L&T.
Mr Deoshthalee said the non-life company would tap into the ‘entire L&T ecosystem’ to generate new business. This would include selling covers to corporate customers of L&T, borrowers of L&T finance and investors in L&T Mutual Fund. He said L&T, at present, had no plans to get into the life insurance business because it required a distribution reach that was not available with the group.
L&T was earlier in discussion with US insurer Travellers for a partnership. However, the talks fell through and L&T decided to go ahead with the venture on its own. Responding to a query on whether L&T would seek a partner, Mr Deosthalee said joint ventures with multinationals were constrained by the product design and overall strategy of the insurance partner. He pointed out that among present joint ventures, in many cases the foreign partner had a major say in running the business despite having a minority stake of only 26%
Thursday, July 15, 2010
Non-life insurers' premium grew 19 pc during April-May period
General insurers grew around 19 per cent by collecting Rs 7,392 crore premium in the first two months of the current fiscal, as compared to the corresponding period last year.
During April-May this year, non-life insurers mopped up Rs 7,392.19 crore against Rs 6,218.42 crore in the previous year, according to data from the Insurance Regulatory and Development Authority.
The four state-run insurers fared better than their private counterparts, with New India Insurance collecting the maximum premium, it added.
New India Insurance mopped up Rs 1,365.83 crore premium during the April-May period, compared to Rs 1,174 crore in the previous year -- growing by 16.34 per cent.
United India Insurance registered a growth of 22.47 per cent by collecting a premium of Rs 1,094.72 crore in the first two months of the current fiscal, as compared to Rs 893.87 crore during the corresponding period in the previous year.
National Insurance collected Rs 979.91 crore premium during the April-May period this year compared to Rs 773.46 crore in the previous year, registering a growth of 26.69 per cent.
Oriental Insurance, on the other hand, grew by 14.16 per cent during the first two months of the current fiscal by mopping up Rs 954.89 crore.
Among private non-life insurers, ICICI Lombard retained the top position. It mopped up Rs 728.91 crore premium during April-May this year as compared to Rs 631.37 crore in the corresponding period of the last fiscal, growing by 15.45 per cent.
Bajaj Allianz mopped up Rs 490.46 crore in the first two months this year, against Rs 424.60 crore last year -- registering a growth of 15.51 per cent.
However, Reliance General registered a negative growth of 28.22 per cent. The insurer managed to collect Rs 276.80 crore during April-May this year, compared to Rs 385.62 crore in the corresponding period last year.
There are over 20 non-life insurance companies operating in the country.
During April-May this year, non-life insurers mopped up Rs 7,392.19 crore against Rs 6,218.42 crore in the previous year, according to data from the Insurance Regulatory and Development Authority.
The four state-run insurers fared better than their private counterparts, with New India Insurance collecting the maximum premium, it added.
New India Insurance mopped up Rs 1,365.83 crore premium during the April-May period, compared to Rs 1,174 crore in the previous year -- growing by 16.34 per cent.
United India Insurance registered a growth of 22.47 per cent by collecting a premium of Rs 1,094.72 crore in the first two months of the current fiscal, as compared to Rs 893.87 crore during the corresponding period in the previous year.
National Insurance collected Rs 979.91 crore premium during the April-May period this year compared to Rs 773.46 crore in the previous year, registering a growth of 26.69 per cent.
Oriental Insurance, on the other hand, grew by 14.16 per cent during the first two months of the current fiscal by mopping up Rs 954.89 crore.
Among private non-life insurers, ICICI Lombard retained the top position. It mopped up Rs 728.91 crore premium during April-May this year as compared to Rs 631.37 crore in the corresponding period of the last fiscal, growing by 15.45 per cent.
Bajaj Allianz mopped up Rs 490.46 crore in the first two months this year, against Rs 424.60 crore last year -- registering a growth of 15.51 per cent.
However, Reliance General registered a negative growth of 28.22 per cent. The insurer managed to collect Rs 276.80 crore during April-May this year, compared to Rs 385.62 crore in the corresponding period last year.
There are over 20 non-life insurance companies operating in the country.
Public sector insurers to push for a common claims settling agency
The four government-owned non-life insurers - National Insurance, New India Assurance, Oriental Insurance and United India Insurance-- will
soon be taking forward their idea of floating a common third party administrator (TPA) to process the health insurance claims.
"We will be issuing a Request for Proposal (RFP) shortly. Our requirements will be specified in the RFP so that interested parties can submit their proposals," New India Assurance Chairman and Managing Director M. Ramadoss said over phone from Mumbai.
Consulting firm KPMG had given a report on the feasibility of setting up a common TPA by the four companies a year ago.
The four insurers, which together do around Rs.6,000 crore of health insurance business selling several lakhs of polices, are not happy with the manner in which claims are being processed and settled by the existing TPAs.
The earlier expectations of TPAs trying to bring down the treatment costs by hard negotiations with the hospitals have not materialised.
On the other hand, insurers complain about diversion of float funds provided to TPAs to other group ventures rather than using those for settling claims.
With their claims ratio ruling around 115 percent, the four insurers are focusing on ways to minimise the claims outgo.
One such measure that is drawing flak is the delisting some hospitals where the policyholders can avail cashless treatment - hospitals will directly bill the TPAs or the insurers.
The decision was taken after a detailed investigation by the insurers on over charging by many corporate hospitals. "We took the decision after a year-long investigation," said Ramadoss.
"We have documentary proof on hospitals charging differential rates -- higher for those with a policy and lower for others," he said.
Hospitals also charge differential rates for diagnostic tests based on the kind of room a patient opts for. A general ward patient is charged lower (not subsidized rate) while a patient in an air-conditioned room is charged a substantially higher sum.
"The costs for such diagnostic tests remaining the same, how can hospitals have differential rates," wonders Ramadoss.
"Under the Bombay Nursing Home Registration Act, all hospitals have to declare their rate card. But nobody does that," an insurance industry official told IANS.
"We have not scrapped the cashless treatment facility. It is available in around 350 hospitals in the four metros. There are also many hospitals who want to join our network. The panel of hospitals is expandable," said Ramadoss.
According to him, the revised rates that have been negotiated with some of the hospitals do not vary much from their earlier ones.
"It should be remembered that higher the claims ratio, insurers will be forced to hike their premium rates. It is only the policyholders who will suffer and not the hospitals," added another insurance official.
Even the Tamil Nadu government has delisted many hospitals as they were found to be carrying out needless operations, resorting to excess billing and other malpractices under its free insurance scheme.
soon be taking forward their idea of floating a common third party administrator (TPA) to process the health insurance claims.
"We will be issuing a Request for Proposal (RFP) shortly. Our requirements will be specified in the RFP so that interested parties can submit their proposals," New India Assurance Chairman and Managing Director M. Ramadoss said over phone from Mumbai.
Consulting firm KPMG had given a report on the feasibility of setting up a common TPA by the four companies a year ago.
The four insurers, which together do around Rs.6,000 crore of health insurance business selling several lakhs of polices, are not happy with the manner in which claims are being processed and settled by the existing TPAs.
The earlier expectations of TPAs trying to bring down the treatment costs by hard negotiations with the hospitals have not materialised.
On the other hand, insurers complain about diversion of float funds provided to TPAs to other group ventures rather than using those for settling claims.
With their claims ratio ruling around 115 percent, the four insurers are focusing on ways to minimise the claims outgo.
One such measure that is drawing flak is the delisting some hospitals where the policyholders can avail cashless treatment - hospitals will directly bill the TPAs or the insurers.
The decision was taken after a detailed investigation by the insurers on over charging by many corporate hospitals. "We took the decision after a year-long investigation," said Ramadoss.
"We have documentary proof on hospitals charging differential rates -- higher for those with a policy and lower for others," he said.
Hospitals also charge differential rates for diagnostic tests based on the kind of room a patient opts for. A general ward patient is charged lower (not subsidized rate) while a patient in an air-conditioned room is charged a substantially higher sum.
"The costs for such diagnostic tests remaining the same, how can hospitals have differential rates," wonders Ramadoss.
"Under the Bombay Nursing Home Registration Act, all hospitals have to declare their rate card. But nobody does that," an insurance industry official told IANS.
"We have not scrapped the cashless treatment facility. It is available in around 350 hospitals in the four metros. There are also many hospitals who want to join our network. The panel of hospitals is expandable," said Ramadoss.
According to him, the revised rates that have been negotiated with some of the hospitals do not vary much from their earlier ones.
"It should be remembered that higher the claims ratio, insurers will be forced to hike their premium rates. It is only the policyholders who will suffer and not the hospitals," added another insurance official.
Even the Tamil Nadu government has delisted many hospitals as they were found to be carrying out needless operations, resorting to excess billing and other malpractices under its free insurance scheme.
Insurers may raise limits on healthcare costs to end row
The four government-owned general insurance companies that have limited the availability of cashless hospitalisation to those hospitals that agree to their rates would now look at raising their cap on treatment cost to bring in more hospitals under the new system.
In a meeting on Tuesday, members of the CII National Committee on Healthcare that include top private hospitals met chiefs of the four companies (New India Assurance, Oriental Insurance, United India Insurance and National Insurance Company) to discuss the preferred provider network project of the insurers that has categorised and graded hospitals and capped the rates for 43 odd surgeries in Delhi, Mumbai, Bangalore and Chennai.
Meanwhile, the Insurance Regulatory & Development Authority (Irda) has written to the four companies asking them as to why cashless has been stopped for retail policyholders and not for corporate policyholder. Insurers have been asked to submit a report in the next 48 hours explaining the basis of launching the preferred provider network project.
Financial Chronicle on July 5 was the first to report that the four government owned non-life insurance companies have graded hospitals and fixed the treatment cost for various 45 surgeries. Hospitals that have agreed to the new rates would be able to provide cashless facility to the policyholders.
A senior official of one of the four insurers who attended the meeting said, “There could be some reconsideration of rates so that there could be a better representation of corporate hospitals on the panel. In the next 90 days we would look at addressing all areas of concern.”
Vishal Bali, CEO of Fortis Hospitals, told Financial Chronicle, “We had three agendas to discuss. One, to grow the preferred provider network by adding more hospitals, relook at the categorisation and pricing of treatments. Insurers have said that they will ask their respective third party administrators (TPAs) to hold discussions with hospitals and try to bring in more hospitals in the network.”
“We have also suggested that instead of setting price bands for various treatment based on the categorisation of a hospital, a better solution would be to introduce a system of co-payment if the policyholder wants to be treated in top hospital. Thus, the onus of using the cover is equally shared by all including the policyholder,” said Bali. Co-payment is a system where an amount of the claim is borne by the policyholder.
“Insurance companies have said that they are willing to look at the price band of treatments at high end hospitals,” said Bali.
In a meeting on Tuesday, members of the CII National Committee on Healthcare that include top private hospitals met chiefs of the four companies (New India Assurance, Oriental Insurance, United India Insurance and National Insurance Company) to discuss the preferred provider network project of the insurers that has categorised and graded hospitals and capped the rates for 43 odd surgeries in Delhi, Mumbai, Bangalore and Chennai.
Meanwhile, the Insurance Regulatory & Development Authority (Irda) has written to the four companies asking them as to why cashless has been stopped for retail policyholders and not for corporate policyholder. Insurers have been asked to submit a report in the next 48 hours explaining the basis of launching the preferred provider network project.
Financial Chronicle on July 5 was the first to report that the four government owned non-life insurance companies have graded hospitals and fixed the treatment cost for various 45 surgeries. Hospitals that have agreed to the new rates would be able to provide cashless facility to the policyholders.
A senior official of one of the four insurers who attended the meeting said, “There could be some reconsideration of rates so that there could be a better representation of corporate hospitals on the panel. In the next 90 days we would look at addressing all areas of concern.”
Vishal Bali, CEO of Fortis Hospitals, told Financial Chronicle, “We had three agendas to discuss. One, to grow the preferred provider network by adding more hospitals, relook at the categorisation and pricing of treatments. Insurers have said that they will ask their respective third party administrators (TPAs) to hold discussions with hospitals and try to bring in more hospitals in the network.”
“We have also suggested that instead of setting price bands for various treatment based on the categorisation of a hospital, a better solution would be to introduce a system of co-payment if the policyholder wants to be treated in top hospital. Thus, the onus of using the cover is equally shared by all including the policyholder,” said Bali. Co-payment is a system where an amount of the claim is borne by the policyholder.
“Insurance companies have said that they are willing to look at the price band of treatments at high end hospitals,” said Bali.
Tuesday, May 25, 2010
AI crash likely to generate Rs 400-cr claims
The Air India Express flight 812 flying in from Dubai which crashed on Saturday while landing at Mangalore’s “table top” airport surrounded by deep gorges is expected to generate insurance claims worth over Rs 400 crore.
The insurers—led by Anil Ambani’s Reliance General which had bagged the AI account for the first time in 2009-10 and reinsurers—led by Japanese Mitsui-have already swung in to action to assess the losses and settle claim quickly as possible.
Coincidentally AI’s UK-based surveyor for last 20 years Charles Taylor Adjuster is in Mumbai when the crash happened and has proceeded to Mangalore to begin the survey of the losses. Industry sources pointed that the claims out of the human tragedies would be around Rs 125 crore while for the aircraft the claim can be around Rs 225 crore. The aircraft which had crashed was new and had been acquired by AI at the end of 2007.
Each passenger who has lost his/her life is entitled to receive a minimum of Rs 75 lakh which can rise if the family members of the passengers prefer to go the court of law demanding higher compensations.
The flight was an international one and since India is signatory of Montreal Convention (in 2008) which fixes compensation for death or bodily injury of any passenger(traveling in an international flight ) over Rs 75 lakh.
Montreal Convention had increased the compensation for death or bodily injury by seven times from the earlier levels of $20000 to $ 1,40,000 . Similarly the compensation for damage to the checked baggage was also hiked from $ 20 per kg approximately to $ 1400 per passenger. The compensation for damage to cargo also was raised from $ 20 per kg approximately to $ 24 per kg.
“As a policy, we do not comment on individual policy details or specific customer claims”, said a Reliance General spokesperson. Reliance general consortium had paid total $ 25 million for AI’s cover out of which $ 20 million was for the aircraft and passengers’ liabilities.
Speaking to FE, S Narayanan, managing director & CEO, IFFCO-Tokio General Insurance, which along with three other general insurers –Reliance General Insurance, HDFC Ergo General Insurance, Bajaja Allianz General Insurance had participated in providing the insurance cover to Air India said, “I don’t think that too much of time will be taken by the consortium while settling the claims as it will be done on-account payment or...
Sunday, May 16, 2010
IRDA to launch vehicle insurance tracking system
The Insurance Regulatory and Development Authority (IRDA) will roll out a web-based system to track vehicle insurance status in a month's time.“We will be launching the system formally from June 9.It will have a database of all the insured vehicles from across the country. The data will also be shared with the transport and police authorities in different States,” Mr A. Giridhar, Executive Director, IRDA, told Business Line here.This implies that the Road Transport Authority (RTA) in every State will have access to the insurance status of different vehicles on the road.In turn, they can launch a drive to track down challan defaulters. The benefit for insurance companies is that the centralised data will help them avoid duplications or multiple claims.BenefitsThe system will make a big difference for the vehicle owners as well as general insurers, he said.As all vehicles will now have to be insured, the premium per policy is likely to come down.The third-party insurance procedure will now be efficient, especially for victims of hit-and-run cases.The system may help reduce insurers' losses as these claims will be settled from a ‘Solatium Fund' now.At present, the insurers pay for losses caused by the uninsured vehicles.“More importantly, several insurers are also complaining of multiple claims in damage and theft cases. This can be brought down,” Mr Giridhar, said.As the system will also have a database of insurance claims made/honoured, cases of bad or negligent driving can be ascertained by the insurers before deciding on the premium to be charged, he added.VerificationAs the data are to be shared with the transport authorities and the police, the new system will also help them verify the insurance status of any vehicle. At present, examining the hard copy of the insurance certificate is the only option available to them. The Web-based system will integrate up-to-date information gathered from general insurance companies.This information will be made available to all stakeholders instantly. The submission of data by each underwriting office will be monitored on a daily basis and a report on the same will be generated, officials said.
The Insurance Regulatory and Development Authority (IRDA) will roll out a web-based system to track vehicle insurance status in a month's time.“We will be launching the system formally from June 9.It will have a database of all the insured vehicles from across the country. The data will also be shared with the transport and police authorities in different States,” Mr A. Giridhar, Executive Director, IRDA, told Business Line here.This implies that the Road Transport Authority (RTA) in every State will have access to the insurance status of different vehicles on the road.In turn, they can launch a drive to track down challan defaulters. The benefit for insurance companies is that the centralised data will help them avoid duplications or multiple claims.BenefitsThe system will make a big difference for the vehicle owners as well as general insurers, he said.As all vehicles will now have to be insured, the premium per policy is likely to come down.The third-party insurance procedure will now be efficient, especially for victims of hit-and-run cases.The system may help reduce insurers' losses as these claims will be settled from a ‘Solatium Fund' now.At present, the insurers pay for losses caused by the uninsured vehicles.“More importantly, several insurers are also complaining of multiple claims in damage and theft cases. This can be brought down,” Mr Giridhar, said.As the system will also have a database of insurance claims made/honoured, cases of bad or negligent driving can be ascertained by the insurers before deciding on the premium to be charged, he added.VerificationAs the data are to be shared with the transport authorities and the police, the new system will also help them verify the insurance status of any vehicle. At present, examining the hard copy of the insurance certificate is the only option available to them. The Web-based system will integrate up-to-date information gathered from general insurance companies.This information will be made available to all stakeholders instantly. The submission of data by each underwriting office will be monitored on a daily basis and a report on the same will be generated, officials said.
Monday, April 19, 2010
Public insurers may offer 17.5% hike in wages
The Government has agreed to meet the insurance employees' demand for a 17.5- per-cent increase in wages, though it remained non-committal on pension.
The Secretary General of the General Insurance Public Sector (Insurance Companies) Association, Mr A. K. Singhal, said “We have already offered a 17.5-per-cent increase to the employees.” Further discussions are due to held with representatives of the employees of the four public sector insurers on May 8, he added.
The Additional Secretary General of the National Confederation of General Insurers Officers Associations, Mr Vivek Saxena, said, “We will know what is offered only at the meeting next month.” Insurance employees have demanded a pension benefit as provided to the bank employees. Mr Singhal, however, ruled out pensions. He said, “Pension is not acceptable to the managements since it would weaken the balance sheets.”
Also conditions stipulated in the management agenda are not acceptable to the unions. They relate to compulsory retirement of employees, with no mention of any voluntary retirement scheme.
The last round of the VRS in the insurance industry resulted in the migration of skilled and experienced employees to the private sector. This time, the sources said. the managements were keen to avoid such mistakes.
So far five rounds of negotiations have ended in deadlock.
Unlike in the past, when the managements were represented by officers of the ranks of General Manager, the negotiations are expected to be handled directly by the Chief Executives of the four insurers - New India Assurance Co, United India Insurance Co, Oriental Insurance Co Ltd and National Insurance Co.
The sources said that the CEO participation in the wage discussions was prompted by the government which is keen to break the deadlock, ahead with reforms in the sector. The reforms included making the core business of underwriting profitable. Insurers are currently operating at negative underwriting margins with loss ratios as 120 per cent. This year the insurers are expected to make up the provision shortfalls of the past. Under Insurance Act of 1938, general insurers are expected to credit at least 50 per cent of their incremental premiums to technical reserves - Unexpired losses. The sources said that after these provisions are deducted, insurers also were likely to end this year with red-lined net underwriting incomes
The Secretary General of the General Insurance Public Sector (Insurance Companies) Association, Mr A. K. Singhal, said “We have already offered a 17.5-per-cent increase to the employees.” Further discussions are due to held with representatives of the employees of the four public sector insurers on May 8, he added.
The Additional Secretary General of the National Confederation of General Insurers Officers Associations, Mr Vivek Saxena, said, “We will know what is offered only at the meeting next month.” Insurance employees have demanded a pension benefit as provided to the bank employees. Mr Singhal, however, ruled out pensions. He said, “Pension is not acceptable to the managements since it would weaken the balance sheets.”
Also conditions stipulated in the management agenda are not acceptable to the unions. They relate to compulsory retirement of employees, with no mention of any voluntary retirement scheme.
The last round of the VRS in the insurance industry resulted in the migration of skilled and experienced employees to the private sector. This time, the sources said. the managements were keen to avoid such mistakes.
So far five rounds of negotiations have ended in deadlock.
Unlike in the past, when the managements were represented by officers of the ranks of General Manager, the negotiations are expected to be handled directly by the Chief Executives of the four insurers - New India Assurance Co, United India Insurance Co, Oriental Insurance Co Ltd and National Insurance Co.
The sources said that the CEO participation in the wage discussions was prompted by the government which is keen to break the deadlock, ahead with reforms in the sector. The reforms included making the core business of underwriting profitable. Insurers are currently operating at negative underwriting margins with loss ratios as 120 per cent. This year the insurers are expected to make up the provision shortfalls of the past. Under Insurance Act of 1938, general insurers are expected to credit at least 50 per cent of their incremental premiums to technical reserves - Unexpired losses. The sources said that after these provisions are deducted, insurers also were likely to end this year with red-lined net underwriting incomes
Fire, marine covers to cost more
The premium on fire and marine transit insurance covers is expected to increase by 10-15 per cent following the recent incidents of fire in Bangalore, Kolkata and Delhi.
Executives at insurance companies said the recent incidents have increased the risks from fire, especially in case of warehouses and transit-related insurance. “Ultimately, premium is a function of claim. The increasing number of claims will lead to an increase in premium,” said Bajaj Allianz General Insurance head of underwriting T R Ramalingum.
“Storage houses and warehouses may see an increase of around 15 per cent in premium. Deductibles in marine will also go up after the recent incidents,” said Tata AIG General Insurance Managing Director and CEO Gaurav D Garg.
An increase in deductibles will result in companies and individuals having to shell out more to make claims. The two moves are aimed at minimising the losses arising from the fire portfolio.
Over the last few weeks, there have been two major instances of fire in Bangalore, including the one in Carlton Towers, a commercial complex, and today’s incident in the godowns of Gokaldas Exports.
In addition, New India Assurance Company has had to take a Rs 35 crore hit due to a fire at the Tughlakabad internal container depot. Other insurers are facing claims from traders whose goods perished in the fire. There was also a fire in a plastic market in Delhi though the scale of damage was not known.
In Kolkata, there were a large number of casualties in Stephen Court on Park Street, though insurers would get away in the absence of a cover.
Generally, in a non-life sector, property insurance covers losses from fire. In India, a majority of the general insurance policies, including property covers purchased by large companies, come up for renewal in April. To that extent, the damage would be limited, though there are several large companies, such as SAIL and Reliance, which have renewals later in the year. In addition, transit marine is insured through the year, depending on when the consignments leave. The term of this policy is 60 days.
Though premium rates depend on the nature of the risk insured, it is less than one per cent of the sum assured in most cases. In case of marine, cargo rates also depends on factors like nature of cargo, scope of cover, packing, mode of conveyance, destination and routes, and past claims experience
Executives at insurance companies said the recent incidents have increased the risks from fire, especially in case of warehouses and transit-related insurance. “Ultimately, premium is a function of claim. The increasing number of claims will lead to an increase in premium,” said Bajaj Allianz General Insurance head of underwriting T R Ramalingum.
“Storage houses and warehouses may see an increase of around 15 per cent in premium. Deductibles in marine will also go up after the recent incidents,” said Tata AIG General Insurance Managing Director and CEO Gaurav D Garg.
An increase in deductibles will result in companies and individuals having to shell out more to make claims. The two moves are aimed at minimising the losses arising from the fire portfolio.
Over the last few weeks, there have been two major instances of fire in Bangalore, including the one in Carlton Towers, a commercial complex, and today’s incident in the godowns of Gokaldas Exports.
In addition, New India Assurance Company has had to take a Rs 35 crore hit due to a fire at the Tughlakabad internal container depot. Other insurers are facing claims from traders whose goods perished in the fire. There was also a fire in a plastic market in Delhi though the scale of damage was not known.
In Kolkata, there were a large number of casualties in Stephen Court on Park Street, though insurers would get away in the absence of a cover.
Generally, in a non-life sector, property insurance covers losses from fire. In India, a majority of the general insurance policies, including property covers purchased by large companies, come up for renewal in April. To that extent, the damage would be limited, though there are several large companies, such as SAIL and Reliance, which have renewals later in the year. In addition, transit marine is insured through the year, depending on when the consignments leave. The term of this policy is 60 days.
Though premium rates depend on the nature of the risk insured, it is less than one per cent of the sum assured in most cases. In case of marine, cargo rates also depends on factors like nature of cargo, scope of cover, packing, mode of conveyance, destination and routes, and past claims experience
Saturday, April 17, 2010
Public sector general insurers' savings-linked plans, the first casualty
Public sector general insurers' proposals to introduce savings-linked products have become the first casualty of the spat between the Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA).
Mr M. Ramadoss, Chairman and Managing Director, New India Assurance Company, said, “There are too many controversies involved in the proposal. We will wait till all the issues are resolved.”
In July 2009, the four general insurers had begun working on introduction of such savings-linked plans, marrying some of the concepts of life insurance into general insurance. Public sector insurers had borrowed the idea from the some of the large private sector insurers, in particular, ICICI Lombard's highly successful Health ULIP. Introduction of the products was at an advanced stage of discussions till the spat between the regulators broke out last week, sources said.
The proposal had involved issuing linked covers in the personal lines of business, either medical or household policies, the sources said. Such a policy was intended to offer risk cover as well as a lumpsum repayment at the demise of the policy.
Currently, all the PSU general insurers are already offering products such as householders' policy, to enhance customer comfort during repayment of housing loans. None of the four public sector general insurance companies though have savings-linked products.
Most offered are risk covers for either property or liabilities. Combination policies, the sources said, were designed specifically with the help of appointed actuaries as mandated by the IRDA.
The proposal also involved upgrading some risk covers into savings-linked policies, the sources said.
Bundling savings-linked covers into motor insurance products, particularly third party, was kept out.
However, some insurers had envisaged factoring in saving components in motor insurance products, particularly in private, personally owned vehicles. This was to help in customer retention and for automatic renewal of insurance with the same company at least for five years.
At the end of this period, the sources said, premiums could be refunded partly or fully.
Savings-linked covers were intended as close-ended policies. None of the proposed savings-linked covers, though, were envisaged to offer any assured rate of return.
Instead, the sources said, the corpus collected through such policies would be invested in Government or designated securities mandated by the insurance regulator.
The proposal had envisaged that returns on such investments would be passed on to the investors, they added.
However, such a product would automatically depreciate in value in the event of claims being made. This is because the claims would be netted from the cumulative payouts, they said.
The sources said that companies intended to restrict their combined ratios through the introduction of such covers. Combined ratios that included management expenses and claims were currently in excess of 120 per cent of the premiums collected.
PSUs stuck with high loss traditional products have been struggling to cut underwriting losses and turn their core business profitable.
Product innovation was seen as one method of complying with deadline prescribed in the statement of intent signed between the government and the PSU insurers in August 2009.
In addition, the sources said that they had also hoped to compete and contain market share losses.
Mr M. Ramadoss, Chairman and Managing Director, New India Assurance Company, said, “There are too many controversies involved in the proposal. We will wait till all the issues are resolved.”
In July 2009, the four general insurers had begun working on introduction of such savings-linked plans, marrying some of the concepts of life insurance into general insurance. Public sector insurers had borrowed the idea from the some of the large private sector insurers, in particular, ICICI Lombard's highly successful Health ULIP. Introduction of the products was at an advanced stage of discussions till the spat between the regulators broke out last week, sources said.
The proposal had involved issuing linked covers in the personal lines of business, either medical or household policies, the sources said. Such a policy was intended to offer risk cover as well as a lumpsum repayment at the demise of the policy.
Currently, all the PSU general insurers are already offering products such as householders' policy, to enhance customer comfort during repayment of housing loans. None of the four public sector general insurance companies though have savings-linked products.
Most offered are risk covers for either property or liabilities. Combination policies, the sources said, were designed specifically with the help of appointed actuaries as mandated by the IRDA.
The proposal also involved upgrading some risk covers into savings-linked policies, the sources said.
Bundling savings-linked covers into motor insurance products, particularly third party, was kept out.
However, some insurers had envisaged factoring in saving components in motor insurance products, particularly in private, personally owned vehicles. This was to help in customer retention and for automatic renewal of insurance with the same company at least for five years.
At the end of this period, the sources said, premiums could be refunded partly or fully.
Savings-linked covers were intended as close-ended policies. None of the proposed savings-linked covers, though, were envisaged to offer any assured rate of return.
Instead, the sources said, the corpus collected through such policies would be invested in Government or designated securities mandated by the insurance regulator.
The proposal had envisaged that returns on such investments would be passed on to the investors, they added.
However, such a product would automatically depreciate in value in the event of claims being made. This is because the claims would be netted from the cumulative payouts, they said.
The sources said that companies intended to restrict their combined ratios through the introduction of such covers. Combined ratios that included management expenses and claims were currently in excess of 120 per cent of the premiums collected.
PSUs stuck with high loss traditional products have been struggling to cut underwriting losses and turn their core business profitable.
Product innovation was seen as one method of complying with deadline prescribed in the statement of intent signed between the government and the PSU insurers in August 2009.
In addition, the sources said that they had also hoped to compete and contain market share losses.
Friday, April 9, 2010
Long-term insurance likely for 2-wheelers
In a move to reduce the number of uninsured two-wheelers plying on the roads, the General Insurance Council (GIC) is working towards introducing long-term insurance for motorcycles – possibly a three- or five-year policy.
Mr S.L. Mohan, Secretary General, GIC, told Business Line that a substantial percentage of two-wheelers did not have insurance as the policies were not renewed. Most agents do not follow up with the vehicle owners for renewal since the premium amounts are not significant – varying between Rs 600 and Rs 800, depending on the age of vehicle . Also the commission amounts on such premiums are small.
Insurers, on their part, do not push motorcycle policies aggressively because it is considered ‘small ticket' compared to car insurance, for example. Therefore, the onus for renewing the insurance policy rests on the owner of the motorcycle.
“We expect that by providing a long-term policy and offering discounts, a large percentage of uninsured bikes will come under the ambit of insurance, “said Mr Mohan.
According to the latest available data from Tariff Advisory Committee, about 2 crore two-wheelers were insured in 2007-08. Although there is no published data on the number of two-wheelers plying on Indian roads, close to 4.5 crore two-wheelers have been sold in the past seven years, according to the Society of Indian Automobile Manufacturers (SIAM). Each year about 75 lakh new two-wheelers get added to Indian roads; 84 lakh vehicles have been added so far this financial year.
Mr S.L. Mohan, Secretary General, GIC, told Business Line that a substantial percentage of two-wheelers did not have insurance as the policies were not renewed. Most agents do not follow up with the vehicle owners for renewal since the premium amounts are not significant – varying between Rs 600 and Rs 800, depending on the age of vehicle . Also the commission amounts on such premiums are small.
Insurers, on their part, do not push motorcycle policies aggressively because it is considered ‘small ticket' compared to car insurance, for example. Therefore, the onus for renewing the insurance policy rests on the owner of the motorcycle.
“We expect that by providing a long-term policy and offering discounts, a large percentage of uninsured bikes will come under the ambit of insurance, “said Mr Mohan.
According to the latest available data from Tariff Advisory Committee, about 2 crore two-wheelers were insured in 2007-08. Although there is no published data on the number of two-wheelers plying on Indian roads, close to 4.5 crore two-wheelers have been sold in the past seven years, according to the Society of Indian Automobile Manufacturers (SIAM). Each year about 75 lakh new two-wheelers get added to Indian roads; 84 lakh vehicles have been added so far this financial year.
Public non-life insurers’ employees to strike
Around one lakh employees of four Indian government owned non-life insurers will strike work for two hours March 31, demanding 40 percent pay hike and an option to join pension scheme. They claim they have “done well and the management should reciprocate”.All the unions in the four companies — National Insurance Company Limited, New India Assurance Company Limited, Oriental Insurance Company Limited and United India Insurance Company Limited — called for a two-hour walk-out from work places preceding the lunch recess March 31, the last working day of the current fiscal.
The unions warned of serious action if their demands were not met.
“The four government owned non-life insurers have clocked a gross premium of Rs.18,222 crore up to February 2010 this fiscal, logging a growth of 12.21 percent over the corresponding period of the previous year. On the other hand, leading private non-life insurers have logged negative growth,” J.Gurumurthy, secretary of All India Insurance Employees Association (AIIEA), told IANS Thursday.
He said the wage talks are still at the level of general manager level of the individual companies, steadfast on their offer of 17.5 percent salary hike, made at Kolkata Dec 22 last year.
The Governing Board of General Insurers Public Sector Association (GIPSA) Feb 5 informed the unions that it did not find it possible to improve the offer.
After the rejection of the offer of 15 percent increase, the GIPSA came up with a revised offer of 17.5 percent.
The AIIEA had demanded 40 percent wage hike so that there is pay parity with that of the private sector.
“The chairman and managing directors seem to feel that it is not their responsibility to find a satisfactory solution to the wage demand of the employees and officers in consonance with growth, productivity and competitive environment,” Gurumurthy added.
He said wage talks were resumed in Life Insurance Corporation of India (LIC) after the unions rejected the 17.5 percent hike offered.
The unions warned of serious action if their demands were not met.
“The four government owned non-life insurers have clocked a gross premium of Rs.18,222 crore up to February 2010 this fiscal, logging a growth of 12.21 percent over the corresponding period of the previous year. On the other hand, leading private non-life insurers have logged negative growth,” J.Gurumurthy, secretary of All India Insurance Employees Association (AIIEA), told IANS Thursday.
He said the wage talks are still at the level of general manager level of the individual companies, steadfast on their offer of 17.5 percent salary hike, made at Kolkata Dec 22 last year.
The Governing Board of General Insurers Public Sector Association (GIPSA) Feb 5 informed the unions that it did not find it possible to improve the offer.
After the rejection of the offer of 15 percent increase, the GIPSA came up with a revised offer of 17.5 percent.
The AIIEA had demanded 40 percent wage hike so that there is pay parity with that of the private sector.
“The chairman and managing directors seem to feel that it is not their responsibility to find a satisfactory solution to the wage demand of the employees and officers in consonance with growth, productivity and competitive environment,” Gurumurthy added.
He said wage talks were resumed in Life Insurance Corporation of India (LIC) after the unions rejected the 17.5 percent hike offered.
Monday, April 5, 2010
State-owned general insurers look to shape up
As part of a drive to curtail losses, the four public sector general insurance companies are going in for a makeover The four state-owned general insurers— New India Assurance, National Insurance, United India Insurance and Oriental Insurance — have undertaken a restructuring exercise to improve underwriting profits.
“We have set a target with the government saying how much would be the underwriting profit or losses. The need to reduce losses has been made clear to us. Therefore, we will be looking at reducing underwriting losses and will focus on departments that are making losses,” said M Ramadoss, chairman and managing director of New India Assurance.
As part of the restructuring, the four insurers — who have been dealing with legacy issues for the past few years — are reconciling the list of claims with those that have been paid but are not reflected in their books.
“There are a lot of cases in which insurers have paid the claims but the provisions, some of which are in excess of the amount paid, are still sitting on the books,” said a non-life insurance executive.
In addition, they have undertaken a business process re-engineering (BPR) exercise, which includes implementation of core insurance solutions and centralising the claim settlement process.
Business is being reorganised into verticals focused on different segments — bancassurance, large companies and agency — and a performance-linked incentive scheme is being introduced for employees.
As a precursor to this, the state-owned general insurers have started measuring the performance of employees on a regular basis in terms of business generated, commission paid on the risk underwritten and the claims incurred.
“Earlier, performance was only measured after the annual accounts were finalised, which was somewhere around July-August. But now, companies are trying to measure performance on a monthly basis so that mid-course corrections can take place,” said an insurance company executive.
This is akin to the exercise undertaken by banks in the 1990s.
During the 2009-10 financial year the finance ministry had asked public sector general insurers to implement Core Insurance Solutions (CIS), in line with the experience of public sector banks, where the implementation of core banking solutions has helped customers carry out transactions across the country.
While Oriental Insurance, the smallest of the four state-owned players, has already implemented CIS, the other three will follow suit over the next 12 months.
New India Assurance, Oriental Insurance and United India Insurance had appointed Boston Consulting Group, while National Insurance had hired PricewaterhouseCoopers for the restructuring exercise. The process is expected to conclude in the next six months.
“Technology is the cutting edge and we expect to implement the core insurance system by 2010. We are focusing on better underwriting practices by adding an element of incentive to performance,” said United India Insurance chairman and managing director G Srinivasan.
United India has divided strategic business units into bancassurance, motor dealer offices and large corporate and agency offices, while Oriental has segmented the market into four groups — agency, corporate, brokers and bancassurance. On servicing claims, United India is strengthening settlement offices and speeding up claim settlement by third-party administrators (TPAs), while Oriental is offering more business to TPAs which have provided it with substantial business.
“As part of our re-engineering, we have added an element of incentive linked to the performance for branches, which will be based on number of claims settled and number of claims incurred by the group. The branch with the lower combined ratio will be incentivised,” Srinivasan added. The underwriting performance of an insurance company is measured by its combined ratio.
A combined ratio of less than 100 per cent indicates underwriting profitability and better return on the amount placed at risk, while a ratio of more than 100 indicates an underwriting loss. The combined loss ratio of the four general insurance companies is hovering at 123-130 per cent.
It is calculated by adding the loss ratio and the expense ratio. The loss ratio is calculated by dividing the loss by the earned premium. The expense ratio is calculated by dividing the operational expenses by the earned premium. The expense ratio of the general insurance companies is around 20 per cent.
“We had appointed consultants when we were losing market share. The ministry has asked the other three insurance companies to implement the CIS, since we had already started it in 2005. We expect to bring down our combined ratio by 10 per cent, from 135 per cent at present,” said a senior executive at Oriental Insurance.
Insurers expect the re-engineering process to result in improved bottomlines. National India had undertaken an IT-led business process re-engineering exercise and is close to implementing CIS.
The ministry had initiated talks on a possible merger of the four public sector insurers, but the insurers themselves said that no opinion had been formalised, and that there was no pressure on them to finalise anything immediately.
“If there is disinvestment and the ministry decides that we should come up with an IPO, the concerns are whether all four companies will come up with the public offer separately or as one company. If at all there is a merger it will be driven by the IPO. Underwriting losses is only part of the discussion and merging the four PSUs will not ensure underwriting profits,” Ramadoss added.
In the last one year public sector players have stemmed the decline in their market share. Due to high discounts insurers had to suffer underwriting losses. PSUs retain 80-85 per cent risk while private players retain around 50-55 per cent risk.
PSUs with more elbow room in writing bigger risks dominate the corporate business. Though these players lack in customer service, they are confident of increasing their market share because of public confidence, financial ability and better technical expertise.
To bring down claims in the health segment, the four insurers are jointly forming a TPA, and have appointed KPMG as the consultant. KPMG has submitted its report.
“We have set a target with the government saying how much would be the underwriting profit or losses. The need to reduce losses has been made clear to us. Therefore, we will be looking at reducing underwriting losses and will focus on departments that are making losses,” said M Ramadoss, chairman and managing director of New India Assurance.
As part of the restructuring, the four insurers — who have been dealing with legacy issues for the past few years — are reconciling the list of claims with those that have been paid but are not reflected in their books.
“There are a lot of cases in which insurers have paid the claims but the provisions, some of which are in excess of the amount paid, are still sitting on the books,” said a non-life insurance executive.
In addition, they have undertaken a business process re-engineering (BPR) exercise, which includes implementation of core insurance solutions and centralising the claim settlement process.
Business is being reorganised into verticals focused on different segments — bancassurance, large companies and agency — and a performance-linked incentive scheme is being introduced for employees.
As a precursor to this, the state-owned general insurers have started measuring the performance of employees on a regular basis in terms of business generated, commission paid on the risk underwritten and the claims incurred.
“Earlier, performance was only measured after the annual accounts were finalised, which was somewhere around July-August. But now, companies are trying to measure performance on a monthly basis so that mid-course corrections can take place,” said an insurance company executive.
This is akin to the exercise undertaken by banks in the 1990s.
During the 2009-10 financial year the finance ministry had asked public sector general insurers to implement Core Insurance Solutions (CIS), in line with the experience of public sector banks, where the implementation of core banking solutions has helped customers carry out transactions across the country.
While Oriental Insurance, the smallest of the four state-owned players, has already implemented CIS, the other three will follow suit over the next 12 months.
New India Assurance, Oriental Insurance and United India Insurance had appointed Boston Consulting Group, while National Insurance had hired PricewaterhouseCoopers for the restructuring exercise. The process is expected to conclude in the next six months.
“Technology is the cutting edge and we expect to implement the core insurance system by 2010. We are focusing on better underwriting practices by adding an element of incentive to performance,” said United India Insurance chairman and managing director G Srinivasan.
United India has divided strategic business units into bancassurance, motor dealer offices and large corporate and agency offices, while Oriental has segmented the market into four groups — agency, corporate, brokers and bancassurance. On servicing claims, United India is strengthening settlement offices and speeding up claim settlement by third-party administrators (TPAs), while Oriental is offering more business to TPAs which have provided it with substantial business.
“As part of our re-engineering, we have added an element of incentive linked to the performance for branches, which will be based on number of claims settled and number of claims incurred by the group. The branch with the lower combined ratio will be incentivised,” Srinivasan added. The underwriting performance of an insurance company is measured by its combined ratio.
A combined ratio of less than 100 per cent indicates underwriting profitability and better return on the amount placed at risk, while a ratio of more than 100 indicates an underwriting loss. The combined loss ratio of the four general insurance companies is hovering at 123-130 per cent.
It is calculated by adding the loss ratio and the expense ratio. The loss ratio is calculated by dividing the loss by the earned premium. The expense ratio is calculated by dividing the operational expenses by the earned premium. The expense ratio of the general insurance companies is around 20 per cent.
“We had appointed consultants when we were losing market share. The ministry has asked the other three insurance companies to implement the CIS, since we had already started it in 2005. We expect to bring down our combined ratio by 10 per cent, from 135 per cent at present,” said a senior executive at Oriental Insurance.
Insurers expect the re-engineering process to result in improved bottomlines. National India had undertaken an IT-led business process re-engineering exercise and is close to implementing CIS.
The ministry had initiated talks on a possible merger of the four public sector insurers, but the insurers themselves said that no opinion had been formalised, and that there was no pressure on them to finalise anything immediately.
“If there is disinvestment and the ministry decides that we should come up with an IPO, the concerns are whether all four companies will come up with the public offer separately or as one company. If at all there is a merger it will be driven by the IPO. Underwriting losses is only part of the discussion and merging the four PSUs will not ensure underwriting profits,” Ramadoss added.
In the last one year public sector players have stemmed the decline in their market share. Due to high discounts insurers had to suffer underwriting losses. PSUs retain 80-85 per cent risk while private players retain around 50-55 per cent risk.
PSUs with more elbow room in writing bigger risks dominate the corporate business. Though these players lack in customer service, they are confident of increasing their market share because of public confidence, financial ability and better technical expertise.
To bring down claims in the health segment, the four insurers are jointly forming a TPA, and have appointed KPMG as the consultant. KPMG has submitted its report.
Sunday, March 28, 2010
SBI General Insurance begins operations in Mumbai
SBI General Insurance, the non-life subsidiary of public sector lender State Bank of India, on Saturday formally announced the launch of its operations beginning with Mumbai.“Initially, we will write policies in Mumbai. We will start full-fledged operations pan-India once our IT infrastructure is put in place,” SBI Chief General Manager (New Initiatives), R.K. Garg, told PTI here.The company expects to start full-scale operations by Q2 of the next financial year, he said.“To begin with, we propose to offer 2-3 products in commercial segments,” he said.The company has filed for 22 products, both in retail and commercial segments with the Insurance Regulatory and Development Authority (IRDA) and is expecting approval for the rest of the products soon, he said.SBI General Insurance is a 74:26 joint venture between State Bank of India (SBI) and Australia-based Insurance Australia Group (IAG).The company, which would be the 22nd player in the general insurance industry, received its R3 approval for starting the company in December last year.The Managing Director and Chief Executive Officer of (CEO) of the company is R.R. Bele.A representative of IAG-Rob Logie-has been appointed as the Deputy CEO of the company.The company has a capital base of Rs. 653-crore, including premium.SBI also has a life insurance joint venture-SBI Life Insurance with BNP Paribas Assurance.
Friday, March 26, 2010
Public non-life insurers’ employees to strike
Around one lakh employees of four Indian government owned non-life insurers will strike work for two hours March 31, demanding 40 percent pay hike and an option to join pension scheme. They claim they have “done well and the management should reciprocate”.All the unions in the four companies — National Insurance Company Limited, New India Assurance Company Limited, Oriental Insurance Company Limited and United India Insurance Company Limited — called for a two-hour walk-out from work places preceding the lunch recess March 31, the last working day of the current fiscal.
The unions warned of serious action if their demands were not met.
“The four government owned non-life insurers have clocked a gross premium of Rs.18,222 crore up to February 2010 this fiscal, logging a growth of 12.21 percent over the corresponding period of the previous year. On the other hand, leading private non-life insurers have logged negative growth,” J.Gurumurthy, secretary of All India Insurance Employees Association (AIIEA), told IANS Thursday.
He said the wage talks are still at the level of general manager level of the individual companies, steadfast on their offer of 17.5 percent salary hike, made at Kolkata Dec 22 last year.
The Governing Board of General Insurers Public Sector Association (GIPSA) Feb 5 informed the unions that it did not find it possible to improve the offer.
After the rejection of the offer of 15 percent increase, the GIPSA came up with a revised offer of 17.5 percent.
The AIIEA had demanded 40 percent wage hike so that there is pay parity with that of the private sector.
“The chairman and managing directors seem to feel that it is not their responsibility to find a satisfactory solution to the wage demand of the employees and officers in consonance with growth, productivity and competitive environment,” Gurumurthy added.
He said wage talks were resumed in Life Insurance Corporation of India (LIC) after the unions rejected the 17.5 percent hike offered.
The unions warned of serious action if their demands were not met.
“The four government owned non-life insurers have clocked a gross premium of Rs.18,222 crore up to February 2010 this fiscal, logging a growth of 12.21 percent over the corresponding period of the previous year. On the other hand, leading private non-life insurers have logged negative growth,” J.Gurumurthy, secretary of All India Insurance Employees Association (AIIEA), told IANS Thursday.
He said the wage talks are still at the level of general manager level of the individual companies, steadfast on their offer of 17.5 percent salary hike, made at Kolkata Dec 22 last year.
The Governing Board of General Insurers Public Sector Association (GIPSA) Feb 5 informed the unions that it did not find it possible to improve the offer.
After the rejection of the offer of 15 percent increase, the GIPSA came up with a revised offer of 17.5 percent.
The AIIEA had demanded 40 percent wage hike so that there is pay parity with that of the private sector.
“The chairman and managing directors seem to feel that it is not their responsibility to find a satisfactory solution to the wage demand of the employees and officers in consonance with growth, productivity and competitive environment,” Gurumurthy added.
He said wage talks were resumed in Life Insurance Corporation of India (LIC) after the unions rejected the 17.5 percent hike offered.
Thursday, March 25, 2010
SBI General's imminent debut ruffles existing players
Likely to kick off operations in end-March or early April.
Public sector insurance players are likely to lose their dominant market share soon, as the country’s largest lender, State bank of India (SBI) gets ready to make a splash in the general insurance space through a joint venture in the next few days.
SBI General Insurance Co, a 74:26 joint venture between SBI and Insurance Australia Group (IAG), is expected to start operations by the end of the March or early next month, according to a source close to the development.
At present, four public sector general insurance companies — New India Assurance, National Insurance, United India Insurance and Oriental Insurance — collectively enjoy about 60 per cent market share.
The biggest setback will be for New India Assurance, as SBI is its bancassurance partner. Out of the Rs 400-crore annual premium that New India earned from the bancassurance channel, SBI accounted for nearly half, or Rs 200 crore.
"We have plans to recover from the loss. We are also in talks with three-four other banks for a partnership," said a New India Assurance executive. The company enjoys around 17 per cent share of the general insurance market.
"It (SBI) is a big player, has a huge reach through a large number of branches and has financial strength. It can create a dent in the market. SBI can reach almost all major clients. Its entry will affect us because New India has a distribution tie-up with SBI," M Ramadoss, chairman and managing director, New India Assurance, had said earlier.
"There might be some impact on the market share of public sector insurance companies, once SBI General Insurance comes into the market. But, we will have to see what strategy they adopt," said a National Insurance spokesperson.
Also, marginal repricing of some products could not be ruled out in the short term, even though premium for fire and engineering insurance had fallen after de-tariffing, said insurance company officials.
"This year, the market might have been erratic due to new entrants, but it should be more disciplined by next year," said an Oriental Insurance spokesperson.
SBI General Insurance has already filed for products across segments.
"The company has made a lot of progress. It will have full range of products," said RR Bele, managing director and chief executive officer, SBI General Insurance. SBI has invested Rs 111 crore for its 74 per cent equity, while IAG has pumped in about in Rs 542.10 crore (including about Rs 500 crore premium) for its 26 per cent stake.
By timing its foray now, SBI would eye corporate clients, as that was the time when most of them renew policies, the source said. The company is also hoping to leverage SBI’s 10,000-plus branch network and borrowers, mostly in retail and small & medium enterprises segments.
Public sector insurance players are likely to lose their dominant market share soon, as the country’s largest lender, State bank of India (SBI) gets ready to make a splash in the general insurance space through a joint venture in the next few days.
SBI General Insurance Co, a 74:26 joint venture between SBI and Insurance Australia Group (IAG), is expected to start operations by the end of the March or early next month, according to a source close to the development.
At present, four public sector general insurance companies — New India Assurance, National Insurance, United India Insurance and Oriental Insurance — collectively enjoy about 60 per cent market share.
The biggest setback will be for New India Assurance, as SBI is its bancassurance partner. Out of the Rs 400-crore annual premium that New India earned from the bancassurance channel, SBI accounted for nearly half, or Rs 200 crore.
"We have plans to recover from the loss. We are also in talks with three-four other banks for a partnership," said a New India Assurance executive. The company enjoys around 17 per cent share of the general insurance market.
"It (SBI) is a big player, has a huge reach through a large number of branches and has financial strength. It can create a dent in the market. SBI can reach almost all major clients. Its entry will affect us because New India has a distribution tie-up with SBI," M Ramadoss, chairman and managing director, New India Assurance, had said earlier.
"There might be some impact on the market share of public sector insurance companies, once SBI General Insurance comes into the market. But, we will have to see what strategy they adopt," said a National Insurance spokesperson.
Also, marginal repricing of some products could not be ruled out in the short term, even though premium for fire and engineering insurance had fallen after de-tariffing, said insurance company officials.
"This year, the market might have been erratic due to new entrants, but it should be more disciplined by next year," said an Oriental Insurance spokesperson.
SBI General Insurance has already filed for products across segments.
"The company has made a lot of progress. It will have full range of products," said RR Bele, managing director and chief executive officer, SBI General Insurance. SBI has invested Rs 111 crore for its 74 per cent equity, while IAG has pumped in about in Rs 542.10 crore (including about Rs 500 crore premium) for its 26 per cent stake.
By timing its foray now, SBI would eye corporate clients, as that was the time when most of them renew policies, the source said. The company is also hoping to leverage SBI’s 10,000-plus branch network and borrowers, mostly in retail and small & medium enterprises segments.
Wednesday, March 24, 2010
General insurance industry posts 22% growth in Feb
The general insurance industry posted a 22 per cent growth in February on the back of robust growth in the motor and health segments. While the public sector companies grew 19 per cent, the private sector players' premium collections increased by 25 per cent.
“Motor and health are two segments where growth has picked up. With car sales zooming, the industry has seen good growth in the motor insurance portfolio,” said an Oriental Insurance Company officer.
According to data released by the Insurance Regulatory and Development Authority in the month of February, all the four public sector companies grew by double digits. Excepting Reliance General Insurance that posted a negative growth of 2 per cent, all the private insurance companies registered a positive growth in gross written premium (GWP).
During the 11-month period ending February 2010, general insurers collected GWP to the tune of Rs 30,936.53 crore, a growth of 11.53 per cent over (Rs 27,739.06 crore) the corresponding period last year.
Both the standalone health insurance companies, Star Health and Allied Insurance and Apollo DKV Insurance, registered good growth in February.
Star Health's GWP grew to 134.34 crore in February, from Rs 10.11 crore recorded in the same period a year ago. Export Credit Guarantee Corporation's of India's premium income grew by 7 per cent in February while Agricultural Insurance Company almost doubled its GWP, to Rs 162.46
“Motor and health are two segments where growth has picked up. With car sales zooming, the industry has seen good growth in the motor insurance portfolio,” said an Oriental Insurance Company officer.
According to data released by the Insurance Regulatory and Development Authority in the month of February, all the four public sector companies grew by double digits. Excepting Reliance General Insurance that posted a negative growth of 2 per cent, all the private insurance companies registered a positive growth in gross written premium (GWP).
During the 11-month period ending February 2010, general insurers collected GWP to the tune of Rs 30,936.53 crore, a growth of 11.53 per cent over (Rs 27,739.06 crore) the corresponding period last year.
Both the standalone health insurance companies, Star Health and Allied Insurance and Apollo DKV Insurance, registered good growth in February.
Star Health's GWP grew to 134.34 crore in February, from Rs 10.11 crore recorded in the same period a year ago. Export Credit Guarantee Corporation's of India's premium income grew by 7 per cent in February while Agricultural Insurance Company almost doubled its GWP, to Rs 162.46
AI G I F W A
To
GIPSA Chairman and All CMDs
Dear Sirs,
Sub: Notice of Agitation on Wage Revision and related issues and other pending issues
Ref: our letters AIG/HQ/GIPSA/118 dated 1 January 2010 and AIG/HQ/GIPSA/126 dated 25 February 2010
We have been repeatedly bringing to your attention the larger issue of wage revision effective from 1st August 2007. The approach of GIPSA and its member companies has been totally indifferent to the reality. Considering the present growth level and the future projections in our industry, the wage parity with private sector, the wage revisions in other Public Sector Companies, wage increase for Central and State Government employees and the increased work load in the present scenario, the offer of 17.5% in wage bill was rejected jointly by all the Unions on 22nd December 2009 being inadequate. Though it is nearly three months since last round of discussions, you have failed to come out with a realistic offer. We are repeatedly demanding rectification of anomalies to Marketing Cadre created by 2003 Amendment to our Rationalisation Scheme for which there is no proper response from you. The last Amendment to our Rationalisation Scheme in 2008 was made with a need to avoid contempt of Supreme Court Order but the Administrative guideline was not followed as envisaged. Despite our repeated protests the issue of disputed excess cost recovery is still pending. Those opted for administration as per the 2003 Scheme are yet to be recognised and given the job allocation as envisaged in the Scheme. While we accepted your initial inability due to pending Court Cases, it is two years since the Supreme Court pronounced its verdict. There is no response to our repeated reminders. Again we are demanding up gradation of Grade II Development Officers (administration), the failure of which has put them in a pathetic situation of languishing at below the Record Clerk salary level for the past six years since only 7 slabs in the time scale. These issues have been submitted in detail in our Charter of Demands as well presented during the discussions and followed with our minutes of the meeting. TO PROTEST THE ADAMENT ATTITUDE OF THE MANAGEMENT IN NOT RESOLVING THESE ISSUES THROUGH MEANINGFUL DISCUSSIONS, ALL INDIA GENERAL INSURANCE FIELD WORKERS ASSOCIATION HEREBY GIVE NOTICE OF AGITATION DECLARING TWO HOUR WALK OUT STRIKE ON 31 MARCH 2010 FROM 11.30 AM TO 1.30 PM. We call upon the Management to engage in meaningful dialogue to end the impasse failing which AIGIFWA will be forced to intensify the agitation for which you will be solely responsible.
To
GIPSA Chairman and All CMDs
Dear Sirs,
Sub: Notice of Agitation on Wage Revision and related issues and other pending issues
Ref: our letters AIG/HQ/GIPSA/118 dated 1 January 2010 and AIG/HQ/GIPSA/126 dated 25 February 2010
We have been repeatedly bringing to your attention the larger issue of wage revision effective from 1st August 2007. The approach of GIPSA and its member companies has been totally indifferent to the reality. Considering the present growth level and the future projections in our industry, the wage parity with private sector, the wage revisions in other Public Sector Companies, wage increase for Central and State Government employees and the increased work load in the present scenario, the offer of 17.5% in wage bill was rejected jointly by all the Unions on 22nd December 2009 being inadequate. Though it is nearly three months since last round of discussions, you have failed to come out with a realistic offer. We are repeatedly demanding rectification of anomalies to Marketing Cadre created by 2003 Amendment to our Rationalisation Scheme for which there is no proper response from you. The last Amendment to our Rationalisation Scheme in 2008 was made with a need to avoid contempt of Supreme Court Order but the Administrative guideline was not followed as envisaged. Despite our repeated protests the issue of disputed excess cost recovery is still pending. Those opted for administration as per the 2003 Scheme are yet to be recognised and given the job allocation as envisaged in the Scheme. While we accepted your initial inability due to pending Court Cases, it is two years since the Supreme Court pronounced its verdict. There is no response to our repeated reminders. Again we are demanding up gradation of Grade II Development Officers (administration), the failure of which has put them in a pathetic situation of languishing at below the Record Clerk salary level for the past six years since only 7 slabs in the time scale. These issues have been submitted in detail in our Charter of Demands as well presented during the discussions and followed with our minutes of the meeting. TO PROTEST THE ADAMENT ATTITUDE OF THE MANAGEMENT IN NOT RESOLVING THESE ISSUES THROUGH MEANINGFUL DISCUSSIONS, ALL INDIA GENERAL INSURANCE FIELD WORKERS ASSOCIATION HEREBY GIVE NOTICE OF AGITATION DECLARING TWO HOUR WALK OUT STRIKE ON 31 MARCH 2010 FROM 11.30 AM TO 1.30 PM. We call upon the Management to engage in meaningful dialogue to end the impasse failing which AIGIFWA will be forced to intensify the agitation for which you will be solely responsible.
Tuesday, March 23, 2010
General insurance rates set to go up
General insurance rates are set to go up in the coming fiscal. With all-time low tariff rates, general insurance companies are considering reducing the discount rates on renewals of industrial fire and engineering policies from April.
Instead of offering across-the-board discount, insurers this year will try to negotiate with corporate policyholders in areas such as deductibles and add-on covers, according to industry experts. Deductibles are the portion of claims borne by policyholders.
The first day of the new financial year is a preferred renewal date for most large industrial houses, with nearly 25-40 per cent of group renewals in a year taking place on the day.
“With the reinsurance rates expected to go up in some policies, price discount may not be the preferred choice year. If the price cut is checked and deductibles increased, the claims ratio could come down in 2010-11,” Mr Alok Agarwal, Director (Corporate), ICICI Lombard, said. Claims ratio in these (fire, engineering) policies are now currently in the range of 70-80 per cent, up from about 40 per cent during the tariff-era.
“The general insurance industry is slowly moving towards better pricing. We may see a check on indiscriminate discounting with the concessions to some corporates being reduced from nearly 90 per cent to about 50 per cent,” Mr Rahul Agarwal, CEO, Optima Insurance Broking, said.
Add-on covers would serve as a selling point during renewals, Mr Alok Agarwal pointed out. The Insurance Regulatory and Development Authority of India recently allowed clubbing of add-on covers with main policies.
Some of the important add-on covers on offer are compensation for damage of employee belongings, civil infrastructure, customer goods lying in factory premises and overhead cost of shutting down plants.
A senior official at National Insurance Company, however, said, “Add-ons cannot become the unique selling point because all insurers would be offering the same set of benefits.” Group insurance business would continue to be price driven, he added.
Instead of offering across-the-board discount, insurers this year will try to negotiate with corporate policyholders in areas such as deductibles and add-on covers, according to industry experts. Deductibles are the portion of claims borne by policyholders.
The first day of the new financial year is a preferred renewal date for most large industrial houses, with nearly 25-40 per cent of group renewals in a year taking place on the day.
“With the reinsurance rates expected to go up in some policies, price discount may not be the preferred choice year. If the price cut is checked and deductibles increased, the claims ratio could come down in 2010-11,” Mr Alok Agarwal, Director (Corporate), ICICI Lombard, said. Claims ratio in these (fire, engineering) policies are now currently in the range of 70-80 per cent, up from about 40 per cent during the tariff-era.
“The general insurance industry is slowly moving towards better pricing. We may see a check on indiscriminate discounting with the concessions to some corporates being reduced from nearly 90 per cent to about 50 per cent,” Mr Rahul Agarwal, CEO, Optima Insurance Broking, said.
Add-on covers would serve as a selling point during renewals, Mr Alok Agarwal pointed out. The Insurance Regulatory and Development Authority of India recently allowed clubbing of add-on covers with main policies.
Some of the important add-on covers on offer are compensation for damage of employee belongings, civil infrastructure, customer goods lying in factory premises and overhead cost of shutting down plants.
A senior official at National Insurance Company, however, said, “Add-ons cannot become the unique selling point because all insurers would be offering the same set of benefits.” Group insurance business would continue to be price driven, he added.
Sunday, March 21, 2010
General insurers face higher liabilities
For the first time, global reinsurers have turned their back on primary general insurers in the country by under-subscribing treaty obligations. That means general insurance companies in India will have to absorb liabilities themselves and will require more capital.
Highly placed officials said that the under-subscriptions were mostly in marine hull, marine cargo and miscellaneous accidents categories. This business accounts for almost 20 per cent of India's general insurance. Marine Hull refers to shipping business. The officials said that the under-subscription in all these businesses varied from 25-35 per cent. At least 55 per cent of private sector business and about 25 per cent of public sector business is ceded to cross-border reinsurers.
Reinsurer under-subscription, the officials said, is largely on account of low risk premiums quoted by domestic general insurers. Since deregulation, the domestic general insurance markets have witnessed steep undercutting of risk premiums, going down by as much as 80 per cent since 2007.
Domestic insurers are likely to face capital stress in the coming weeks, already partially evident from the reduced business intake. For the first 10 months of the current year, two of the largest private sector general insurers, ICICI Lombard General Insurance Company Ltd and Bajaj Allianz General Insurance Company Ltd showed negative growth rates of 10.18 per cent and 8.22 per cent respectively. The gross premiums collected by these two insurers were Rs 2,730 crore and Rs 2,032 crore respectively for the period.
It appears some insurance lines covered by annual treaties are likely to be restricted further. Most of India's cross border treaty reinsurance placement is with either Munich Re or with Swiss Re although there are other smaller treaty reinsurers that include Hannover Re and to some extent Lloyds group.
Officials of Bajaj Allianz said, “It has been found that some new reinsurer would offer their support to the market whereever participation was restricted / reduced by an existing reinsurer, as witnessed in the FY 09-10.”
Treaty negotiations
Treaty negotiations this year are yet to be concluded. Reinsurance arrangements are normally expected to be completed at least 45 days before the beginning of the next financial year. ICICI Lombard's Head, Reinsurance, Mr Rajiv Kumaraswamy, said, “We have already submitted the draft reinsurance programme to the regulator. We are now in discussions with the reinsurers for finalising our programme for the next year.”
But with global capacity under pressure, domestic companies are reconciled to looking for spot market reinsurance placement in the form of Facultative Reinsurance (an arrangement where ceding insurers offer individual risks to a reinsurer, who has the right to accept or reject each risk). Spot placements would essentially translate into higher costs for reinsurance wiping out the little commission that primary insurers earned through such cession.
Highly placed officials said that the under-subscriptions were mostly in marine hull, marine cargo and miscellaneous accidents categories. This business accounts for almost 20 per cent of India's general insurance. Marine Hull refers to shipping business. The officials said that the under-subscription in all these businesses varied from 25-35 per cent. At least 55 per cent of private sector business and about 25 per cent of public sector business is ceded to cross-border reinsurers.
Reinsurer under-subscription, the officials said, is largely on account of low risk premiums quoted by domestic general insurers. Since deregulation, the domestic general insurance markets have witnessed steep undercutting of risk premiums, going down by as much as 80 per cent since 2007.
Domestic insurers are likely to face capital stress in the coming weeks, already partially evident from the reduced business intake. For the first 10 months of the current year, two of the largest private sector general insurers, ICICI Lombard General Insurance Company Ltd and Bajaj Allianz General Insurance Company Ltd showed negative growth rates of 10.18 per cent and 8.22 per cent respectively. The gross premiums collected by these two insurers were Rs 2,730 crore and Rs 2,032 crore respectively for the period.
It appears some insurance lines covered by annual treaties are likely to be restricted further. Most of India's cross border treaty reinsurance placement is with either Munich Re or with Swiss Re although there are other smaller treaty reinsurers that include Hannover Re and to some extent Lloyds group.
Officials of Bajaj Allianz said, “It has been found that some new reinsurer would offer their support to the market whereever participation was restricted / reduced by an existing reinsurer, as witnessed in the FY 09-10.”
Treaty negotiations
Treaty negotiations this year are yet to be concluded. Reinsurance arrangements are normally expected to be completed at least 45 days before the beginning of the next financial year. ICICI Lombard's Head, Reinsurance, Mr Rajiv Kumaraswamy, said, “We have already submitted the draft reinsurance programme to the regulator. We are now in discussions with the reinsurers for finalising our programme for the next year.”
But with global capacity under pressure, domestic companies are reconciled to looking for spot market reinsurance placement in the form of Facultative Reinsurance (an arrangement where ceding insurers offer individual risks to a reinsurer, who has the right to accept or reject each risk). Spot placements would essentially translate into higher costs for reinsurance wiping out the little commission that primary insurers earned through such cession.
National Insurance opens motor business hub
In order to facilitate speedy settlement of motor claims of Maruti customers, the National Insurance Company has launched a motor business hub in the State.
Mr N.S.R.Chandraprasad, Chairman-cum-Managing Director inaugurated Kerala's first NatMar Business hub at the Kochi divisional office of the company.
National Insurance has a tie up with Maruti Suzuki Ltd for online issuance of policies at dealer outlets since May 2002.
The alliance with Maruti, popularly known as NatMar Insurance is one of the company's largest portfolios in motor insurance.
According to company officials, surveys will be arranged, reports will be received online and claims will be processed instantly. The hub will provide hassle-free and cashless settlement of damage claims, officials said.
The company plans to open more such hubs in Thiruvananthapuram and Kozhikode.
Mr N.S.R.Chandraprasad, Chairman-cum-Managing Director inaugurated Kerala's first NatMar Business hub at the Kochi divisional office of the company.
National Insurance has a tie up with Maruti Suzuki Ltd for online issuance of policies at dealer outlets since May 2002.
The alliance with Maruti, popularly known as NatMar Insurance is one of the company's largest portfolios in motor insurance.
According to company officials, surveys will be arranged, reports will be received online and claims will be processed instantly. The hub will provide hassle-free and cashless settlement of damage claims, officials said.
The company plans to open more such hubs in Thiruvananthapuram and Kozhikode.
Friday, March 19, 2010
Insurers propose 80% hike in third party motor risk premium
In a decision that will hurt auto owners in the commercial vehicle (CV) segment, domestic general insurers have finally taken the initiative to increase premiums for third party motor insurance by almost 80%. General Insurance Council (GIC), the official representative body of the domestic general insurers, met in Hyderabad on Friday and passed an resolution to this effect. "We have decided to initiate the process to hike third party motor insurance rates by 80% since losses from the portfolio are no longer sustainable," said the chief of a public sector general insurance company. Over 50% of the premiums of general insurers come from motor insurance. The third party insurance covers the risks of financial losses arising out of a situation where a vehicle damages a third party in an accident. In India, third party motor insurance has a provision for unlimited liability and many cases end up in prolonged litigation with courts awarding large financial compensations to victims. Third party motor premiums account for the largest share of revenues of general insurers. However, the business makes big losses too with the loss ratio for the portfolio exceeding 120-130% every year. It is legally mandatory for vehicle owners to buy this cover and this is the only segment where the premium is still regulated and needs to be ratified by the government. General insurers claim they are at the receiving end while selling third party insurance covers. Since the cover is mandatory, they have to sell them even if the portfolio incurs losses, eating into the profits of other segments. In order to simplify the third party motor insurance business, insurance companies had created a mechanism in April 2007 wherein all insurers would transfer their premiums collected to the Indian Motor Third Party Insurance Pool. General Insurance Corporation of India is the pool administrator and claims that are paid out of the pool depend on each insurance company's market share. During 2008-09, 17 members of IMTPIP had contributed Rs 2,822.96 crore of premium to the pool, which had paid Rs 3,258.54 crore towards claims, thereby taking a hit of Rs 650.30 crore. A proposal by insurance companies to increase third party motor premiums by 150% in January 2007 was met with stiff resistance from the All India Motor Transport Congress (AIMTC), which has over 3,400 affiliate associations and members owing over 4.5 million vehicles. Finally, the government had to relent, allowing a 70% hike.
In a decision that will hurt auto owners in the commercial vehicle (CV) segment, domestic general insurers have finally taken the initiative to increase premiums for third party motor insurance by almost 80%. General Insurance Council (GIC), the official representative body of the domestic general insurers, met in Hyderabad on Friday and passed an resolution to this effect. "We have decided to initiate the process to hike third party motor insurance rates by 80% since losses from the portfolio are no longer sustainable," said the chief of a public sector general insurance company. Over 50% of the premiums of general insurers come from motor insurance. The third party insurance covers the risks of financial losses arising out of a situation where a vehicle damages a third party in an accident. In India, third party motor insurance has a provision for unlimited liability and many cases end up in prolonged litigation with courts awarding large financial compensations to victims. Third party motor premiums account for the largest share of revenues of general insurers. However, the business makes big losses too with the loss ratio for the portfolio exceeding 120-130% every year. It is legally mandatory for vehicle owners to buy this cover and this is the only segment where the premium is still regulated and needs to be ratified by the government. General insurers claim they are at the receiving end while selling third party insurance covers. Since the cover is mandatory, they have to sell them even if the portfolio incurs losses, eating into the profits of other segments. In order to simplify the third party motor insurance business, insurance companies had created a mechanism in April 2007 wherein all insurers would transfer their premiums collected to the Indian Motor Third Party Insurance Pool. General Insurance Corporation of India is the pool administrator and claims that are paid out of the pool depend on each insurance company's market share. During 2008-09, 17 members of IMTPIP had contributed Rs 2,822.96 crore of premium to the pool, which had paid Rs 3,258.54 crore towards claims, thereby taking a hit of Rs 650.30 crore. A proposal by insurance companies to increase third party motor premiums by 150% in January 2007 was met with stiff resistance from the All India Motor Transport Congress (AIMTC), which has over 3,400 affiliate associations and members owing over 4.5 million vehicles. Finally, the government had to relent, allowing a 70% hike.
Thursday, March 18, 2010
Finmin wants PSBs to exit insurance
The finance ministry has circulated a proposal that aims to ask state-run banks to exit noncore businesses, notably insurance, to force greater capital efficiency and ensure that periodic capital infusion into them goes into increasing the spread of banking rather than propping up money-losing ventures. “The money provided through recapitalisation support is for core banking activities such as increased lending and branch expansion. Banks with interests in other areas may divert the funds, which is not desirable,” a senior finance ministry official told ET. The proposal, which is in the early stages of debate and discussion within the ministry, reasons that noncore businesses such as insurance are highly capital intensive and can take up to 10 years to be profitable. India’s life insurance industry posted a combined net loss of Rs 4,878.49 crore in 2008-09 , up 43% from a year ago. Of 22 life insurers, only four have reported profits, data from insurance regulator Irda shows.
The finance ministry has circulated a proposal that aims to ask state-run banks to exit noncore businesses, notably insurance, to force greater capital efficiency and ensure that periodic capital infusion into them goes into increasing the spread of banking rather than propping up money-losing ventures. “The money provided through recapitalisation support is for core banking activities such as increased lending and branch expansion. Banks with interests in other areas may divert the funds, which is not desirable,” a senior finance ministry official told ET. The proposal, which is in the early stages of debate and discussion within the ministry, reasons that noncore businesses such as insurance are highly capital intensive and can take up to 10 years to be profitable. India’s life insurance industry posted a combined net loss of Rs 4,878.49 crore in 2008-09 , up 43% from a year ago. Of 22 life insurers, only four have reported profits, data from insurance regulator Irda shows.
Govt for level playing field in insurance sector
Union Finance Minister Pranab Mukherjee on Tuesday said in the Rajya Sabha that the UPA Government was providing a level playing field in the insurance sector and informed that private sector insurance companies had more than three times the outstanding number of death claims on individual insurance policies compared to state-owned Life Insurance Corporation (LIC). Replying to a question by Brinda Karat (CPM) and subsequent supplementaries during Question Hour, Mr. Mukherjee said the outstanding number of death claims, as on March 31, 2009, as a percentage of total number of claims intimated to the companies in 2008-09, stood at 7.75 per cent for private firms. The same for LIC was 2.21 per cent, he added. For group policies, private sector companies had 3.93 per cent outstanding claims while LIC had 0.24 per cent. Mr. Mukherjee said private sector insurance companies started operations eight years ago while LIC has been in the business since 1956. “There certainly is a difference (between outstanding claims with private and public sector firms). This difference will have to be looked into but forming a committee for this is not a solution,'' he said. The Finance Minister said the government's role was limited to providing level playing field to private and public sector companies. Minister of State for Finance Namo Narain Meena said there were 23 insurance companies operating in India, of which 22 were private. He said the claim pendency ratio of private firms was higher than LIC but it had come down due to intervention of the Insurance Regulatory and Development Authority. The pendency ratio of private firms was 13.32 per cent in 2006, which came down to 10.88 per cent in 2007 and to 7.75 per cent in 2008-09.
Friday, March 5, 2010
Union Budget 2010: Hidden gems for policyholders, insurance agents
There are hidden gems for policyholders and insurance agents in the union budget. Last year a provision to impose service tax on all charges levied by life insurers on ulip policyholders has been reworked so that service tax is now applied only on fund management charges. Life insurance agents too can rejoice as the government has now raised the limit for exemption from tax deduction at source to Rs 20,000 from Rs 5,000 earlier. Insurers say that agents will have to bring in insurance premium of over Rs 1,00,000 in a year to come under the TDS. Under the revised limit more than half the life insurance agents will be exempt from tax deducted at source.
According to Gaurang Shah, managing director, Kotak Mahindra Life Insurance the removal of the service tax on other charges will result in an improvement in yield for the policyholder ranging from 20 basis points to 30 basis points depending on the tenure and size of the policy. Two years back the government had decided to tax the life industry under a formula which was brought out by an illustration in the finance bill. In terms of the illustration if the total premium paid for ULIP was Rs 100, and the risk premium (towards life protection) was Rs 10 and the amount actually invested was Rs 85, the balance Rs 5 (Rs 100- Rs 10 - Rs 5) would be subject to service tax. The budget has clarified that service tax will now be imposed only on fund management which is only Rs 1.35 on every Rs 100 invested.
There are hidden gems for policyholders and insurance agents in the union budget. Last year a provision to impose service tax on all charges levied by life insurers on ulip policyholders has been reworked so that service tax is now applied only on fund management charges. Life insurance agents too can rejoice as the government has now raised the limit for exemption from tax deduction at source to Rs 20,000 from Rs 5,000 earlier. Insurers say that agents will have to bring in insurance premium of over Rs 1,00,000 in a year to come under the TDS. Under the revised limit more than half the life insurance agents will be exempt from tax deducted at source.
According to Gaurang Shah, managing director, Kotak Mahindra Life Insurance the removal of the service tax on other charges will result in an improvement in yield for the policyholder ranging from 20 basis points to 30 basis points depending on the tenure and size of the policy. Two years back the government had decided to tax the life industry under a formula which was brought out by an illustration in the finance bill. In terms of the illustration if the total premium paid for ULIP was Rs 100, and the risk premium (towards life protection) was Rs 10 and the amount actually invested was Rs 85, the balance Rs 5 (Rs 100- Rs 10 - Rs 5) would be subject to service tax. The budget has clarified that service tax will now be imposed only on fund management which is only Rs 1.35 on every Rs 100 invested.
Insurance unions oppose pre-set wage revision
Unions and associations in the public sector general insurance companies have opposed the General Insurers Public Sector Association's (GIPSA) move to put pre-conditions for wage-revision. The unions are planning a one-day strike in March after the protest dharna to be held on Tuesday (Feb. 23) at all the regional centres, according to Mr P.P. Mohanan, Kerala State Convenor of the Joint Action Committee of General Insurance Employees and Officers. He said that the offer of 17.5 per cent wage increase with conditions was not acceptable to the unions/associations. The pre-conditions or ‘organisational agenda' offer includes increase in the limit of 150-km distance for the transfer of Class-III employees, provision for compulsory retirement, short-term appointments at various levels in the officers cadre, further outsourcing, flexible pay and flexible working hours. The wage revision is due from August, 2007.
Unions and associations in the public sector general insurance companies have opposed the General Insurers Public Sector Association's (GIPSA) move to put pre-conditions for wage-revision. The unions are planning a one-day strike in March after the protest dharna to be held on Tuesday (Feb. 23) at all the regional centres, according to Mr P.P. Mohanan, Kerala State Convenor of the Joint Action Committee of General Insurance Employees and Officers. He said that the offer of 17.5 per cent wage increase with conditions was not acceptable to the unions/associations. The pre-conditions or ‘organisational agenda' offer includes increase in the limit of 150-km distance for the transfer of Class-III employees, provision for compulsory retirement, short-term appointments at various levels in the officers cadre, further outsourcing, flexible pay and flexible working hours. The wage revision is due from August, 2007.
Insurance unions oppose pre-set wage revision
Unions and associations in the public sector general insurance companies have opposed the General Insurers Public Sector Association's (GIPSA) move to put pre-conditions for wage-revision. The unions are planning a one-day strike in March after the protest dharna to be held on Tuesday (Feb. 23) at all the regional centres, according to Mr P.P. Mohanan, Kerala State Convenor of the Joint Action Committee of General Insurance Employees and Officers. He said that the offer of 17.5 per cent wage increase with conditions was not acceptable to the unions/associations. The pre-conditions or ‘organisational agenda' offer includes increase in the limit of 150-km distance for the transfer of Class-III employees, provision for compulsory retirement, short-term appointments at various levels in the officers cadre, further outsourcing, flexible pay and flexible working hours. The wage revision is due from August, 2007.
Motor claims ratio improves in 2008-09
But general insurance industry sees deterioration
Insurance companies have managed to reduce the losses incurred on the motor insurance portfolio, that accounts for nearly half the business underwritten by them.
According to the latest data released by the Insurance Regulatory and Development Authority (Irda) in its annual report, general insurers lowered the incurred claims ratio to 88.84 per cent during 2008-09 from 92.31 per cent in the previous year.
Claim ratio is the proportion of claims incurred to the premium underwritten by them. In simple terms, it means that insurance companies paid Rs 88.84 in claims on a premium of Rs 100 that they earned.
The reduction in claims has once again pushed insurers, who avoided underwriting the motor business due to claims exceeding the premium income to once again look at the segment. One of the key reasons for the portfolio earning handsome profits is Irda’s decision to keep third party insurance outside the ambit. Now, the premium on the annual third party business, which continues to be fixed, is transferred to a pool and all general insurance companies share the losses.
Despite the improvement in the claims ratio for the motor business, the overall claims ratio for the industry deteriorated from 84.88 per cent in 2007-09 to 86.30 per cent in 2008-09.
A part of the reason for the increase was the dent in the fire and marine portfolios. During the last financial year, marine saw the highest jump in the claims ratio from 86.68 per cent in 2007-08 to 102.90 per cent in 2008-09 mainly due to high severity in the segment and steep discounts offered by companies to garner business.
As a result, insurers paid more claims on the marine business — which includes hull, cargo and offshore energy — than the premium they earned during the year.
Health claims improved marginally from 107 per cent to 106 per cent. "Insurers are trying to reduce discounts in health," said ICICI Lombard Chief Financial Officer Rakesh Jain.
Group health has been a bleeding portfolio for most insurers while most of them are making underwriting profits in retail health. Similarly, fire saw a slight increase from 68 per cent to 75.72 per cent. This segment has been highly discounted and insurers were offering 90-95 per cent discount.
During the last financial year, the underwriting losses of the general insurance companies increased to Rs 5,326.11 crore from Rs 3,899.49 crore in the previous year. However, there appeared to be a slowdown in the growth of underwriting losses in 2008-09 which stood at 36.58 per cent. The slowdown in growth rate was observed in the case of all public insurers. In contrast, the private non-life insurers continued to witness high growth in underwriting losses, which increased to 83.54 per cent.
Whereas net profit of the four public sector companies dropped by 81 per cent to Rs 426.81 crore as against Rs 2,205.48 crore. Oriental Insurance reported a net loss of Rs 52.66 crore, as against a profit of Rs 9.30 crore during the previous year.
National Insurance incurred a loss of Rs 149.21 crore though the same company reported a net profit of Rs 163.43 crore in the earlier year. Six private players reported losses during the year including Reliance, HDFC Ergo, Future Generali, Universal Sompo, and newly established insurers such as Shriram and Bharti AXA.
Insurance companies have managed to reduce the losses incurred on the motor insurance portfolio, that accounts for nearly half the business underwritten by them.
According to the latest data released by the Insurance Regulatory and Development Authority (Irda) in its annual report, general insurers lowered the incurred claims ratio to 88.84 per cent during 2008-09 from 92.31 per cent in the previous year.
Claim ratio is the proportion of claims incurred to the premium underwritten by them. In simple terms, it means that insurance companies paid Rs 88.84 in claims on a premium of Rs 100 that they earned.
The reduction in claims has once again pushed insurers, who avoided underwriting the motor business due to claims exceeding the premium income to once again look at the segment. One of the key reasons for the portfolio earning handsome profits is Irda’s decision to keep third party insurance outside the ambit. Now, the premium on the annual third party business, which continues to be fixed, is transferred to a pool and all general insurance companies share the losses.
Despite the improvement in the claims ratio for the motor business, the overall claims ratio for the industry deteriorated from 84.88 per cent in 2007-09 to 86.30 per cent in 2008-09.
A part of the reason for the increase was the dent in the fire and marine portfolios. During the last financial year, marine saw the highest jump in the claims ratio from 86.68 per cent in 2007-08 to 102.90 per cent in 2008-09 mainly due to high severity in the segment and steep discounts offered by companies to garner business.
As a result, insurers paid more claims on the marine business — which includes hull, cargo and offshore energy — than the premium they earned during the year.
Health claims improved marginally from 107 per cent to 106 per cent. "Insurers are trying to reduce discounts in health," said ICICI Lombard Chief Financial Officer Rakesh Jain.
Group health has been a bleeding portfolio for most insurers while most of them are making underwriting profits in retail health. Similarly, fire saw a slight increase from 68 per cent to 75.72 per cent. This segment has been highly discounted and insurers were offering 90-95 per cent discount.
During the last financial year, the underwriting losses of the general insurance companies increased to Rs 5,326.11 crore from Rs 3,899.49 crore in the previous year. However, there appeared to be a slowdown in the growth of underwriting losses in 2008-09 which stood at 36.58 per cent. The slowdown in growth rate was observed in the case of all public insurers. In contrast, the private non-life insurers continued to witness high growth in underwriting losses, which increased to 83.54 per cent.
Whereas net profit of the four public sector companies dropped by 81 per cent to Rs 426.81 crore as against Rs 2,205.48 crore. Oriental Insurance reported a net loss of Rs 52.66 crore, as against a profit of Rs 9.30 crore during the previous year.
National Insurance incurred a loss of Rs 149.21 crore though the same company reported a net profit of Rs 163.43 crore in the earlier year. Six private players reported losses during the year including Reliance, HDFC Ergo, Future Generali, Universal Sompo, and newly established insurers such as Shriram and Bharti AXA.
GIC's natural disaster fund to start by Apr 1
The natural catastrophe pool being set by General Insurance Corporation (GIC) for insurance and reinsurance companies in Africa and Asia will have an initial capacity of $500 million. The pool will be functional by April 1, 2010.
GIC Re, the state-owned national reinsurance company, has been entrusted with creating the pool, to be called ‘FAIR Natural Catastrophe Pool’, by a voluntary industry organisation, the Federation of Afro-Asian Insurers and Reinsurers (FAIR). GIC has been given the responsibility to create and manage the pool for members of FAIR.
"We are in talks with members of several countries and will start with 20-30 members. We are looking to make the pool operational by April 1, 2010," said Yogesh Lohiya, chairman and managing director, GIC. He added that each member would have to put in a minimum of $50 million to become a part of the pool. GIC will have 5 per cent stake as the manager of the fund.
The re-insurer is expanding its international footprint by entering into Malaysian and South African markets. It has applied for a branch licence in Malaysia and will later go to Johannesburg. GIC Re has a branch in Dubai and a representative office in Moscow.
GIC Re, the state-owned national reinsurance company, has been entrusted with creating the pool, to be called ‘FAIR Natural Catastrophe Pool’, by a voluntary industry organisation, the Federation of Afro-Asian Insurers and Reinsurers (FAIR). GIC has been given the responsibility to create and manage the pool for members of FAIR.
"We are in talks with members of several countries and will start with 20-30 members. We are looking to make the pool operational by April 1, 2010," said Yogesh Lohiya, chairman and managing director, GIC. He added that each member would have to put in a minimum of $50 million to become a part of the pool. GIC will have 5 per cent stake as the manager of the fund.
The re-insurer is expanding its international footprint by entering into Malaysian and South African markets. It has applied for a branch licence in Malaysia and will later go to Johannesburg. GIC Re has a branch in Dubai and a representative office in Moscow.
New India moots cheapest health insurance policy
Public sector general insurance company, New India Assurance (NIA), is looking to launch one of the cheapest health insurance policy, with the yearly insurance premium for a minimum Rs 1 lakh sum assured for less than Rs 1,000.
The insurer is hoping to keep the price of the policy low by restricting the choice of hospitals, and covering only major illnesses.
"By restricting the choice of the insured, we will see how the premium could be brought down. We can also look at sum insured at more than Rs 1 lakh. We hope to file the application with the regulator in the next one month," said M Ramadoss, chairman-cum-managing director, New India Assurance.
The initiative comes at a time when almost all general insurance companies have raised their health insurance premiums by 20-30 per cent over the last year.
At present, for a person of up to 35 years, the minimum premium rates for up to Rs 1 lakh sum assured is Rs 1,000 or more.
Also, with SBI general insurance slated to enter the market this year, the competition in the industry is likely to intensify.
"The entry of SBI in the general insurance industry can make a dent in the market," said Ramadoss.
New India Assurance is the largest general insurance company with gross premium last year at about Rs 6,200 crore.
General insurance companies have been trying to reduce the loss ratio in the health insurance companies by reducing exposure to corporate health policies or repricing them upwards.
The overall growth of the health insurance portfolio has come down to about 5-6 per cent in the financial year 2008-09, against about 30 per cent in the previous year, said Ramadoss.
This financial year, New India Assurance is looking at a growth rate of about 16 per cent in terms of gross premium, at Rs 7,250 crore (with Rs 6,000 crore from India, and the rest from foreign branches).
Ramadoss said, the general insurance industry was likely to grow at about 10-11 per cent, with the gross premium collection at Rs 34,000 crore. In the last financial year, the gross premium collection was Rs 31,000 crore.
Last year, New India Assurance had a net profit of Rs 270 crore. This year, there might be a reduction in the net profit to about Rs 250 crore, due to lesser investment profit, said Ramadoss.
The insurer is hoping to keep the price of the policy low by restricting the choice of hospitals, and covering only major illnesses.
"By restricting the choice of the insured, we will see how the premium could be brought down. We can also look at sum insured at more than Rs 1 lakh. We hope to file the application with the regulator in the next one month," said M Ramadoss, chairman-cum-managing director, New India Assurance.
The initiative comes at a time when almost all general insurance companies have raised their health insurance premiums by 20-30 per cent over the last year.
At present, for a person of up to 35 years, the minimum premium rates for up to Rs 1 lakh sum assured is Rs 1,000 or more.
Also, with SBI general insurance slated to enter the market this year, the competition in the industry is likely to intensify.
"The entry of SBI in the general insurance industry can make a dent in the market," said Ramadoss.
New India Assurance is the largest general insurance company with gross premium last year at about Rs 6,200 crore.
General insurance companies have been trying to reduce the loss ratio in the health insurance companies by reducing exposure to corporate health policies or repricing them upwards.
The overall growth of the health insurance portfolio has come down to about 5-6 per cent in the financial year 2008-09, against about 30 per cent in the previous year, said Ramadoss.
This financial year, New India Assurance is looking at a growth rate of about 16 per cent in terms of gross premium, at Rs 7,250 crore (with Rs 6,000 crore from India, and the rest from foreign branches).
Ramadoss said, the general insurance industry was likely to grow at about 10-11 per cent, with the gross premium collection at Rs 34,000 crore. In the last financial year, the gross premium collection was Rs 31,000 crore.
Last year, New India Assurance had a net profit of Rs 270 crore. This year, there might be a reduction in the net profit to about Rs 250 crore, due to lesser investment profit, said Ramadoss.
Thursday, February 18, 2010
GIC's natural disaster fund to start by Apr 1
The natural catastrophe pool being set by General Insurance Corporation (GIC) for insurance and reinsurance companies in Africa and Asia will have an initial capacity of $500 million. The pool will be functional by April 1, 2010.
GIC Re, the state-owned national reinsurance company, has been entrusted with creating the pool, to be called ‘FAIR Natural Catastrophe Pool’, by a voluntary industry organisation, the Federation of Afro-Asian Insurers and Reinsurers (FAIR). GIC has been given the responsibility to create and manage the pool for members of FAIR.
"We are in talks with members of several countries and will start with 20-30 members. We are looking to make the pool operational by April 1, 2010," said Yogesh Lohiya, chairman and managing director, GIC. He added that each member would have to put in a minimum of $50 million to become a part of the pool. GIC will have 5 per cent stake as the manager of the fund.
The re-insurer is expanding its international footprint by entering into Malaysian and South African markets. It has applied for a branch licence in Malaysia and will later go to Johannesburg. GIC Re has a branch in Dubai and a representative office in Moscow.
SEARCH
The natural catastrophe pool being set by General Insurance Corporation (GIC) for insurance and reinsurance companies in Africa and Asia will have an initial capacity of $500 million. The pool will be functional by April 1, 2010.
GIC Re, the state-owned national reinsurance company, has been entrusted with creating the pool, to be called ‘FAIR Natural Catastrophe Pool’, by a voluntary industry organisation, the Federation of Afro-Asian Insurers and Reinsurers (FAIR). GIC has been given the responsibility to create and manage the pool for members of FAIR.
"We are in talks with members of several countries and will start with 20-30 members. We are looking to make the pool operational by April 1, 2010," said Yogesh Lohiya, chairman and managing director, GIC. He added that each member would have to put in a minimum of $50 million to become a part of the pool. GIC will have 5 per cent stake as the manager of the fund.
The re-insurer is expanding its international footprint by entering into Malaysian and South African markets. It has applied for a branch licence in Malaysia and will later go to Johannesburg. GIC Re has a branch in Dubai and a representative office in Moscow.
SEARCH
Tuesday, February 16, 2010
GENERAL INSURERS’ [PUBLIC SECTOR] ASSOCIATION OF INDIA
To,
All check-off Qualified Unions/ Associations of Member Companies
Re : Wage Revision
Please refer to the discussions we had with you in the 5th round held at Kolkata on 22nd December, 2009, at which, on behalf of our Member Companies, we had floated an improved offer of overall 17.5% (including non-core items) revision in the wages with effect from 01.08.2007, (subject to the approval of the Government) along with an organizational agenda aimed at improving the productivity to the requisite level necessary to absorb the impact of the Wage Revision having regard to the statutory limits on the management expenses.
We had requested you to appreciate the offer as also the financial constraints despite which it has been made to you with a view to motivate the employees for contributing further in improving the productivity of the Companies and sought your consent to the same for our approaching the Government for approval thereof and issuance of requisite Notification. While appreciating the improved offer, you had, nevertheless, made certain observations, inter-alia, seeking to explore the possibilities of further improvements, if at all.
Your observations were submitted by us to the Governing Board of GIPSA in its Meeting held on 29th January, 2010. After threadbare deliberations, particularly, looking to the financials of the Member Companies, the Board did not find it possible to further improve the offer made before you in the 5th round as indicated above and desired us to reiterate the same to you.
We would request you to kindly appreciate that this is the maximum the Companies could afford with the given financials and come forward with your consent to the same to enable us to proceed further in the matter.
All check-off Qualified Unions/ Associations of Member Companies
Re : Wage Revision
Please refer to the discussions we had with you in the 5th round held at Kolkata on 22nd December, 2009, at which, on behalf of our Member Companies, we had floated an improved offer of overall 17.5% (including non-core items) revision in the wages with effect from 01.08.2007, (subject to the approval of the Government) along with an organizational agenda aimed at improving the productivity to the requisite level necessary to absorb the impact of the Wage Revision having regard to the statutory limits on the management expenses.
We had requested you to appreciate the offer as also the financial constraints despite which it has been made to you with a view to motivate the employees for contributing further in improving the productivity of the Companies and sought your consent to the same for our approaching the Government for approval thereof and issuance of requisite Notification. While appreciating the improved offer, you had, nevertheless, made certain observations, inter-alia, seeking to explore the possibilities of further improvements, if at all.
Your observations were submitted by us to the Governing Board of GIPSA in its Meeting held on 29th January, 2010. After threadbare deliberations, particularly, looking to the financials of the Member Companies, the Board did not find it possible to further improve the offer made before you in the 5th round as indicated above and desired us to reiterate the same to you.
We would request you to kindly appreciate that this is the maximum the Companies could afford with the given financials and come forward with your consent to the same to enable us to proceed further in the matter.
Friday, February 12, 2010
L&T likely to foray into insurance biz
Larsen & Toubro is likely to start its general insurance business in the first quarter of next fiscal and has got preliminary approval from the Insurance Regulatory & Development Authority (Irda).
Irda member R Kannan told said the insurance watchdog has given its initial R1 approval to L&T and the company would take at least three-four months to start the venture.
"In its board meeting, Irda has given R1 approval to L&T for its general insurance venture," Kanan said. According to L&T senior vice-president (financial services) N Sivaraman, the venture would be operational in the first half of the next fiscal subject to regulatory approval.
The proposed insurance firm would begin operations with paid-up capital between Rs 110 crore and 120 crore, he said, adding, "We expect the share capital to go up to Rs 500 crore in the next 5 years depending on business growth." L&T has already put in place top management for the proposed venture. Joydeep Roy will head L&T General Insurance Company.
There are three stages of approval required for getting a licence for an insurance company. R1 is the preliminary approval wherein the regulator evaluates the promoters. In the second stage (R2), Irda looks into the business model of the company and in the third (R3), at the formation of the company. Besides, Irda also gave R2 approval to health insurance company Max Bupa Health Insurance, Kannan added.
Irda member R Kannan told said the insurance watchdog has given its initial R1 approval to L&T and the company would take at least three-four months to start the venture.
"In its board meeting, Irda has given R1 approval to L&T for its general insurance venture," Kanan said. According to L&T senior vice-president (financial services) N Sivaraman, the venture would be operational in the first half of the next fiscal subject to regulatory approval.
The proposed insurance firm would begin operations with paid-up capital between Rs 110 crore and 120 crore, he said, adding, "We expect the share capital to go up to Rs 500 crore in the next 5 years depending on business growth." L&T has already put in place top management for the proposed venture. Joydeep Roy will head L&T General Insurance Company.
There are three stages of approval required for getting a licence for an insurance company. R1 is the preliminary approval wherein the regulator evaluates the promoters. In the second stage (R2), Irda looks into the business model of the company and in the third (R3), at the formation of the company. Besides, Irda also gave R2 approval to health insurance company Max Bupa Health Insurance, Kannan added.
New India to introduce core insurance solution soon
The New Indian Assurance is in the process of implementing the Core Insurance Solution (CIS) to network its offices and automate its operations.
New India Assurance chairman and managing director M Ramadoss said all the 26 regional offices and 393 divisional offices and 614 branches will be brought under the CIS system very soon.
Ramdoss, who was here on Thursday to preside over the board of directors meeting, said the board has approved the company's third quarter results during which the company has earned a premium income of Rs 7200 crore.
The chairman said all the districts in Orissa would be covered under the the Rashtriy Swasthya Bima Yojana (RSBY) very soon.
"In Orissa, 12 districts have been covered. The remaining 18 districts will be taken up very soon", Ramadoss said. He said an independent cell will be formed in the regional office of the company to oversee the RSBY implementation.
The public sector non-life insurer has so far covered 1.75 lakh BPL families out of the targeted 22 lakh under the RSBY.
The RSBY was launched in 2008 to provide cashless medical facilities to the BPL families. The scheme has been implemented successfully in states of Maharashtra, Gujarat, Himachal Pradesh, Goa and Sikkim.
"The RSBY will create demand for health facilities which in turn would see more investment in the health sector in the country" , the chairman said.
New India Assurance chairman and managing director M Ramadoss said all the 26 regional offices and 393 divisional offices and 614 branches will be brought under the CIS system very soon.
Ramdoss, who was here on Thursday to preside over the board of directors meeting, said the board has approved the company's third quarter results during which the company has earned a premium income of Rs 7200 crore.
The chairman said all the districts in Orissa would be covered under the the Rashtriy Swasthya Bima Yojana (RSBY) very soon.
"In Orissa, 12 districts have been covered. The remaining 18 districts will be taken up very soon", Ramadoss said. He said an independent cell will be formed in the regional office of the company to oversee the RSBY implementation.
The public sector non-life insurer has so far covered 1.75 lakh BPL families out of the targeted 22 lakh under the RSBY.
The RSBY was launched in 2008 to provide cashless medical facilities to the BPL families. The scheme has been implemented successfully in states of Maharashtra, Gujarat, Himachal Pradesh, Goa and Sikkim.
"The RSBY will create demand for health facilities which in turn would see more investment in the health sector in the country" , the chairman said.
Thursday, February 4, 2010
High-loss health, auto covers contribute to PSU insurers' growth
High-loss health, auto covers contribute to PSU insurers' growth
Although PSU insurance companies stepped up growth this year, this was largely contributed by high-loss segments where the payouts exceed the premiums.
The four PSU insurers reported premium growth of 12 per cent for the first nine months of the current financial year. Private sector insurers grew only 8 per cent for the same period.
But highly placed PSU officials, who declined to be quoted, said the stepped up growth was largely from the health and automobile segments. Health insurance contributed to as much as 40 per cent of the PSU insurers' growth during the period. The auto sector contributed about 10 per cent of the growth, though private sector continued to dominate the segment. But it is in motor third party risk covers, especially commercial vehicles, where the public sector growth remained high, the officials said.
The high growth segments for the PSU insurers, the officials said, were not exactly profitable. The losses as measured by the combined ratio remained at about 130 per cent for health risk covers, both retail and group medical covers. The combined ratio is a measure of profitability of the insurance industry's core business. A ratio over 100 per cent implied the business acquisition/administration expenses and claims were well over the premiums earned. In the case of the automobile sector, the combined ratios continue to remain at over 150 per cent, with commercial vehicle third losses at over 200 per cent.
However, the sources said, the claims losses on their respective balance sheets had reduced after the third party pool began operations in 2007. This was because the losses were now being shared between all the general insurers, including private sector, who are also members of the pool. Losses for the PSUs though remain high, since they have the largest market share in the commercial vehicle third party segment sector.
Low loss sectors
The officials said private sector insurers' cautious growth in the high-loss segments stemmed from fears of bleeding capital. But capital constraints for the PSU insurers were also likely to mount this year, the officials said, given the current state of the profitable business — fire and engineering sector. Tariffs in these traditionally low loss sectors are still 80 per cent below the pre-deregulation levels. Besides, with reinsurance negotiations expected to be tied up over the next two weeks, the officials said there was intense resistance within the sector — public and private — against further undercutting risk premiums.
The resistance was also partly on account of the fear of weakening technical reserves. Currently, insurers are expected to have at least 50 per cent of their incremental premiums as provisions for unexpired risks. The sharp fall in tariffs have, in turn, reduced transfers to the technical reserves.
Low profits
Besides, the officials said, this year PSU insurers made reduced profits through sale of investments, unlike the last few years. This year, the officials said, PSU insurers' profits from investment sales were unlikely to exceed Rs 300 crore. PSU insurers had used this route to recapitalise, till last fiscal. Investments are currently recognised in the balance sheets at book value. Sale of the investments and booking profits on the same, however, improved the capitalisation, as the profits were used to bolster their general reserves.
With investment profits unlikely to improve in the coming weeks, PSU insurers sought additional capitalisation measures from the Government for supporting business growth ahead of the Budget on the lines of the banking sector.
Although PSU insurance companies stepped up growth this year, this was largely contributed by high-loss segments where the payouts exceed the premiums.
The four PSU insurers reported premium growth of 12 per cent for the first nine months of the current financial year. Private sector insurers grew only 8 per cent for the same period.
But highly placed PSU officials, who declined to be quoted, said the stepped up growth was largely from the health and automobile segments. Health insurance contributed to as much as 40 per cent of the PSU insurers' growth during the period. The auto sector contributed about 10 per cent of the growth, though private sector continued to dominate the segment. But it is in motor third party risk covers, especially commercial vehicles, where the public sector growth remained high, the officials said.
The high growth segments for the PSU insurers, the officials said, were not exactly profitable. The losses as measured by the combined ratio remained at about 130 per cent for health risk covers, both retail and group medical covers. The combined ratio is a measure of profitability of the insurance industry's core business. A ratio over 100 per cent implied the business acquisition/administration expenses and claims were well over the premiums earned. In the case of the automobile sector, the combined ratios continue to remain at over 150 per cent, with commercial vehicle third losses at over 200 per cent.
However, the sources said, the claims losses on their respective balance sheets had reduced after the third party pool began operations in 2007. This was because the losses were now being shared between all the general insurers, including private sector, who are also members of the pool. Losses for the PSUs though remain high, since they have the largest market share in the commercial vehicle third party segment sector.
Low loss sectors
The officials said private sector insurers' cautious growth in the high-loss segments stemmed from fears of bleeding capital. But capital constraints for the PSU insurers were also likely to mount this year, the officials said, given the current state of the profitable business — fire and engineering sector. Tariffs in these traditionally low loss sectors are still 80 per cent below the pre-deregulation levels. Besides, with reinsurance negotiations expected to be tied up over the next two weeks, the officials said there was intense resistance within the sector — public and private — against further undercutting risk premiums.
The resistance was also partly on account of the fear of weakening technical reserves. Currently, insurers are expected to have at least 50 per cent of their incremental premiums as provisions for unexpired risks. The sharp fall in tariffs have, in turn, reduced transfers to the technical reserves.
Low profits
Besides, the officials said, this year PSU insurers made reduced profits through sale of investments, unlike the last few years. This year, the officials said, PSU insurers' profits from investment sales were unlikely to exceed Rs 300 crore. PSU insurers had used this route to recapitalise, till last fiscal. Investments are currently recognised in the balance sheets at book value. Sale of the investments and booking profits on the same, however, improved the capitalisation, as the profits were used to bolster their general reserves.
With investment profits unlikely to improve in the coming weeks, PSU insurers sought additional capitalisation measures from the Government for supporting business growth ahead of the Budget on the lines of the banking sector.
SBI General core team in place; may begin operations by June
SBI General Insurance has put in place its top management team and is expected to commence operations by June.
The company has appointed Mr R.R. Bele as its Managing Director and CEO. Prior to this, Mr Bele held the position of General Manager with State Bank of India.
Mr Rob Logie, the representative from Insurance Australia Group (IAG), has been appointed as the Deputy CEO.
Joint venture
SBI General Insurance is a 74:26 joint venture between State Bank of India and IAG. SBI had signed the joint venture agreement with IAG in November 2008 for foraying into the general insurance business.
While SBI has invested Rs 111 crore for its 74 per cent equity, IAG brought in Rs 542.10 crore (including share premium) for its stake of 26 per cent
SBI General Insurance has received the final R3 licence from the Insurance Regulatory and Development Authority and is in the process of getting its products approved from the insurance regulator. The company will have its soft launch soon after the products are approved. However, the full launch will only be in June.
Products
“We have filed for 22 products with the regulator. The products will cater both to the corporate and the retail segment”, said Mr Avijit Ghosh, National Underwriting Manager-Corporate and SME, SBI General Insurance.
Health products are not in the initial filings. But they will be a part of the bouquet of products offered by the time the full launch happens in June, Mr Ghosh said, while speaking on the sidelines of an insurance seminar organised by the Asia Insurance Review.
However, the company does not plan to offer liability products in the initial phase.
The company is in the process of setting up its distribution network. It has already opened seven branches in large centres and 13 branches in smaller centres
The company has appointed Mr R.R. Bele as its Managing Director and CEO. Prior to this, Mr Bele held the position of General Manager with State Bank of India.
Mr Rob Logie, the representative from Insurance Australia Group (IAG), has been appointed as the Deputy CEO.
Joint venture
SBI General Insurance is a 74:26 joint venture between State Bank of India and IAG. SBI had signed the joint venture agreement with IAG in November 2008 for foraying into the general insurance business.
While SBI has invested Rs 111 crore for its 74 per cent equity, IAG brought in Rs 542.10 crore (including share premium) for its stake of 26 per cent
SBI General Insurance has received the final R3 licence from the Insurance Regulatory and Development Authority and is in the process of getting its products approved from the insurance regulator. The company will have its soft launch soon after the products are approved. However, the full launch will only be in June.
Products
“We have filed for 22 products with the regulator. The products will cater both to the corporate and the retail segment”, said Mr Avijit Ghosh, National Underwriting Manager-Corporate and SME, SBI General Insurance.
Health products are not in the initial filings. But they will be a part of the bouquet of products offered by the time the full launch happens in June, Mr Ghosh said, while speaking on the sidelines of an insurance seminar organised by the Asia Insurance Review.
However, the company does not plan to offer liability products in the initial phase.
The company is in the process of setting up its distribution network. It has already opened seven branches in large centres and 13 branches in smaller centres
PSU GENERAL INSURANCE COs GEAR UP FOR COMPETITION
The public sector general insurance companies in the country have taken up a restructuring exercise to improve their performance in the wake of stiff competition from private players, according to Mr N.S.R Chandra Prasad, Chairman and Managing Director of the National Insurance Company Ltd.
At a press meet here on Sunday, after participating in the State-level All-India General Insurance Field Workers' Association, he said that by the end of 2008-09 financial year, the general insurance companies had collected premium of Rs 32,000 crore, of which the public sector companies accounted for 60 per cent. The National Insurance Company had collected premium of Rs 4,280 crore.
He said, “After the opening up of the market, the private players have taken away a substantial chunk, but the market is growing and the PSU companies are also registering growth year-on-year. It is estimated that by 2015 the premium income of all general insurance companies in the country will cross Rs 1,00,000 crore.”
General insurance companies, including the National Insurance, have appointed international consultants to improve their performance. Core insurance services would also be introduced, similar to core banking solutions, to improve their performance, he added.
He said the role of development officers in the insurance sector could not be underestimated or undermined. All the PSU general insurance companies were hiring personnel for the past two years and it would continue for two more years. “A thousand officers are being appointed,” he said.
Claim settlement was also good in the PSU companies, he added. On the issue of demands put up by the insurance staff, he said they would be looked into.
At a press meet here on Sunday, after participating in the State-level All-India General Insurance Field Workers' Association, he said that by the end of 2008-09 financial year, the general insurance companies had collected premium of Rs 32,000 crore, of which the public sector companies accounted for 60 per cent. The National Insurance Company had collected premium of Rs 4,280 crore.
He said, “After the opening up of the market, the private players have taken away a substantial chunk, but the market is growing and the PSU companies are also registering growth year-on-year. It is estimated that by 2015 the premium income of all general insurance companies in the country will cross Rs 1,00,000 crore.”
General insurance companies, including the National Insurance, have appointed international consultants to improve their performance. Core insurance services would also be introduced, similar to core banking solutions, to improve their performance, he added.
He said the role of development officers in the insurance sector could not be underestimated or undermined. All the PSU general insurance companies were hiring personnel for the past two years and it would continue for two more years. “A thousand officers are being appointed,” he said.
Claim settlement was also good in the PSU companies, he added. On the issue of demands put up by the insurance staff, he said they would be looked into.
Public sector general insurers outshine their private peers
Public sector general insurance companies seem to be bouncing back under the detariff regime.
The four nationalised general insurance firms have pipped their private-sector counterparts in business premium growth in the first nine months of the current fiscal.
The private general insurance firms saw an almost 42% decline in premium underwritten during April-December 2009, as against the corresponding period of the last year.
The nationalised majors, on the other hand, reported 11% growth in the premium underwritten in the first nine months in 2009-10. During the same period of the last fiscal, they had logged in a growth of 7.6%.
Interestingly, the overall general insurance industry growth of almost 10% in April-December has been largely contributed by the public sector companies, which cumulatively grew by higher 11.37% than the overall market average.
Private biggies like ICICI Lombard General, Bajaj Allianz General and Tata AIG General saw degrowth in the first nine months.
The figures released by the Insurance Regulatory & Development Authority indicate a clear decline in the rate of growth of the nine-month premium for the private sector in 2008-09 and 2009-10.
Some of the private sector players such as Royal Sundaram, Reliance Life and Iffco-Tokio grew 11.43%, 4.58% and 4.61%, respectively in the first nine months.
Cholamandalam grew 13% whereas HDFC Ergo General, which picked up a higher tempo in the last couple of years, has shown significant growth of 183%.
Among the public sector players, United Insurance reported a 19.34% premium growth while New India Assurance grew its business premium by 9% — both on higher bases.
A senior official of United India Insurance told DNA, that there was a continuous trend of growth over the last few years. “But to be honest, 2008-09 was a watershed year for us when we were able to break through and get back the market share which we lost out since the industry was privatised. Moreover, the results of a reengineering exercise that we conducted with the help of the Boston Consulting Group, has paid rich dividends,” the official added.
According to an industry analyst, detariffing has helped the public sector players a lot.
“Having deep pockets, they could afford to discount rates significantly. For some of the private players, however, growth was very fast in the initial years and some of the degrowth at present could be attributed to a conscious decision by them to underwrite better risks,” the analyst said.
Public sector general insurance companies seem to be bouncing back under the detariff regime.
The four nationalised general insurance firms have pipped their private-sector counterparts in business premium growth in the first nine months of the current fiscal.
The private general insurance firms saw an almost 42% decline in premium underwritten during April-December 2009, as against the corresponding period of the last year.
The nationalised majors, on the other hand, reported 11% growth in the premium underwritten in the first nine months in 2009-10. During the same period of the last fiscal, they had logged in a growth of 7.6%.
Interestingly, the overall general insurance industry growth of almost 10% in April-December has been largely contributed by the public sector companies, which cumulatively grew by higher 11.37% than the overall market average.
Private biggies like ICICI Lombard General, Bajaj Allianz General and Tata AIG General saw degrowth in the first nine months.
The figures released by the Insurance Regulatory & Development Authority indicate a clear decline in the rate of growth of the nine-month premium for the private sector in 2008-09 and 2009-10.
Some of the private sector players such as Royal Sundaram, Reliance Life and Iffco-Tokio grew 11.43%, 4.58% and 4.61%, respectively in the first nine months.
Cholamandalam grew 13% whereas HDFC Ergo General, which picked up a higher tempo in the last couple of years, has shown significant growth of 183%.
Among the public sector players, United Insurance reported a 19.34% premium growth while New India Assurance grew its business premium by 9% — both on higher bases.
A senior official of United India Insurance told DNA, that there was a continuous trend of growth over the last few years. “But to be honest, 2008-09 was a watershed year for us when we were able to break through and get back the market share which we lost out since the industry was privatised. Moreover, the results of a reengineering exercise that we conducted with the help of the Boston Consulting Group, has paid rich dividends,” the official added.
According to an industry analyst, detariffing has helped the public sector players a lot.
“Having deep pockets, they could afford to discount rates significantly. For some of the private players, however, growth was very fast in the initial years and some of the degrowth at present could be attributed to a conscious decision by them to underwrite better risks,” the analyst said.
Monday, February 1, 2010
Public sector general insurers outshine their private peers Posted by kjk2709 11:22 AM 0 comments »
Public sector general insurance companies seem to be bouncing back under the detariff regime.The four nationalised general insurance firms have pipped their private-sector counterparts in business premium growth in the first nine months of the current fiscal.The private general insurance firms saw an almost 42% decline in premium underwritten during April-December 2009, as against the corresponding period of the last year.The nationalised majors, on the other hand, reported 11% growth in the premium underwritten in the first nine months in 2009-10. During the same period of the last fiscal, they had logged in a growth of 7.6%.Interestingly, the overall general insurance industry growth of almost 10% in April-December has been largely contributed by the public sector companies, which cumulatively grew by higher 11.37% than the overall market average.Private biggies like ICICI Lombard General, Bajaj Allianz General and Tata AIG General saw degrowth in the first nine months.The figures released by the Insurance Regulatory & Development Authority indicate a clear decline in the rate of growth of the nine-month premium for the private sector in 2008-09 and 2009-10.Some of the private sector players such as Royal Sundaram, Reliance Life and Iffco-Tokio grew 11.43%, 4.58% and 4.61%, respectively in the first nine months.Cholamandalam grew 13% whereas HDFC Ergo General, which picked up a higher tempo in the last couple of years, has shown significant growth of 183%.Among the public sector players, United Insurance reported a 19.34% premium growth while New India Assurance grew its business premium by 9% — both on higher bases.A senior official of United India Insurance told DNA, that there was a continuous trend of growth over the last few years. “But to be honest, 2008-09 was a watershed year for us when we were able to break through and get back the market share which we lost out since the industry was privatised. Moreover, the results of a reengineering exercise that we conducted with the help of the Boston Consulting Group, has paid rich dividends,” the official added.According to an industry analyst, detariffing has helped the public sector players a lot.“Having deep pockets, they could afford to discount rates significantly. For some of the private players, however, growth was very fast in the initial years and some of the degrowth at present could be attributed to a conscious decision by them to underwrite better risks,” the analyst said.
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