Kingfisher Airlines renews air insurance policy at lower premium

Kingfisher Airlines (KFA) has renewed its annual insurance policy without much hassle as premium rates fell by 37% for its insurance policy, mainly due to the abundant capacity in the reinsurance market. The policy is insured primarily with ICICI Lombard, which is the lead insurer, while Bajaj Allianz, SBI General and IFFCO TOKIO are part of the consortium.

According to a source close to the development, premium rates have come down 37% to 43 crore ($9.5 million) in 2011-12, lower from 60 crore ($15 million) paid in FY11.

"Premium rates have not gone up. This is despite the increase in the number of aircraft during the past one year, increase in landing and increase in passengers. There were not any major claims made by the aviation company," the source revealed.

The airline has coughed up 56 crore towards aviation insurance in FY10 compared with 52 crore in the previous fiscal. The policy covers the hull of the aircraft and liability to passengers. It includes coverage for any third party damage to property or people outside the aircraft.

Aviation policies are mainly reinsurance-driven since underwriting capacity is restricted to 150 crore. The number of accidents determines the premium rates for airlines. Kingfisher had made a claim of $17 million last year for the damage caused to its turboprop ATR that flew from Bhavnagar to Mumbai.

"The capacity available in the market is twice than is required. While there is an intent to increase rates, the capacity remains abundant," said Rajiv Kumaraswamy, head of underwriting at ICICI Lombard. Insurance premium rates had hardened in 2009 with three major accidents - Air France, Yemenia and Caspian Airlines. Prior to this, rates had shot up after 9/11.

The total premium in the airlines sector globally has touched $2 billion in 2010 against $1.6 billion a year ago.

State-run Air India is in the process of renewing its annual policy.

Mass exodus of agents hits life insurance business hard

The slashing of agents’ commission in selling unit-linked insurance policies (Ulips) is costing the life insurance companies dear, with agents leaving the business in droves, resulting in a fall in business.

According to information available with the Insurance Regulatory and Development Authority (Irda), at least 10.45 lakh agents left the business in the financial year 2010-11, against 7 lakh who joined, resulting in a 35 per cent fall, compared with the beginning of the financial year.

“Many insurance consultants, across the industry, are leaving the business, because it is not seen as a lucrative business any more. For a large insurer like us without a banking promoter, the agency channel is a significant contributor to business growth. This is an issue of concern to us,” says Rituraj Bhattacharjee, head of market management, Bajaj Allianz Life Insurance.

The commission for insurance agents for selling Ulips has been slashed from 15 per cent earlier to just about 5-6 per cent now. Ulips account for the biggest chunk of business for life insurance companies and a fall in the business adversely impacts growth of the companies.

In fact, the first year premium for the life insurance industry almost halved to Rs 15,406 crore during the April-July, 2011 period, compared with Rs 24,914 crore in the corresponding period in the previous year.

According to a life insurance agent, who did not wish to be identified, the Secunderabad branch of a leading private insurer was the top branch in the country with each of the 10 agents clocking over Rs 3.5 crore per month in business. Over the past six-eight months, they have not been able to cross even Rs 1.5 crore.

“Churning and attrition among agents is a regular feature. The churn is higher among private companies. However, with commissions being slashed, we have been finding it difficult to recruit new agents,” says the spokesperson of Life Insurance Corporation of India (LIC), the market leader in the business.

It is not just the fall in commission and lower revenues that have prompted agents to leave, but also the lacklustre performance of Ulips that they have sold to customers.

“Both insurance companies and agents have been misselling Ulips to customers by asking them to pay premium for three years and then see their money double in the fourth year. Now, when stock markets have fallen and customers see their investments dwindle, agents are not in a position to face their customers and just want to leave the business,” says an agent with a leading life insurer on conditions of anonymity.

DLF Pramerica Life keen to rope in bank as equity partner

DLF Pramerica Life Insurance Company, an arm of real estate major DLF India headed by KP Singh, is scouting for equity partners. The insurance company is keen to rope in a national bank as an equity partner, apart from offering a distribution tie-up.

“We are evaluating opportunities for a long-term distribution tie-up. I cannot disclose more at this stage,” said Pavan Dhamija, managing director and chief executive officer, DLF Pramerica Life Insurance.

DLF Pramerica Life Insurance is not the first insurance company that wants to divest stakes to mop up fresh equity, expand footprint and increase market share. In addition, DLF Pramerica Life Insurance is not the first insurance company that prefers banks as its equity partner that can also take up distribution over a long term.

Last year, Max New York Life Insurance sold 4 per cent stake to Axis Bank for an undisclosed sum. Axis Bank accounts for about 30 per cent of new sales. Recently, MetLife India Insurance sold 30 per cent stake to Punjab National Bank.

Even as DLF Pramerica scouts for partners, it has signed a pact with Mapusa Urban Cooperative Bank based in Goa for distribution of its products.

While the insurer is busy negotiating deals for equity–distribution partnership with a bank having a national presence, it is not very keen on online sales. DLF Pramerica is joint venture between DLF India and Prudential International Insurance holding 74 per cent and 26 per cent stakes, respectively.

The insurer proposes to add more products. At present, the insurer provides around 12 life insurance products, out of which three are unit-linked plans. “We plan to expand our product offering in the health and pension space. As per our analysis, there is a lot of scope and unmatched demand in these segments,” added Dhamija.

Banks in talks with Reliance Life for picking up stake

After securing the largest-sized foreign direct investment in the Indian insurance sector, with Nippon Life taking 26 per cent stake in it, Reliance Life Insurance, part of reliance Capital, the financial service arm of the Anil Dhirubhai Ambani Group, is open to dilute a “small” stake to banks.

“Some banks have expressed interest for taking some equity in our company. We are open to it,” Sam Ghosh CEO Reliance Capital told Business Standard. He said both parties are in agreement for such small stake sales with banks. And, the bank, in turn, would also work as a bancassurance partner of the insurance company.

He clarified that in the event of a stake sale, it will be the promoters', that is Reliance Capital’s shareholding that will come down. “Whatever might be the extent of the dilution, say three to five per cent, it will be done by the promoters. Nippon Life’s holding will remain at 26 per cent,” Ghosh added.

In May, the bancassurance committee report recommended that banks be allowed to tie up with sets of two insurance companies, life and non-life, for selling insurance policies. Following this, Punjab National Bank said it was taking a 30 per cent stake in MetLife India. Syndicate Bank is also looking to pick up equity stakes in existing insurance companies and invited bids.

Earlier in the day, the Union finance ministry said domestic insurance company holders could bring down their stake to 26 per cent over 10 years, which effectively paves the way for the Reliance Life-Nippon Life deal. Their deal was signed in March, for a 26 per cent stake to the latter for Rs 3,062 crore. However, clearance was getting delayed as the company was yet to complete 10 years of operation. According to the Insurance Act, a company has to complete 10 years before divesting any stake and Reliance Life will be completing 10 years only in January 2012.

“The circular (of today) clarifies the situation. Now we are waiting for approvals from the Insurance Regulatory and Development Authority and the Reserve Bank of India,” said Ghosh. He added that of the Rs 3,062 crore, about Rs 300 crore will be invested in the life insurance company and the remaining part in the parent company, Reliance Capital. “The life insurance business continues to remain robust and we expect to report higher profits in the current financial year,” he said.

Life insurance premium collection down by 22%

The premium collection of the life insurance industry in India dipped 21.8 per cent to Rs 26,794 crore during the April to July period as against Rs 34,249 crore reported in the corresponding period last year.

According to the data collected by Insurance Regulatory and Development Authority (Irda), during the first quarter of the financial year, premium collection of the Life Insurance Corporation (LIC) during the first four months fell by 20.5 per cent to Rs 19,406 crore from Rs 24,430 crore, a year ago. Whereas for the 22 private life insurers, the first year premium collection was down by around 25 per cent to Rs 7,388 crore as against Rs 9,818 crore collected a year ago. Premium collections were down by 28 per cent during April-June period.

However, during the month of July, the industry collection was higher by 41 per cent to Rs 8511 crore as against Rs 6,023 crore collected in June.

GENERAL INSURERS GROW BY 21%
The gross written premium of the general insurance industry grew 21.4 per cent during the first quarter of 2011-12 compared to the year before.

According to data collated by insurers, the industry collected Rs 18,646 crore by writing new policies during April-July period, as against Rs 15,361 crore last year. While, private insurers registered a growth of 24.4 per cent to Rs 7,975 crore, the four state-owned general insurance companies’ collection was higher by 19.2 per cent to Rs 10,671 crore.

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Term insurance plans see renewed interest

Unlike earlier days when term insurance policies were an important part of the business for life insurance companies, the segment saw a fall in consumer interest recently, when unit-linked insurance plans (Ulips) became more popular and remunerative. The term insurance segment is again seeing a renewed interest, according to industry members.

Term insurance policies are plans where the benefit is provided only on the demise of the insured. If the insurer survives the term of coverage, he has to forego the premium paid all along, unlike endowment policies, where a lumpsum is paid back to the insured on policy maturity.

Neither the regulatory body, the Insurance Regulatory and Development Authority (Irda), nor the insurance companies share details on the number of term insurance policies sold. Term insurance policies usually account for just about 5-10 per cent of the total policies sold by companies. But, there has been an increase in awareness and signs of growth in term insurance business of late, industry members said.

“There has been an increase in term policy sales, especially through the internet. Companies, which were selling not even 100 term policies per month, are now selling 1,000 policies, which is very good for the segment,” said P Nandagopal, chief executive officer, IDBI Federal Life Insurance.

With many companies, such as Aviva, Kotak Mahindra Old Mutual Life Insurance and Aegon Religare, launching term policies, which can be purchased online, there has been a lot of activity in the sector, industry members said.

Apart from online sales, an increase in group term plans, availed by banks to provide cover for their consumer loans and savings bank accounts, are also reasons for heightened activity in the segment, according to Nandagopal. Premium rates for term policies are also cheaper than endowment policies because there is no guarantee of the insured getting money back.

After September 2010, when Irda brought about sweeping changes in the rate structure of Ulips, the products, with lower commission, became less attractive for agents to push. Hence, Ulips, which earlier accounted for over 80 per cent of the sales for many insurers, comprises only 50-60 per cent of the sales for many players now. Hence, apart from other money-back policies, term policies have also benefitted from the Ulip crisis.

“After the Ulip crisis, there has certainly been an increase in awareness of insurance policies for protection and that has helped growth in the term insurance segment in the past few months,” says Mani Kant, vice-president,India Insure Risk Management and Brokerage Services.

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However, there are those in the business who believe that Ulips should purely be seen as an investment product, while term and endowment policies are for coverage and that there cannot be one segment influencing the other.

“From an investment perspective, investors looking for protection alone, would prefer term plans because they offer higher covers at lower costs. Investors, who want protection along with the flexibility to meet anticipated needs over the long term like child’s education, marriage, purchase of a new home and retirement, would opt for traditional or Ulips,” said Suresh Agarwal, executive vice-president, Kotak Mahindra Old Mutual Life Insurance.

Life cover premiums dip 28% in June quarter

In another sign of weakening investment environment, the life insurance industry witnessed a 5 per cent decline in its total premium collections for the quarter ended June on the back of a sharp fall in new business premium during the quarter even as the renewal premium witnessed a double- digit growth.

According to the data released by the Life Insurance Council on Monday, the industry witnessed a 28 per cent drop in its new business premium from Rs 25,522 crore last year to Rs 18,282 crore by the end of June 2011. The industry, however, witnessed a 13 per cent rise in its renewal premium from Rs 32,959 crore in the quarter ended June 2010 to Rs 37,221 crore in June 2011.

The total collection for the industry dropped from Rs 58,559 crore to Rs 55,523 crore.

The industry, however, saw its total assets under management (AUM) cross Rs 15 lakh crore mark to touch Rs 15,04,629 crore against Rs 13,50,850 crore last year.

Experts say that Ulip investments have gone down.

“Investors are very wary of the market now,” said SB Mathur, secretary general, Life Insurance Council. “The total premium collections show a dip because last year the numbers in the first half grew very sharply and thus the base grew high. I expect that the numbers for the full year will be in line with what they were last year.”

The insurance industry grew aggressively in the first five month of 2010 (between April and August) as they anticipated the change in the Ulip guidelines from September 1, 2010.

“If you consider the new business premium collected in last two years for the same period, the industry’s premium collection has grown at 13 per cent CAGR despite a fall this year,” said the Life Insurance Council statement.

The industry has also witnessed a fall in the number of its insurance agents by around 4 lakh as it has come down from 28.16 lakh last year to 24.27 lakh now.

Experts say that companies are unwilling to retain less productive agents now.

The life Insurance industry’s contribution to infrastructure development however continues to be robust and the investment in infrastructure has risen to Rs 2,00,235 crore from Rs 1,42,445 crore.

In need of a lifeline

* Life insurance industry witness 5% decline in its total premium collections for the quarter ended June

* Renewal premium, however, witness 13% rise from Rs 32,959 crore in the quarter ended June 2010 to Rs 37,221 crore in June 2011

* Total collection drops from Rs 58,559 crore to Rs 55,523 crore

* Ulip investments down, say experts

Birla Sun Life to wipe out Rs 1,575 cr loss in 4 yrs

Private insurer Birla Sun Life Insurance (BSLI) that for the first time reported profit in 2010-11 is expecting to wipe off its accumulated losses in the next three to four years. BSLI has accumulated losses of Rs 1,575 crore.

Speaking to Financial Chronicle, Mayank Bathwal, chief financial officer at BSLI, said, “We have been reporting profits since the last five quarters including the first quarter of this fiscal. We expect it will take another 3-4 years to wipe out the accumulated losses depending on the rate of growth.”

The insurer reported a gross profit of Rs 144 crore for April-June 2011 as against Rs 9 crore in the corresponding quarter a year ago. “This was primarily driven by the growing size of in-force book, balanced product mix, lower new business strain and better expense management,” the company said in a release.

The Embedded Value of BSLI, which reflects the value of future profits embedded in the in-force policies written by a life insurance company, increased from Rs 3,816 crore as at March 31, 2010 to Rs 4,108 crore on March 31, 2011. Net profit for last financial year was Rs 305 crore against a loss of Rs 435 crore in FY10.

The company is targeting to grow over 18 per cent in this fiscal. “Industry should in a steady state on an average grow at approximately 15-18 per cent. Our goal is to grow faster that the market. In the last three months, our market share among private players has improved from 7 per cent to 8.4 per cent,” said Bathwal.

Since September 2010, when new Ulip guidelines capping the overall charges that could be levied on policyholders were made effective, insurers saw their growth and profitability being impacted.

“Insurers went through a significant transition to create a balanced product portfolio and revamped the business strategy in order to implement new guidelines. Given the fact that in essence the opportunity for life insurance remains very large, and we believe we will see positive momentum in new business sales from Q3 onwards largely aided by base effect,” said Bathwal.

Among private players, BSLI is fifth in terms of new business premium with an improved market share of 8.8 per cent in April-June 2011 up from 8.1 per cent in the first quarter of the previous year.

Assets under management of the insurer scaled up year on year by 19 per cent to 19,984 crore in the first quarter of this year.

Online term insurance 8-10% cheaper

To cover your self from unforeseen risks in future, buy term plans or pure insurance plans online as against those sold through regular channels. Term plans sold online are cheaper as insurers pass on the cost saved on distribution (agent’s commission) and are loaded with features.

Term plans sold online are 8-10 per cent cheaper than those sold through an insurance agent.

Most life insurance companies have begun offering term plans specially designed to be sold online. Many companies such as HDFC Life Insurance will begin offering online term plans soon.

Gaurav Rajput, director (marketing) Aviva India Insurance said, “Online plans are cheaper than the ones sold through regular channels because there is no intermediary between the buyer and seller, thus, saving on commission. Also, the marketing costs of the company and perceived risk of death are significantly lower with higher persistency (because they have opted for the product themselves).”

Term plan or pure insurance policies are increasingly becoming popular with increased awareness about the need for life insurance. Term plans do not have any investment components and maturity benefits. To push online sales, insurance companies are adding more benefits to make their online term plans more attractive.

Suresh Agarwal, executive vice-president, Kotak Mahindra Old Mutual Life Insurance said, “In our online plans, we offer two additional features – step up and step down options. Step up option guarantees additional cover at certain important stages in life at a cost in hassle free manner. One can increase the sum assured without having to undergo any further medical examination.”

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Various stages could be marriage, purchase of house in India, birth or legal adoption of a child. A step down plan is subject to lower amount of cover only if minimum amount of cover available in the chosen plan. On stepping down, premium is recalculated based on revised sum assured. This option is helpful since one’s responsibilities don’t remain the same throughout life.

Aegon Religare that introduced first online term plan in the market plans to overhaul its existing online term plan (called iTerm) with more features. “We will soon launch iTerm with more features,” said Yateesh Srivastava, CMO, Aegon Religare Life Insurance.

You can also enhance your life cover by adding riders to the covers by paying a small additional sum. Popular riders include critical illness and personal accident. Basic features of term plans, both sold online and offline, are similar and suicide is excluded.

However, riders may have their own set of exclusions. For example, ICICI Prudential Life insurance lists engaging in aerial flights (including parachuting and skydiving) other than fare paying passenger on a licensed passenger-carrying commercial aircraft as an exclusion in its accidental death benefit rider sold along with iProtect term plan.

Subrat Mohanty, senior vice-president (strategy and product), HDFC Life said, “We have kept exclusions at a minimum for the basic term plan. The one exclusion that we continue to carry is on suicidal deaths. We shall not be liable to pay if death occurs directly or indirectly on account of suicide within one year from inception date or issuance date, whichever is later. There are separate exclusions for riders if opted for.”

LIC scales down equity investment target

Lower premium collection during the first quarter of the current financial year has led the country’s largest institutional investor, Life Insurance Corporation (LIC) of India, to revise its equity investment target for 2011-12.

The life insurer now expects to invest Rs 35,000-40,000 crore in equity markets, against the earlier target of Rs 60,000 crore for 2011-12.

“Equity investments depend on various parameters like premium collection, sales of unit-linked plans, term plans and interest income. Across the industry, the premium collection has been negative in the first quarter, largely due to the dip in sales of unit-linked plans. Looking at the present trend, it is highly unlikely that we would be able to match last year’s investment figures during 2011-12,” said a senior LIC official

.

Equity investments by the insurance behemoth in 2010-11 shrunk 30 per cent to Rs 43,000 crore, compared to Rs 61,500 crore in the previous year. During the April-June period, LIC’s premium collection dropped 29 per cent to Rs 13,342 crore from Rs 18,740.4 crore in the corresponding period a year ago.

According to data collected by the Insurance Regulatory and Development Authority (Irda), life insurance industry premium collections were down 28 per cent, primarily on the account of the new regulations by Irda, which had hit sales of unit-linked policies across the industry. In unit-linked insurance plans, 90 to 95 per cent of the funds are deployed in equity.

“In a high interest rate scenario, people generally tend to shift to non unit-linked products. Hence, equity investments, going ahead, are expected to be lower,” he said.

LIC invests eight-10 per cent of its total investment corpus in equity markets. The investment corpus largely depends on total premiums collected, interest income, dividends and claims paid during a financial year.

However, scaling down the target is not related to the recent volatility in the Indian equity market, the official said. “Rather, it is an opportunity for us to make some value purchases, as some stocks are trading at 25-30 per cent discount,” the official said, adding during the last 15 days, the insurance behemoth invested around Rs 2,000 crore in equity markets.

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LIC’s total investment in debt and equities during 2011-12 is expected to stand at Rs 1,80,000 crore, down from Rs 1,93,000 crore invested last year.

According to LIC’s Annual report for 2009-10, the total cumulative investment corpus stood at 10 lakh crore. Currently, LIC can invest up to 10 per cent of the capital employed by an 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.

Let needs decide your insurance plan

As Indians, we are naturally very cost conscious and this holds true even for financial products we buy. Premium, the actual amount of money charged by insurance companies for active coverage, is often measured as the cost of an insurance product. An insurance premium for the same service can vary widely among insurance providers. As in the case of consumer durables, the lowest quoted price on an insurance premium may seem like the better bargain, but the level of coverage may also be lower.

Having said that, a cheaper premium is an apt comparison for pure term plans alone, since the benefit offered by all insurers is standard.

For all other types of plans, including health plans, one needs to consider the features and benefits of a product. Customers can review the following guidelines when deciding on subscribing to a particular policy:

Is the life cover offered sufficient? One must definitely ensure whether the life insurance cover is adequate to cover the family in case of an eventuality. While opting for a life cover, one must ensure that the cover is sufficient to cover dependants not only today, but also over the life stage.

Are the features/benefits offered suited to your life stage needs? You must check whether the benefits offered by the policy are suited to your individual needs. A policy providing benefits to customers towards the end of the policy term may be suitable for younger customers, but not for older customers. Similarly, a money-back product may be offering a money-back every three years. However, the amount may be miniscule, compared with the customer’s need. In that case, one is better off choosing an endowment product.

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Term of the policy: If you require a term policy to cover dependants during your working years, then the term of the policy must coincide with your planned retirement age. If the policy term is shorter than the desired term, then you may not realise the full potential of the benefits.

Additional protection: In addition to life cover, policies also provide additional protection against critical illnesses, accidental death and permanent disability. It is important to check whether your policy offers such options or inbuilt riders to protect you for various eventualities.

Monetary factors: For traditional plans, an important factor to consider is the quantum of bonus declared by the company in the past. For unit-linked insurance plans (Ulips), you must also consider the fund’s performance history and its risk-return profile.

It is important to note that new Irda regulations have made most life insurance products more or less similar. Therefore, a key differentiator would be ‘service delivery’ of the insurer. You could look at the company’s records in managing the entire customer life cycle. The other important service differentiator is ‘claims’. A claim is a moment of truth when the family of the policyholder is in distress due to an unfortunate incident in their lives and it is important that the company you choose has a good record in claim settlements.

Therefore, price should not be the only factor for choosing an insurance plan, where benefits are realised in the long term and quite often, not directly by the person investing.

Vijaya, United India in pact for selling insurance

Vijaya Bank has signed a MoU with United India Insurance to distribute the latter’s general insurance products. In March, the bank signed a similar agreement with Life Insurance Corporation of India (LIC).

According to HS Upendra Kamath, chairman and managing director of Vijaya Bank, with more than 8 million customers spread across several segments, a loan book of Rs 51,000 crore, of which at least Rs 30,000 crore is backed by assets, and a pan-India presence of more than 1,200 core banking solution (CBS)-networked branches, there is a tremendous scope for insurance business for the bank in-house, in the life and non-life front.

“One alternative that organisations like us have is to start our own insurance company, whether it is life or non-life. We have chosen to tread the known path of bancassurance, so that we can save precious capital,” Kamath said.

In the past one month since Vijaya Bank started marketing LIC products, it has sold 3,717 LIC policies and collected a premium of Rs 12 crore.

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Referring to plans for marketing United Insurance products, Kamath said the bank has a modest target, but now, the focus is on learning the basics of the insurance business and creating capacity and well-equipped resources to market insurance products effectively. Initially, the focus will be on metros, which will be extended to other regions gradually.

Reliance Life plans to build up traditional products

Reliance Life Insurance Company, a part of Reliance Capital is looking to enhance its offering for protection-oriented plans, as it plans to launch couple of riders that will give the insured added protection at nominal cost. The company has filed two new riders ‘family income benefit’ and ‘waiver of premium’, for which regulatory approvals are awaited.

The firm is also looking to launch competitive online term insurance plan.

“The regulator has already reiterated its focus on protection by increasing the minimum life cover for Ulip policies. We are taking that further by offering opportunities to increase protection beyond the basic life cover,” said Malay Ghosh, CEO, Reliance Life Insurance during a media interaction.

Reliance Life is further considering the launch of fixed benefit simplified health insurance plan for individuals.

The company has, over the last couple of fiscal years, seen significant reduction in its operating losses and is set for turnaround in current fiscal as it aims at profit of over Rs300 crore. The company, which had reported loss of Rs129 crore in FY11, has been making operating profits every month since the last three quarters.

The firm is targeting regular premium of Rs5,000 crore and new business premium (NBP) of Rs3,500 crore in the current fiscal, with half of it likely to come from traditional plans.

The largest private insurance firm (by number of policies) is open to bancassurance strategy, which would help it to significantly increase its topline.

“Reliance Life has been approached by several banks for tie-up with equity partnership and we are keenly exploring innovative partnership models,” said Ghosh.

The company, which has been in the forefront in reaching out to rural mass market, is also launching rural career agent programme, under which it would induct 6,000 agents during the year. It would also recruit 4,000 sales managers during the fiscal, taking the total sales manager’s strength to 12,000.

The company has seen 31% growth in its assets under management (AUM) during fiscal 2011 to `17,855 crore and islooking at doubling it in the next three years.

Indians are ready to pay more for term insurance: Survey

Close to 78% respondents from India are planning to buy life or health insurance products in the next 12 months, according to a recent survey done by Swiss Re.

Life insurance is not as expensive as people may perceive and Indians can afford it, the study finds.

For a term insurance cover, 80% of respondents in India are willing to pay at or above the market price range.

Amit Kalra, head of economic and consulting India, Swiss Re Ltd says, “There is willingness to buy insurance cover and Indians find it affordable.”

“We also got a perception that insurers try to sell more of investment products than protection plans. Lack of customised products was another problem,” he said.

Insurance penetration in India is at 5.1%---life contributes 4.4% and 0.7% comes from non-life.

The survey was conducted across 11 Asia Pacific markets, covering 13,800 consumers between the 20 and 40 age group. People between 20 and 40 age group in India are the most willing to take risk in their lifestyle, such as pursuing danger sports and working for longer hours.

“But, 83% of Indian respondents still consider capital preservation as their top priority in making an investment. This proposition is the highest in the region,” added Kalra.

The insurable population in India would be 250 million by 2020. Hence, the insurance products should be innovative enough to satisfy the requirements.

“Insurers must demonstrate the benefits and their value propositions to meet the needs of consumers,” Amit Kalra says.

In India, 71% of the respondents are concerned about increasing medical expenses, the study finds.

But, lack of awareness about long-term healthcare products, where premiums are locked in for multiple years, is the reason why healthcare market is not picking up.

LIC ordered to pay accidental cover of Rs 2.82 lakh

The consumer protection forum ordered to Life Insurance Corporation (LIC) on Monday to pay Rs 2.62 lakh to a complainant as accidental cover of a policy within 30 days of the order.

Complainant Shobha Tandon, a resident of Vishnupuri, had filed the complaint for payment of accidental cover of policy purchased by her husband. In her petition, she claimed that her husband Anand Kumar Tandon had purchased seven policies from LIC and one of them had accidental cover.

Complainant Shobha Tandon, a resident of Vishnupuri, had filed the complaint for payment of accidental cover of policy purchased by her husband. In her petition, she claimed that her husband Anand Kumar Tandon had purchased seven policies from LIC and one of them had accidental cover.

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Anand Kumar Tandon died at Tundla Railway station in an accident on February 2, 2008. The LIC paid the insured amount of all the policies but did not pay the amount of policy having accidental cover. Shobha Tandon claimed that she did correspondence with LIC, but the corporation did not release accidental cover amount. Since her husband died in an accident and she was nominee of all policies, she was entitled to receive the accidental cover amount.

Anand Kumar Tandon died at Tundla Railway station in an accident on February 2, 2008. The LIC paid the insured amount of all the policies but did not pay the amount of policy having accidental cover. Shobha Tandon claimed that she did correspondence with LIC, but the corporation did not release accidental cover amount. Since her husband died in an accident and she was nominee of all policies, she was entitled to receive the accidental cover amount.

LIC appeared in the forum and admitted that claimant was nominee of all policies of Anand Kumar Tandon. The corporation had demanded certain information and documents such as First Information Report, final report filed by the police and post-mortem report, but the petitioner did not comply as a result her claim for accidental death policy could not be admitted.

LIC appeared in the forum and admitted that claimant was nominee of all policies of Anand Kumar Tandon. The corporation had demanded certain information and documents such as First Information Report, final report filed by the police and post-mortem report, but the petitioner did not comply as a result her claim for accidental death policy could not be admitted.

Follow IRDA guidelines on insurance policies

It is not unusual to see insurance-seekers as well as those who have bought policies to rely heavily on their insurance agents for advice and help regarding operational issues. Insurance companies, therefore, invest heavily in training and rewarding their agents.

On the flipside, however, there are agents who sell insurance on a part-time basis and drop out when the situation turns unfavourable, leaving policyholders in the lurch. This is especially true in the current scenario, where reduced commissions have made many to abandon their job as insurance agents.

The agent's job does not stop at selling a policy to you and delivering the documents thereafter. They are required to help you further with paying renewing premiums, arranging to get changes (like those of address) effected, exercising the switch funds option, top-ups, partial withdrawals, policy surrender as also guiding your dependants with the claims process in the event of your demise.

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If you happen to be one of those who have been left in the lurch by an agent, you need not be disheartened. Remember, your agent is just an intermediary between you and the company, and you can always go straight to your insurer to get any issue resolved. Besides, the Insurance Regulatory and Development Authority (( IRDA)) has put in place detailed guidelines for handling such 'orphan' policies.

If the agent closes shop, the insurance company is under obligation to assign an official or another agent to service the policy and offer help to such policyholders. Typically, insurers transfer the servicing of such orphaned policies to their in-house cells set up specifically for the purpose. The policyholder will not be affected much in such cases. The insurer informs them about the change, asking them to get in touch with the company directly if the need arises.

Things could be a bit complicated if your agent happens to be your bank that acts as a bancassurance agency channel for your insurer. If the bank and the company decide to sever ties, the former may stop servicing your policy. Again, it's the insurer's responsibility to take charge of such policies and its call centre will become your point of contact.

This apart, there could be a situation where you voluntarily wish to dissociate yourself from your agent due to poor quality of services. In such a case, you can bring this to the notice of your insurer who may decide to take over the servicing of the policy or assign the job to another agent. However, there is very little scope of you getting a new agent as companies usually do not accede to such requests.

Reliance Life eyes over Rs 300 cr profit in FY12

Private sector life insurer Reliance Life Insurance has said it will turn profitable in the current financial year and is eyeing an over Rs 300-crore profit in 2011-12.

Speaking about the financial health of the company, Reliance Life said the profitability and capital efficiency of the company has improved a lot in the last 24 months.

“In 2009-10, the loss was reduced by 80 per cent over the previous year. In the last financial year, the loss was brought down even further by 55 per cent. As a result, there has been no capital infusion since August 2010,” Reliance Life Insurance Executive Director and President Malay Ghosh said.

The company has also drawn plans to revisit its business strategy this fiscal by focusing on product mix, new distribution model and increased rural penetration.

On new product strategy, Ghosh said, “The strategy will focus more on protection than investment and the company has filed two new riders that gives customers the option of increasing protection at a nominal cost”.

The company is awaiting regulatory approvals for the same, he said.

Reliance Life is introducing a ‘family income benefit’ rider, which will give a family over 12 per cent of the sum assured annually. This will be for the next 10 years or balance policy term, whichever is longer, in case of death of the life assured.

This will be in addition to the life cover under the base policy.

The company also plans to launch another rider which will ensure that in case of unfortunate loss of life of the insured, apart from the life cover under the basic plan, the family will also continue to get full survival and maturity benefits of the policy.

“This option is normally attached to Best child plan. However, we are keen to make it available for all plans,” Ghosh noted.

Reliance Life had launched its first reimbursement health policy last year. The company plans to launch another simplified policy with a fixed benefit this year.

It is also looking at launching an improved competitive credit shield product that can be bundled with loans of any type on a voluntary basis by the customer to cover the loan outstanding in case anything happens to the loanee.

“A number of times, the family are left with the burden of such financial liabilities if the main earning member dies. This product offers protection against such situations at a relatively lower cost.

The product will cover all types of loans, including mortgage loan, personal loan and educational loan,” he said.