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Monthly Archives: May 2012

Discounts on Own-Damage Covers Lowered by 20%

Posted on May 31, 2012 by
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Protected CarGeneral insurance companies have lowered the discount by up to 20% on commercial and private own-damage motor policies, as third-party motor risk moves to declined pool.

Insurance Regulatory and Development Authority (IRDA) recently scrapped third party motor pool and replaced it with declined pool. It will have lower industry contribution for insurance cover at about Rs 1,200 crore against Rs 6,000 crore earlier.

Discounts on motor own-damage have come down after IRDA increased premiums on third party premium rates.  This year third party premium has been increased by 10%.

Third-party motor risk, which earlier went to third party motor pool, will now be borne by individual companies and they have to take claims on their book. This will prompt companies to emphasise on better underwriting and management of risk.

Motor insurance policy basically consists of two parts i.e. third-party-liability and own-damage covers. Third party cover is mandatory by law while own-damage cover is optional.

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IRDA imposed penalty of Rs 1.18 cr on ICICI Prudential Life

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ICICI PRUDENTIALInsurance Regulatory and Development Authority (IRDA) has imposed a fine of Rs 1.18 crore on ICICI Prudential life for violating norms. This is the highest ever penalty imposed by IRDA on a life insurer. Violations include paying commission to agents and brokers exceeding the permissible limit.

During an inspection in November and December 2010 IRDA observed 42 possible violations by ICICI Prudential and out of which ICICI Prudential has been charged for six violations.

In FY’10 and FY’11 ICICI Prudential life paid commission beyond the permissible limit to nine corporate agents. These corporate agents include Sharekhan Financial Services and India Infoline Insurance Services.

In FY’11 ICICI Prudential paid Rs 36.26 crore to India Infoline as commission as against permissible limit of Rs 31.68 lakh. Netambit was paid Rs 26.52 crore against permissible commission of Rs 13.48 crore. In FY’10 ICICI Prudential paid Rs 49.33 crore to India Infoline as commission against the permissible commission of Rs 2.97 crore. There were eight such incidents.

ICICI Prudential was found to have entered into various incomplete agreements with its group companies without specifying the fees, though they were acting as the corporate agents and referral partners of ICICI Prudential life and were receiving the commissions and referral fees.

ICICI Prudential was also found to be making payments to its distribution channel partners in the name of (sales, marketing and business support expenses) and (agent’s incentives).

IRDA imposed additional penalty of Rs 40 lakh on ICICI Prudential for giving incentives to its referral partners in the name of infrastructure support during FY’10 and FY’11.

ICICI Prudential has also been found to have given incentives to brokers beyond the legal limits. During 2009-10 ICICI Prudential remunerated Bajaj Capital Insurance Broking and Standard Composite Insurance Brokers 152.94% and 402.53% of the legal limit, respectively, higher than the prescribed limits. There were seven such incidents in FY’10 and FY’11 involving six insurance brokers. For this violation IRDA imposed fine of Rs 20 lakh on ICICI Prudential.

ICICI Prudential also created multiple code numbers for a single corporate agent or broker based on the locations of the business procured. For this violation IRDA imposed fine of Rs 11 lakh on ICICI Prudential.

IRDA has directed ICICI Prudential Life to pay the penalty within 15 days.

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Health Insurance Policies Covering Alternative Treatments

Posted on May 31, 2012 by
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AyushAs now a days many people preferring alternative forms of treatments, several non-life insurance companies are planning to launch retail health insurance policies that cover alternative forms of treatments. And those insurers which already cover such treatments are in the process of increasing the limits.

Alternative treatments are referred to as Ayush (Ayurveda, Unani, Sidha and Homeopathy).

Even policies that cover alternative treatments, excludes naturopathy treatment, acupressure, acupuncture, magnetic therapy, massages, steam bathing and shirodhara.

At present alternative treatments are covered by only seven non-life insurance companies that even with limits and conditions. Insurers that cover hospitalization under alternative treatments include four PSU non-life insurers –National Insurance, Oriental Insurance, New India Assurance and United India Insurance and three private insurers -TATA AIG, HDFC Ergo and CholaMandalam General Insurance.

Country’s largest general insurer, New India Assurance, covers alternative treatments up to 25% of the sum assured. TATA AIG’s MediPrime cover alternative treatments with limits. National Insurance covers alternative treatments up to the sum insured in their individual policy.

In many ways, treatment under alternative forms of medicines is quite similar to the treatment procedures followed under allopathic medicines. But because alternative forms of medicine are considered outside the scope of traditional medicine, most of the non-life insurers do not cover it under health insurance policies.

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28% Urban Indian Families Have Health Insurance: Survey

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SurveyNational survey of household income and expenditure, a report released by NCAER in collaboration with ICICI Lombard General Insurance, found that at least one member of around 28.4% urban Indian families is covered under some kind of health insurance. Out of which 7.3% is self purchased.

Survey found that 50.9% respondents are confident of managing their medical expenses. In urban areas it is 64.9% while in rural areas it is 44.3%.

Around 15% households said that at least one member of the family got hospitalized at least once in last one year.

40.4% urban Indian families reported that at least one member of the family is covered under life insurance.

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Marine Hull and Aviation Insurance Segments Showing Moderate Growth

Posted on May 31, 2012 by
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marine hullIn 2011-12 though general insurers witnessed growth of 31% and 18% in motor and health insurance segments respectively but they have seen moderate growth in marine hull and aviation insurance segments.

In FY’12 premium collection from marine hull policies grew 1.05% to Rs 1,006 crore. Income from aviation premium grew 4% to Rs 486 crore.

This moderate growth in marine hull and aviation insurance is the result of slow down in growth of these sectors. Aviation companies have not expanded in terms of fleets or adding new destinations in the last one year.

Marine hull and aviation sectors are largely reinsurance driven. They have high severity claim and rates go up depending upon global experience.

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Max New York Life Net Profit Up Over Two Fold in FY’12

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max new york life insurancePrivate insurer, Max New York Life insurance, has reported over two fold rise in net profit at Rs 733 crore for 2011-12 as against Rs 283 crore in 2010-11.

In FY’12 company’s gross premium collection increased 10% on year-on-year basis at Rs 6,391 crore. As of 31 March 2012 Company’s asset under management stood at Rs 17,215 crore which is the rise of 24% on y-on-y basis. As of 31 March 2012 Company’s outstanding claims ratio has come down to 1.6%.

Max New York life insurance is a 74:26 joint venture between Max India and U.S.A. based New York Life. Last month New York Life decided to exit from the venture and sold its entire 26% stake to Japanese insurer Mitsui Sumitomo for Rs 2,731 crore.

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M&M Set to Enter General Insurance Business

Posted on May 28, 2012 by
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Mahindra FinanceMahindra & Mahindra (M&M) Group is planning to enter general insurance business as it is in talks with U.S.A. based Travelers Group to form a general insurance joint venture.

M&M has hired KPMG to find a partner with technical experience to run a general insurance business including writing covers for industrial accidents and automobiles.

As M&M is also present in automobile sector it will provide enormous opportunity to it to sell motor insurance.

Earlier this Travelers parted ways with Larsen & Toubro after signing MOU in 2009.

Recently it has been seen that many major foreign players are willing to enter Indian general insurance market despite government’s reluctance to increase Foreign Direct Investment (FDI) limit to 49% in insurance sector from current 26%.

In recent months Liberty has tied up with Videocon Industries to form a general insurance joint venture and U.S.A. based Cigna has tied up with TTK healthcare for health insurance joint venture.

Foreign players are seeing huge potential in Indian general insurance business it is a fastest growing and untapped market. 40,000 crore Indian general insurance industry is growing by 20%. Despite 35% growth in traditional lines of business such as health and motor, the penetration of non-life insurance policies is as low as 0.65% of   the GDP.

Travelers is the largest US insurance company by market value and second largest writer of US commercial property casualty.

M&M is one of the India’s biggest business group. It is present across sectors including financial services. It owns Mahindra & Mahindra financial services, a non banking finance company with vast rural network. The group is in insurance broking business through Mahindra insurance brokers.

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Premiums of Travel Insurance Likely to be Increased Soon

Posted on May 28, 2012 by
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travel insuranceIt is expected that premium rates of travel insurance will be increased soon as leading general insurance companies are feeling the pressure of depreciating rupee.

The claims of outbound travel insurance are paid in foreign currencies while their premiums are collected in Indian currency. And as rupee depreciates it increases the cost for insurers.

Generally April-June quarter is considered as the best quarter for travel insurance, pegged at Rs 250 crore. And at this time it is expected that in near future rupee will touch 60 mark against dollar.

In current year Indian rupee has fallen more than 5% against US dollar, making it the worst performing Asian currency.

Depreciating rupee impacts the margins of insurers hence, it is expected that if this depreciation of rupee continues than insurers will increase the premiums of travel insurance.

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ICICI Prudential Moving to Integrated Geographic Structure

Posted on May 28, 2012 by
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ICICI PRUDENTIALTo drive profitability and growth private sector insurer ICICI Prudential Life has moved from vertical structure to integrated geographic structure. This move will not only bring accountability and responsibility among its staff but also ownership for the geography, in terms of people, cost, profitability for the state, market share, and the top line.

Company is trying to create an entrepreneur and CEO in each geography. Under this structure geography heads will be responsible for each state with complete responsibility and ownership for that region.

Company has divided states into several districts to have cluster heads that will be responsible for a set of districts. This will eventually become a branch.

At the branch level there will be branch head that will have whole responsibility. Holding branches accountable for performance, he will be given incentive as branch head will take ownership for new recruits and help them succeed.

Company’s number of employees has come down to 14,000 from 30,000 in 2007. But since last two years company’s headcount has remained almost stable as Company is continuing with its replacement hiring. Company has succeeded in arresting early attrition.

To reduce cost company has also started e-learning. Soon company will bring certification programme for its employees.

The frontline sales force contributes about 80% of company’s total staff. But company wants to build flexible workforce that can move across functions. Hence, Company is increasingly seeing more people moving from sales to operations and vice-versa.

Company is willing to have productive workforce hence, its high performing employees are given ‘Tatva’ award for exemplary customer service across the country.

Company also uses technology to deal wit its customers and employees. Company has active internet facility for its employees, where latest updates about the company are regularly updated.

To enable customers to understand its product in better manner, company has also provided product information on tablets.

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Group Health Insurance Premiums Set to Rise

Posted on May 28, 2012 by
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PSU General InsurerPremium rates of group health insurance policies are set to rise, as to curtail losses, Government has asked PSU general insurance companies to either increase premiums or stop renewing group health insurance policies.

At present, the combined ratio-claims paid plus other expenses as a percentage of premium earned-is close to 150%. The combined loss on account of such discounts of four state-run non-life insurers is expected to be around Rs 1,500 crore for FY’12. Therefore, government has issued a directive for PSU general insurers to curve losses.

Public sector general insurers are offering huge discounts to corporate customer to grab wider market share.

Since 2007 when prices were freed, PSU general insurers are facing huge underwriting pressure. The overall loss ratio of companies has been over 100%, which means companies are making profit only on their investments.

Government wants to make sure there is audit of individual portfolio so there is no segment vise loss.

Health insurance segment is one of the fastest growing segments of general insurers, accounting one-fourth of the total gross premium income. Hence, despite it is acknowledged as the product of inadequate pricing many insurers continue offering discounts for sustained premium inflows.

Government has also asked PSU non-life insurers to cap brokerage and commission at 5% of the premium.

Government has also asked PSU insurers to introduce co-payment ratio of 20% that means policyholder has to pay Rs 20 for every claim of Rs 100.

Government has also told insurers to acquire customers of lower age groups.

To curve competition-induced losses, government has also directed insurers to obtain No Objection nod from the chairman of the existing insurer before underwriting a new business.

Companies will have to share data on premium, claims and frauds among themselves.

The boards of state-run insurers will need to review their performance every quarter.

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