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.
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