IRDA issues insurance demat norms

Insurance buyers will soon be able to open demat or 'e-insurance' accounts for their contracts which will allow them to hold policies in electronic form. Having an -insurance account will reduce hassles for buyers as it does away with the need to provide age and address proof every time a policy is bought. It will also save insurers crores in printing and dispatching policies.

The move will bring in benefits similar to the efficiency gains in the capital markets after Sebi introduced dematerialization of equities. Dematerialization in capital markets speeded up transactions, dramatically reduced transaction costs and completely eliminated fraudulent transactions.

Taking a leaf out of the securities market, the Insurance Regulatory and Development Authority wants to create insurance repositories on the lines of securities depositories like the National Securities Depository or the Central Securities Depository. These repositories will be licenced by the regulator and connected to all insurance companies.

"This is one of the most positive steps which will impart efficiency and better customer service," said Sandeep Bakhshi, MD, ICICI Prudential Life Insurance. He said the benefits in terms of convenience to policyholders will be enormous while insurers will save in costs. Since the repository will consolidate all policies under a single account, the family will immediately come to know of the policies purchased by an individual in an emergency.

IRDA on Thursday issued guidelines for creating the insurance repositories and electronic issuance of policies. In the guidelines, the regulator said that it will grant licences to and regulate 'insurance repositories', which will act as service providers to life insurance companies.

The repository will give a unique number to every individual and all his policies will come under that account. It will hold all types of policies, including life, health, motor and group covers. The data maintained by the repository will include history of the claims data of the individual. It will also have the names of the beneficiary, assignees and nominees.

Dematerialized policies will be more liquid than paper policies as these contracts can be easily assigned. IRDA has said that whenever the policies are assigned, the assignee shall have the same rights as the policyholder. According to the IRDA guidelines, any insurance policyholder or a prospective policyholder can open an e-insurance account. Opening an account will require identity proof and address proof.

But not all companies are in favour of full-fledged dematerialization. Some of the players were not very keen to have a depository right now and they wanted only partial demat. Even the Life Insurance Corporation is not keen on giving that option to all policyholders immediately as it has a very large database and has concerns of data security.

SBI Life profit up 33 pct in FY'11

Leading private sector insurer SBI Life Insurance reported a 33 per cent growth in net profit at Rs 366 crore for the financial year ended March 2011 on the back of increase in renewal premium income.

"We continue to be profitable from operations side as we keep our expenses low. Bancassurance (bank channels) and agency force is helping us to sustain profits," SBI Life Insurance Managing Director M N Rao said.

SBI Life Insurance is a joint venture between State Bank of India and BNP Paribas Assurance. SBI owns 74 per cent of the total capital in the JV and BNP Paribas Assurance holds the remaining 26 per cent.

The total premium income of the insurance company during the fiscal grew by 28 per cent to Rs 12,912 crore. New business premium collection stood at Rs. 7,572 crore, a rise of 7 per cent over previous financial year.

"We are moving aggressively on renewal business. With 74 per cent growth, our renewal premium collection rose to Rs 5,340 crore in FY'11 from Rs 3,063 crore in FY'10," Rao added.

The persistency ratio of SBI Life rose to 69 per cent in FY'11, from 58 per cent last year. Also the Asset under Management jumped by 40 per cent to Rs 40,163 crore at the end of March 31, 2011. The company added 135 branches during the fiscal.

During the current financial year (2011-12), SBI Life would focus on optimizing bank channel usage for product distribution.

"We will focus on the bancassurance model. We plan to open 75 new branches by middle of June this year for which we have IRDA approval," he added.

The company is also looking at increasing the workforce by up to 15 per cent during the current fiscal. We will increase the staff strength to about 8,250 from 7,300 at present.

On plans of capital infusion, Rao said SBI Life is a well capitalized company and all expansions would be funded by internal accruals.

"In the current fiscal we are targeting a 35 per cent growth in total business premium from Rs 12,912 crore at present. With this we will be able to fund all the expenses," Rao added.

ICICI Prudential Life FY 11 PAT at Rs 808-crore

Private sector ICICI Bank today said that its life insurance subsidiary--ICICI Prudential Life Insurance Company (ICICI Life)--has clocked a profit after tax for FY 11 at Rs 808-crore as against Rs 258-crore in FY 10.

Assets increased by 19 per cent to Rs 68,150-crore as at March 31, 2011, from Rs 57,318-crore in the year-ago period, the bank said in a press release issued here.

The other subsidiary, ICICI Lombard General Insurance Company (ICICI General) has clocked a loss of Rs 80-crore in FY 11.

"The company has provided Rs 272-crore during Q4 2011 towards additional motor pool losses pursuant to the IRDA order of March 12, 2011. After taking the same into account, ICICI General reported a loss of Rs 80-crore," the company said in the release.

Its gross premium income in FY 11 increased 28 per cent to Rs 4,408-crore from Rs 3,431-crore in the year-ago period.

A majority of other subsidiaries, including ICICI Securities, the asset management company and international subsidiaries in Canada and the UK had a flat year in FY 11, the bank said.

Profit from the AMC was at Rs 72-crore while ICICI Securities' profit was at Rs 110-crore, it said. Its Canadian subsidiary's profit was at CAD 33-million while the profit from the UK subsidiary stood at USD 37-million, it said.

The bank's Chief Executive and Managing Director, Chanda Kochhar, said international subsidiaries accounted for around 25 per cent of the bank's overall business in FY 11 and it will keep it in the 22-25 per cent range for the ongoing FY 12.

BNP Paribas may increase stake in SBI Life JV to 49%

BNP Paribas Assurance, the joint venture partner in SBI Life Insurance, may raise its stake to 49% in the JV at market value as and when regulations allow.

Foreign partners can now hold up to 26% stake in an insurance company. A proposal to increase FDI to 49% is lying with the parliamentary standing committee.

Meanwhile, the Insurance Regulatory and Development Authority (IrDA) is working on the IPO guidelines as the companies complete 10 years. Three companies, ICICI Prudential, HDFC Life and SBI Life, have completed 10 years of operation. As per the current norms, companies can tap the public market only after completing 10 years of operations.

SBI Life is not in a hurry to tap the public market. "We don't need capital at the moment. We have not taken any capital from the promoters in the last three years so here is no hurry to go public," said SBI Life MD and CEO MN Rao.

"We also need to see what the options available are if we list, whether the public is holding 25% or 10%. In case of 10%, we may reduce our stake and so BNP Paribas will have its veto power. But if it is 25% public shareholding, then we don't know who will reduce it."

The company reported 33% increase in net profit to Rs 384 crore during the fiscal year 2010-11 from a year-ago period. New business premium income of the company grew by 7% to Rs 7,572 crore. SBI Life's total premium income went up by 28% to Rs 12,912 crore.

Its renewal premium recorded a growth of 74%, thus the persistency increased by 69% against 58% a year ago. It aims to raise its new business premium growth by 35% and its total premium collection by 32% during this fiscal.

Pvt Life insurers drop market share in FY11

The private sector life insurance industry, comprising of 22 companies, after being hit by the regulations announced by Irda in September 2010, has only clocked 3% growth in new premium income 2010-11.

The LIC which has seen its composite premium income growing by 22% to R86,445 crore in 2010-11 has gained market share of almost 4% to 68.7% in terms of premium and 7% to 77% in garnering policies in the year. The industry has grown by 15% in new premium income to R125, 826 crore in 2010-11.

“Our Ulip to traditional policy ratio is estimated at 60:40 in 2010-11. We will like to maintain this level,’’ said DK Mehrotra, MD, LIC. Mehrotra said LIC is targeting a growth of 15% in policies and 25% in premium income in 2011-12.

The total premium for the entire private sector life insurance industry is pegged at R39,381 crore in 2010-11.

Some of the well known private sector life insurance companies have recorded a negative growth in 2010-11.

Bajaj Allianz Life Insurance at R3, 462 crore has seen a negative growth of 22% in new premium income during 2010-11. Other companies which have scored negative growth in new premium income during the reporting period are Reliance Life (23%, R3, 035 crore), Birla Sun Life (30%, R2, 077 crore).

Another development that brings cheer to LIC is that all major private sector life insurers have lost market share.

Although ICICI Prudential Life Insurance retained its number one position among private life insurers by recording a growth of 24% in total premium (R7,861 crore), it lost market share of over 3% during the year.

SBI Life which has recorded a total premium of R7, 571 crore during the year has lost its market share by 89 basis points. However, the company reported a 33% growth in net profit at R366 crore for 2010-11. “We are ploughing all out profit back to our operation,” said MN Rao, MD and CEO, SBI Life, adding that the company is targeting a growth of 35% in 2011-12. The persistent ratio of SBI Life rose to 69 % in FY11, from 58% last year.

Also the asset under management (AUM) jumped by 40% to R40, 163 crore at the end of March 31, 2011.

HDFC Life which has grown by 25% to R4,065 crore during the year has lost its market share by around 2%.

Some bancassurance players like Star Union Dai-ichi Life Insurance and Canara HSBC OBC Life Insurance, India First Life Insurance have done extremely well.

Star Union Dai-ichi Life Insurance has mobilsed a total premium income of R759 crore and gained a market share by 57 bps, while Canara HSBC OBC Life Insurance saw its premium income rise by R823 crore and gained a market share of 42 bps.

India First Life Insurance recorded a premium income of R705 crore in the reporting period and has gained market share of over 1%.

K Sahay, MD and CEO, Star Union Dai-ichi Life Insurance said, “We could sell overall premium worth R935 crore and registered a growth of 73% during the financial year. Our Ulip to traditional products comprise 90:10 in terms of premium and 70:30 in terms of number of policies. There was some impact of the Irda regulations on our business. We could sell only 98,000 policies during the year, as against the previous year’s mark of 108,000.”

Prashant Tripathy, director, strategic planning and business development, Max New York Life Insurance, said, “Post Ulip regulation period a true picture on how the sector performance is panning out to be. While on adjusted individual first year premium basis where the total industry and private insurers recorded a decline of 19% and 35% respectively during September to March 2011, Max New York Life’s grew by 8% to R1,081 crore

Drive your way to cheaper car premiums

The Insurance Regulatory and Development Authority's (Irda) decision to revise third-party insurance premium rates upwards is going to push up your car insurance costs. The new structure for charging third-party insurance premiums will be applicable to all new policies as well as the ones renewed on or after April 25. The move will lead to third-party insurance premium rates for private vehicles and two wheelers going up by up to 10%. What's more, the insurance regulator has also stated that henceforth, the premiums are to be reviewed and adjusted annually based on formula that has been arrived at. This formula takes into account parameters like average claims cost as well as the frequency of claims for each class of vehicle and cost inflation index for the year of review.

However, the insurers will have to honour the existing annual contracts in their current form till they expire. That is, if you have bought a new policy or renewed the existing one say in December 2010, you will not have to shell out additional premium as per the new schedule of charges. Since third-party liability cover is mandatory - even before a vehicle makes its way from the showroom to the road -you need to buy the cover and there's little you can do to reduce the premium, given the regulated charge structure. Then, if you are buying a comprehensive motor insurance policy, there are other customary parameters that come into play. These include age of the vehicle, price, engine capacity and the geographical zone, on which you have limited control. However, there are several other measures you can take to make sure that your total car insurance bill stays within manageable limits.

ING Life Insurance ties up with Vizag co-op bank

ING Life India, part of the ING Group, has tied up with Visakhapatnam District Central Co-op Bank in Andhra Pradesh.

The tie-up gives access to ING Life India to make its products available to more than 60,000 customers of the co-op bank through its 28 branches spread across Visakhapatnam, Anakapalli, Narsipatnam and Yelamanchili.

Commenting on the tie-up, T K Uthappa, director - sales, ING Life India, said, “ING Life India has a strong network of tie-ups with co-operative banks across India. We have been keen to develop our network in Andhra Pradesh, and this tie-up gives us the right start in the region to reach out to our customers to help them manage their financial future.”

Visakhapatnam District Central Co-op Bank is the fifth district central cooperative bank that the company has tied up with in AP.

B Satya Rao, chairman, Visakhapatnam District Central Coop Bank, said, “With the tie up we will now be able to add one more service to our customers by offering life insurance products.”

LIC regains market share, private company slip

Private life insurers have seen their new business growth slow down to a mere 2% even as Life Insurance Corporation regained market share with a 23% jump in premium collections to Rs 86,444 crore for the financial year 2010-11. Life insurers have found it a challenge to grow business after new regulations came into effect from September 2010.

According to data collated by the Insurance Regulatory and Development Authority, private life companies' growth came from group insurance. They posted new business premium collection of Rs 39,281 crore. Premium from individuals, which excludes payments for group policies made by corporate, shrunk by 4% to Rs 3041 crore for the private life industry.

But Life Insurance Corporation (LIC) managed to beat the trend due to three factors; firstly, its economies of scale allow it to sell single premium policies. Secondly, it has a strong base of traditional products (non unit-linked plans) which were unaffected by the guidelines; and thirdly, its group retirement products have done very well.

Following the sharp growth in new business premium, LIC's market share in premium from new policies has jumped four percentage points from 64.86% in March 2010 to 68.7% in March 2011. The other companies among the top five in terms of market share include ICICI Pru Life (6.25%), SBI Life (6.01%), HDFC Life (3.23%) and Bajaj Allianz (2.75%)

For private companies, besides the inability to sell policies that were predominantly investment products, there were two other limitations. Most private life companies were under pressure from their promoters to shift focus from topline to profits after turning in losses for over eight years. Also, private companies were hit by their inability to sell pension plans which constituted a large chunk of their business.

The performance of the insurance industry this year comes out better than it actually is because IRDA numbers give full credit for single-premium policies. These are covers where premium for subsequent years is collected in the first year. If, like in other markets, the collection from single premium plans were annualized, the private life insurers would not have recorded any growth.

Last year, following charges by Sebi that life insurers were selling mutual fund schemes under the guise of unit-linked life insurance, the insurance regulator cracked down on life companies and came out with stringent norms. The new guidelines drastically reduced charges that companies could deduct from the investment component. They also forced insurers to offer a minimum level of insurance with every policy. Following the new norms, customers, particularly high net-worth investors, did not find it worthwhile to route their stock market investments through unit-linked policies. Pension plans, which constituted 30-40% of premium for several companies, also took a hit after IRDA made it mandatory for life insurers to guarantee a minimum level of return.

PNB to finalize life insurance partner by June

The country second largest public sector lender, Punjab National Bank (PNB), intends to finalize the partner for its life insurance foray by June.

"We hope to finalize the partner this quarter," Punjab National Bank Chairman and Managing Director K R Kamath said.

The bank short listed 10 entities from 41 and further it was narrowed down to three, he said.

The three short listed life insurers include Bharti AXA, Aviva and Metlife.

The bank will finalize the partner for life insurance business based on the evaluation of the proposals submitted by these insurance companies, he said.

If PNB picks up stake in any life insurer, either domestic or overseas partner will have to dilute stake in the insurance firm.

Aviva India is 74:26(%) per cent joint venture between FMCG player Dabur India and UK-based Aviva Plc while Bharti AXA Life Insurance is joint venture between Bharti Enterprises and AXA of France.

Metlife India stakeholders include Jammu and Kashmir Bank, Shapoorji Pallonji and other investors besides Metlife of the US.

Last year, PNB announced its plans for a strategic partnership with an insurance player. The bank had said it has decided to participate in the life insurance venture through "a corporate agency tie-up along with equity participation in an existing Indian life insurance company".

PNB is among the few banks with a large branch network which does not have a stake in a life insurance company.

Last year, PNB decided to part ways with it foreign partner in a proposed life insurance joint venture it set up four years ago.

PNB bought the entire 26(%) per cent stake held by Principal Financial Group and the 32(%) per cent participating interest of domestic firm UK (Berger) Paints in Principal PNB Life Insurance Company Ltd.

PNB's stake in the proposed joint venture was 30 per cent, while that of Vijaya Bank was 12(%) per cent.

Japanese crisis lifts demand for suppliers’ extension cover

Demand for suppliers' extension insurance cover from manufacturing companies has picked up following the recent crisis like the earthquake in Japan and floods in Australia. Suppliers' extension is offered as an add-on to business interruption cover, which insures business interruption due to any material damage or loss to supplier due to natural calamities or other accidents.

"There are a lot of enquiries, mostly from auto companies. Domestic companies have also become aware of this policy. Companies have suffered losses due to problems at the suppliers' end," said Bajaj Allianz General Insurance assistant vice-president VP Sharma. The overseas suppliers' policy, however, is covered in case of mega policy where the sum insured is more than Rs 2,500 crore. "Tariffs apply to policies above Rs 2,500 crore. We are seeing more demand from domestic players. There is increased enquiry from small and medium enterprises and manufacturing companies," said Bharti Axa General Insurance MD and CEO Amarnath Ananthnarayan.

Insurance company executives said the demand for covers goes up whenever there is a tragic event. Interestingly, domestic companies are also looking for such covers to insure any business interruption at the supplier's end. After having seen huge losses due to recent catastrophes in Japan and Australia, most reinsurance companies are now restricting the overseas supplier's extension to damage caused by fire, lightening, explosion and aircraft damage (flexa).

According to Rajiv Kumaraswamy, head of reinsurance at ICICI Lombard, reinsurers are now restricting the suppliers' extension cover to flexa risk. So in most policies, damage due to natural calamities is normally not covered. Large risks are heavily reinsurance-driven. Around 90% of the risks in such cases are reinsured. Reinsurers provide insurance to insurance companies.

"Indian insurance companies have taken a hit during recent catastrophes like the floods in Australia. The general awareness and benefits of this policy have risen following the recent events," said a senior executive of a non-life insurance company. S Narayan, MD and CEO of Iffco Tokio General Insurance said it is a difficult policy and they are extremely cautious on this cover as it involves huge risks.

Prospective insurers may well need higher capital base

A spiring entrants to the insurance industry would now be required to start their ventures with a higher initial capital base than the prescribed level of Rs 100 crore.

At least two insurance companies that are expected to secure approvals for starting operations in the current financial year have increased their initial capital base to Rs 200-500 crore, after the Insurance Regulatory Development Authority’s (Irda) advised them do to so.

“Initially, we were considering starting the venture with Rs 100 crore, which is the minimum capital required. However, after analysing our business plans, Irda advised us to increase this to Rs 200 crore. So, we pumped in more than Rs 200 crore,” said an official of a financial company, which had already announced its plan to foray into the general insurance business.

Another official at a financial services company which plans to enter the life insurance business, said the company had raised the initial capital base to Rs 500 crore after consultations with the regulator.

According to the industry sources, though the regulator cannot force companies to bring in more capital, it can prescribe it, whenever required.

An Irda official said though the minimum capital required to start an insurance business is Rs 100 crore, the regulator prescribed the capital requirement based on the business plan of a company. “We have no intention to change the minimum capital requirement. However, if a company plans to expand very fast, then Rs 100 crore is obviously not enough. We also access the promoter’s financial health and then prescribe a capital level which, we feel, would be required to meet the solvency norms,” he said, adding if a company started a business with more capital, it gave additional comfort to customers.

“With the changes in regulations, margins have taken a hit. Hence, it is quite logical for the regulator to ask aspiring players to pump in more money,” said an industry expert.

The changes in regulations for unit-linked plans had resulted in the industry coming under pressure on profitability, both for life as well as non-life insurance companies.

Since September 2010, when the new norms for unit-linked plans were introduced, sales across the life insurance industry had taken a hit. In most cases, policy sales declined by 25-40 per cent.

According to industry experts, the new norms may also exert pressure on most companies recording underwriting profits in the life insurance industry.

The non-life insurance industry had reported underwriting losses in motor and health portfolios, which account for more than 65 per cent of the industry. While the loss ratio for car insurance was estimated at 150 per cent, for health plans, the loss ratio stood at 120-130 per cent.

Importance of critical illness cover

In today’s day and age research shows that there is no specific age to develop a heart disease which requires sophisticated heart surgery or any other medical condition. So, it is a must to be prepared for any expensive medical costs of life-support equipments or payment of doctors/specialists to survive. These are times of high stress, anxiety and unhealthy life styles which further increases chances of health care costs.

Being sick takes a toll on one’s health as well as finances. One has to bear the medical costs as well as the loss of income (if one happens to be the breadwinner). What would happen if one also has a home loan (or any other loan) in his/her name?

To save you from this all you need to have is a critical illness cover in our banc assurance home loan insurance policy, which will keep your EMIs for your home loan from bouncing but also covered the medical bills instead of eating your savings during contingency.

It is very simple to obtain such a cover. You just need a simple declaration of your health. There may not even be a medical check-up. We all are aware that if one has secured savings it facilitates one’s speedy recovery.

In fact an ICICI Lombard analysis also indicates at a worrying pattern in the occurrence of various lifestyle diseases in men and women alike! ICICI Lombard's Health Research Cell analyzed the claims distribution data of the past two years from the company's group health portfolio. The results clearly showed that critical diseases such as cardiac ailments, cancer, kidney or renal failure and stroke are affecting people at an early age. It shows that there is an immediate need to address these health risks that affect a large number of individuals and increasingly so at a younger age.

The cost of involved in treatment or procedures of critical illnesses is usually very high, which may be difficult to provide for by an individual's savings alone. So, it is essential to prevent the risk of these lifestyle ailments through health insurance that provides comprehensive protection against critical or life endangering diseases such as cancer , coronary artery bypass graft surgery, heart attack, end stage renal failure, major organ transplant , stroke, paralysis, heart valve replacement surgery, multiple sclerosis cancer, heart attack, stroke and kidney failure etc.

A critical illness cover offsets such risks by helping one focus on health as it takes away the monetary stress. Careful evaluation of both existent and imminent health risks based on factors such as age, gender, heredity and lifestyle is basis on which one can gauge the insurance needs and choose the right cover. Some general insurance companies have comprehensive home loan insurance policies, which pay off the loan, insure the home and simultaneously provide cover against critical illnesses.

These policies include cover for

· Losses to structure and contents of home

· Living expenses while one is off work due to the ailment.

· These policies also ensure that the loan EMIs are not dishonored in case of loss of employment in the event of such illnesses.

Even in case of unfortunate death or permanent disability caused by an accident, the total sum assured is paid off to the insured. So you should opt for a policy that covers multiple individuals under the same loan in case of joint loans. Before taking a policy, make sure you go through the different exclusions in the insurance contract which may prevent payout in certain circumstances.

The policy's premium usually depends on

· the age of the applicant,

· loan amount,

· loan tenure,

· sum insured and

· Applicant’s occupation.

The risk in all financial liabilities can be nullified with adequate insurance cover. A critical illness cover takes care of immediate and future financial requirements arising from a severe ailment so that the savings are intact and used in the way initially planned. It is not possible to prepare for everything but some of the burden can be lifted with a critical illness insurance plan.

Insurance sector eying rural strap

A two-day national conference on 'insurance industry in India: agenda for future' began at the commerce department of Banaras Hindu University (BHU) on Saturday.

Inaugurating the conference, Yogesh Gupta, senior vice president, Bajaj Allianz Life Insurance Company Limited, Mumbai, said, "There is a growing need to increase penetration of insurance industry in the rural belts of the country."

He said that nearly 90% of the life insurance policies from rural areas of the country lapse due to non-payment of premium amount.

He also emphasised the need for spreading awareness and propagate scientific knowledge about insurance policies in the rural areas.

He said that 23 life insurance and 24 general insurance companies working in the country have till date collected over Rs 11 trillion as revenue.

Presiding over the inaugural function, BHU vice-chancellor D P Singh said that the industry-institute collaboration would give a new dimension to the insurance industry in the country. Conference director O P Rai highlighted the details of the two-day programme while welcoming the participants on the occasion.

Seminar concludes: The two-national seminar on 'print to e-resources: challenges and opportunities’ organised by central library, BHU, concluded on Saturday.

Presiding over the valedictory session, registrar, BHU, K P Upadhyaya said that there is a need to create balance between print and e-resources so that one of them does not grow at the cost of another. Both the sources of information are relevant and important, he added on the occasion.

It may be mentioned here that a total of 158 delegates including library experts from as many as 17 universities in the country participated in the two-day programme.

Life Council charts out 10-yr action plan

As the life insurance sector completes a decade post the opening up of the sector, it is going for a rethink. Life Insurance Council, the official representative body of life insurers, is busy preparing a road map for the next 10 years. Some of the broad areas being covered under the vision document for the industry include code of conduct, governance, profitability, growth, product development, distribution, penetration and innovation.

The document is being prepared by a committee comprising P Nandagopal, managing director and CEO of IndiaFirst Life Insurance, Nageshwar Rao, managing director and CEO of IDBI Federal, and Rajesh Relan, managing director and CEO of Metlife Insurance.

The committee was supposed to submit its report before the council a couple of months ago, a industry source requesting anonymity said.

Talking to FE, SB Mathur, secretary general, Life Insurance Council, said, “The industry has already completed 10 years, and hence, it is time to re-evaluate the industry.”

Though the road map was basically meant for internal consumption of the industry, we may discuss the contents of the report with the insurance regulator, Insurance Regulatory and Development Authority (Irda), Mathur added.

Recently, J Hai Narayan, chairman of Irda, had said that in the next three years insurance companies will see changes in distribution set up, marketing techniques, and channels of distribution and terms of regulatory development.

“The agency model that we see right now has serious deficiencies and that requires to be strengthened. I do not think the agency distribution model is going to last very long,” he said.

He said agency model in the traditional form has vanished in large markets across the world. “I do not see why India will be any exception to that particular development,” the Irda chief added.

He said policy holders will gradually have to pay more for motor, health and other general insurance covers as costs would go up due to companies setting aside higher funds for claim settlements.

“I think the demand and supply position in the non-life industry will be such that prices should harden and I expect to see evidence of that in the course of next few years. And I would like to make it even harder as we go along,” said Hari Narayan. He had said that the non-life insurance companies would need to bring in changes in marketing, pricing and modes of claim settlement to become profitable.

“Because of the requirement of increase in provisioning, there will be a reduction in capacity and because of that there will be a hardening of prices,” he added.

Irda has already proposed to increase provisioning requirement for insurers providing motor insurance covers.

Irda had increased the provisions made for motor pool to 153% of book value for the four years till March.

Life insurance premium may come down soon

Life insurance premium to be paid by young people and those between 50-60 years will fall soon as the Insurance Regulatory and Development Authority (Irda) is about to approve the new mortality table that will show higher life expectancy.

The impact will be most on pure insurance or term plans, and senior Irda officials said premium could fall 10-15 per cent. There will be a drop in premium of unit-linked insurance plans (Ulips) and endowment plans, which are insurance-cum-investment products.

“We are studying the data. We will soon approve it,” a senior Irda official told Financial Chronicle. The data were collected by Life Insurance Corporation and private insurers. The new table will be driven by the experience of LIC, which has a market share of over 65 per cent and a major chunk of traditional products portfolio.

The new mortality table is based on 2008-10 data and it was prepared by a committee made up of members of the Mortality and Morbidity Investigating Centre, an affiliate of the Institute of Actuaries of India, actuaries and members from the industry.

Life insurers now use LIC’s 1994-96 table, which was based on claims over the years, because private players started operations only in the past decade.

The table only provides mortality rate per thousand. According to Irda officials, the new table will have location-based information. “The country has been divided into five groups, with states falling into one of the groups based on life expectancy in the state. The new table will also contain data on gender and life expectancy of smoking and non-smoking population," said an official.

GN Aggarwal, chief actuary, Future Generali Life Insurance, said, “There will be a slight reduction in premium. Even though all companies use LIC data, they take into account that the data is old, so reduce the standard premium.”

Aggarwal said insurance companies had been reducing rates across segments over the years. “Premium has gone down 6-7 times in the past one year,” he said.

Mortality table indicates the rates that are to be charged on people of different age groups based on average life expectancy of a person in that age group. As a country develops and prospers, better health care and improved lifestyle lead to an increase in life expectancy, which is reflected in reduced mortality.

A senior industry official said life expectancy has improved by around 20 per cent over the past 10 years.

LIC might tender part of its stake in Siemens AG offer

Life Insurance Corporation of India (LIC) is likely to participate in the open offer by Siemens AG to buy 19.82 per cent stake in its Indian unit Siemens. The offer closes on Wednesday.

LIC, which owns 13.72 per cent stake in Siemens, will take a final decision on the number of shares to be tendered on Wednesday, a top official told Financial Chronicle. “We have not taken a decision yet. We will decide on it on Wednesday,” said the official.

Siemens AG has priced the offer at Rs 930 a share. Going by Monday’s price of Rs 841.35, the offer looks attractive with a premium of Rs 88.65 apiece (9.53 per cent). Siemens AG will be spending as much as $1.4 billion (Rs 6,215 crore) for hiking its stake in the Indian unit from 55.18 per cent to 75 per cent. Know more about Life Insurance

It will also be keenly watched whether MFs, which own stake in Siemens, will participate in the offer. Reliance AMC (4,134,718 shares), DSP Black rock (3,921,063 shares), UTI AMC (3,132,347 shares), Tata AMC (1,494,660 shares), SBI Funds Management (1,400,735 shares), IDFC MF (633,169 shares) and Birla Sunlife AMC (514,629 shares) are the mutual funds that have holding in Siemens.

Last July, during a similar offer by Zurich-headquartered Asea Brown Boveri for its Indian unit, LIC had tendered nearly half of its stake. The open offer for ABB was priced at Rs 900 a share. The stock closed at Rs 801 on Monday.

Gaurav Mehta, derivatives analyst at Ambit Capital, had earlier told Financial Chronicle that he expects LIC to tender at least half of its holding, if not more in the offer, considering the premium. “LIC is likely to tender at least 50 per cent of its holdings in the offer as there would not be any impact cost for the insurer (if they chose to sell their stake in the offer),” Mehta said. HSBC Holdings is the investment banker for the open offer.

LIC set to employ brand consultant

The country's largest financial institution, Life Insurance Corporation of India, has decided to appoint a brand consultant to ensure that it appears as a tech-savvy institution to the public.

LIC has invited expressions of interest from consultancy firms to 'create further value for the strong LIC Brand'. Among other things, the corporation is seeking advice on brand strategy and support on brand tracking and media audit.

Speaking to ToI, a senior LIC official said that although LIC has one of the largest in-house technology teams with over 140 programmers, it does not have the image of a tech-savvy company. The brand consultant would change that.

"When it comes to number of customers, we are the largest life insurance company in the world and we make extensive use of technology to manage such a huge customer database," he said. With assets under management of over Rs 11, 00,000 crore, LIC is the largest financial institution in the country.

"Our ULIP portfolio is also larger than the portfolios of most mutual funds in the country. Yet not many are aware of this" he added. The corporation spends close to Rs 250 cr a year in advertising but this amount is much lower than its market share of revenue. "We are close to 75% of total premium, but in terms of adspend we are probably 25%" said an official.

IndiaFirst Life crosses Rs. 900 cr in new business

IndiaFirst Life Insurance, a joint venture between Bank of Baroda and Andhra Bank along with UK’s leading risk, wealth and investment company Legal & General, on Monday announced that the company had crossed Rs. 900 crore in new business premium in the first 500 days of operations.

“With Rs. 703-crore of new business in 2010-11 and Rs. 200-crore in the 4.5 months of 2009-10, IndiaFirst crossed Rs. 900 crore of total new business in exactly 500 days of commencement of business operations on 16 November, 2009. This is the fastest run rate by any life insurance company in the country,” IndiaFirst Life Insurance managing director & CEO, P Nandagopal said in the financial capital.

IndiaFirst is the fastest to achieve Rs. 100 crore in just 100 days of operations,Rs. 200 crore in 4.5 months of operations, and over Rs. 300 crore in under 9 months from inception, resulting in the highest ever start-up phase productivity in the industry. Know more about life insurance

The company has covered 1.2 million lives during this period. The Total Assets under Management (AUM) with the company at the close of 500 days was Rs. 1,000 crore, Nandagopal said.

PNB shortlists Aviva, MetLife & Bharti Axa for Life Venture

Punjab National Bank, a state-run lender, will choose from a list of life insurance companies - Bharti Axa Life, Aviva Life and MetLife - to buy an equity stake, after dropping Reliance Life and Birla Sun Life , among others, from potential investments. The bank will call for commercial bids this week and evaluate on the tie-up.

The bank will finalize a partner based on the evaluation of the proposals submitted by these insurance companies. "We had divided the companies in three bands. Aviva, Bharti Axa and MetLife are in band 1. We will call for commercial bids this week and decide on a partner," said PNB chairman KR Kamath. Sources close to the development said the bank was interested in taking a substantial stake, and therefore , opted for smaller companies.

In order to achieve scale within the new distribution cost structure prescribed by the regulator, the smaller players are willing to offer a high stake. Off late, it has become essential for insurers to bring down their distribution cost. Bancassurance provides low cost of distribution as insurers sell policies through bank branches. Aviva, MetLife and Bharti Axa had a market share of 2.4%, 2.1% and 1.4%, respectively, at the end of February.

On a year up to February, Aviva saw its new business income slip by 13% while MetLife saw a drop of 45% in new business income. Bharti Axa Life Insurance registered a fall of 1.4% in income by selling new policies. Mr Kamath said the bank would look at non-life venture after forming a life insurance venture.

India to be along with top 3 life insurance markets by 2020

The insurance industry will continue to outpace the rapid economic growth to reach $350-400 billion in premium income by 2020, making India amongst the top three life insurance markets and top 15 non-life insurance markets by the year, a study said.

It stated that the total penetration of insurance (premium as percentage of GDP) has increased from 2.3 per cent in 2001 to 5.2 per cent in 2011. In addition, there has been a vast increase in the coverage of insurance.

“The number of life policies in force has increased nearly 12 fold over the past decade and health insurance, nearly 25 fold,” according to a Ficci and the Boston Consulting Group (BCG) report titled ‘India Insurance — Turning 10, Going on 20’.

This progress has been aided by the dramatic shift in the availability of products, for example: better term, ULIPs, whole life, maximum NAV guarantee, auto assistance, auto pay per km insurance, disease management and wellness.

aid Rajiv Kumar, director general, Ficci, “The report estimates the total insurance premium at approximately Rs 17 lakh crore to Rs 22 lakh crore in 2020 (with life being Rs 15 lakh crore to Rs 20 lakh crore). This massive growth will have a significant impact on India’s ranking in the global insurance industry and is based on strong fundamentals.”

“While the industry has come a long way over the past decade, the big challenge with the industry is profitability. Private life insurers have accumulated losses of over Rs 16,000 crore till March 2010. Similarly, the non-life industry has cumulative underwriting losses of nearly Rs 30,000 crore,” said Alpesh Shah, partner & director, BCG India and author of the report.

The report highlights the importance of insurance in India’s economy, the progress made in the last decade, key challenges associated with the sector and an action agenda for insurance companies and the government,” said Sandeep Bakhshi, chairman, Ficci’s insurance and pensions committee and managing director & CEO, ICICI Prudential Life Insurance Co Ltd.

Progress has been made on the channel front with the emergence of five distinct channels — bancassurance, broking, corporate agency, direct and auto dealers to complement the existing third-party agency and in-house salaried sales force.

“Along with the emergence of multiple channels, the distribution reach has increased manifold, nearly 6-fold for life, and 1.5 times for non-life. During the same time, the Indian market has evolved from a monopoly to a truly competitive market,” the study said.

Life insurance rates to go up on lifestyle & stress

Life insurance companies may need to raise their premium rates on the basis of a new industry-wide study on mortality to revise 15-year-old data.

New data show that emerging risks from urban lifestyles and the spread of new strains of diseases in congested areas are putting more men and women in the working age at risk. This means while the average life expectancy of Indians has improved dramatically since the 1990s, more younger people in urban areas are falling prey to stress and related diseases. Since they are also the largest segment of people who take out life insurance policies, the premium that insurance companies need to charge them will rise.

This has put the Insurance Regulatory and Development Authority in a fix. If it allows the insurance companies to adopt the new table, the new rates will certainly will have to be brought in.

The mortality table has been prepared for the Indian insurance industry by the Mortality and Morbidity Investigation Centre set up by the Life Insurance Council and the Institute of Actuaries of India. The study was made by noted actuary KP Sharma.

The centre studied data furnished by 15 insurers for three years to come out with the first mortality table after the sector was opened up to private companies. The last mortality table was prepared by the Life Insurance Corporation (LIC) in 1996 and was used by the new players with the regulatory permission.

An improvement in the mortality risks would have benefited the life insurance and pension customers in the country as they would have paid much lower premiums and would have received bigger maturity and death claims. But based on the new report, the mortality risks in India on an average has remained almost same.

For instance, it shows life risks of all females have improved below age 24 and above age 45, but has deteriorated between ages 25 and 44. The maximum deterioration for all females has occurred at the age of 34.

Similarly, the life risks of all males have improved in the age category of 20 to 26 and above age 52, but between 27 and 52 (the productive working years), such risks seem to have increased.

Max New York Life Insurance to use social media for customer connect

With a view to leverage the impact of social networking, leading insurer Max New York Life Insurance is mulling an initiative whereby its customers can connect with the company through SMS to get the complaints resolved. "Social media has become an effective tool to increase networking and business development efforts. To leverage the impact of social networking on businesses, we are planning to start an initiative whereby our customers can just send an SMS and get their grievances resolved," the company's Director and Head (Information Technology), Hitesh Arora, told PTI here today. Max New York Life Insurance, a joint venture between MAX India and New York Life International, plans to launch the initiative in the third quarter (Q3) of FY 12, he said. "We want to use the SMS platform for connecting with our customers. Under the initiative, when a customer sends an SMS, he would get either an SMS or an email from our side informing about the registration of his complaint. An executive will then contact the customer and help him resolve the issues," he explained. The company had, last year, started a similar interactive initiative on Facebook by creating a community titled 'Igenius' for parents to discuss opportunities that would help hone their children's hidden talents, he said. "We have around 2-lakh members including parents and experts in the community who share their experiences as well as information. This platform has also helped us in reaching out to the parents to inform them about our new policies for children, thus generating business for us

IRDA issues new rule on telemarketing

Telecallers of insurance products should be trained according to the syllabus prescribed by the Insurance Regulatory and Development Authority (IRDA) and they should inform clients that the call is being recorded and that the client is free to a voice copy, according to the new guidelines issued by the insurance watchdog.

“The training shall be for duration of not less than 25 hours as per syllabus to be agreed by IRDA in matters related to regulations, disclosures, ethical conduct of business and specific instructions to be complied with while making the calls,” IRDA said.

The new guidelines on telemarketing and distance mode marketing shall come into force from October 1. The hours during which calls are made shall be in agreement with the orders issued by TRAI/DoT from time to time.

In all, instances where a policy is issued without obtaining a proposal in physical form, the insurers should provide a verbal transcript of the voice/electronic record of the queries raised and answers on the basis of which the policy has been underwritten, along with the policy bond, the order said.

“No inconvenience, nuisance or harm shall be caused to the clients in the course of solicitation or thereafter. Full disclosures shall be made to the clients under all modes of distance marketing and the requirements of confidentiality, privacy and non-disclosure shall be complied with,” it said.

Also, insurers shall not solicit ULIPs of non-single premium type for annualized premium exceeding Rs 50,000 over telephonic mode (voice as well as SMS). Single premium ULIPs shall not be solicited for a premium of more than Rs 1, 00,000 over telephonic mode.

The insurance watchdog has also banned selling or soliciting variable insurance product over distance marketing mode.

The records pertaining to every call made and SMS sent by a telemarketer/corporate agent/broker that materialises into a policy shall be transferred to the insurer’s location within 30 days of conclusion of sale. In the case of telephone calls, the records transferred shall be the recordings of the entire conversation.

Insurers/brokers shall monitor the calls live by arranging for listening to at least 1(%) per cent of the calls as they happen.

Insurers shall verify at least 3(%) per cent of the calls leading to sales for compliance with the guidelines, by engaging a team of dedicated employees to listen to the call recordings.

The observations made in the course of verification should be preserved in a retrievable form for a period of not less than three years, IRDA added.