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Health Insurance TPA Of India Yet To Get License

Third Party AdministratorHealth insurance TPA of India is expected to begin operations only by December 2014 instead of the scheduled April 2014. This is because the company is yet to get a license from the Insurance Regulatory and Development Authority (IRDA).

Health insurance TPA of India is an in-house Third Party Administrator (TPA) of psu general insurers -National Insurance, New India Assurance, Oriental Insurance, United India Insurance and General Insurance Corporation of India (GIC Re).

It was formed in August 2013 to handle health insurance claims of psu general insurers. Currently, these claims are handled by external TPAs. Meanwhile the team is already in place and the company is setting up all the software-systems in place.

Health insurance TPA of India will provide end-to-end health services. This will include member enrollment, call centre, customer service and grievance management, pre-authorization and claims processing. It will also be involved in provider network empanelment, verification and investigation, pre-policy health check-up and facilitate customer awareness and wellness programmes.

The company will provide services to support all types of health insurance policies sold by insurance companies. This includes individual, family floater, group covers, mass schemes, indemnity, fixed benefit among others.

The common TPA has been proposed to curtail large scale leakages while settling health insurance claims. This common TPA is expected to speed up the claim settlement process, as well as reduce the claims ratio of insurance companies. This move is expected to reduce cost for insurers since insurers pay a commission of around 6% of premiums to TPAs to settle claims.

When the TPA comes into operation, the claims handling and processing from external agencies will gradually be transferred to the new entity.  Health insurance TPA of India has been formed with an authorized capital of Rs 300 crores and paid up capital of Rs 10 crores.

IRDA Likely To Make It Mandatory For Life Insurers To Tie-Up With All Repositories

The Insurance Regulatory and Development Authority (IRDA) is likely to make it mandatory for life insurance companies to tie-up with all five insurance repositories by July 2014. 

Insurance-POLICYMANTRAThe insurance repository system lets policyholders keep policies in electronic form, and make changes and revisions in the policy. The five insurance repositories are Karvy, NSDL Database, Central Insurance repository, SHCIL Projects and CAMS repositories services.

The benefit of holding policies electronically for policyholders is that there is no risk of losing the physical document, while for insurers, it will bring down costs. Also, policyholders can pay their premiums online and renew policies through the portals.

While the initiative was launched in September 2013, only some private life insurers have tied up with the repositories. Others, including state-owned Life Insurance Corporation of India (LIC) have yet not tied-up.

Currently, while the total number of life insurance policies is around 40 crores, only 65,000 e-insurance accounts have been created so far.

One of the main reasons of insurers being reluctant to tie-up with repositories is the cost involved in transferring the policies to the repository system. While the facility is free for policyholders, repositories typically charge the insurer around Rs 60 a policy.

The IRDA has formed two committees to ensure smooth transition of policies into the repository system. The first committee will look at streamlining the processes to reduce costs involved for insurers. The second committee will look at IT security issues.

IRDA Warned Public To Be Alert Of Fraudulent Calls

IRDAThe Insurance Regulatory and Development Authority (IRDA) has issued a series of advertisements to inform customers that it does not announce any bonuses for policyholders.

The IRDA has also asked insurance companies to include these warnings in all their current and future advertisements. Consequently all insurance advertisements have been modified to include a warning that IRDA does not offer bonus and that customers should not surrender their existing policies or buy new policies falling prey to false promises.

IRDA has asked people receiving such fraudulent calls to lodge a police complaint, giving the details of the caller, telephone numbers etc.

Several policyholders had complained that some individuals had contacted them claiming that they are employees of IRDA. They offered them policies with unviable returns including a bonus from IRDA if they buy an insurance policy and wait for a few months.

Some fraudsters had advised policyholders to subscribe to a fresh policy after surrendering their existing policy and wait for a few months in order to get additional benefits. They also told policyholders that their survival benefit, maturity proceeds or bonus was due and that they should buy a new insurance policy to be able to receive the amounts that are due.

Some fraudsters told customers to invest in insurance policies to avail gifts, promotional offers, and interest free loans, among others.

Insurers Want To Have Assistance Model For Buying Insurance Online

online insuranceInsurance companies have requested the Insurance Regulatory and Development Authority (IRDA) to have an assistance model in buying insurance online. This model will not only increase web traffic but also improve quality of business.

At present, direct business done through the online channel contributes less than 5% of the total business of the insurance companies.

Now not just term insurance plans, but all types of products are available online. However, all customers are not comfortable buying it online since product structures are difficult to understand. To resolve this problem, insurers want to have an assistance structure.

This model will have assistance services to individuals who require help during purchase of an insurance policy online. Dedicated personnel will be appointed who will take care of all queries arising during an online purchase. This model would be distinct from the call-centre individuals who assist customers in grievance redressal and claims processing.

At present, insurance purchased online has a much lesser premium due to the lower distribution costs and absence of any third party in the transaction. Hence, products are custom-made for this segment and are much simpler than offline products. Payments are done online and the policy documents are sent to the policyholder. With digital signature acceptance in insurance policies also being discussed, policy purchase will fully go online.

For small ticket policies with premiums in the range of Rs 5,000-15,000, customers are comfortable paying online. However, in large ticket size policies with a premium of Rs 25,000 and above, individuals are reluctant to pay online. Therefore, an assistance model would be helpful, wherein the customer could be assured of the security features and inscription or in some cases, these persons could be deployed to collect the premium.

Insurers Started Tying-Up With Smaller Healthcare Chains

healthcare-insurance-policy-mantraGeneral insurance companies have started tying up with medical institutions of all sizes for offering health insurance benefits. This mean you can now even go to smaller hospitals. This will not only give customers a choice but it will also help insurers if policyholders choose small hospital over bigger hospitals for minor ailments.

According to Insurance Regulatory and Development Authority’s (IRDA) health insurance guidelines, to be categorized as a hospital, it should have at least 10 in-patient beds in towns with less than one million population and 15 in-patient beds in others. The hospital should also have qualified nursing staff and medical practitioners round the clock and a fully equipped operation theater. It should also maintain daily records of patients.

Insurers say that a category of customers visit high-end hospitals for small ailments such as fever and minor injuries due to this insurers have to incur higher costs. There is no explicit rule in restricting policyholders from going to big hospitals for minor sickness.

Insurers cover smaller hospitals apart from the major hospitals in different regions based on client needs that meet IRDA criteria. This will allow customers to visit any hospital of their choice.

IRDA Directed SBI Life To Refund Rs 275.29 Crores To Policyholders

SBI LifeThe Insurance Regulatory and Development Authority (IRDA) has directed SBI Life to refund Rs 275.29 crores to the policyholders within six months for violating norms.

The IRDA issued this order after an inquiry revealed that SBI Life was charging the second year premium along with the first year premium on its Dhanaraksha Plus Limited Premium Paying Term, a group insurance policy.

Domestic Insurers Not Yet Ready To Adopt Solvency-II Norms

insurance indiaAs in immediate future, not all domestic insurance companies are ready to adopt Solvency II mechanism, hence, it may take longer time than expected to be implemented in India. As only some large private insurers and state-owned insurers are ready for the transition, it may take 4-5 more years to be implemented.

In February 2013, the Insurance Regulatory and Development Authority (IRDA) has proposed a lower solvency margin for insurers at 145% against 150%, after including a risk charge.

Solvency II norms are to insurers what Basel-III norms are to banks. These norms are made up of provisions related to the capital requirements of companies, regulatory assessment of a specific firm’s risk and the regulator’s broader supervision of the entire market.

Solvency-II is a European Union legislative programme to be implemented in all 28 European Union member states. It introduces new, harmonized EU-wide insurance regulatory regime. Its objective is to have a uniform policyholder protection across countries through a robust system. This will enable a regime that will have sharper pricing and better allocation of capital, since solvency will be based on the risks.

Insurers say that India does not have required statistical database to adopt Solvency-II norms. At present, domestic insurers use factor-based processes for arriving at the solvency margin and hence moving into a completely different system will take time.

IRDA had earlier said that the requirement would be applicable from FY’14 and a certificate needed to be furnished on March 31, 2014. It had proposed to impose a risk charge for debt investments of insurers. According to IRDA regulations 2000, a majority of funds need to be invested in government securities and approved investments, and no risk charge is imposed on insurers which invest in riskier instruments.

Solvency-II Has not yet comes into force in the European Union hence, it would be wrong to assume that India will adopt it immediately, say insurers.

India’s expert committee will take reference from the study of risk-based capital approach of advanced nations such as Japan, Singapore and US and study of Solvency-II approach followed by some Indian life insurers. The committee is also expected to suggest the methodologies for market risk arising from interest rate risk, equity risk, property risk, spread risk and concentration risk.

IRDA said all mandated and non-mandated assets of insurers would have risk charge applicable to them. Assets of non-linked businesses would be considered for risk charge for life insurers, as risks for linked businesses are borne by the policyholders.

According to IRDA, loans and advances should be categorized according to the ratings of counter parties. For Non Performing Assets (NPAs), IRDA said insurers if followed the provisioning norms required by them, no separate risk charge would be applicable.

Further, the IRDA also said that the risk charge would also be provided for the debt of general insurers.

Long-term ULIPs Increasingly Gaining Favour

ULIPUnit-Linked Insurance Plans (ULIPs) are seen as unattractive for both distributors and investors due to lower commission and volatile equity markets since last few years. And as a result, traditional plans now contribute 80% to the total sales of insurers whereas ULIPs just 20%.

The primary reason for traditional products is doing well is the higher commission structure. However, insurers say long-term ULIPs are increasingly gaining favour.

Though equity markets might not be very attractive at the moment, single premium ULIPs are in favour.

In September 2010, the Insurance Regulatory and Development Authority (IRDA) had capped the commissions and charges on ULIPs due to which the average commission as percentage of premium collected fell from about 10% in FY’10 to 4% in FY’12.

Insurers say that ULIPs are not just superior investment instruments, these also offer insurance cover. Insurers also say that from April, the sector would see ULIPs with longer tenures brought into the market, not just in the insurance space, but in the pension sector as well.

Insurers say that now customers are approaching bank channel for ULIPs. For long term investors, ULIPs continue to be the best bet. If an investor invest for 15 years or more and have a risk appetite to invest in equity, ULIPs are the best choice. As new guidelines have linked commissions to the duration of the policy, the bias against ULIPs might be reduced, as agents will be keen to distribute these products for better remuneration.

IRDA Prescribed Standard Format For Insurance Policies

IRDATo improve transparency and help people take informed decisions, the Insurance Regulatory and Development Authority (IRDA) has prescribed a standard format for life and non-life insurance policy.

To make forms easily accessible to policyholders, insurers have to make available these forms in languages recognized under the constitution of India on their websites.

Insurers have also to maintain minimum or reasonable font size in respect of all the forms provided or used. Insurers are advised to use a minimum print equivalent to font ‘Times New Roman-size no. 7’ or above in respect of all the forms that are made available to both prospects and policyholders during the course of granting the cover and subsequent servicing throughout the policy term.

Insurers Not In Hurry To Invest In New Instruments

investmentIn recent times, the Insurance Regulatory and Development Authority (IRDA) has issued guidelines that allow insurance companies to invest in new categories such as infrastructure debt funds, equity Exchange Traded Funds (ETFs) and alternative investment Funds (AIFs). This has given more investment options to insurers, but they are not in a hurry to invest in these instruments as their fund sizes are smaller then other investors and risks are higher on these platforms.

Last week, the IRDA has allowed insurance companies to invest in new instruments issued by domestic banks such as debt capital instruments, redeemable non-cumulative preference shares and redeemable cumulative preference shares under Tier-II capital. Earlier, IRDA has allowed insurers to invest in perpetual debt instruments of banks Tier-I capital and debt capital instruments of upper Tier-II capital.

As banks are moving to Basel-III capital adequacy norms, they are required to raise substantial additional capital. This move will help banks to augment additional capital.

The IRDA has also allowed insurers to invest in category-II AIFs, including private equity funds, debt funds and funds of funds. Earlier, insurers were allowed to invest in category-I AIFs.

Category-I AIFs include venture capital funds, SME funds, social venture funds, infrastructure funds and other specified AIFs.

Category-II funds have a higher rate of return and higher risks, hence, only large companies with higher risk appetite and confidence about the cash flow will invest in these instruments, say insurers.

IDFs are another avenue of investment allowed by the IRDA. However, insurers say that they will have limited exposure to this segment initially, as this is a new instrument and the sector is illiquid. IDFs are investment vehicles that may be sponsored by commercial banks and non-banking financial companies (NBFCs). Domestic/ offshore institutional investors, insurance and pension funds can invest in these through units and bonds issued by these funds.

Instead of newer segments, insurers say that those segments like index-linked plans should be re-visited.