Insurance agents set to turn more professional

Come October and your policies will be managed by a professional agent. Life Insurance Corporation of India (LIC) is planning to segregate its agency force. The agents will come under four categories—LIC Mithra, Advisor, Financial Advisor and LIC Wealth Manager.

Agency force will be segregated on the basis of performance. Each segment of the agents will be trained according to the role specified by the corporation. LIC feels that there is a strong need for reshaping the agency force.

S Roy Chowdhary, excecutive director (marketing), LIC, says, “The main objective is to train the agency force in the most professional manner. By doing so, agents will be able to know more about the products, financial markets and the prevailing economic scenario. This will benefit the policyholders since the agents will be in a position to provide financial advices to them.”

This move will encourage a change of role for agents from merely distributing products to financial advisors.

So how is LIC planning to segregate the agents?

“Performance-based and experience-based segmentation of agents will be more effective. Agents will be provided training as per the specified categories. The category depends upon the kind of polices each agent deals with. For instance, agents who deal with high net worth individual (HNI) policies will be trained accordingly,” says LIC official.

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This could also help in retaining agents in the industry. The Indian insurance industry has been facing a challenge from the agency force. The life insurance industry has been witnessing large scale agents drop outs for few months.

Agents have welcomed such a move, saying it will help prevent mis-selling, among other things.

“This move will help the policyholders. Agents need to play the role of an advisor along with distributing products. It increases the level of customer awareness also,” says Debiprasad Bhattacharya, a Mumbai-based insurance agent.

Life insurers' premium mop-up falls

Premium collection of the life insurance industry in India continued to decline in August. During the April-August period, the industry collected premiums worth Rs 71,565.49 crore by writing new policies. This was a fall of 22.07 per cent, compared with Rs 91,833.94 crore collected in the corresponding period last year.

During the April-June period, premium collection was down 22 per cent.

According to data collected by the Insurance Regulatory and Development Authority (Irda), premium collection of Life Insurance Corporation (LIC), in the same period fell 20.91 per cent, while that of private peers, fell 28.72 per cent. While LIC collected Rs 30,912.31 crore, private insurers collected Rs 9,740.87 crore.

However, in August, the total premium collection by the industry stood at Rs 13,857.89 crore, up 62 per cent, compared with Rs 8,511.25 crore collected in July.

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GENERAL INSURERS
Gross written premiums of the general insurance industry rose 24.06 per cent during 2011-12, compared to the previous year.

According to data collected by insurers, the industry collected Rs 23,712.75 crore by writing new policies during the April-July period, compared with Rs 19,144.06 collected crore last year.

While private insurers registered a growth of 25.97 per cent at Rs 9,861.28 crore, the four state-owned general insurance companies' collection was higher by 22.74 per cent at Rs 13,851.47 crore.

LIC retains number 1 spot in life insurance category

From the year 2003 to 2007, LIC reigned supreme in Brand Equity's Most Trusted Brands Survey - in the services list of the survey - the insurance major was the numero uno service brand for five consecutive years.

But call it a reflection of the market dynamics on-the-ground, the big daddy of life insurance in India slipped to No. 4 in the overall services list last year and is ranked No. 12 in the services list this year. The slip is owing to the rise of other service brands, particularly telecom services providers who have kept a scorching and an aggressive go-to-market strategy touching millions of lives across India.

Telecom services and banks may have dislodged LIC from the overall list, but the company still rules the life insurance category. LIC is at No. 1 spot, followed by competitors SBI Life and Reliance Life at No. 2 & 3 respectively. LIC today has 78% market share in the life insurance space and services 28 crore individual policies besides covering more than 9 crore people under group insurance /superannuation schemes and more than 3 crore families under social security schemes.

While LIC still dominates the category by a wide margin, there are clear indications that competition is hard at work to narrow the gap. The Brand Equity's Most Trusted Brands survey reveals that in the four zones, SBI Life comes a close second after LIC in the North zone. SBI Life also beats LIC as the most preferred life insurance brand in Chandigarh. Reliance Life Insurance is the other life insurance brand that has managed to beat LIC in the cities of Chennai, Bangalore and Chandigarh.

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The brand has been quite visible through advertising recently and its efforts at improving distribution two years back through the introduction of the Chief Life Insurance Advisors (CLIA) scheme to leverage cream of its agent pool has also yielded positive results. In less than 24 months after CLIA was first introduced, LIC managed to get close to 15 lakh agents.

The first year premium coming from just the CLIA scheme was so significant, that if the proceeds from CLIA were taken in isolation, it'll be the sixth largest amongst the 22 life insurance companies operating in India. For the year 2010-11, LIC earned Rs 203,358 crore as premium and settled a mind-boggling 183 lakh claims for the same time period paying Rs 52,160 crore.

A rider can help expand your insurance coverage

If you want to increase the coverage of your life insurance policy so that a higher sum insured is paid in case of eventualities like disability or death due to an accident, then going for the disability and accidental death rider with a term insurance policy or a personal accident policy along with a term insurance are suitable options.

A personal accident policy, offered by general insurance companies, is suitable for those who are adequately covered by a separate term insurance policy to take care of natural as well as accidental death. The disability rider is suitable for policyholders who want the convenience of paying only one yearly premium towards life insurance and riders. An accident policy works as a standalone policy and provides coverage up to the sum insured for accidental death and accidental disability.

A term insurance on the other hand, provides the sum insured in the event of the policyholder's death, however, there is no provision for the sum insured to be paid in the event of disability. Hence, taking a disability rider on term insurance allows a policyholder to claim the sum insured for physical disability due to an accident.

In addition, an accidental death rider on term insurance allows the nominee of the policyholder to claim the total sum insured in term insurance, along with the sum insured for the accidental death rider.

“Personal accident policies offered by general insurance companies are more or less the same with the accidental death and disability riders. However, some term insurance disability riders exclude temporary disability, which is covered in a personal accident policy,“ said Sanjay Datta, head of customer service at ICICI Lombard General Insurance Company.

The premium for a 30year-old person choosing a 20-year term insurance with coverage of Rs 5 lakh has to pay Rs 495 for an accidental death benefit rider and Rs 248 for a permanent disability rider from Kotak Mahindra Old Mutual Life Insurance. Similarly, Max New York Life Insurance Company will charge Rs 675 for an accidental death rider and permanent disability rider combined together. The policyholder must, however, take a base term plan for these riders. Typically, a term insurance policy from Kotak Mahindra for the same person will cost Rs 3,119 with coverage of Rs 15 lakh. The whole policy package with riders will entitle the policyholder to receive Rs 15 lakh in the event of natural death, Rs 20 lakh in case of accidental death and Rs 5 lakh in case of total physical disability.

On the other hand, a 30year-old person opting for Rs 5 lakh coverage on a personal accident policy will have to shell out Rs 589 for Royal Sundaram Accident Shield policy and Rs 650 for Bajaj Allianz General Insurance Company’s Personal Guard policy. These policies will pay the sum insured of Rs 5 lakh in case of accidental death or permanent total disability of the policyholder. Also, a policyholder is eligible to claim a certain fixed sum insured depending on his policy terms if he suffers from temporary or partial disability. “The sum assured is also payable on account of disablement coverage (permanent or partial). However, the exact percentage payable will be determined based on the extent of disability and that varies from insurer to insurer. Like in our case, we pay 50 per cent of sum insured if the person becomes incapable of speech or loses hearing capability in both ears,“ said Arun Mehrotra, head of retail underwriting and product development at IffcoTokio General Insurance Company.

“General insurers offer features like accidental medical expenses, ambulance charges, and education fund, which are not available in life insurance riders. So, depending on the policyholder's needs, he can choose the product and insurer that best suits him,“said Antony Jacob, chief executive officer of Apollo Munich.

$100 mn cover for Formula 1 Grand Prix

Insurance excludes instruments, cars and drivers, already covered globally.

As India’s date with the Formula 1 Grand Prix approaches, JPSI, the organiser of the world’s biggest and fastest single-seater motor-racing tournament, has sought an insurance cover of $100 million (around Rs 490 crore) for the event.

JPSI or Jaypee Sports International Ltd is a subsidiary of Jaiprakash Ltd (JAL).

The total cover includes two policies: the first is a $15 million event cancellation policy mainly covering for loss of revenue on account of cancellation of the event due to reasons beyond the control of the organisers. HDFC Ergo is likely to underwrite this.

The second policy, to be provided by Reliance General Insurance Company, is a $85 million terrorism and third-party liability cover. Apart from any terrorist activity, it covers third-party liability risks like personal accident covers for ground crews, instruments of the organisers and property damages.

Roughly 70 per cent of the risk has been reinsured to global reinsurance majors. ACE Insurance Brokers Ltd advised on the reinsurance deal.

The total premiums were expected to be in the region of Rs 7-10 crore, said a source close to the development.

The General Insurance Corporation of India (GIC Re) was ceded 10 per cent of the risk. Twenty per cent of the risk would be retained by the insurers while the remaining would be reinsured by the global players,” the source added. GIC Re is the designated reinsurer in the country.

Since the instruments, cars and drivers are already covered under the annual global policy by respective team owners, the total coverage for the racing extravaganza is lower than other marquee sports events in India like the Indian Premier League (IPL) and the ICC Cricket World Cup 2011. While the World Cup 2011 took a cover of Rs 600 crore, the total sum insured for IPL-4 was around Rs 900 crore, which included a Rs 450 crore cover against terrorist attacks.

The maiden Formula 1 race in India is scheduled from October 28-30 at the Buddh International Circuit in Greater Noida near Delhi and Jaypee Group is the main sponsor of the event. The three-day event includes three practice sessions, one qualifying session and the final race. The 60-lap race will start at 3 pm on October 30 in the 120,000-capacity racing circuit.

Formula 1 is known for some exotic covers, especially for the leading drivers. For instance, last year, two-time Formula One World Champion, Ferrari driver Fernando Alonso, had his thumbs insured for nine million pounds (almost Rs 64 crore)!

Twelve participating teams would fly in 24 racing cars, engines, tyres and pares in separate jets. The other equipment includes radio sets, high-tech gadgets, TV equipment, computers, etc.

Wait for bancassurance norms gets longer

The much-awaited bancassurance guidelines might take some more time to come out. The regulator is considering the reaction to certain issues, such as protests from bank-backed insurance companies and the Life Insurance Corporation of India (LIC).

The bancassurance report, which came out in June, recommended that banks be allowed to tie-up with two types of insurance companies (life and non-life) for distributing insurance products.

Bank-backed insurance companies are protesting against the opening up of the channel, allowing banks to sell products of more than one insurance company. Some feel the channel, if at all, should be opened for only two companies. New entrants opine that banks should be allowed to sell products of multiple insurance companies.

LIC, the largest life insurer, is particularly against opening the channel. While it has a tie-up with at least 20 banks across the country for selling life insurance products, it says if more than one insurer is allowed to tie-up with a bank, it might lead to a “highly questionable business practice”.

“There is no easy solution to the debate on whether the bancassurance channel should be opened up. We in LIC still feel it is advisable to have a tied-agency system with one insurance company, rather than two. If banks are allowed to tie-up with more than one insurance company, then the most likely situation would be evolution of a highly questionable business practice and competition, as had happened in the case of the mutual fund industry,” said Sushobhan Sarkar, executive director (international operations) of LIC.

“It requires a huge amount of commitment from both the insurers and the banks to set up a successful bancassurance partnership. To that extent the Indian financial system has not matured and, in our opinion, banks should be allowed to tie-up with one or, at the most, two insurance companies,” said M N Rao, CEO of SBI Life, promoted by the country's largest lender, State Bank of India.

“Most bank-promoted insurance companies are against opening the sector, as it might start a commission war,” said K Sahay, CEO of Star Union Dai-ichi Life Insurance Co, jointly promoted by Bank of India and Union Bank of India.

There is also the issue of upfront payments and on equity, which, after protests from banks led by Punjab National Bank (PNB), the insurance regulator might allow. This means banks might be allowed to treat payments and discounts on equity separately, rather than treating it as an advanced commission.

The draft report recommended that any upfront payments or equity discount offered by insurers to banks be treated as advance commission and amortised within three years of the deal. “This could have an effect on future deals, so the regulator is seriously examining it,” said sources. The issue is important, in the wake of the proposed deal between PNB and MetLife, which saw the bank getting nearly Rs 750 crore as discount.

Insurers cannot reject claims for delay in intimation: IRDA

Insurance companies cannot mechanically reject claims on technical grounds, such as delay in intimation and submission of documents, particularly if the delay is due to unavoidable circumstances, according to the insurance regulator.

Besides benefiting policyholders, whose claims for settlement are rejected on technical grounds, the regulatory move will also help the industry curb unnecessary expenses on litigation and court settlement.

The Insurance Regulatory and Development Authority (IRDA) has issued a circular to this effect to life and non-life insurance companies as it has received many complaints on rejection of claims.

The regulator said policyholders should intimate and submit the required documents to their insurance company within the stipulated time so that the insurer can start post-claim activities such as investigation, loss assessment, and provisioning and claim settlement.

However, when there is delay in intimation or submission of documents due to unavoidable circumstances, the regulator has emphasised that this should not prevent settlement of genuine claims.

“We expect a lot more enforcement from the IRDA on rejection of claims and timely settlement of claims. It is definitely a step in right direction from the regulator,” said Mr Amarnath Ananthanarayanan, CEO and MD, Bharti AXA General Insurance Company.

The reduced litigation will lower costs for both, the insurer and the policyholder, added Mr Amarnath suitable clauses

The regulator has asked the companies to incorporate additional clauses in policy documents to assure customers that their claims can be rejected only on the basis of sound logic and valid grounds.

“The circular is in policyholders' interest. It clarifies that if the policy has a stipulated time period for submission of claims, the insurer must also now include a clause that a delay due to unavoidable circumstances will be condoned,” said Ms Kalpana Sampat, Chief-Branch Operations, Underwriting and Claims, ICICI Prudential Life Insurance.

The circular pointed out that policyholders would lose confidence in the insurance industry if their claims are rejected purely on technical grounds.

Licence rules eased for life insurance agents

For life insurance agents, a breather is at hand.

New guidelines spelled out by the Insurance Regulatory and Development Authority (IRDA) on Tuesday said agents need to show a lower persistency ratio of 50% to keep their licence, compared with 75% earlier, with effect from July 1, 2014. Meaning, if an agent sells 100 policies in a year, he has to worry about getting only 50 of them renewed instead of 75 earlier.
Persistency, thus, indicates an agent’s ability to generate policy renewals and premiums in time.

Debiprasad Bhattacharya, a Mumbai-based insurance agent since more than two decades, said he is a relieved man. “This is a very good move by Irda for people like us. It eases the pressure. This would also mean a lesser number of agents will move out of the life insurance industry compared with what we saw last year,” he said. Failure to comply with the 50% ratio will lead to termination of the agent’s licence.

Earlier in February this year, Irda had said agents needed to maintain a 75% persistency rate in both, the number of policies and premiums.

In the revised norms put out on Tuesday, Irda said the average persistency rate has to be at least 50% in terms of number of policies — the premium collection limit is no longer a performance metric.

The objective of the modification is to ensure a high level of persistency of life insurance policies, Irda said.

“This new guideline will help the LIC. Agents should get more serious about collecting renewal premiums. They should do their best to avoid any lapsation in policies. Earlier, 2 out of 10 life insurance agents left the industry, according to our study. Now fewer may leave,” said R R Dash, zonal manager, LIC. MN Rao, managing director and CEO, SBI Life Insurance, said the new guidelines “will help insurers maintain a professional agency force”.

Curtains on highest NAV guarantee cover plans

In a move that may further dent sales of unit-linked life insurance plans (Ulips), the Insurance Regulatory and Development Authority (Irda) is set to scrap the highest Net Asset Value (NAV) guarantee products.

Highest NAV guarantee products accounted for a fifth of Ulip sales after pension plan sales dried up following the stringent norms on Ulips from September 2010. Under the highest NAV guarantee products, customers are guaranteed returns based on the highest NAV a policy has achieved during the entire term of the insurance plan.

According to insurance industry sources, the insurance regulator is wary of a “systemic risk” associated with the way the funds are managed. Such products lay more emphasis on debt instruments and run the risk of a heavy sell-off in equities in case of a stock market fall.

CHANGE OF COURSE

* Notification by month-end

* Irda not renewing any such products

* Irda won’t approve new schemes based on highest NAV guarantee

* Highest NAV products comprise 20% Ulip sales

* MF players not allowed to have such schemes

“For instance, in the case of highest NAV products, insurers protect the guarantee by appropriately apportioning money in debts. When the market falls, the exposure in debt instruments increases and insurers try to sell equities at marginal profits. If there is too much concentration of such products in the market, a large number of insurers might sell equities at the same time to protect the guarantee, leading to a further market fall,” an Irda official explained.

Leading private insurers like ICICI Prudential Life, HDFC Life, Bajaj Allianz Life and Birla Sun Life all have at least one such product still in the market, but it is very unlikely that any new ones would be launched. The insurance regulator is neither renewing any existing products nor approving any new products. The markets regulator, Securities and Exchange Board of India, does not allow mutual fund houses to sell such products. Life Insurance Corporation of India (LIC) had launched two products — Wealth Plus and Samridhi Plus — which ensured returns based on the highest NAV. However, both have been withdrawn.

“Once the earlier products expired, Irda did not approve any new product based on the highest NAV,” said an insurance company official. “The regulator has informally told us it is not comfortable with such products,” he said. The insurance regulator is not comfortable with the way these products are being pitched to customers. According to industry experts, these products are not expected to do as well as simple equity oriented schemes, since insurers tend to invest substantial amounts in debt.

In addition to these, insurers are also charging an additional “guarantee charge” in these products, which ranges between 0.10-0.50 per cent of the fund value.

Over the last one year, all major life insurance companies launched highest NAV guarantee products and some of the companies also came up with more than one version.

The Life Insurance Council is also examining the issue with insurance companies and is likely to take up the matter with the regulator.

“We are in the process of finding out the details as more or less all insurance companies have at least one such product in their stable. We have asked them to provide details regarding the likely impact if such products are discontinued,” said a council member.

Irda to slash exposure to promoter companies

Draft norms reduce investment ceiling from 25% to 5%.

Insurance companies promoted by corporate houses will not be allowed to invest more than five per cent in group companies, the insurance regulator has proposed.

In its draft guidelines on investment norms, the Insurance Regulatory and Development Authority (Irda) has recommended the overall exposure in promoter group companies should be brought down to five per cent, from 25 per cent.

The move is aimed at curbing the practice of routing funds through insurance arms in group companies. According to current guidelines, an insurance company can invest up to 10 per cent in equity and 2.5 per cent in debt in the promoter’s group companies. Additionally, in infrastructure firms of the parent company, another 12.5 per cent exposure is allowed, which means the total exposure can go up to 25 per cent.

Also, the draft says insurance companies will not be permitted to invest in unlisted debt instruments and/or by way of private placement in the promoter’s group. Insurance players say the regulator is wary of the discounts in prices offered by the promoters, as these issuances are unlisted.

“Investment made in all companies belonging to the promoter’s group shall not be made either by way of private placement (equity) or in unlisted instruments (equity and debt),” said the draft guidelines. The draft guidelines, if accepted, will affect insurance companies backed by large conglomerates such as the Tata group, Birla group, Reliance, etc.

“For instance, the Tata group has a number of blue-chip companies and it is quite natural for Tata AIG Life, its life insurance arm, to have investments in these companies. If the draft guidelines are accepted, then it will severely restrict their investment practices. The same can be applied to the Aditya Birla Group-promoted Birla Sun Life, as well,” says an industry expert. Similarly, bank-backed insurance companies like ICICI Prudential, SBI Life and HDFC Life, too, will have to bring down their exposure in the parent arms to five per cent.

For instance, HDFC Life’s investment in bonds will be impacted, as it has substantial exposure in bonds issued by HDFC Ltd, the promoter group.

When contacted, a senior Irda official confirmed the development. He said the proposed measures should not come as a surprise to insurers, as when the sector was opened to the private sector in 2000, the exposure for promoter groups was capped at five per cent.

“Originally, the exposure limit in the promoter’s group was capped at five per cent. In between, it was raised to 25 per cent. But with the inherent risk associated with exposure in a conglomerate, it is advisable to bring the limit back to five per cent,” the official said.

However, he added, the regulator was open to suggestions, as some companies were going to be affected more than others.

Industry sources, who did not wished to be named, said capping investments in unlisted issuances was justified but if investments in “good” companies were restricted, the policyholders’ returns might be impacted. The argument regarding the inherent risk associated with the promoter’s group did not hold true, as some of the conglomerates had diversified businesses, they added.

Apart from the exposure in the promoter’s group companies, the insurance regulator is likely to keep the exposure limit in a single company unchanged at 10 per cent. This means the investment practice of the largest life insurance company in the country, Life Insurance Corporation of India (LIC), will remain largely unaffected. LIC, one of the largest domestic institutions in the equity market, had invested Rs 43,000 crore in the equity markets in 2010-11. At present, it can invest up to 10 per cent of capital employed by the investee company or 10 per cent of the fund size in a corporate entity, whichever is lower. The capital employed includes share capital, free reserves and debentures or bonds.

Use riders of an insurance plan to increase coverage

To ensure that you are adequately insured against any untoward mishaps in the future, you don’t need to buy too many different insurance policies that your agent recommends to you for earning higher commission. Be a smart investor and check out the riders or attachments offered by your insurance company to expand the scope and coverage of your insurance policy.

Riders are attached to a base policy and provide additional benefit at relatively lower premium. The premium charged for a rider is much lower compared with a standalone policy because the administrative expenses are loaded in the base plan and, hence, not loaded again for riders. This makes riders relatively cheaper.

Riders cover risks arising out of specific situations such as accidental death, critical illness and permanent disability, among others. In the unfortunate occurrence of the event covered by a rider, the insured gets the promised rider benefit. Rider benefits are in addition to insurance sum assured. Say for instance, the life insured meets with an accidental death, the insurance payout will include both the sum assured as well as the rider benefit. The rider premium will depend on the rider sum assured, age of the insured, insured’s health condition and other factors.

Rituraj Bhattacharya, head of market management, Bajaj Allianz Life Insurance, said, “Riders allow you to enhance your cover qualitatively and quantitatively. Moreover, the amount you pay for riders is small when you consider that you would otherwise have had to pay a lot more for a completely new cover for the same benefit. Most customers are usually not aware of the various types of riders available.”

Deepak Sood, chief executive officer and managing director, Future Generali India Life Insurance Company, said, “Some of the covers are generally not available on a standalone basis and, hence, availing them with a rider with some insurance policy is the only way.”

You can tailor-make your insurance policy based on your needs by selecting the right riders. Insurance companies offer a bouquet of riders. Here are the popular riders available on the shelf.

Accidental death or double accident benefit rider: In the event of death of the insured due to some accident, the insurer pays the sum insured, which is generally equal to the original base policy sum insured.

Term assurance rider /additional term benefit rider: It allows the policyholder to increase the life coverage component of the base policy so that in case of any unfortunate event, like death, his family gets a higher sum insured.

Family income benefit rider: On the death of policyholder, this rider ensures a steady flow of monthly income to the heirs of the policyholder.

Waiver of premium rider: In the unfortunate event of death or total disability of the insured, family members of the insured find it difficult to continue the insurance policies taken by the insured. This rider basically waives of the future premiums that are to be paid by the insured in case of such events.

Accident and disability benefit rider: The policyholder is provided with a lumpsum or annual payment in case he meets with an accident that causes permanent, temporary, partial or total disability. In this case, the life insurance continues for the rest of the tenure.

Major surgical/surgical care rider: This rider is helpful in cases where the insured needs to undergo a life-saving surgery. However, the rider will not provide coverage for any treatment that does not require surgery. Also, the insured should go through the list of surgeries that would be covered before opting for this rider.

Critical illness rider: The insured may opt for this rider in case he wants extra coverage for any critical illness. Sum insured is provided to the insured on first diagnosis of the critical illness. The policyholder should go through the list of critical illnesses, which will be covered in the policy. It varies from insurer to insurer.

Insurance companies are innovating and coming out with new riders for their customers. Bajaj Allianz offers unique riders exclusively for women. Under this rider, the policyholder is provided certain sum insured in case she is diagnosed with any critical illness, undergoes any reconstructive breast surgery, complications while she is pregnant or for any congenital disability of the new born. Yateesh Srivastava, chief marketing Officer, Aegon Religare Life Insurance, said, “There are a number of innovative riders that we are considering. These are in the areas of gender specificity, health and income protection. At this point of time, it would be premature to share specific details.”

Most insurance companies are offering riders to their customers to enhance protection. “Offering riders is one of the additional features we give to our customers. Over time, we have seen that persistency ratio (ratio of customers renewing their policy) is better in case of policy with a rider,” said Rajeev Kumar, vice-president, product and pricing, Bharti Axa Life Insurance.

Most companies allow you to buy a rider during the policy tenure, mainly at the start of a policy or on renewal. But some companies do have restrictions so get in touch with your company to know more. In case you have bought a rider and do not need the benefits prescribed in the policy and it does not fit your bill, you also have an option to discontinue the rider on renewal of your policy. But do think through before discontinuing with a rider from your policy, because once you opt out, opting in again is generally not allowed.

However, riders do not have any surrender benefits, as they are risk-based riders. Surrender benefit is payable only when there is a saving component in an insurance policy.

Post payment of the claim amount, the rider may continue or cease depending on the terms and conditions of this rider policy. However, the base policy continues to be in effect.

There is no limitation on the number of riders one can buy. But as per provisions of the insurance regulator, Insurance Regulatory and Development Authority (Irda), the premium in respect of all the riders put together in any policy should not be more than 30 per cent of the base premium.

If the base policy lapses, the rider cover will also lapse and both may be revived based on the policy terms and conditions. The insurer may also allow revival of base policy without riders, but riders alone cannot be revived in isolation. In other words, while the base policy is in a lapsed condition, the riders cannot be revived.

The premium rates of riders vary from insurer to insurer, depending on the definitions of the cover offered under them, the exclusions, target population, selection procedure adopted by the company and the past experience it has in respect of such or similar covers.

Suresh Agarwal, executive vice-president, Kotak Life Insurance, said, “Documents that prove occurrence of the event covered by the rider is necessary to claim rider benefit.” While making a claim, in case of term riders (which enhances life coverage), no other documentation is required, but for other riders, extra documents are needed to prove the occurrence of event. For example, in case of critical illness, documents such as hospital papers and certificate of diagnosis, among others are needed.

Riders also have a separate set of exclusions. For example, in case of an accident death benefit rider, if you are involved in frivolous life threatening activities, such as parachuting and skydiving, or death while under the influence of alcohol or narcotic substances, or you have committed any breach of law, claims won’t be paid. One must carefully go through these exclusions before opting for a rider.

Max New York Life Insurance to hire 3000 people

Jaipur Private Insurer Max New York Life Insurance (MNYL) is planning to roll out three new insurance products this fiscal to fuel its growth. The company has already launched four products this year to take the total tally to 22.

MNYL managing director and CEO Rajesh Sud told ET that the company is studying the needs of customers before launching new products. "Customers basically need insurance for retirement, child education and monthly income. We are designing our products to suit their requirements," he said.

The company will also hire more than 3000 on roll insurance professionals and 20,000 agents this year to increase its penetration. At present the company has 7700 on roll employees and 37000 agents in its fold.

"We will strengthen our agency channel to increase our reach and business. Rather than opening new branches, we are concentrating on hiring trained agents who can understand the needs of customers and service them accordingly," he said.

MNYL has 468 branches across the country with 50 per cent business coming from agency, 27 per cent from bancassuance channel and the rest from other channels like corporate agencies. This year has been good so far for the company. With near 8% market share among private insurance companies, MNYL aims to corner double digit share.

It has clocked a profit of Rs 173 crore in the first quarter - 9 times higher than the last year's profit in the corresponding period. "Even in last fiscal, we achieved 20% growth in revenue earning Rs 5,812 crore and 11% growth in first year premium garnering Rs 2,061 crore. We expect this year to fare better than the previous fiscal," he said.

Aviva Life Insurance may sell 30% stake to Syndicate Bank

Aviva Life Insurance, the local unit of the UK insurer, may sell as much as 30% stake to state-run lender Syndicate Bank to raise its fortunes in a competitive market.

Consumer goods maker Dabur India owns 74% stake in the insurer while Aviva Group owns the rest.

Mohit Burman, director of FMCG major Dabur Group, confirmed that talks are on. "The deal is in process," he said. A board meeting will take place on Wednesday where a decision will be taken on the stake sale, he added.

"Aviva is likely to offer a discount on the face value to Syndicate Bank," said a person familiar with the negotiations.

The insurer, which started operations in May 2002, is following the established route of bancassurance - partnering with banks to sell insurance - for a wider reach.

Aviva Life Insurance has a paid-up capital of 2,004 crore. It is not clear whether the company will issue fresh shares or if the promoters will divest their stake.

Globally, Aviva is a leader in bancassurance and operates through the bank distribution channel. In India, the company sells insurance through Punjab & Sind Bank, IndusInd Bank and DBS. The insurer will certainly benefit from an association with Syndicate Bank, which has over 1,500 branches.

The company made a profit of 29 crore in 2010-11. It had collected 2,345 crore of premium in the last financial year. Total assets under management stood at 7,654 crore. With market share of a little over 1%, Aviva is looking at a bank partner to boost income.

Syndicate Bank had short-listed a dozen insurers for its brownfield foray into life insurance. Ernst & Young is helping Syndicate in the deal.

According to a report by the Insurance Regulatory and Development Authority (Irda), premium collected through bancassurance amounted to 21,947 crore in 2009-10, which is 7.31% of the total premium income of life and non-life insurance sectors.

The Irda report said the discount in valuations offered by insurers to banks has to be treated as commission over a period time. This is expected to affect the deals under way.

There are 17 banks with shareholding in insurance companies. Although banks have entered into pacts to sell policies of insurance companies, insurers have not been able to fully utilise the potential of banks. Of the 80,000 bank branches in the country, just 7,000 are selling insurance.

Many insurers are willing to sell equity to banks which would give them wider reach. Recently, MetLife sold 30% to Punjab National Bank. Earlier, Max New York Life had sold 4% stake to Axis Bank.

LIC increases bonus after two years

After a gap of two years, Life Insurance Corporation of India (LIC) has raised bonus by up to 15 per cent for 2010-11.

The country’s largest life insurer, which reported a 10.3 per cent rise in net actuarial surplus at Rs 22,716 crore for 2010-11, compared to Rs 20,586 crore in the previous year, allocated Rs 21,580 crore for paying annual bonus to policyholders

“The bonus rates have gone up after a gap of two years. We will be providing higher bonus rates under seven plans like Jeevan Anand, Jeevan Tarang, Jeevan Madhur, Child Future Plan, Jeevan Shree I, Jeevan Bharti I and Jeevan Pramukh. This apart, we have also brought in seven other plans under loyalty additions,” a LIC spokesperson told reporters.

For the rest of the schemes, there is no change in the bonus rates. Last year the bonus payout of LIC stood at Rs 19,557 crore. In a bid to arrest the slide in its premium collection, LIC is planning to come up with new products, both under the unit-linked and traditional portfolios.

The insurance behemoth saw a 29 per cent dip in premium collection during April-June of this financial year at Rs 13,342 crore, compared to Rs 18,740.4 crore in the previous corresponding period. In the same period, private insurers saw a 28 per cent dip in premium collection.

“During the same period last year, we had successful products like Market Plus, which generated good revenues. So, going forward, we will be launching similar products, both on linked and non-linked platforms. In the second half of the year, we will see good growth in premium collection,” said S Roy Chowdhury, executive director - marketing, LIC.

In the traditional plans category, which accounts for more than 60 per cent of its incremental sales, the insurer will launch cheaper products, in line with the rates offered by private insurance companies. “Currently, our traditional plans are costlier than offered by the competition. So, we will come out with plans with competitive rates,” he said.

In 2010-11, LIC collected Rs 86,444.7 crore by selling new policies, 22 per cent more than Rs 70,891.5 crore garnered in the previous corresponding period. Total investment in debt and equities stood at Rs 2, 00,000 crore and the solvency margins improved to 154.07 per cent from 153.96 per cent.

LIC is also looking to generate five per cent of its new business income from the bancassurance channel. The corporation has tie-ups with more than 20 banks for selling insurance products, and the bancassurance channel accounted for 1.5 per cent of the first-year premium collection.

“During 2010-11, we collected Rs 1,281 crore as premiums from the bancassurance channel. In the current financial year, we expect this channel to contribute around five per cent to the new premium collection,” an LIC official said.

Private insurers see business growing from this month

Private life insurers, which have been seeing a decline in new business since last August when the new unit-linked insurance plan (Ulip) guidelines came into force, are hopeful of posting good numbers from this month.

“September onwards we are expecting a positive trend because the industry has been facing a sluggish growth since August last year and compared to those numbers, we see signs of growth going ahead,” said G N Agarwal, chief actuary, Future Generali Life Insurance Co.

According to a report from JP Morgan on August 26, capital market sluggishness and base effect may favour life insurance business in the coming months.

“Last year there was a steep decline in the business which was the immediate effect of the Ulip regulation. September 2010 witnessed some spillover volumes from August 2010 backlog and thus strong year-on-year growth from October 2011 can be expected,” the report said. Insurers said growth is usually sluggish in July and August as against the last two quarters of the year.

“The new business premium is cyclical. Usually July and August are sluggish, whereas quarters at the end of the year are comparatively larger because most of the companies run incentive plans by then,” says Anisha Motwani, director and chief marketing officer, Max New York Life Insurance Co (MNYL).

Private insurers feel Ulip norms are the main reason for declining annual premium equivalent (APE), or new business premium, of private life insurers to 38% on a year-on-year basis in July.

“Because of the adjustment period and the top markets fluctuating, the insurance market may see an upward trend going forward,” said Motwani of MNYL.

On a month-on-month basis, the new business premium of private life insurers grew 10% in July while the state-owned player, LIC, witnessed 77% growth.

However, the first-year premium collection declined 28.36% in April-June 2011 compared with the corresponding previous period.

Insurers said lower agent commissions on Ulips are a major concern for decline in the new business premium. The industry has been focusing on traditional products to boost sales.

“Industry’s almost 60%-70% business used to come via Ulips. With Ulips contributing so much to our business, it is obvious for the industry to face de-growth,” said Agarwal of Future Generali.

According to a JM Financial
report on life insurance sector dated August 26, all major private life insurers showed a significant decline in new business premium except MNYL, which saw a marginal year-on-year decline of 5%. The report said ICICI Prudential and Reliance Life Insurance were the main losers in market share on APE basis, marking a decline of 6.6% and 4.9%, respectively.

Regulation on pension products:
“The other reason for the fall in new business premium is decline in the pension products after 2010,” said Motwani.

Pension products had lost their sheen post September 2010 due to the regulation, which mandated offering minimum guaranteed returns of 4.5% on all pension and annuity products.

The Insurance Regulatory Development Authority has come up with a draft on pension products earlier this month removing the guaranteed return. Insurers are showing mixed reaction on this.

Insurance agent dropouts rising:
The increasing dropouts of private insurance agents is also a major concern for the industry. A national-level survey has revealed that dropouts are set to rise 25% in the current financial year. Fixed deposit Interest Rates

“Along with the reduced commissions on Ulips, the increase in the dropout rate of insurance agents may be a reason for the business decline. There may be less number of agents, most may be part-time, but unlike before, there is quality in their services because the regulator wanted more productive and serious agents rather than non-serious ones who hampered the industry’s growth,” said SB Mathur, secretary-general at Life Insurance Council, said.