Change in single-pay plans on cards: Irda

Single premium product, which has caught the fancy of the life insurance industry after the change in regulations around unit-linked insurance products, may be in for some reform.

"We need to think about the need of insurance as long-term business. Focus had shifted to three-pay or four-pay products and, even worse, to single-pay products. Industry based on single premium is not good," said Irda chairman J Hari Narayan.

"We need to re-emphasize insurance as a long-term business. The marketing and selling of products (like single premium) have de-emphasized the long-term nature of the business."

Single-pay products are insurance policies where policyholders need to pay premium only once while he or she is covered for the term of the policy. In 2011-12 so far, the total single premium, including group and individual, has gone up by 46% compared to 49% in 2010-11.

Pointing to the decline in business, Hari Narayan said that this is not a function of regulatory changes but because insurance companies have not build the kind of trust required. Internationally, however, he said that de-growth has been even sharper.

He said that 2012 is going to be worse than 2011. "Therefore, 2013 is going to be better. The best way to go forward is to start from absolute bottom. Future is going to be better than what the immediate past has been," he said.

The life insurance industry has seen a 17% fall in new business premium income in April-December 2011 compared with the same period last year.

He noted that there are difficulties in pension products. Such as lack of certain long-term instruments to hedge. Though insurance companies are allowed to invest in interest rate derivatives, it is only for a short period. Hari Narayan said that there are indications that we would like to develop derivatives market on debt front like RBI has come out with swap in corporate debt.

A high-level committee of regulators has suggested that all long-term products should be given tax incentives in order to underpin and strengthen the industry, he said.

Aviva Life Insurance Looks Out For a Bank Partner

Aviva Life Insurance is looking for a bank partner for expanding its insurance network and the deal is likely to be finalized by December-end. “We are in talks with different banks for a tie-up. The negotiations are at initial stages. We expect to close the deal in 2-3 months,” Dabur Group Director Mohit Burman said.

Burman, who is a member of the promoter family of the Dabur Group, holds a majority stake in Aviva Life Insurance, while the UK-based Aviva Group has 26 per cent stake in it. He added that the company is scouting for a bank partner for tie-up. They are yet to decide on whether there will be a stake sale or fresh equity.

He said Aviva Life has participated in the RFP (Request for Proposal) floated by PSU lender Syndicate Bank and is also in talks with other lenders. Aviva Life Insurance is a joint venture between the Dabur Group and UK-based Aviva Group with a paid up capital of over Rs. 2,000 crores.

At present, Aviva Life Insurance sells products through partner banks - Punjab & Sind Bank, IndusInd Bank and RBS. A bank partner would help Aviva Life, which started operations in May 2002, to expand its reach using the bank's branch network. For the full fiscal 2010-11, Aviva Life reported a net profit of Rs 29 crore and total premium collection of Rs 2,345 crore.

Now-a-days, insurance companies are showing interest to sell stakes to banks to have access to their wide branch network.

Faster, cheaper trade draws insurers to direct mkt access

The facility is currently available only to institutional investors in India.

Domestic insurance companies have started using the direct market access (DMA) facility for stock market transactions to keep trades confidential and benefit from extremely low broking rates.

DMA is an electronic facility that allows brokers to offer their clients a direct access to the exchange trading system through their infrastructure, but without manual intervention. The Securities and Exchange Board of India (Sebi) had allowed DMA in April 2008. This facility is currently available only to institutional investors in the country.

DMA EXPLAINED

WHAT’S DMA? DMA is an electronic facility that allows brokers to offer clients direct access to the exchange trading system through their infrastructure, but without manual intervention. Sebi had allowed DMA in April 2008 WHO ARE ITS MAJOR USERS? At present only institutional investors are allowed to use DMA in India. Over 30 per cent of FII trades are estimated to come through this route

Foreign institutional investors (FIIs) are the major users of DMA in India, with more than 30 per cent of their trades coming through this route, according to brokers.

“Since manual intervention is not there in DMA, you can have finer broking rates, which can be as low as 25 per cent of the normal rates,” said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance. “You can monitor your trade on a real-time basis. Also, sanctity of trades is maintained as they are not disclosed,” he added. About 25 per cent of IDBI Federal Life Insurance’s trades in stock markets now happen through DMA.

The Life Insurance Corporation (LIC), India’s biggest insurer, has also shown interest in using this facility for its stock market transactions, according to brokerages officials.

The brokerage rate for DMA in the cash market is 5-6 paisa for a turnover of every Rs 100. For trades placed over phone and manually entered by dealers, institutional investors pay an 10-15 paisa per Rs 100 turnover as brokerage.

“We are using DMA in a small way at present. It works well wherever the liquidity is low, as the identity is not revealed. Also, it gives the full control in terms of execution of the orders,” said Sampath Reddy, chief investment officer (equity) at Bajaj Allianz Life Insurance. “Sometimes on smaller orders or orders with a higher monitoring level, brokers may not pay much attention in those cases DMA will be more helpful,” he added.

Bajaj Allianz Life Insurance started using DMA six to seven months ago. Less than five per cent of the company’s trade in the stock market comes through this route. “The use of DMA will keep on increasing gradually. But you can’t replace traditional broking with DMA,” Reddy added.

Keep your insurance policies in demat form

After shares, you can now keep your insurance policies in demat form. In order to reduce transaction costs and ensure swift modifications in insurance policies, the Insurance Regulatory and Development Authority (IRDA) issued guidelines for electronically issuing policies. IRDA has also laid down guidelines for repositories, which compile and store data about policyholders on behalf of insurance companies.

According to the IRDA, the objective of creating an insurance repository is to provide policyholders with a facility to keep insurance policies in electronic form. They can also undertake changes, modifications and revisions in the insurance policy with speed and accuracy.

This would enable the insurance companies to sell all the polices - life, pension and non-life , in electronic form. With the issuance of e-insurance policies, there will be efficiency, transparency and cost reduction in issuing and maintaining them. According to the guidelines, an insurer issuing e-insurance policies will have to take the services of a registered repository. All such insurance policies in electronic form will be treated as valid insurance contracts.

A certified insurance repository has to have a net worth of at least Rs 25 crores, without any foreign investment. No insurance company can hold over 10 percent or hold any managerial position . The repository has measures to safeguard the privacy of the data to prevent manipulation of records and transactions, before the commencement of operations. An insurer can enter into an agreement with one or more insurance repositories for maintaining the electronic insurance policies.

Hence, insurance buyers will now be able to open demat or e-insurance accounts for their contracts and hold the insurance policies in electronic form. Having an e-insurance account will reduce hassles for buyers. The need to provide age and address proof every time a policy is bought will not be necessary now. It will also save insurers substantial money in printing and dispatching policies.

Similar to demat account

E-insurance will be similar to the demat account for shares and mutual funds. Just like the securities market, the IRDA has proposed 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 will result in efficiency and better customer service by the insurance companies. 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 will grant licences 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 of the individual and names of the beneficiary, assignees and nominees.

Dematerialized policies will be more liquid than paper policies as these contracts can be easily assigned. Whenever the policies are assigned, the assignee will have the same rights as the policyholder.

Pay your LIC premium online Click Here LIC Online Payment

Any insurance policyholder or a prospective policyholder can open an e-insurance account. Opening an account will require identity proof and address proof. There would be no additional costs for a policyholder for opting for electronic policies. You will not be required to go through KYC (know-your client) procedure every time you buy a policy.

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.

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.

ING Life eyes 50% increase in biz from north

ING Life Insurance Company, the insurance arm of the ING Group, is eyeing 50(%) per cent increase in business from the northern region. The region for ING life comprises Jammu and Kashmir, Punjab, Haryana, Himachal Pradesh, Delhi and Rajasthan.
ING Life Insurance (North) Executive Vice-President Ajay Kapoor maintained, as against business of Rs 24 crore in the related period last year they were anticipating surge in business. In addition to new products which comprise both traditional products as well as unit-linked insurance plan (Ulip), the growth would be fuelled by the spike in sales of insurance products for the 3 months from January to March.
Many people still consider insurance as a tax-saving tool which results in business rolling for the insurance sector especially during 3 months from January to March.
Ajay Kapoor was here to launch the traditional insurance product ING ACE. The new plan comes in two variants – ING ACE Pension and ING ACE Life. While the pension variant offers customers guaranteed addition of 8.75(%) per cent p a throughout the 10-year term of the policy. ING ACE Life version offers 7.75(%) per cent or 7(%) per cent p a guaranteed additions, depending on the premium paid. In both the plans customers need to pay premium for only 3 years in an annual mode, and tax benefits.
Kapoor maintained ING Life insurance which ranked 13th among the insurance companies had ascended to the 11th position now, and was expecting to touch the 10th position by March-end this year.

Auto Insurance Policy | Common Exclusions

The insurance policy jargon is such that most of us find it difficult to understand. In fact it is not surprising, that many people don’t even fully read their insurance policy. The reason is that all standard insurance policy contracts are long, boring, confusing, and actually, misleading. For example, in many cases a coverage is excluded in one section, only to be added back later on in the policy. It can get frustrating, that you need a lawyer or an expert, to help you understand what exactly is covered.
There are few common misconceptions about what is and what isn’t covered in an insurance contract, which can be cleared by understanding the policy exclusions.
1. Delivery for Commercial Purposes: If you pick up a job delivering pizzas a few nights a week, there will be no coverage from your personal auto insurance, if you happen to get in an accident while delivering. Commercial deliveries are excluded from the standard personal auto insurance policy.
Always check with the company you are working for, to see if they have a commercial auto policy, that will cover you, while you make deliveries.
2. Company Vehicles: The insuring agreement of personal auto policy excludes, “coverage for the use of a vehicle furnished or available for your regular use.”
For instance: Your employer supplies you a company vehicle. Suppose your spouse also has a car of their own, which is insured under a personal auto policy, which you are named under. If your spouse were driving your company car, she has no coverage under the commercial auto policy.
3. Vehicles not Considered Autos: Auto insurance doesn’t cover all things with a motor. Typical exclusions include boats, four wheelers, motorcycles, go carts, and golf carts.
Before adding this on to your auto policy, first check with homeowners insurance, to see if it’s covered through your policy. In most cases, you have to add a special endorsement, either to your home or auto insurance, or buy a separate policy.
4. Personal Contents: The gadgets we carry in our cars today are not cheap. The combined cost of even a cheap cell phone costs, your CD collection and iPod, you’re easily approaching Rs20, 000 of personal contents in the car. Unfortunately, if someone were to break into you car and steal these items, none of that is covered under your auto insurance policy.
However, personal contents are covered under your home/renters insurance policy.
Endorsements to Insurance Contracts: All of the above are excluded from the standard insurance contract. That doesn’t mean that individual carriers, can’t add them back in. Adding coverage to a policy is called an endorsement.
The next time you’re reviewing your insurance agreement, check to see what your policy is endorsed for. There are a lot of special perks, the better insurance companies will give, that often go unnoticed.
To conclude: It is a good practice to read your insurance contract. Set aside just a few minutes of your time, to get through your auto, home, life, and health insurance contracts. It is bound to prove beneficial and you will definitely learn a lot.

Private insurers to espouse PSU rates for cashless mediclaim

Private non-life insurance companies are expected to implement the packaged rates prescribed by their public sector counterparts for cashless mediclaim.

“Private players have expressed interest in following the packaged rates decided by the PSU insurers,” said a senior General Insurance Public Sector Association (Gipsa) member who did not want to be quoted.
The rates worked out by Gipsa are likely to be 15-20(%) per cent less than what healthcare providers charge at the instant.
“We have in principal agreed to be part of the packaged charge. But the mechanics of packaging needs to be worked out. We will join them, but how soon will depend on how fast they move and incorporate us,” said Sanjay Datta, head of health insurance at ICICI Lombard.
The PSU insurers had graded hospitals fewer than 4 categories – primary, secondary, tertiary and tertiary plus, the Gipsa member said. He added they had made a list of 43 diseases. The rates, 15-20(%) per cent less than what the hospitals charge, will differ on the basis of provider, infrastructure, location and past experiences.
“We have not properly advised on the rates but would like to join them if it brings down our costs,” said T R Ramalingum, head of underwriting, Bajaj Allianz General Insurance.
By packaging rates and stabilising costs, insurers expect to cut expenses. “The claim ratio may not fall but the cost of treatment at individual hospitals will become standardised. The rates may differ from one hospital to another based on location and facilities,” said New India Assurance Chairman and Managing Director M Ramadoss.
State-run insurers have made a list of hospitals in the National Capital Region, Mumbai, Chennai and Bangalore. The rates are worked out on the basis of those accepting the rate packages. The rates include medical procedures and hospitalisation costs.
The public sector insurance companies — New India Assurance, National India, United India and Oriental Insurance —launched a new list for the preferred provider network after they stopped the cashless facility from July. Under the new list, only healthcare providers selected by the four insurance companies are covered by the cashless mediclaim policy.
Meanwhile, the Insurance Regulatory and Development Authority (IrDA) has asked insurance companies to provide the cashless facility if the policyholder is undergoing treatment in a hospital that has been put off the preferred network list.
The insurance industry has been incurring huge losses in the health segment. In the last financial year, PSUs paid claims of Rs 5,400 crore, as against a total collection of Rs 4,900 crore.
For policyholders willing to pay higher premium to be treated at any elite hospital, insurance companies are working on a different product.

Purchasing a policy in India is cheaper

Students going overseas for studies need to have an insurance cover. And the good information is that purchasing the cover in India, if the country or the university allows you to do so, is a cheaper option.
In countries like Canada and New Zealand, universities themselves offer cover to their students. In fact, the cover is integrated in the tuition fees. These universities do not accept insurance purchased by a student in his\her home country. But one can buy an additional cover from India, too.
“The university may not permission that insurance purchased by a student provide coverage in these areas. But, such additional coverage is helpful. For instance, coverage for medical expenses connected to mental disorders may be useful if a student suffers from depression or stress and needs medical aid,” says T A Ramalingam, head-underwriting, Bajaj Allianz General Insurance.
Universities in the US and the UK are more elastic and allow students to buy insurance from their home country, provided it satisfies the requirements of the university. Rasika Iyer, set to travel to the UK this September for her higher education, seems converted by the logic. As she puts it, “After expenses a huge amount for my studies in the UK, a little extra expense to cover medical emergencies seems worth it.”
The policies offered by Indian companies like Tata AIG, Bajaj Allianz and ICICI Lombard are received by most universities in the US. Even if purchasing university insurance is required, students usually prefer to take an additional policy from India.
It makes sense to do so, say financial planners. “A major segment of the insurance offered for students covers medical costs. This is a big benefit if you think how expensive medical treatment is outside India,” says Suresh Sadagopan, a certified financial planner.
“The waiting period at public hospitals can be very long from time to time. When the student cannot afford any delay in treatment, he can use his Indian insurance policy at a private hospital,” says Vinayak Kamath, director, G B Education.
If you have an option to choose between Indian and university policies, purchasing a student insurance policy in India will show to be more cost-effective. It will cost you approximately one-third the amount you will have to pay for the university insurance.
For a sum assured of $100,000 and upwards, a 2-year insurance cover from the university costs Rs 27,000-36,000 ($600-800 per year), at the rate of $1=Rs 45. Indian insurance policies will charge anywhere Rs 7,000-19,000 (between $ 150 and $425) for a related policy.
The university insurance mostly covers only medical expenses, and in certain cases, dental expenses. However, student insurance policies available in India offer certain benefits over and above the medical coverage like:
Study interruption
Say, you meet with an accident and cannot follow your studies further because of medical reasons. In this case, the insurance company will repay the tuition fee paid for that semester.
Sponsor protection
If your parent or guardian who is financing your education expires, the insurance cover will ensure your studies are not broken up. You will be entitled to tuition fees payable up to a certain limit, specified in the policy.
Compassionate visit
In case you get hospitalised for more than 7 consecutive days, the insurance company pays for the return air fare for one of the parents to visit you. Similarly, if either of your parents gets hospitalised in India, your return air fare is enclosed.
Repatriation of remains
If a student dies while studying overseas, expenses incurred for repatriating his leftovers to India will be taken care of by the insurance company.
So, go ahead and choose an insurance product that best suits your needs. It will go a long way in ensuring that you have a smooth sailing during your education years overseas.