MyInsuranceNews

New India Assurance order to pay Rs 60000 by Consumer Court

Mon, 21 May 2012 17:20:28 GMT

Central District Consumer Disputes Redressal Forum has ordered New India Assurance, one of the biggest public sector general insurance companies, to pay around Rs.60,000 as compensation to its policyholder Shiv Kumar Gupta.

Delhi-based Shiv Kumar Gupta holds a mediclaim policy from New India and he filed a claim of Rs.45,252 towards medical expenses incurred for his son. Mr. Gupta informed the third party administrator (TPA) of New India and submitted the requisite documents to the TPA for claim processing. But New India Assurance closed the claim processing on the grounds that in spite of several reminders, the policyholder did not provide the doctor's prescription slip and IPD paper.

However, neither the insurer nor the TPA could prove that they had sent out reminders to the policyholder. Therefore, the consumer court ruled the decision in favour of the claimant Shiv Kumar Gupta and asked New India to pay for the expenses incurred plus Rs. 10,000 as compensation against harassment and mental agony and Rs. 5,000 as litigation cost.

The authorised person of the forum, Mr. B B. Chaudhary said that the insurance company closed the claim without any valid reason and caused harassment and mental agony to the complainant.

Bharti Axa introduces New Endowment Insurance Plan

Fri, 18 May 2012 16:16:26 GMT

Bharti Axa Life Insurance has launched a with-profits endowment insurance policy called Bharti AXA Life Young India Plan. This policy which offers guaranteed returns, is targeted at young adults with a positioning of ‘Jeevan Suraksha Ka Naya Nazariya’. The plan has a good feature of providing for an increase of upto 25 times the base Sum Assured on reaching the milestones of marriage and child-birth, without any additional medical tests.
(Read complete policy details of Bharti Axa Life Young India Plan)

Managing director and CEO of Bharti Axa life insurance Mr.Sandeep Ghosh said that this plan focuses on the young generation of today and basically their needs at the time of marriage and childbirth which is quite a tough milestone. Research has shown that marriage and birth of child in the family are key milestones in the customers’ life where they need additional money to meet the requirements and added protection to secure their family against any unforeseen event

Explaining about the new policy, Mr.Ghosh further added that a policy holder can get his money back in form of “Good times money back” on request. Moreover the policyholder can also go for premium waive-off facility whereby in case of sudden death or any unexpected calamities all future premiums of the policyholder gets waived off. On maturity of the policy, the policyholder can get 200 times of the maturity value or the sum assured.

Bharti AXA Life Insurance Company Ltd is a joint venture between Bharti Enterprises and AXA, world leader in financial protection and wealth management. Very few life insurance companies offer flexible and innovative features like Young India Plan from Bharti AXA.

IRDA and IIB launch web based service to track motor insurance details

Fri, 18 May 2012 11:10:22 GMT

Insurance Information Bureau (IIB), the insurance data repository of IRDA announced the launch of its web-enabled facility to find out insurance policy details and track claim status of motor vehicles.

The Insurance Regulatory and Development Authority (IRDA) had engaged IIB in collecting, collating and compiling motor insurance data which will be useful to the insurance companies, policyholders and other related parties in claims management. This service will be available on a trial basis (beta version) for now whereby a link is provided on the website of IIB (http://iib.gov.in). The aim of this service is to enable victims of motor vehicle accidents who are in need of details of insurance policy of involved vehicle(s) and the insurer concerned, to enable him/his representative to expedite the processing of claim arising out of the accident.

The IIB has provided access to the general public to the insurance status of motor vehicles for FY 2010-11 & 2011-12. The data will be updated regularly on receipt of data from insurance companies. This web-enabled facility has been provided to assist the victims of road accidents to get details of the motor insurance policy number of the involved vehicle(s) and the name/office details of the insurer. The accuracy of information will depend on the quality of data submitted by the insurers to IIB.

The first phase of this project will provide the following:
Input
The Querist needs to give details of the following mandatory fields –
(a) Identity - Name and Postal Address
(b) Email id & Mobile number
(c) Registration number and accident date

Output

If the record is available, it will flash the details of vehicle registration number, engine number, chassis number, policy number, name of the insurer and insurer’s office details.
If no data is retrieved, the Querist will be asked to input Engine number or Chassis number.
Even then if no data is retrieved, a message will flash highlighting the reasons for absence of information sought relating to the particular vehicle. The reasons for absence of information sought could be (i) absence of insurance, (ii) time lag in uploading of data by the insurance company etc.

As this process stabilises, IIB along with the support from insurers will try to reduce the time lag of two months so that the insuring public and the victims can use the web enabled facility for sourcing information required by them for claim purposes

A single micro insurance policy to cover multiple risks

Wed, 16 May 2012 19:28:59 GMT

The Insurance Regulatory and Development Authority (IRDA) is in the process of devising a new micro-insurance policy for the rural masses which will offer the multiple benefits of life insurance, health insurance and asset protection. IRDA has requested the Life Insurance Council of India to assess the pros and cons of such a multiple benefit insurance policy and submit a report at the earliest.

For a long time, IRDA has been studying the feasibility of offering products that can cover different risks like life, accident, health, travel etc for the individuals in rural and semi-urban areas. Such products are referred to as Micro insurance policies and are capped at a coverage amount of Rs.50,000. Micro insurance products were launched with the idea of solving the needs of low-income households.

According to IRDA chairman J HariNarayan, a single insurance product will reduce the cost of the product and will improve the efficiency of distribution. He suggested that one single product which protects all assets, accidents, cattle, health and life should be developed. To test waters, IRDA has appointed a couple of insurance companies to design, develop and distribute such micro insurance products. Post some feedback and results, IRDA will try and build a framework for such products and roll out to all the insurance companies.

According to IRDA the distribution channels used are non-governmental organization, self- help groups and microfinance institutions apart from insurance agents, brokers & corporate agents. Most of the insurance products areoffered by microfinance institutions in combination with microloans. But the problem observed is that they are usually bundled with loans by microfinance institutions. Clearly, IRDA is not happy with such a distribution process.

The insurance regulator is relentlessly trying for ways to penetrate the rural India with effective and long-term approaches. Micro-insurance policy with low cost and simple distribution model is one such initiative.

Highest NAV guaranteed ULIP plans are now banned

Mon, 14 May 2012 10:29:04 GMT

Unit-linked insurance plans which were offering the guarantee of returns basis highest NAV of the term on maturity have been banned by the Insurance Regulatory and Development Authority (IRDA).

Around 2009-10 insurance companies could see a lot of customers becoming refusing to buy unit-linked insurance plans due to the high risk involved in such products. To make the proposition attractive and assure a certain guaranteed benefit, the insurance companies designed ULIP with a guaranteed component. This gave rise to Highest NAV guaranteed unit-linked insurance plans where the insurance company would give a minimum guaranteed return on maturity basis the highest NAV recorded during the policy term. This caught the attention of buyers and most of the insurance companies rolled out at least one highest NAV guaranteed plan.

However, IRDA is of the opinion that the insurance companies will have to take a high-risk fund management approach to offer guaranteed returns to the customers. The premium in unit-linked plans is invested in the equity and debt markets and market performance is uncertain. Hence, insurance companies pass on this risk to the customers in case of ULIPs. In the initial days of ULIPs, many customers earned good returns and thus the popularity of unit-linked policies went up. However, one bad market cycle in 2007-08 eroded the capital of a lot of customers in such plans and customers lost confidence in unit-linked insurance plans. But sales of ULIPS shot up the profitability of many insurance companies because of which insurers were trying hard to keep up the sales of ULIPs. Life insurers found some respite in highest NAV guaranteed unit-linked policies.

But IRDA probably fears another disaster like the one caused by ULIPs and hence wants to stop such doubtful products at an early stage. IRDA follows F&U (file and use) approval approach which is why IRDA highlights most of its concerns after the product has been in the market for some time. The insurance regulator is taking every step possible to protect the long-term interest of the customers even though it is harmful to the growth of insurers.

After New York Life, HSBC may exit the Life Insurance business in India

Fri, 11 May 2012 11:59:37 GMT

HSBC which holds 26% in Canara HSBC OBC Life Insurance Company is known to be in talks of exiting the business of life insurance in India. This is the first ever time HSBC has ventured into the life insurance space.

Canara HSBC Oriental Bank of Commerce Life Insurance Company which started operations in 2008 is a joint venture between Canara Bank, Oriental Bank of Commerce and HSBC Insurance. HSBC has been exiting many of their non core businesses globally in order to maintain focus on its core banking business. Moreover, with the ongoing changes in the life insurance industry in India, companies are struggling to meet the desired profitability levels. Issues like increase in FDI cap to 49% from the existing 26% and IPO norms have been a major hindrance for life insurance companies to raise capital at an affordable cost.

Individual New Business Performance of Canara HSBC as at Sept, 2011

Banks

Other Channels

Total Business

Policies

Premium

(in crores)

Policies

Premium

(in crores)

Policies

Premium

(in crores)

17004

117.73

212

0.83

17216

118.56

Canara HSBC Life Insurance has been focusing on their distribution through the network of all the three banks associated in the life insurance joint venture. All the 3 banks collectively have a network of over 4400 branches. The Life Insurer sourced 98.77% of its total policies which contributed 99.30% of its total premium collection from the Bancassurance channel as on September 2011.

The revenue numbers of life insurance companies were down in 2011-12 as compared to the previous year. Due to the revised ULIP guidelines, life insurance companies saw a dip in sales of one of their most profitable products. This and many more reasons could have triggered the thought of exiting the life insurance market and deploying the money in their core banking business.

HSBC is the second largest banking and financial services organizations in the world with a customer base of over 89 million. HSBC is known in banking circles for its conservative and risk-averse approach to business – a company tradition going back to the 19th century.

Few weeks back, New York life announced their exit from the life insurance joint venture Max New York Life. New York Life sold their 26% stake to Mitsui Sumitomo for close to Rs.2,370 crores. The valuations clearly suggest that life insurance market is hugely untapped and is going to be a big market in the near future. However, the important thing for insurers is to stay lean and continue to build the foundation in such challenging times.

FDI Cap in Insurance may remain at 26% for some more time

Wed, 09 May 2012 17:08:35 GMT

The Finance Ministry is expected to discuss the Insurance Bill with the Cabinet in a few days from now. However, the reforms suggested in the bill seem to be toned down. The wait for increasing the FDI limit in the insurance sector from 26% to 49% will go on for a bit longer.

The proposed changes / amendments in the Insurance Bill are focusing on customer protection and better transparency. Some of the points which may be a part of the changes in the Insurance Bill are –

FDI limit to remain at 26% as against the proposal to hike it up to 49%
Allow Foreign Reinsurance companies to set up operations in India
Increase the time period of questioning a policy mis-selling from 2 years to 5 years

The Ministry of Finance followed the recommendations of Parliament’s standing committee who was of the opinion that the insurance companies should tap the domestic market instead of seeking foreign capital at this stage.

One of the reasons to open up the Indian space for foreign reinsurers is to reduce the exposure on General Insurance Corporation of India (GIC).

The government is keen to implement the proposed amendments smoothly and hence has kept the debatable proposals out of the draft.

DLF in talks for selling stake in DLF Pramerica

Tue, 08 May 2012 20:47:07 GMT

DLF, the Indian arm of the life insurance company DLF Pramerica is looking to exit the joint venture by selling its stake. Reports are that DLF is in talks to sell a majority stake in its life insurance joint venture to HCL Group for about 5 billion rupees.

The real estate sector has been under tremendous pressure for last couple of years and DLF too is learnt to be starving for working capital and cash. The real estate giant has a debt of over $4.2 billion. DLF plans to pay off a huge chunk of this debt from the money raised by selling stake in DLF Pramerica Life Insurance Company.

DLF's primary business is development of residential, commercial and retail properties. In addition to real estate, DLF is also present in Retail and Hospitality industries. The company's US$ 2 billion IPO in July, 2007 was India's biggest IPO in history. With its increased assets, DLF has been trying to increase its operations all over India

DLF holds 74 percent stake and Pramerica, the trade name for Prudential Financial, Inc holds the remaining 26 percent.

IRDA imposes a penalty of Rs 28 lakhs on Shriram Life Insurance Company

Mon, 07 May 2012 13:39:50 GMT

On 4th May 2012, The Insurance Regulatory and Development Authority (IRDA) released an order whereby it has imposed a fine of Rs.28 lakhs on M/s Shriram Life Insurance Company Ltd

IRDA had conducted an onsite inspection of Shriram Life Insurance Company in 2010 which revealed certain violations of the provisions and regulations of the Insurance Act, 1938. There were several charges whereby Shriram Life Insurance Co was found in compliance of the rules barring a few observations for which the insurer has to pay a penalty.

IRDA observed that payments were made to M/s Shriram Chits (a group company) which are beyond the scope of Regulation 10 of the IRDA Regulations. Shriram Life has made these payments under 'Referrals' whereas the rule clearly says that Referral arrangements are to be entered only with Banks Moreover, the payout as referral fee show a percentages which varies from 37.69% in 2008-09 to 76.56% in 2010-11 which is far in excess of what is permissible. IRDA fines Rs.11 lakhs for violation of this regulation in two financial years.

The Insurer was found non compliant on 64VB time frames and ULIP guidelines where the credit of premium is given to policyholders only from the date of realisation of amount. Shriram has been giving credit of premium to only those policyholders who deposit renewal premium in cash. A penalty of one lakh was imposed because of not meeting this particular regulation.

The inspection report revealed few more lapses which resulted in a total penalty amount of Rs.28 lakhs which needs to be paid within 15 days of receiving the order from IRDA.

Max Bupa Health Insurance has a new CEO

Fri, 04 May 2012 19:49:18 GMT

Max Bupa Health Insurance Company announced the appointment of Mr. Manasije Mishra as their new Chief Executive Officer (CEO). He will take over the office from Dr. Damien Mormion who has been handling the position since inception.

Prior to Max Bupa, Mr Manasije Mishra has served as Managing Director & CEO of HSBC Invest Direct. He has also served as Sales & Marketing Director of Canara HSBC OBC LIFE Insurance Company. Mr. Mishra joined the HSBC group in 1989 and has immense experience in retail banking, operations, E-commerce, trade finance, treasury and financial control. He was also a trainee at HSBC management training centre in UK.

Dr. Damien Mormion will move back to the parent company Bupa UK. Mr. Mishra will be working closely with Damien over the next few months to ensure a seamless transition and would assume the position of CEO of Max Bupa thereafter.

Standalone Health Insurer Max Bupa completes two years

Wed, 02 May 2012 12:50:08 GMT

Max Bupa Health Insurance Company, the latest entrant in the group of standalone health insurance companies announced the completion their two successful years of operation in India. Max Bupa also shared their aim to double their growth on all parameters and cover 1 million lives by 2015.

The growing insurance sector in India has witnessed launch of monoline or specialist health insurance companies. These companies focus on offering only health insurance products popularly known as mediclaim insurance. After Apollo Munich and Star Health, Max Bupa entered this space of specialist health insurance companies in 2010.

Max Bupa which is headquartered in New Delhi, is a joint venture between Max India who holds 74% stake and the UK based Bupa Finance who holds 26%. Max Bupa pioneered many good features in the health insurance industry such as any age enrolment, assured lifelong renewability, maternity and childcare benefits, coverage of all day care procedures and in house servicing of claims. Their flagship product Heartbeat is one of the most comprehensive and flexible plans in the market.

Max Bupa is the first insurance company in India with ISO 10002: 2004 certification for customer complaint management. In a span of 24 months of business, Max Bupa has managed to build a strong customer base of 2, 27, 650 (Data as on April 25, 2012).

Max Bupa already has six health insurance plans in the market and a couple of them to be launched soon. Additionally, they also plan to enter the travel insurance market in the coming months.

Ministry of Finance asks Insurance regulator to relax branch opening norms

Mon, 30 Apr 2012 16:02:47 GMT

The Ministry of Finance has requested the Insurance Regulatory and Development Authority (IRDA) to relax the branch opening norms in smaller cities thereby increasing the penetration of insurance in smaller towns and rural areas.

The current penetration of insurance in rural areas is very dismal in both life as well as non-life insurance sector. The Ministry of Finance is of the opinion that the one of the ways to boost the penetration of the insurance in these areas is by relaxing the norms for opening branches. Taking the case of the Banking industry, the ministry believes that IRDA should also follow the footsteps of Reserve Bank of India (RBI) who relaxed the norms of opening bank branches in the Tier II cities.

Life as well as non-life insurance companies are confined to the limited urban population of India and therefore engaging in highly competitive tactics such as low pricing. If the insurance companies are allowed to expand geographically then they may hold on to their profitability grounds and come up with innovative products especially for such markets.

IRDA is a little apprehensive on currently allowing insurance companies to open branches in rural areas due to the fear that this step may affect the profitability and ratios of the insurance companies. According to the IRDA regulations, every insurance company should generate at least 7% of their total gross written premium from rural business.

Tata AIG General launches MediPrime a lifetime renewable health insurance plan

Wed, 25 Apr 2012 17:11:08 GMT

On April 24, 2012, Tata AIG General Insurance Company announced the launch of their health insurance policy called MediPrime. One of the striking features of this policy is that it offers lifetime renewal.

“We are proud to announce the launch of MediPrime; a product that has been designed specifically to meet the current requirements of the consumer and ensure that their needs from a health policy are met. Customer Delight is an important pillar of our Company values and MediPrime, with its’ strong customer service commitments and service initiatives will provide our policyholders a wholesome experience” said Gaurav D Garg, MD & CEO, Tata AIG General Insurance Co. Ltd.

Tata AIG GIC has assured that all customers applying for MediPrime will receive a decision from the company within 24 hours notifying them of their acceptance and the suitable premium. Additionally, all cashless claims would be authorized within 4 hours on receipt of all documents and claims would be settled in 7 working days after completion of formalities.

The policy provides a family discount wherein a discount of 10% is allowed if 3 or more members of the family are covered under the individual plans. Read complete review of Tata AIG MediPrime Health Insurance

Some of the features of MediPrime are:

Renewal for Life
No loading on renewal in case of a claim
Claims Settlement: Within 7 working days after completion of formalities
No Sub limits across hospitalization benefits
No Co-pay
Inpatient and outpatient coverage for Accidental Dental treatment.
Coverage for Non-allopathic in-patient treatments like Ayurvedic, Unani or Homeopathy

The product is available to individuals between the ages of 18 to 65 years and also offers the unique benefit of lifetime renewability for existing customers. The policyholder is entitled to tax benefits under section 80D of the Income Tax Act 1961.

Insurance company will pay the third party claim in spite of premium cheque bounce

Tue, 24 Apr 2012 18:06:15 GMT

A verdict of the Supreme Court in a matter involving United India Assurance states that even if the premium cheque of the policyholder bounces, the insurance company will still compensate the third party claim. The judgment in bold letters reads - Premium cheque dishonoured – Cancellation after accident – Insurer liable

Insurance companies issue motor insurance policies instantly after collecting the payment from the policyholder. In cases where payment mode is cash or credit card, there is no possibility of payment default. But cases where premiums are paid vide cheques, there is a possibility of payment default in case the cheque bounces. In such cases the policy contract stands invalid and insurance companies do not honour the claim, if any. But now a ruling by the Supreme Court suggests otherwise.

The case in mention is United India Insurance Co. Ltd. as Appellants VERSUS Laxmamma & ORS as Respondents. United India Assurance collected the premium cheque and issued the policy. The cheque got dishonoured and there was an accident resulting in death of the relative of the respondent. The insurance company cancelled the policy after the date of the accident citing cheque bounce as the reason of cancellation. The Supreme Court did not want the respondent to suffer in this case and ruled in favour of the claimant.

The final extract of the case mentions, ‘The owner of the bus obtained policy of insurance from the insurer for the period April 16, 2004 to April 15, 2005 for which premium was paid through cheque on April 14, 2004. The accident occurred on May 11, 2004. It was only thereafter that the insurer cancelled the insurance policy by communication dated May 13, 2004 on the ground of dishonour of cheque which was received by the owner of the vehicle on May 21, 2004. The cancellation of policy having been done by the insurer after the accident, the insurer became liable to satisfy award of compensation passed in favour of the claimants.’

This sets a good example for the all the general insurance companies who may now be more cautious in issuing the policies where mode of payment is cheque. If the insurance company issues a third-party insurance cover on the basis of cheque, it will be liable to compensate the third-party claim in case of an accident, even if the premium cheque bounces. The insurance company can reject such a claim only if it has cancelled the policy after the payment default and intimates the policyholder before the accident.

Tapan Singhel is the new CEO of Bajaj Allianz General Insurance

Tue, 24 Apr 2012 12:18:39 GMT

Bajaj Allianz General Insurance Company, which is one of India’s leading private general insurance company, has appointed Tapan Singhel as its new Managing Director and CEO. Mr. Singhel who has been with Bajaj Allianz since inception was previously holding the position of Chief Marketing Officer since November 2009.

Tapan was a Zonal Manager for almost 3 years and then moved in the role of a President till 2009 post which he took up the Marketing function. He takes over the top position from the outgoing CEO Hemant Kaul who has relocated to Singapore for an assignment at Allianz Asia Pacific.

Religare Health Insurance all set to launch operations

Mon, 23 Apr 2012 14:25:57 GMT

Religare Health Insurance Company Ltd. announced that they have received the R2 license from the insurance regulator IRDA. The R2 license is one step before the final approval after which the company will roll out operations and distribution network.

Religare Enterprises Limited (REL) which is a leading financial services group announced its foray into the health insurance industry by setting up Religare Health. The company has already established a strong foothold in the life insurance industry with Aegon Religare Life Insurance Company Limited.

Religare Health Insurance Company is a joint venture between Religare Enterprises, Union Bank of India and Corporation Bank. The responsibility of setting up the business is being handled by Anuj Gulati. Anuj who is the CEO of Religare Health Insurance Company Ltd has worked in ICICI Lombard General Insurance prior to this assignment.

The non-life insurance industry already has three players who are exclusive health insurance companies, namely, Apollo Munich, Star Health and Max Bupa. The health insurance market is growing at a very fast pace and there is a huge untapped market. Identifying this potential in the health insurance sector, Religare has entered this line of business.

Let the tax benefits stay pleas the life insurance industry

Wed, 18 Apr 2012 16:24:43 GMT

The announcement by the Finance ministry in Budget to withdraw tax benefits from life insurance policies for low premium to sum assured ratio cases has gotten the entire life insurance industry worried. Now, the Insurance Regulatory and Development Authority (IRDA) has requested the finance ministry to revisit this decision and continue some of the tax benefits in life insurance policies.

The finance ministry has levied a rule that a policyholder will be able to avail tax benefits under section 80C if the sum assured (cover) in his life insurance policy is at least 10 times of the annual premium amount. However, the life insurance companies and the regulator are not convinced about this rule which links the tax benefits with the premium to sum assured ratio. Instead IRDA has suggested considering the policy duration for deciding eligibility of tax benefits.

The IRDA Chairman J Harinarayan said that they have asked the finance ministry to let the availing tax benefits continue for all approved products. He also said that the policy term should also be given weightage while giving tax breaks. To justify his inputs, the Chairman said, “Policies that have tenure of more than 10 years should be considered as long-term policies, while those having tenure of less than10 years should be considered differently from a taxation perspective.”

The life insurance industry is already going through a tough time battling with multiple issues such as dipping sales, high agent turnover ratio and spiralling distribution costs. The last thing they wanted was a hit from the finance ministry on their key selling point of tax benefit. The Life Insurance Council of India which is an advisory body also came to the rescue of the life insurance companies and joined the appeal to retain the tax benefits. The Finance ministry has forwarded this request to the Central Board of Direct Taxes (CBDT). One will have to wait till the Finance bill is tabled in the Parliament session to see how the finance ministry or the CBDT responds to this request.

All Life Insurance companies may keep a Standard Proposal form

Tue, 17 Apr 2012 11:01:16 GMT

On 16th April 2012, The Insurance Regulatory and Development Authority (IRDA) released an exposure draft of regulations for standard proposal form in life insurance. In continuation to prescribing standards for Needs Analysis in Life Insurance, the IRDA has now proposed a standard proposal form for individual policies in life insurance that shall have a section on Needs Analysis.

The regulator mentioned that it is not being prescriptive about any particular matrix or model but the idea is to have in place a process and system to assess the Needs Analysis for each and every proposal received. IRDA wants every insurance company to verify the soundness of a recommendation made to the customer about a particular product.

The draft document released by IRDA stated that the objective of this regulations is, ‘to introduce a standard proposal form that not only brings in uniformity in information sought but also ensures that it takes into consideration all relevant questions that are required to understand the need for a particular product and make a recommendation to the prospect that is based on ‘suitability’ in a simple and straightforward manner bringing in transparency and thereby protecting his/her interests.’

In the last few years, there have been several instances of mis-selling where customers complain that they were not given the complete policy details by the insurer. Many policyholders state that they were sold a policy which was different from their need. To address all these and many other issues, IRDA has floated this idea of having a standard application form which will ensure that all customer needs are known to the insurance company before issuing the policy.

These regulations will be applicable to all policies issued by life insurance companies irrespective of the type of product such as term, money back or unit-linked plan. The regulator also mentions in the draft that the insurance company has to put a supervision system that is reasonably designed to achieve compliance with these guidelines. It looks like a good step towards protection of customer’s interests even though it can make the entire application process a little tedious for the insurance company.

Policy terms of health insurance plans will be standardised

Fri, 13 Apr 2012 13:31:17 GMT

It will now be easy for customers to choose a health insurance policy because soon insurers will have to offer standard communication, policy tenures, exclusions and few other things. IRDA is coming out with some good recommendations that will be very useful to the customers while choosing a health insurance policy.

Earlier this year, the insurance regulator set up a Health Insurance Forum which will assist IRDA in creating standard rules and processes in the health insurance industry. On Thursday, the IRDA conducted its first meeting with the Forum where the IRDA Chairman shared some of the proposed changes in health plans. Mr. J Hari Narayan said that a working group which constitutes members from the industry has standardised 20 common terms associated with health insurance, 20 critical illnesses, standard exclusions, pre authorisation and claims forms, discharge summary and bill processes.

The regulator expressed its concern on the communication which goes out to the customers while purchasing a health insurance policy. Many complicated words and jargons which are used in the policy brochures or on websites need to simplified so that a customer can easily understand the benefits of the plan. At the time of paying the renewal premiums or making a claim many policyholders realise that the policy features are not in sync with their requirement. This is the probably the reason why IRDA registered around 35,000 complaints related to health insurance out of the total 92,898 complaints in the non-life insurance sector.

The Chairman also shared his concern on the bleeding health insurance portfolio due discounted pricing of the product. Looking at the high claim rates, the health insurers should be increasing the premiums but they are not doing so. Non-life insurance companies are still offering low and competitive pricing for their health insurance products in pursuit to grab maximum market share.

However, with recommendations such as standard choices of policy tenure, exclusions and critical illnesses, it looks like the customers stand to benefit a lot more than what they are currently availing.

Mitsui Sumitomo picks buys out New York Life holding for Rs 2730 crores

Thu, 12 Apr 2012 18:18:56 GMT

Max New York Life Insurance Company finds a new foreign promoter when New York Life exited the life insurance company by selling its 26% stake to Mitsui Sumitomo for around Rs. 2,730 crores.

A simple calculation – if 26% is equal to Rs. 2,730 crores, then the life insurance company is valued at Rs. 10,507 crores. This is a healthy valuation for the 10 year old life insurance venture. This is by far the second highest valuation received so far by a life insurance company in India, barring LIC. Almost a year back Reliance Life Insurance Company sold 26% stake t Nippon Life for Rs. 3,062 effectively valuing the company at Rs. 11,500 crores.

Coming back to New York Life – they had invested Rs. 505 crores in Max New York Life Insurance almost 10 years back and now walk away with close to Rs. 1,929 crores. Out of their total stake of 26%, New York Life had to sell 9.37% to Max India at par (Rs. 182 crores) to Max India as they had the right of first refusal. Max India sold off this stake to Mitsui Sumitomo for Rs. 984 crores. So Max India too made some handsome gains in this transaction.

The transaction would be subject to regulatory approvals in India. Mitsui Sumitomo is already a joint venture partner in the Cholamadalam MS General Insurance Company.

Life Insurance business is not too bad this year

Thu, 12 Apr 2012 17:30:46 GMT

Many life insurance companies may not want to talk about their business performance of 2011-12 but the regulator has checked that the drop in business has been only marginal as compared to the previous financial year, i.e.2010-11. The IRDA Chairman, Mr. J Harinarayan stated that the decline in the overall life insurance business may be about one percent as compared to the year ago. However, he also stated that the decline in first year premium collection dropped by 14%.

The life insurance companies have been trying to steer their ship through stormy waters like policy changes, uncertain economic reforms, amended tax laws and rising cost of distribution.

The life insurance industry collected a total premium of Rs.2,86,500 in 2010-11 versus the premium collection of Rs.264,450 in 2009-10. This year the industry is expecting a marginal drop in total business. The maximum earnings of life insurance companies comes from the renewal premiums and group insurance business. So a drop in the first year premium collection should not affect their overall sales and profitability too much.

IFFCO Tokio General Insurance injects 125 crores into their business

Thu, 12 Apr 2012 14:07:16 GMT

IFFCO Tokio General Insurance Company has infused an additional 125 crores into their business. 74% of this has been brought in by the Indian promoter while the balance 26% has been done by the foreign promoter Japanese company Tokio Marine.

IFFCO TOKIO General Insurance Company has the whole range of products catering to both retail and commercial business lines. IFFCO TOKIO car insurance, health insurance, two wheeler insurance and travel insurance are the popular retail offerings of theirs.

The capital infusion would be used to grow their business and hence gain more market share. The company has so far infused Rs 526 crores into their business.

HDFC Ergo sets up an inhouse claim service team for health insurance

Tue, 10 Apr 2012 16:02:42 GMT

HDFC ERGO General Insurance, one of the leading non-life insurance companies in the Indian market has set up an in-house health claim servicing department. Health Claim Services (HCS) by HDFC Ergo has been introduced with the idea of providing a single window assistance to all their health insurance policyholders for all health care related services.

The claim settlement process in a general insurance company is the moment of truth for the customer. In order to achieve cost efficiencies, many insurance companies have been outsourcing their claims management processes to Third Party Administrators (TPA). But with the rising customer complaints against the TPAs, many non-life insurers are moving their claims process within the company itself.

HDFC ERGO has tied up with NSPs (Network Service Providers) like Pharmacies, Diagnostic Centres, Ambulance and Wellness Centres in order to provide a high level of service to their health insurance policyholders. Other insurance companies who are known to have a good inhouse claim settlement process are Max Bupa and Star Health Insurance.

Finance minister urges IRDA to incentivise insurance e-policies

Fri, 06 Apr 2012 19:37:03 GMT

On Wednesday, the Finance Minister Mr. Pranab Mukherjee had a discussion with the board of Insurance and Regulatory Development Authority (IRDA) on various issues like cutthroat competition among the insurers, mis-selling of policies and promotion of online policies.

In the private sector, life insurance companies have started selling policies through the internet. A customer can purchase a pure online term insurance policy by visiting the respective insurer’s website and pay the premium through debit/credit card or net banking. This online distribution space which had only two players till 2010, now has close to ten private life insurers promoting their online insurance policies.

The Finance minister urged the insurance regulator to identify ways to expand the reach of online policies with a special emphasis on targeting the youth of our country. He reiterated the concern of poor insurance penetration in our country and the challenge in replicating the massive agent network of LIC across all the other companies in the life insurance sector. Mr. Mukherjee said, “Can we think of a system where in the mass market /OTC vanilla products with low-ticket size are incentivised by having a second level of agents with lesser entry restrictions?” He opened up the room for discussing ways to reach semi-urban and rural areas and spreading insurance literacy and awareness.

The Finance Minister was extremely happy with the efforts of IRDA to dematerialise insurance accounts and set up a grievance redressal body for customer queries and assistance. After tasting success with one or two online policies, many life insurance companies are in the process of developing online policies across other sub-products in life insurance such Term with Return of Premium (TROP), Pension, ULIPs and Child Plans. The premium rates of online term plans are as low as one-third of the term plans which are available through the branch networks and agents. This low pricing has increased the popularity of online term plans and increased the sales numbers in this category for insurers. Lets hope with the request of the Finance Minister and the efforts of life insurance companies, more online policies are available at lower cost to the Indian consumers.

Berkshire Hathaway enters the Reinsurance market in India

Thu, 05 Apr 2012 13:18:55 GMT

Berkshire Hathaway Inc which runs Insurance and reinsurance business activities through approximately 70 domestic and foreign-based insurance companies extends its Reinsurance business in India.

Berkshire which is controlled by the business magnate and investor Warren Buffet, has been trying to set its foot in the Indian Insurance market for sometime now. But the bar on the foreign investment limit has kept them at bay from setting up a wholly owned insurance company. Last year, Berkshire India was formed as a non-direct subsidiary of Berkshire Hathaway Inc and it operates as a licensed corporate agent of Bajaj Allianz General Insurance Company Limited. And now Berkshire has set up a reinsurance company in India.

To begin with, Berkshire Hathaway will be the lead reinsurer for Bajaj Allianz and National Insurance. This means that Berkshire will take a large percentage of the total risk of the two companies. In addition to this, the reinsurer will be a co-lead insurer for New India Assurance. Here the reinsurance portfolio will be shared with General Insurance Corporation of India (GIC). GIC is presently the only reinsurer for the domestic insurance industry. No international reinsurance company can directly conduct business in India. Foreign reinsurance companies like Munich Re (Germany), Swiss Re (Switzerland) and RGA (America) have offices in India but they do not transact reinsurance business directly. They have to go back to their underwriting, actuarial and claims team of the parent company and then proceed.

Berkshire acquired General Re Reinsurance Company is one of the largest reinsurers in the world based on net premiums written and capital. Berkshire has been hesitating to commence business in India due to cap on the foreign ownership rules in the Indian industry.

The current size of Indian industry is estimated to be at US$41 billion. Statistics reveal that only two million people (0.2 % of the total population of 1 billion) in India are covered under health insurance. Developed nations like USA and UK have about 75 to 80% of the total population covered under insurance policies. General insurance companies reinsure their risks to shed the burden in case of high claim rates. Global Reinsurers are determined to enter India given the growing industrialisation and commercialisation in the country. Berkshire Hathaway’s foray into the reinsurance market of India is sure to get the attention of other reinsurers waiting to enter India in a big way.