News . Views . Reviews

Panel to study paying non-life claims in instalments

Oct 17, 2018

The IRDAI has formed a panel to examine the feasibility of paying out general and health insurance claims in instalments.

“Some general and health insurance companies have proposed payment of claims in instalments in respect of personal accident policies and benefit-based health policies as against lump sum payments,” IRDAI said in a circular.

The concept of settlement of claim benefits in instalments will enable the beneficiaries/claimants to receive payments in a series of pre-determined instalments, reports Hindu Business Line quoting the IRDAI circular.

In order to examine the proposal, the regulator has constituted a working group with Mr Suresh Mathur, ED (Health), IRDAI, as its chairman.

Source: Asia Insurance Review

Title insurance makes little headway

Oct 17, 2018

The Real Estate (Regulation and Development) Act [RERA] has taken effect since 1 May 2017 making it compulsory for developers to take title insurance, but to date, not a single state regulator has mandated it.

Section 16 of the RERA requires developers to adopt title insurance; however, the insurance will be mandatory only after the regulator of each state issues a notification about it, notes Press Trust of India. The new law covers residential and commercial construction.

In addition, since the concept is new in India, not many insurance firms have introduced the product. HDFC Ergo launched title insurance in July, making it one of the first such products launched by private insurers.

Furthermore, developers are hesitant to adopt it, saying it may add to costs. According to financial services company Nisus Finance, considering the real estate sector is estimated at about $50bn each year, the potential insurance premium can be in excess of $1bn each year, which can add about INR150 ($2.12) to INR200 per sq feet of cost to the end product, which is steep for affordable housing.

Nisus Finance MD and chief executive Amit Goenka said, "The burden on developers will be massive because they will have to fork up almost 2-3% of the development value of the project upfront to obtain title insurance, apart from undergoing a prolonged and difficult exercise to verify the authenticity of title to the satisfaction of insurers which will add to the transaction costs."

Title insurance provides coverage against financial loss arising from title defects and other irregularities pertaining to property acquisition.

House of Hiranandani chairman and MD Surendra Hiranandani said the key question in adoption of title insurance is the cost. "Hopefully, if there are a large number of takers, the costs would fall. Right now, it is prohibitively expensive and would impact costs and therefore prices. Also, it should be noted that title insurance covers only part of the risks and does not protect from many kinds of litigation and issues," he said.

Source: Asia Insurance Review

Govt to build talent pool for succession in public sector insurance sector

Oct 16, 2018

The government will create a talent pool of officials who will be eligible for fast-track promotions to hold the top positions at public sector general insurance companies, say Finance Ministry officials.

The government run general insurance industry will see a wave of retirement of senior officials in the next two-three years. There are not many who will be eligible to hold the top positions of these companies, reports The Indian Express.

Meanwhile, the post of the chairman and managing director (CMD) at United India Insurance hasn’t been filled as yet as the appointee — Girish Radhakrishnan, chief executive officer, New India Assurance’s London operation — has yet to get regulatory clearance to be relieved from his present assignment. New India Assurance is also operating without a CEO.

Though the merger of three companies United India, National Insurance and Oriental Insurance has been announced, the issue appears to have been placed on the back burner and MoF’s current focus is to strengthen the insurance companies.

Source: Asia Insurance Review

Foreign reinsurers continue to lobby regulator

Oct 15, 2018

Foreign reinsurance companies have made another appeal to the IRDAI to relax the order of preference for reinsurance business in India, before reinsurance contracts are due to be renewed on 1 January.

Despite multiple requests from foreign reinsurers to reconsider the order of preference, IRDAI has maintained that the national reinsurer GIC Re will hold the first right of refusal, reports Moneycontrol.

New regulations for the reinsurance business in India were finalised by the IRDAI at its 28 September 28 meeting that gives GIC Re the first right to accept reinsurance usiness in India.

A senior official at a global reinsurance firm said, “We have made significant investments in the country and would seek an equal opportunity to compete in contracts. Else, we would have not set up a branch presence in India.”

According to the rules, only if GIC Re refuses to write a risk on their books is it passed on to other reinsurers. The second preference will be other Indian reinsurers that have been in business for at least three consecutive years and the third preference will be given to foreign reinsurance branches.

Fourth on the list will be insurance offices in International Financial Services Centre, GIFT City in Gujarat. If they also refuse, the insurer can obtain the best terms for reinsurance from overseas reinsurers with a minimum credit rating of A- from an international financial credit rating agency.

Last year, several foreign reinsurers received branch licences to operate in India, following amendments in 2015 to the insurance law allowing reinsurers to set up branches in India.

Source: Asia Insurance Review

Adequacy of nuclear liability insurance discussed

Oct 12, 2018

Global nuclear industry players and Indian insurance companies met at the two-day India Nuclear Business Platform earlier this week, at which the adequacy of nuclear liability insurance was discussed, particularly with the Indian government planning on expanding nuclear power plants.

The issue is important as India plans to increase nuclear power capacity to 22GW by 2032. At end-March 2018, India had a total installed nuclear capacity of 6,780MW.

At present, nine nuclear power reactors with a capacity of 6.7GW are at various stages of construction, which would take the total installed nuclear power capacity to 13.48GW by 2024-25. In addition, government has already granted approval for another 12 nuclear power reactors with an aggregate capacity of 9GW, reports Business Standard.

The Indian government set up the INR15bn ($202m) India Nuclear Insurance Pool in June 2015, to provide cover corporate liability against any accident at nuclear plants. The cover comes under India’s Civil Liability for Nuclear Damage Act of 2010 (CLND Act). The pool was created as to promote the development of nuclear power in India.

Increasing the pool size leads to higher capital required from GIC Re and the four state-run general insurance companies. Though there are seven other Indian insurance companies with stakes in the pool, such as ICICI Lombard and Tata AIG, their stakes are small. However, the government-run New India Assurance, National Insurance, United India and Oriental Insurance, each contributes INR3bn to the pool.

The Indian side argues that the pool amount is adequate for now, and that the risks are quite unlikely.

It is essentially a matter of perception, said a senior IRDAI official. “India has never reneged on an international commitment, which too the companies should factor in,” said a government official. IRDAI though does not have a a direct role in the discussions which are a commercial issue between the GIC-Re-led consortium and foreign nuclear project developers.

Source: Asia Insurance Review

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