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.
Sunday, March 28, 2010
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.
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