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Scrapping the third party motor pool unfair move; says PSU general insurers

Posted on November 29, 2011 by
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Third Party Motor Pool Policy MantraState-run general insurers have complained to the Finance Ministry that an expected move of Insurance Regulatory and Development Authority (IRDA) of scrapping the third party motor pool is to benefit the private sector general insurers. As per PSU general insurers, if pool is scrapped then private insurers will not provide third party motor cover to commercial vehicles as it is a loss making portfolio and all the burden will fall on the PSU general insurers.

They further stated that it is only due to the third party motor pool that the third party motor cover had been available for all and scrapping of it means that they will come to the pre 2007 situation where private insurers would not have to offer third party motor cover to commercial vehicles.

Replying to these allegations IRDA has said that it will not do anything which will destabilize the market and it will develop the system which will be robust and fair. IRDA further added that earlier there was gap between demand and supply which has been addressed.

At present the cost of loss making third party motor insurance is shared by all insurers through the pool mechanism.

According to PSU general insurers, the pooling mechanism should be strengthened and it should be administered by the Finance Ministry. The Finance Ministry can set up a central government pool and identify a suitable pool manager.

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Premium collection of General insurers surged by 26% for the first half of FY’12

Posted on October 31, 2011 by
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Premium riseGeneral insurance industry has witnessed the growth of 26% in premium collection during first half of the current fiscal.

Since the decontrolling of pricing of the all portfolios except motor insurance growth of general insurers have been subdued but now their two portfolios i.e. motor and health are showing tremendous growth.

Total Health insurance premiums for the first half of the current fiscal have surged by 21.47% at Rs 6,730 crore on year-on-year basis. Whereas total motor insurance premiums for the first half of the current fiscal has spurt by 32% at Rs 10,872.51 crore y-on-y basis.

Total third-party insurance premium risen by 48% at 4,451.05 crore for the first half of FY’12 y-on-y basis. The motor premium in own-damage category which is optional has contributed 23% to the higher premium. Rise in the third party motor premium can be attributed to the recent hike in the premium by 10-70%.

Of all 24 general insurance companies four public sector general insurers New India assurance, United India insurance, Oriental insurance and  National insurance’s premium collections for the first half of the current fiscal stood at Rs 16,915.28 crore showing the growth of 25% year-on-year basis. However, 20 private sector insurers reported the growth of 27% y-on-y basis at Rs 11,686 crore.

While, largest public sector general insurer New India insurance market share has declined to 15.28% from 15.98% and largest private insurer ICICI Lombard’s market share has declined to 8.32% from 9.35%. However, PSU insurers have maintained their market share at 60% for the first half of the FY’12.

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IRDA may scrap the third party motor pool

Posted on October 31, 2011 by
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Third Party Motor PoolLong pending demand of General insurance companies is likely to be fulfilled as Insurance Regulatory and Development Authority (IRDA) is thinking to dismantle the third party motor pool. However, it will not be beneficial for vehicle owners as their premium of motor insurance may get doubled.

Third party motor pool is a corpus of funds created by General insurance companies from which claims of all accident victims are settled.

Private sector General Insurers have been opposing third party motor pool as they were saying that they are forced to contribute disproportionately to the pool whereas, public sector General insurer New India insurance which has 50% market share in motor insurance is benefiting as liabilities are socialized.

General insurers has suggested many ways such as dismantling the pool, declined risk pool and increasing the provisioning. But IRDA has asked insurers to periodically increase the premiums.

This is the only segment for which IRDA decides the premiums. Insurers do not prefer to provide motor cover as this segment is not profitable for them hence; they are demanding to rationalize premiums.

Earlier in April 2011 premiums for commercial vehicles were increased by 70 % and before this; four years ago premiums were raised by 60%.

Corpus in the pool stood at Rs 5,500 crore. Pool requires more capital from promoters as if they have to allocate higher fund towards the pool then it reduces their solvency margins hence, promoters requires more capital to maintain the required solvency.

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Govt. asked PSU general insurers to launch no-frills health insurance policies

Posted on October 7, 2011 by
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To make health insurance affordable for wider population of the country and increase its penetration among low and medium income group of people Finance ministry has asked public sector general insurers to launch No-Frills health insurance plans or basic health cover as early as possible.

Of four public sector general insurers and 20 private general insurers none offers a basic health cover which covers just most prevalent diseases.

No-frills policies will be available at lower premium as it will exclude low probability diseases and will also have limits on reimbursement so that hospitals do not over charge them under the scheme.

As per estimates there are about 60-70 crore people in India who did not have any kind of health cover; hence seeing immense potential in this segment for growth two public sector general insurers New India Assurance and Oriental insurance are in process to launch no-frills health cover to tap this under tapped market.

No-frills policies will cover 40 diseases; you also will need to pay 15-20% less premium for this. Such policies will cover diseases such as cataract, dialysis and swine flew but it will have limits on each disease. However, there will be no limits on emergency cases; and policyholder can get cover of amount that he desire.

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CIC directed PSU health insurers to be more transparent

Posted on September 5, 2011 by
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Central Information Commission (CIC) has directed public sector health insurance companies to provide names of hospitals that do not feature on the list of Preferred Provider Network (PPN) for cashless services and reason of putting them off the PPN list to the applicant under Right to Information (RTI) Act.

As per CIC when a policyholder takes a mediclaim policy he assumes that he will get the cashless facility at all hospitals that are featured on the list of PPN. But insurance companies without informing it to policyholder reduces the hospitals that provide the cashless facilities hence it is right of the policyholder to know the names of hospitals that are taken off the list.

However, CIC also said disclosing of the names of hospitals that are taken off  the list will not reduce the obligation of the insurer in term of amount of premium that need to be collected from the policyholder.

PPN system was started by four public sector general insurance companies New India Assurance, United India insurance, National insurance and Oriental insurance in 2010. As per PPN system insurers have fixed rates for 42 treatments that are covered under cashless mediclaim policy and hospitals that have joined the PPN will have to offer the treatments to the cashless mediclaim policyholder on that rate.

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United India insurance increased premium for RSBY for FY’12

Posted on August 29, 2011 by
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In Kerala about 28 lakh families are covered under Rashtriya Swastya Bhima Yojana (RSBY). RSBY is a health insurance scheme sponsored by Union government and state government for the BPL families which covers five members of a family for the hospitalization benefit of upto Rs 30,000 per year.

Above Poverty Line (APL) families can also enroll in the scheme but for it they require to pay premiums.

RSBY is being implemented by Public sector general insurance company United India insurance in Kerala from 2009. Company in FY’11 has paid Rs 149 crore towards hospitalization claim whereas company has received Rs 79 crore as premium which is the loss of Rs 70 crore.

In order to reduce the loss company has increase the premium for the financial year 2011-12 but still company is expecting the loss of Rs 60 crore in the current fiscal. Company in four months has already given out claim of Rs 100 crore.

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Air India’s premium for annual insurance policy increased by 15%

Posted on August 23, 2011 by
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Despite of no-claim in FY’11 and same number of fleets this year Air India have to pay 15% more premium for its annual insurance policy which is due for renewal on first October 2011 as companies have quoted higher premium due to operational inefficiency of the company and some stringent regulation in the tender. Air India will pay premium of Rs 160 crore this is the highest premium out go; it has paid Rs 136 crore as premium in FY’11 for insuring its fleets which valued at $ 9.1 billion. ICICI Lombard was the lead insurer for the insurance policy of Air India of FY’11 while four public sector general insurers had the share of 40%.

Premium for Air India also rose by 15% in FY’11 on account of increase of fleet size and another reason was to increase was the Mangalore air crash which killed 158 passengers and a crew member.

Air India’s policy was once considered a prestigious policy this is evident as last time all major private insurers and public sector general insurers participated in the bid while this time only two bids were made one by ICICI Lombard and one by the consortium of four public sector insurers as now it is not on the focus of the insurers due to the some stringent conditions in the tender such as upfront payment in the case of claim and low margins; and another condition which kept most of insurers out of the bids is that companies have to guarantee full claim settlement even though re-insurers fails to pay its share.

There is another new provision in the tender according to which in the event of major loss insurers will have to provide interim relief of at least 25% of the hull claim within the 7 days of the incident whether or not insurer receives the share of the re-insurer.

Policy will cover three types of risks

  • Aviation hull- Aviation hull or basic cover includes aircraft, third party liabilities, engines, baggage and cargo.
  • Terror and war cover – covers emergency risk such as terrorist attack.
  • Deductibles – Deductible amount is the amount which insured have to pay before the beginning of insurance companies own coverage plan.

Usually 85-88% risks of aviation policies in India are reinsured with foreign reinsures as the capacity of Indian general insurers is limited.

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PSU General Insurers launched CMCSTPC center for speedy claim settlement

Posted on August 8, 2011 by
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Four public sector General insurance companies New India Assurance, Oriental insurance, National insurance and United India insurance have launched their second Common Mechanism for Compromise settlement of third party claim (CMCSTPC) centre in Kochi to reduce the number of pending motor accident cases and ensure speedier settlement of claims.

PSU insurers had launched their first CMCSTPC center in Cuttack in the eastern zone of the country in March 2011 which had already dispersed Rs 2.93 crore as settlement and they are also planning to open 50 such centers across India; and two more pilot centers will be opened at Mehsana and Jaipur soon.

India has taken over China in the rate of accidents and about 1.2 lakhs casualties takes place; Insurers are facing losses on account of third party insurance and they have average settling of compensation time of 4-5 years.

Insurers are putting pressures on various authorities to tighten some norms such as stringent system to issue licenses for drivers, making mandatory to wear seat belts and helmets.

Currently over 10 lakh accident cases are pending against four PSU insurers before various tribunals of which about one lakh are in Kerala.

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IRDA tightened the solvency norms

Posted on July 26, 2011 by
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Insurance Regulatory and Development Authority (IRDA) is going to tighten the solvency norms for the insurers from the current financial year itself; as per the IRDA’s guidelines now insurers would have to maintain the solvency margins of 150%; IRDA in FY’11 has relaxed the rules according to which insurers would have to maintain the 130% solvency margins but it was for one year only and it cannot be continued forever.

Solvency ratio means capital and value of assets that insurers have to maintain over their insured liabilities.

Insurers will have to increase their solvency ratio gradually as for this year they have to increase it to 137% and next year they have to increase it to 145% and by the third year they have to make it 150%.

For public sector insurers maintaining the solvency is not a issue as Life Insurance Corporation of India (LIC), New India assurance, United India insurance, National insurance maintain over two times of their insured liabilities; however Oriental insurance solvency ratio shrunk to 134% due to third party motor insurance pool where the provision of Rs 350 crore has to be made.

For private sector insurers especially General insurers they will need to infuse additional capital to buffer the increased solvency ratios.

The insurers who fall short in solvency margins include Reliance General Insurance whose solvency ratio stood just 1.15 times of its insured liabilities.

For private sector life insurers tighten solvency norms has forced them to focus more on Unit-Linked Insurance Plan (ULIPs) with an add-on term insurance plan where entire investment risk is on policyholder; that is the reason that portfolios of most of the private sector life insurers have almost 80% ULIPs.

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Public sector non-life insurers have edge over private non-life insurers in customer satisfaction

Posted on July 1, 2011 by
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Public sector non-life insurance companies have outperformed than private non-life insurance companies in customer satisfaction of motor insurance policyholders in 2011.

According to the survey New India Assurance ranked first with 804 points out of 1000 points; Oriental Insurance scored 802 points stood at second place while ICICI Lombard is at third place with 801 points.

According to survey The 2011 India Auto insurance Customer Satisfaction Index Study done by JD Power Asia Pacific in its third year prove that New India assurance has succeeded in satisfying maximum policyholders.

The survey included 11 private sector non-life insurance companies and 4 public sector insurance companies the survey is based on the responses of 5,284 customers in 20 cities across India who has renewed or purchased a Auto policy in between January 2010 and April 2011 with at least 2.5 -3.5 years experience of vehicle ownership.

The survey based its findings on the policyholders experience with their insurer on six factors; they are -:

  • Interaction – The survey found that the customer satisfaction has declined mainly on the factor of the Interaction; among customers most dissatisfaction has increased for branch offices followed by agents. But still customer who has said that would like to renew or purchase an Auto policy by a branch office has increased to 46 % in 2011 as compared to less than 25 % in 2010 hence it has become important for the insurers to improve their customer service at their branch offices.
  • Claims – Northern region has the highest claim satisfaction among customer; whereas in East and South regions proportion of customer who filed claim is highest which stood at about 25 % while north and West’s customer who filed claim stood below 15 %.
  • Policy offering
  • Renewal or purchase process
  • Billing and purchase process
  • Premium – price for coverage offered

Though customer satisfaction is higher with public sector insurers but still they witnessed a decline of 17 points  as compared to last year while customer satisfaction with private insurers increased by 3 points.

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