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Monthly Archives: June 2011

Aviation sector is not on the focus of private non-life insurers

Posted on June 29, 2011 by
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None of the private General insurance company except ICICI Lombard General insurance has showed interest to bid for providing the insurance cover to the Air India and its subsidiaries.

According to private insurers there are no margins in aviation business; it is a Facultative reinsurance driven policy hence insurers gets only reinsurance commission; they also says that this can grow the top line of the company but not the profitability.

Air India cover for the FY’12 is due for renewal on 1st October 2011, Air India has invited the bids in May for which only ICICI Lombard and four public sector insurers New India assurance, Oriental insurance, National insurance and United India insurance has applied.

Air India insurance policy is the country’s largest aviation policy. Air India insurance policy is a Hull, spares and liability policy which covers the aircraft value, passenger’s liabilities and suites in the case of an accident, fire, flood or natural calamity.

Last year ICICI Lombard has won the mandate to provide the cover to Air India; ICICI Lombard has provided the cover of over $9 billion for it Air India has paid the premium of $30 million.

As earlier; this time also four public sector insurers are bidding in a consortium again in which New India assurance will be the lead insurer whose net capacity will be less than 5% while other three insurers will be co-insurers whose net capacity will be less than 5% and rest of the policy will be reinsured.

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LIC hiked its stake in Andhra Bank

Posted on June 29, 2011 by
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India’s largest insurer Life Insurance Corporation of India (LIC) has bought 9.99 % stake in public sector bank Andhra Bank. After this acquisition it has hiked its stake to 10 %.

LIC on 21st June has bought about 5.58 crore shares through open market deal in Andhra Bank.

After this deal now LIC holds 5.59 crore shares i.e. over 10 % stake in Andhra Bank. At current investments of LIC in Andhra Bank is valued about Rs 750 crore.

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PFRDA allocated pension fund on previous performance

Posted on June 29, 2011 by
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As per current allocation of pension fund by PFRDA SBI pension fund has lost its share while LIC pension fund has gained the share and UTI Retirement solution has emerged as the country’s largest pension fund manager on account of its splendid performance in the last Financial year. Last year it has outperformed in five schemes out of nine schemes. It will manage the corpus of Rs 8000 crore; PFRDA has allocated this fund on the basis of previous performance of the fund managers.

Pension Fund Regulatory and Development Authority (PFRDA) has allocated 34% and 35.5% corpus of the central government fund and state government fund schemes respectively to the UTI retirement solution, while LIC pension fund has been allocated 33.5% corpus and SBI fund got 32% and 31% respectively corpus in both central and state government schemes.

All employees of central government who joined the service after 2004 comes under the New Pension Scheme (NPS) while different state government joined the NPS at different times; and West Bengal and Kerala will join it from this year.

Corpus of central government scheme includes retirement fund of all central government’s employees; who joined after 2004 while state government fund scheme include the retirement fund of state employees depending from when their state joined it.

The NPS was started in 2009; for the first year of the scheme SBI had the largest share while LIC has the lowest share; SBI, UTI and LIC had 55%, 40% and 5% share respectively.

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IRDA reluctant to adopt Solvency II

Posted on June 28, 2011 by
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When insurers all over the world are set to adopt the solvency II norms our insurance regulator Insurance Regulatory and Development Authority (IRDA) is not willing to introduce in India.

According to IRDA we don’t have requisite statistical database to adopt the solvency II norms.

Currently Indian insurers are using solvency I norms; which is a factor-based process; this has a set formula to arrive at the solvency hence there is no possibility of disparity therefore it is easy to arrive at the capital requirements.

Solvency II is a new regime for the European insurers and reinsurers; its norms are devised by Europeans; objective of Solvency II is to arrive at the solvency requirements which reflects all kinds of risks that a company will face; it intends to ensure that the insurer understand the inheretent business risk and allocation of the sufficient capital to cover it.

IRDA is not ready for it as evaluation of risk may show different figures and India does not have necessary systems to calculate such risks.

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Premium income of General and life insurers in opposite directions

Posted on June 28, 2011 by
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Figures of first two months of Fiscal 2011-12 are showing two different trends in insurance industry on the one hand premium income of General insurance companies grew whereas on the other hand premium income of life insurers showed a decline.

Total gross premium income for all 23 non-life insurers grew by 27% in May to Rs 4,004 crore as compared to Rs 3,151.41 crore in the corresponding period last year.

Four Public sector companies i.e. New India assurance, National insurance, Oriental insurance and United India insurance’s market share accounted 59% in May; they witnessed the growth of 23% in their gross premium income in May 2011 to Rs 2,358.60 year-on-year basis.

Among Private General Insurers ICICI Lombard’s premium income has risen by 37% to Rs 329.26 crore, whereas HDFC Ergo showed the growth of 50% to Rs 113.31 crore and Reliance general insurance grew by 13.33% to Rs 156.59 crore in April.

Among Life insurers Life Insurance Corporation of India (LIC) showed the decline of 8.03% to Rs 9,273.08 crore in first two months of Financial year 2011-12 in its premium income as compared to Rs 10,082.85 crore in April-May 2010-11.

All 22 private life insurers witnessed the decline in April-May 2011 of 23.26% in their premium income to Rs 2,980.36 crore as compared to Rs 3,883.76 crore in April-May 2010.

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IRDA restricting Health Insurance Portability to non-life insurers

Posted on June 28, 2011 by
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Health insurance portability is likely to be confined to non-life insurance companies; i.e. switching from health policy of a life insurer to health policy of non-life insurer is not permitted; as Insurance Regulatory and Development Authority (IRDA) says that they have different practices of underwriting policies.

Health insurance portability allows a policyholder to shift from one insurer to another insurer without changing terms and conditions of the existing policy.

IRDA is starting it with mediclaim policies which are issued by General insurers only. Health insurance policies which are issued by life insurers will not come under it.

Health policies offered by life insurers and non-life insurers are different in many aspects which is restricting IRDA to extend it to life insurers.

Reasons

  • Term of the policies – First reason is that health policies offered by non-life insurers has one year term while policies offered by life insurers have long term ranging between 3-15 years.
  • Benefits of the policies – Most of the health policies offered by life insurers are indemnity policy or benefit policy which gives lump sum at the end of the policy term which are subject to pre specified conditions while plans offered by general insurers are fixed-benefit plans which need to be renewed annually and on other hand health plans of General insurers does not have survival benefits or life cover hence both insurers have different underwriting techniques therefore it would not be practical to port health policy from General insurer to life insurer.
  • Pricing – Another reason is that different insurers offer different benefits to add some exclusive benefits in their plans and if a policyholder wishes to switch from one insurer to another insurer than he might have to forgo some benefits, for it he may ask for discount which insurer might not allow.
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Impact of ULIP sales on income of Life Insurers

Posted on June 27, 2011 by
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Life insurance companies have shown a decline of 12.3% in the sales of new policies in April – May 2011 which stood at Rs 12,253 crores as compared to the corresponding period previous year this can be mainly attributed to the decline in the sales of Unit-Linked Insurance Plans (ULIPs).

Insurers have begun shifting their focus from ULIPS to traditional products after September 2010 when Insurance Regulatory and Development Authority (IRDA) has changed regulations for the ULIPS, but according to insurers though they may have shifted their focus to traditional products it will not compensate for the fall in the sales of ULIPs.

Most of the private sector and public sector companies have shown decline in their new business income, for instance Life Insurance Corporation of India (LIC) has shown the decline of 8%, while ICICI Prudential life’s new premium income slumped by 29%, Reliance life saw the fall of 52%, HDFC life’s new premium income fell by 27% and Bajaj Allianz life’s new premium income dropped by 42%.

Industry may be going through tough time but still insurers are hopeful that things will come to normal in six months.

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Consider following points before going for Permanent Disability and Critical Illness covers

Posted on June 25, 2011 by
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Insurance companies can reject your permanent disability and critical illness claim if your disability is caused by some hazardous occupation or adventurous sports.

Permanent disability cover is provided to a policyholder who becomes incapable of being employed or engaged in any occupation or when he losses both of his hands, legs or eyes or combination of any of these.

A disability is considered permanent if it lasts for more than 180 days.

Insurer can reject your claim on the ground of disability is caused by following events:

  • If you injured yourself under the intoxicating effect of alcohol or narcotics.
  • If disability is caused by riots, civil turmoil, hunting or war.
  • If disability is caused by any adventurous sports such as Mountaineering, racing, Steeple chasing, river rafting, bungee jumping, scuba diving or paragliding.
  • If a policyholder violate any law.
  • Insurer can also reject disability claim on the basis if a policyholder is employed in armed forces or military services of any country at war.
  • If he is engaged in duties of paramilitary, security, naval or police organization.
  • If a policyholder get into an accident while he is engaged in any aviation or aeronautics activity other than traveling by any air craft whether fare paying, part-paying or non-paying passenger.

If you want to avail the permanent disability cover you must keep in mind some points such as:

  • While buying a policy provide complete information about your occupation.
  • Inform your insurer if you are changing your occupation to more hazardous occupation.
  • If you take part or intend to take part in any adventurous sport than Inform your insurer at the time of application itself.

Critical illness riders benefits is normally available in two types; they are:

  • Core benefit (CI) – In this additional sum assured upto the basic sum assured is paid.
  • Accelerated benefit (ACI) – In this case basic sum assured is reduced by the sum assured of the ACI benefit applied for, and if the claim is accepted than death benefit under basic plan is reduced by the ACI benefit paid.

The number and type of diseases which are covered under critical illness differ from insurer to insurer therefore before buying a policy read the information document provided by insurer carefully; go through the terms and conditions of the policy on the receipt of the policy.

To avail the critical illness rider you must keep in mind following points;

  • If critical illness is diagnosed within the specified days from the commencement of the policy or revival date than your claim may be rejected.
  • Policyholder must have to survive for the minimum specified days after the diagnosis of the disease to avail the benefit of the critical illness.
Categories: Articles, Insurance 101, Life Insurance | Tags: , ,

New premium income of Life Insurers for May 2011 fallen significantly

Posted on June 25, 2011 by
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Insurance Regulatory and Development Authority (IRDA) has released the figures of life insurance companies for the May 2011, according to IRDA’s data new premium income for all 23 life insurers has declined by 12.53% to Rs 7,190.08 crore as compared to Rs 8,220.26 crore in May 2010; while they managed to witness the growth of 42 % against the last month April 2011 which stood at Rs 5,063.37 crores.

If you compare all four segments of the business i.e. Individual single premium, Individual regular premium, group single premium and group regular premium they witnessed the growth of 70.83%, 26.67%, 44.45%, and 37.62% respectively; if you compare it with April 2011; and if you compare it on the basis of May 2010 than they have shown a decline in individual single premium and individual regular premium while they have shown growth in group premium collection this can be seen by the following table-;

Serial NO. Segment Collection of May 2010(in crores) Collection of May 2011(in crores) Change in per cent
1 Individual single premium 2,547.20 1,834.15 -27.99
2 Individual regular premium 3, 334.71 2,355.61 -29.63
3 Group single premium 1,116.51 1,538.64 37.81
4 Group regular premium 1,221.83 1,461.67 19.63

Out of 23 life insurers only 5 insurers have shown the positive growth; DLF Pramerica has shown the highest growth of 65.81 to Rs 5.97 crore from Rs 360 crore; another companies who witnessed the positive growth include ING vysya life, Canara HSBC OBC life, IndiaFirst life and Star Union dai-chi life.

Reliance life, Bharti Axa life and IDBI Federal Life showed the highest decline of 57.02%, 55.35% and 54.01% respectively.

SBI Life has shown the decline of 10.87% in may 2011 to Rs 394.38 crore as compared to the Rs 442.50 crore in corresponding period previous year.

Life Insurance Corporation of India (LIC) has shown the decline of 6% in its collection of premium in May 2011 to Rs 5,554.41 crore from Rs 5,909.15 crores in May 2010.

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Health Insurance portability is delayed for another three months

Posted on June 25, 2011 by
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Health insurance portability has been postponed for another three months; earlier Insurance Regulatory and Development Authority (IRDA) has proposed to implement health insurance portability across all non-life insurers including stand alone health insurance companies from first July 2011 but now it has been postponed to first October 2011.

Health insurance portability allows a customer to switch from one insurer to another without loosing the waiting period.

As insurers have shown some concerns over health portability; now IRDA is trying to resolve the apprehension of the insurers and make it more effective and customer friendly; it has arrived at the conclusion that it is necessary to make available historical data of customer for the insurers.

Hence IRDA has decided to provide web-based facility for the insurers; according to which a insurance company who will issue the health policy will have to feed in all the relevant details of the policyholder on the website so that if a policyholder wishes to switch from it to another company then that company can assess the details about the policyholder such as history and data of health and claims.

According to IRDA it will apply the web enabled facility soon; which will resolve the concern of the insurers; hence it will implement the health insurance portability across all non-life insurers from first October 2011.

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