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Insurance watchdog proposes regulatory sandbox

Sept 27, 2018

The insurance regulator IRDAI has mooted the idea of a regulatory sandbox for innovations in the FinTech and insurance space.

The IRDAI proposed a "regulatory sandbox approach" for a safe and conducive space to experiment with FinTech solutions where consequences can be contained, reports Times of India.

"In the recent past, new insurance companies and insurance intermediaries have carried out technological innovations in their products and services. The authority encourages companies to develop such new technologies to add value for customers, increase efficiency and better manage risks," said Mr S C Khunita, IRDAI chairman.

"Against the backdrop of a fast evolving financial technology landscape, where FinTech solutions are becoming more common and sophisticated, a responsive and forward looking regulatory approach will further enhance the ability of promising FinTech innovations to develop and flourish," he added.

In this regard, the regulator has formed a 10-member committee comprising IRDAI senior officials as well as representatives from insurance companies.

The IRDAI said that among the issues to be examined are: regulatory issues FinTech poses across the insurance value chain; developments in FinTech, practices followed in other financial sectors such as banking and capital markets, and practices followed in international jurisfictions such as Singapore, UK and Hong Kong. The committee would also seek feedback from industry participants and put a draft consultation paper in the next two months.

Source: Asia Insurance Review

Insurance market to be US$280bn industry by 2019-20, says Assocham

Sept 24, 2018

The Indian insurance industry is expected to grow to $280bn by the fiscal year ending March 2020 (FY2020), aided by the government's Ayushman Bharat health insurance scheme, industry chamber Assocham has said, citing a joint study conducted with research firm APAS.

Other growth drivers like rising disposable incomes, the presence of global players and easing of the regulatory regime, also help insurance penetration in the country, the study said.

“Several factors such as a growing middle class, young population and increasing awareness towards the need for protection and retirement planning will enable further growth," it said .

In a statement, Assocham said the study indicated insurance penetration in the country to have reached 3.7% in 2017, from 2.71% in 2001, and that gross premium had increased from INR3.2 lakh crore ($44 bn) in FY2012 to reach INR5 lakh crore in FY2018.

The government's ambitious Ayushman Bharat scheme covering 100m poor and vulnerable families with a cover of INR5 lakh per family of tertiary care and hospitalisation will be transformative for the insurance industry as it would have a major multiplier effect on a host of allied sectors and create lakhs of new jobs, it added.

According to the industry body, private sector companies, which presently hold close to 48% market share in the country's general insurance business and 29% in life insurance, will see a big growth in opportunities.

Source: Asia Insurance Review

Amazon eyes selling insurance

Sept 24, 2018

Internet commerce giant Amazon plans to sell insurance in India, according to filings by its Indian unit with the Ministry of Corporate Affairs, reports BloombergQuint.

Amazon India wants to start by selling life, health and general insurance, say its filings with the Registrar of Companies. It aims to carry out the business of soliciting, procuring and servicing insurance as a corporate agent.

The firm’s digital-payments arm, Amazon Pay, is slated to roll out the specific products, along with other financial products like loans and EMI services.

E-commerce firms whose business model lies in forming a “customer connect” try to “sell everything their customer needs”, including, now, insurance products, said Kalpesh Mehta, partner at auditing firm Deloitte Haskins & Sells.


Amazon will be following on the heels of other online companies which are entering the insurance market. In February this year, payments major Paytm created two separate insurance companies, including a life insurance firm designed to compete even with state-owned behemoth LIC. The company, already backed by Softbank and Alibaba, received a “game-changer” of an investment from Warren Buffet just two weeks ago.

A year ago, India's biggest online commerce company Flipkart, in which Walmart acquired a controlling stake this May, reportedly declared its intent to enter the insurance market.

Flipkart reportedly sought the IRDAI approval months ago, but there’s been no word since. Paytm, on the other hand, received the nod last September, and has incorporated its two insurance companies, Paytm Life Insurance Corporation and Paytm General Insurance Corporation. Amazon, on its part, is yet to apply for a licence, according to sources cited in BloombergQuint’s report.

Room for growth

Overall insurance coverage in India remains quite low in India. Between 2001 and 2017, it rose by just one percentage point, from 2.7% to 3.7%, according to a study by industry body Assocham. The insurance coverage is projected to grow far more quickly in the next few years, with the industry value estimated to rise from the current $72bn to $280bn by 2020.

Source: Asia Insurance Review

Insurers are well positioned to benefit from strong domestic economic growth

Sept 18, 2018

Latest regulatory reforms in India have improved the ability of Indian primary insurers to take advantage of the country's strong economic growth, a credit positive for the sector, says Moody's Investors Service in its first published report on the Indian insurance market.

"Regulations introduced since 2015 have facilitated the access of the insurers to capital and reinsurance cover, while encouraging them to improve the quality of their investment assets and reserve adequacy," said Mr Mohammed Ali Londe, a Moody's Assistant Vice President and Analyst.

"These developments will gradually allow Indian insurers to reap greater benefits from India's strong economic expansion and to increase take-up of insurance from current low levels," he said.

Moody's conclusions are contained in its report , "Insurance -- India, Developing regulatory landscape and strong economy supportive for insurers", released yesterday.

Moody's expects the non-life insurance sector to maintain its double-digit growth over the next 3-4 years, supported by the expectation that India's (Baa2, Stable) real GDP will expand by 6.7% in the fiscal year ending 31 March 2018. Furthermore, annual insurance premium penetration remains comparatively low in India at just 3.5% of GDP, and is likely to increase in line with household spending.

In the year to March 2017, the top 10 Indian non-life insurers reported 30% growth in gross written premiums to INR1,009.3 billion (US$15.6 billion) whilst their top five life counterparts reported a 14% increase in GWP to INR3,740.8 billion. Regulatory reforms are also improving the sector's access to capital. For example, in 2015, the IRDAI raised the maximum stake that foreign investors can hold in Indian insurers to 49% from 26%. The regulator has also made it easier for Indian insurers to launch initial public offerings (IPOs) and for state-owned insurers to privatise, leading to six IPOs over the past 14 months and a further three expected in 2018.

Moody's also says that reinsurance liberalisation will benefit the non-life sector. In 2017 the IRDAI admitted eight private reinsurers to the Indian market, which had previously been dominated by the state-owned General Insurance Corporation of India. The arrival of major global reinsurers will improve Indian insurers' access to reinsurance, supporting their management of underwriting risk. This should also help gradually reverse a recent deterioration in the non-life sector's underwriting performance due to rising claims expenses. Moreover, asset quality and reserving will strengthen.

Regulatory risk-based capital (RBC) rules scheduled to take effect in the fiscal year ending March 2021 will encourage insurers to adopt eligibility criteria for their investment assets that will improve the quality of their investment portfolios.

Separate rules requiring insurers to adopt external actuarial reserving assessments, expected to take effect from March 2018, will likely increase reserving requirements for some in the short-term, putting their profitability under pressure. However, in the longer term, Moody's expect the actuarial reserving to strengthen reserve adequacy and improve pricing discipline, leading to stronger underwriting results.

Source: Asia Insurance Review

Supreme Court steps in again to crack down on uninsured vehicles

Sept 17, 2018

The Supreme Court yesterday ordered all states to amend Motor Accident Claims Tribunal (MACT) rules to make it mandatory to auction uninsured vehicles involved in an accident and transmit the proceeds to the victim or his beneficiaries.

The court directed all the states to implement the rule within 12 weeks. Currently this rule is applicable only in Delhi, reports Zee News.

The MACT awards compensation to beneficiaries after determining issues like income of the deceased, the deduction to be made towards personal living expenses, and the multiplier to be applied with reference to the age of the deceased.

Last month, the IRDAI made long-term third party insurance policy mandatory following a Supreme Court order requiring all general insurance companies to issue a three-year third party (TP) insurance cover for new cars and five-year TP insurance cover for new two-wheelers as a separate product or as part of a comprehensive insurance product.

IRDAI said that after the introduction of long-term motor TP insurance, an insured should be given two options -- long-term package cover offering both motor TP insurance and own damage insurance for three years or five years as the case may be or a bundled cover with a 3/5 year term for the TP liability component and a one-year term for own damage cover.

Regulator looking into telematics for motor insurance

Meanwhile, IRDAI chairman Subhash Khuntia has said that the regulator is going through a report on telematics, that is expected to be finalised by next March, with the technology expected to motivate drivers to drive better.

Currently, motor insurance in India is being priced based on parameters, such as the model of the vehicle, capacity, and geographical use, reports ENS. But in actuality, there are various other parameters to be considered in the assessment of risks that a vehicle is exposed to, such as upkeep of the vehicle, how frequently it is driven, what distance it is driven for, the quality of roads it is driven, the driving habits of driver and so on.

Consideration of these factors will lead to a more meaningful risk assessment and provide a more accurate mechanism for pricing, said Mr Khuntia.

Source: Asia Insurance Review

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