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Insurers prepare for claims from cyclone Fani

May 07, 2019

Insurers are preparing to manage claims arising from an extremely powerful cyclone which battered the eastern Indian state of Odisha on 3 May causing extensive damage to property, vehicles, crops and the loss of at least 56 lives. According to risk modelling and data analytics firm AIR Worldwide, Fani is the equivalent of a strong Category 3 storm on the Saffir-Simpson Scale and is the strongest cyclone to make landfall in Odisha since Phailin in October 2013. Several news report have also labelled cyclone Fani as the worst storm in four decades affecting eastern India and neighbouring Bangladesh.

A large number of claims are expected for the damage of property, vehicles and hospitalisation while few claims will be for damage to crops, reported local publication The Hindu Business Line. There is also likely to be fewer life insurance claims as the state’s improved disaster-management efforts limited the number of casualties. However, several insurers note that underinsurance is a major challenge. According to research from Lloyd's and the Centre for Economics and Business Research, India was found to have an insurance penetration rate of less than 1% with the absolute cost of the insurance gap standing at $27bn.

The Insurance Regulatory and Development Authority of India is expected to issue advisories for claims processing in the cyclone-affected areas. There are no official figures regarding total insured losses arising from cyclone Fani yet.

Drawing similarities from cyclone Phailin

According to AIR, Phailin and Fani are the strongest storms to hit India since October 1999. Most recently, cyclone Hudhud made landfall near the city of Visakhapatnam in Andhra Pradesh in October 2014 causing widespread damage to property. AIR noted that cyclone Fani is a very strong storm for early May as other historic cyclones on record have all made landfall in October.

Six years ago, cyclone Phailin made landfall as a Category 4 storm on India’s east coast, killing more than 25 people and generating economic losses of an estimated $700m to $4.5bn according to local governments and Swiss Re respectively. Despite its strength, Phailin resulted in very low insured losses due to relatively few exposures in the landfall region and low insurance penetration rates.

To quantify potential losses from Phailin, AIR had conducted a study for GIC Re, the sole reinsurer in the Indian insurance market. The study revealed that insured losses were only a fraction of total economic losses due a relatively low participation for crop insurance and high proportion of uninsured residential losses in the region. The hardest hit regions also had a low insurance penetration rate.

According to AIR, residential structures in India are generally less resistant to wind and water damage compared to commercial/industrial buildings. However, India’s diverse commercial/industrial building stock continues to change as older structures are replaced with others that are engineered for wind and water resistance.

Source: Asia Insurance Review

IRDAI asks insurers to give crop insurance claim details in vernacular languages

Mar 26, 2019

The general insurers will have to provide details about crop insurance claims to farmers in vernacular languages, apart from Hindi and English, regulator Insurance Regulatory and Development Authority of India (IRDAI) has said.

The IRDAI said it has been receiving various complaints and suggestions in respect of crop insurance claims. IRDAI, in a circular, said there is a need for effective implementation of crop insurance schemes.

Insurance companies should put in place a robust system to register all the requests of individuals loss assessment, and if an individual loss assessment is rejected, a written rejection letter mentioning the reason should be sent to insured, IRDAI said.

"Insurers should ensure that all call centres/toll-free numbers responses should be available in state's official language other than Hindi and English. Wesbites of insurers should disclose crop insurance related details in the vernacular language for the benefit of farmers," it said.

Among others, widespread awareness programmes should be conducted for educating farmers on scheme guidelines, claim settlement process and grievance redressal process, it further said.

Source: Business Today

Aviation insurance losses in India at a 5-year high, touches Rs 2,500 crore

Mar 12, 2019

A series of air-crash incidents have led to insurers incurring a loss of Rs 2,500 crore in India's aviation sector. These incidents include both major and minor instances in the Indian air space.

Industry sources said the period 2014 to 2019 has been one of the worst five-years for the aviation insurance segment.

The size of the Indian aviation insurance market is estimated to be around Rs 5,000-6,000 crore.

What is aviation insurance?

Aviation insurance provides coverage for hull (aircraft) losses as well as liability for passenger injuries, environmental and third-party damage caused by aircraft accidents.

Depending on the type of company, there are various type of aviation insurance products available in the market. These include insurance for the crew members, passengers, spares (aircraft equipment), hull all risk cover for any damage to the aircraft.

For small aircraft flying passengers for business or leisure, there are niche aviation insurance covers available for loss of life and aircraft damage. Helipads are also eligible for insurance cover under this category.

Depending on the size of the cover, the premium range from 0.002 percent to 0.004 percent of the sum assured. There is a revision in annual premiums depending on the claims in the previous fiscal.

Rise in air accidents

In India, the past few incidents include damages to aircraft parts of Jet Airways and SpiceJet in separate incidents, apart from a Su-30 fighter jet crash and KingAir C-90 crash among others have led to losses of around Rs 2,500 crore.

The Sukhoi Su-30 crash in July 2018 had led to insurance losses of Rs 250 crore. New India Assurance, which is the country’s largest aviation insurer, was liable to pay the losses.

The Chennai floods in December 2015, when several aircraft and private jets belonging to companies were damaged, led to insurance losses of Rs 400 crore.

Due to a rise in the air-crashes and airline damages due to flights skidding from the runway, there has been a cumulative increase in risk rating for airlines.

At the time of renewal of insurance policies, this risk rating is taken into account. Higher the risk rating (directly proportional to past claims), greater is the insurance premium applicable. Re-insurers who provide risk cover to insurers against large risks like aviation also increase premiums when there are higher claims.


Insurers see ‘strong potential for revival of pet insurance market’

Mar 04, 2019

Insurance companies are looking to tap into the steadily growing pet market in India by either reviving existing cover or designing new products to suit consumers.

According to data available on the India International Pet Trade Fair (IIPTF) website, the pet population in India has grown from 70 lakh in 2006 to one crore in 2011. On average, six lakh pets are adopted every year.

The Indian pet market is estimated at more than $800 million, and is expected to register strong double-digit retail value growth in the coming years.

Higher disposable incomes, smaller families, sensitivity to animals, and social-media craze are the key contributors to the rise in pet ownership, studies point out. This, coupled with an increase in awareness about pet health, is driving people to look for pet insurance cover.

A number of public sector insurance companies, including National Insurance Company (NIC) and United India Insurance Company, have pet insurance products, and offer cover against death due to accident or disease, and third-party liability.

However, these products have not been able to make a mark due to the lack of awareness and poor inclination among agents to sell these products, as well as the absence of a proper distribution model, said a senior official at one of the public sector insurance companies. Hence, the number of policies sold and premium collected is very small.

NIC sold close to 25 dog insurance policies, and collected a total premium of around ₹4.8 lakh in 2016-17 (collecting an average of ₹19,700 per policy). The state-owned insurer sold around 31 policies in 2017-18; however, the premium figures were not readily available.

“There is a strong potential for revival of pet insurance. If marketed well, it can be a good product,” KB Vijay Srinivas, former director, United India Insurance, told BusinessLine.

Online customers

Online insurance marketplace is in talks with a few insurance companies to come up with a pet insurance product aimed at online customers in the next six months.

According to Premanshu Singh, CEO,, the plan is to customise some existing products offered by a public sector insurer to suit the needs of online customers.

“Currently, insurance companies cover death due to accident or disease. But owners are emotionally attached to their pets and look for health insurance plan. Once the supply is created, then the demand will automatically follow,” said Singh.

The medical cost involved in maintaining a pet is quite high, and is almost similar to what is spent on human healthcare. Hence, there is a need for pet insurance. However, just having a product may not solve the problem. It would call for proper distribution, said Sanjay Datta, Chief – Underwriting and Claims at ICICI Lombard General Insurance.

“You need pet insurance, but there has to be a good number of people who will pay the premium for the same, otherwise it is unsustainable. I do think it will evolve,” he said.

Source: The Hindu Business Line

Merger of 3 state-run insurers to be completed in FY2019

Feb 28, 2019

The proposed merger of three state-run insurance companies is expected to take place during the financial year starting 1 April 2019 (FY2019), according to a report in The Economic Times. The government is moving carefully on the issue.

Finance Minister Arun Jaitley in his Budget speech in February last year had said that the three public sector general insurance companies — National Insurance, United India Assurance and Oriental India Insurance — will be merged into a single entity and listed subsequently.

According to the FY2019 interim Budget document that was released last Friday, the merger is in process and will see completion in the next financial year as various steps are being taken. The next financial year starts on 1 April 2019. The enlarged entity, after the merger is effected, is touted to be India's biggest general insurer.

Mr Atanu Chakraborty, secretary at the Department of Investment and Public Asset Management (DIPAM) told The Times of India, “Mergers take time, and you should take time in mergers anywhere. I am telling you with experience mergers have natural obstacles in terms of culture and manpower if nothing else. So, once you align the business then you should start aligning the culture and manpower and you have to go to the last man to be able to do so.”

The DIPAM had asked the Department of Financial Services to examine the issue of the merger and prepare a fresh road. There is a view within the government that the issue needs to be thoroughly examined.

With the proposed merger hovering over the three insurers, vacancies at these state owned general insurers are piling up. According to rough estimates, in the officers' ranks alone, 600-900 posts have remained vacant over the last one year. At the clerical and subordinate levels, the staff shortage is around 12,000, sources in the companies told Business Standard.

While the government has not imposed any official freeze on recruitment at the three insurers, there has been no fresh hiring since February 2018, as the Finance Ministry had advised the companies to suspend new staffing until the completion of the merger, according to a top official of a public sector general insurance firm.

Source: Asia Insurance Review

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