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Scooters, motorcycles, cars insurance premium increased from 16th June

June 12, 2019

Motorcycle and scooter sales have already been hit by the on-going slowdown in the auto industry and now increased third-party insurance rates may further dampen consumer sentiments. Increased third-party insurance rates were announced by Insurance Regulatory and Development Authority of India (IRDAI), a move that will help insurance companies to manage rising costs related to third-party claims settlements.

Revised third-party insurance rates will become effective from June 16, 2019. Anyone buying a new two-wheeler after June 16 or renewing their third-party insurance after this date will have to pay the increased rates.

However, IRDAI seems to have looked into consumer interests as well, as new rates are not too high. Revised rate for 75 cc to 150 cc two-wheelers, which is the largest segment, is Rs 752, which is just 4.44% more than Rs 720 earlier. New rate for two-wheelers below 75 cc is Rs 482, which is 12.88% more than Rs 427 earlier.

The highest increase in rates is for two-wheelers in the range of 150 cc to 350 cc. Third-party insurance rates for these bikes are up 21.11%, from Rs 985 earlier to Rs 1,193. The only segment spared from increased rates is above 350 cc segment.

At Rs 2,323, there is no change in third-party insurance costs for motorcycles exceeding 350 cc. Such bikes are fewer in numbers, so mathematically they have a lower probability of being involved in an accident.

IRDAI has also announced third-party insurance rates for electric two-wheelers, which are gaining momentum across the country. Rates for electric two-wheelers are based on their engine capacity, expressed in kW. For e-scooters below 3kW, the rate is Rs 410. For 3kW to 7kW, rate is Rs 639 and for those between 7kW to 16kW, rate is Rs 1014. Any electric two-wheeler above 16kW will be charged Rs 1975.

Federation of Automobile Dealers Associations(FADA) quote on Insurance regulation price hike – “The Automobile Industry is already going through a difficult phase with low sales & subdued customer sentiments. This sudden change in price hike of 3rd party insurance will again dent the pace of sales, specially the 2W category which is already reeling under price hike for mandatory 5 yrs insurance and ABS/CBD implementation.

We feel IRDAI should reconsider the price hike, as this increase would significantly impact the sales volume also affecting the insurance business. However, as the report says the proposed 15% discount on third party insurance on Electric Vehicles (private cars & two wheelers) is a welcome move through the sales of such vehicles are very minuscule.

Going forward, we would require substantial support from all quarters and specially the insurance industry to help the automobile industry to recover from the slowing demand affected by the uncertainty around NBFC and the previous regulation passed for collecting three and five years of premium for new cars & two-wheelers respectively.” – said Manish Raj Singhania, Hony. Secretary – F A D A.


55% Indians still buy insurance via agents

June 11, 2019

In India, insurance continues to be a push product, mostly due to its complex structure that is difficult to understand. No wonder then that a recent report by PwC India Pvt. Ltd, a consultancy firm, done along with the Confederation of Indian Industries (CII) found that even today about 55% Indians buy insurance products from agents or brokers.

The report, titled Competing in a new age of Insurance - How India is Adopting Emerging Technologies, said convenience plays a big role when it comes to buying insurance and 41% stated this to be the reason for opting a particular mode of purchase. Two hundred customers, agents and insurers were interviewed for the report.

“The insurance sector is one domain where a lot of human interaction is needed—not only for the fact that insurance is a push product, but also that it requires a lot of solicitation as it is a long-term commitment. Even in today’s time, almost 95% of online sales of products such as term plans, critical illness plans and Ulips (unit-linked insurance plans) is assisted by call centre executives," said Rakesh Wadhwa, chief marketing officer and executive vice-president, strategy, Future Generali India Life Insurance Co. Ltd.

Insurance penetration, which is measured as the ratio of insurance premiums paid and GDP (gross domestic product) of the country didn’t see a drastic jump in the last 17 years. According to the report, penetration increased from 2.17% in 2001 to only 3.69% in 2017. On the contrary, global penetration currently stands at 6.13%. “The overall penetration is dragged down by general insurance. Life insurance penetration is closer to the global average. Within general insurance, the SME segment in commercial insurance, and the middle income segment (excluding HNIs and low-income groups) in the personal insurance side is lowest in terms of penetration," said Abhishek Bondia, principal officer and managing director,

Life insurance is still seen as a tax-saving instrument, but it rarely makes it to the list of key financial planning tools. “To increase the penetration in the country, it is critical to achieve the objectives of financial inclusion. The need is to run programs like the mutual fund industry did to broaden its base," said Wadhwa.

Intermediaries continue to remain important to the sector but experts said there is scope for traditional channels to adopt newer ways to make the buying process simpler and faster. Bondia said the opportunity to digitise the processes is abundant even in the traditional methods of selling. “For example, once an individual identifies a particular plan with an agent, the entire buying process should be digitised. A policyholder should be able to fill the proposal forms, get assets inspected, and make payment digitally," he said.

Most insurers have apps to make the purchase and claims settlement process easier, but the adoption of these seems to be low. Though smartphone adoption in India has grown at a rate of 19.43% during the period 2015–18 and is expected to grow by 7.80% by 2022, in the case of insurance, the adoption of apps is still at a nascent stage, said the report. “An app needs to have high-frequency usage and exclusive benefits, otherwise it won’t be a good idea to push app downloads where the usage gets limited after a certain point of time," said Wadhwa.

Every insurance product comes with several inclusions and exclusions that are difficult to comprehend by most end-users. According to Bondia, the user experience across various distribution channels is not designed for unassisted sales. People who are accustomed to simple tools like WhatsApp are unable to negotiate with complex insurance apps, he added.

The report said 67% customers prefer to leverage aggregators or online platforms which enable them to make calculated and informed decisions by comparing products. “The regulatory body hasn’t given permission to insurance companies to compare products on their own platforms. Hence, independent platforms provided by web aggregators fulfil that need for comparison and help customers make their own decisions," said Wadhwa.

While the government and the insurance regulator have been taking significant steps to harness the market’s potential, a lot more needs to be done to widen the reach, said experts we spoke to. A massive awareness program talking about the benefits of life insurance is needed to build credibility among customers, said Wadhwa.


Simple & cost-effective insurance soon for homeowners and firms

May 24, 2019

An IRDAI working group has recommended the standardisation and simplification of fire insurance covers for homes, offices, commercial establishments and micro, small and medium enterprises.

The working group's report released by the IRDAI on 20 May 2019 contains several recommendations keeping the target market segments and the perils they encounter in focus.

Three variations of a standardised simple fire insurance cover

The working group has recommended a single product for fire and all allied perils for dwellings of any value. It has suggested that all existing products with varying terms and coverages should cease to exist.

Three variations of this standardised and simple fire insurance cover have been proposed. The first variation which would be the basic and the simplest with highly relaxed terms would be for homeowners.

A slightly more refined version would be for micro commercial establishments with a risk value up to INR50m ($0.715m).

Commercial risks with value at risk from INR50m to INR500m would be offered a moderated version of the existing product.

Terms and conditions, coverage and add-ons cannot be changed in the new product

The product in all three variations would be standardised and worked out such that there would be no possibility to change its terms, conditions, coverage and add-ons. There would be no provision for offering any discount to opt out of any coverage of the product. All cat perils would be covered in the standard base product itself. Home insurance penetration in India is just about 1%. Hardly 3% of houses in India are insured at present.

All perils, especially Nat CATs would be covered by default

At present, cover for many CAT perils does not form a part of the base product and is sold as an add-on following demand from a customer or a sales push. Earthquakes which have caused large economic losses in various parts of the country are not provided for in a default cover in the fire insurance policy and has to be opted for by express demand according to the working group report.

Vulnerability to catastrophes

Around 60% of Indian subcontinent landmass is vulnerable to earthquakes and other natural catastrophes and at least 38 Indian cities lie in high-risk seismic zones. Furthermore, most Indian cities are densely populated and do not adhere to the best architectural layout standards. Also, a majority of both residential and commercial premises do not comply with earthquake and flood resistance safety guidelines. These aspects make them highly vulnerable to natural and man-made perils.

In the existing product, all contents are insured for only one year. The report recommends coverage for a longer term. The panel also recommends that the insured value of apartments in high rise buildings be equivalent to the total saleable price of the unit based on the rates published by the state government concerned.

The policyholder will now have the option to increase this rate if the actual rate is higher than the ready reckoner, but not reduce below it.

Catastrophe bonds recommended

The working group has recommended that the “government funds Nat CAT losses and then buy a reinsurance solution to reduce the volatility of their outgo. There are many countries where Nat CAT losses are funded by government. Two potential reinsurance solutions for government could be: parametric insurance or capital market solutions via catastrophe bonds”.

Low awareness and confusion about products the main reason for low penetration

The poor fire insurance penetration of homes/ dwellings and other real estate properties in India is primarily due to overall low insurance awareness and confusion in the minds of customers due to multiplicity and lack of clarity of the products in the fire category.

Stakeholders can send in their comments on the report to the IRDAI by 7 June 2019.

Source: Asia Insurance Review

GIC Re to remain as the only locally-owned reinsurer after competitor's license is cancelled

May 13, 2019

The Insurance Regulatory and Development Authority of India (IRDAI) has cancelled the registration of ITI Re citing its inability to commence business within the prescribed timeframe.

Established three years ago, ITI Re first received a certificate of registration (CoR) effective 30 December 2016. The reinsurer had two years from the date of the CoR to secure new business and, having failed to do so, surrendered its license.

This latest development means that General Insurance Corporation of India (GIC Re) retains the position as the only local firm in the country’s reinsurance sector. The sector still has many active international reinsurers.

Seeking to service the direct insurance markets in India and other global markets, ITI Re described itself as the ‘first private sector reinsurance company in India’. The firm was promoted by Investment Trust of India (previously called Fortune Financial Services).

According to, Investment Trust of India holds 80% stake in the reinsurance firm while Lakshdeep Investment & Finance and Suraksha Realty hold 10% stake each. In June last year, the Investment Trust of India was planning to sell its entire stake to Go Digit Infoworks Services, backed by Fairfax Group chief executive Prem Watsa. However, IRDAI did not clear the deal.

ITI Re’s failure can be attributed to the lack of a proper credit system and being subjected to the first preference norm.

Source: Asia Insurance Review

IRDAI directs speedy settlement of cyclone claims as losses could rise to $500m

May 10, 2019

Insurance Regulatory and Development Authority of India (IRDAI) has directed general and standalone health insurance companies to ensure that all claims of the affected insured population in the cyclone Fani ravaged Odisha and neighbouring states are surveyed immediately and the payments disbursed at the earliest. A circular from IRDAI issued by member (non-life) Sujay Banarji has said that the time taken to settle the claims should not exceed the stipulated timeline.

“There is an urgent need for the insurance industry to take immediate steps to mitigate the hardships of the affected insured population by ensuring immediate registration and settlement of eligible claims,” said Mr Banarji.

Extremely severe cyclone Fani made landfall in Odisha on 3 May

Tropical cyclone Fani made landfall on the coast of Odisha state on 3 May 2019. This powerful storm has been categorised by the India Meteorological Department as an ‘extremely severe cyclonic storm’—the equivalent of a strong category 3 hurricane on the Saffir-Simpson scale. In terms of wind speed, it was the strongest April storm to strike Odisha state.

Insurers gear up to expedite claims processing of cyclone victims

India Abroad News Service has quoted an assessment by an Indian public sector general insurance company, that the insurance claims from cyclone Fani may touch INR35bn ($500m). As the cyclone was a short period cyclone, the damages may not go up further. had earlier reported the initial losses due to cyclone likely to be in the region of INR20bn ($290m) with majority of claims expected to come from crop, property and motor portfolios.

Insurance companies are not likely to suffer major losses from cyclone Fani as insurance penetration in Odisha is quite low. Most of the properties of the middle and lower strata of the society are usually not insured.

Source: Asia Insurance Review

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