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Investors in Star Health Insurance Company look to exit venture

Feb 09, 2017

Investors in Star Health Insurance Co, including ICICI Ventures, Sequoia Capital and Oman Insurance, have put their holdings on the block as they look to exit a venture that is getting fiercely competitive.

At least two global and two local investment banks have made pitches to PE investors for a mandate to sell the company, two people with direct knowledge of the development said. Of the two sources, one is an investor and another, an investment banker. Bank of America Merill Lynch, Credit Suisse and local players Kotak Mahindra Capital Company and ICICI Securities have participated in the beauty parade in the past fortnight.

But getting a single buyer for many holders’ stake is becoming tough as it had to sell either to a strategic investor or other PE funds in a secondary sale, said investment bankers. “As a company policy, we do not comment on market speculations,” said Star Health in an email response. Bank of America Merrill Lynch, Credit Suisse, ICICI Securities and Kotak declined comment.

Star Health is a joint venture between ICICI Ventures, Sequoia Capital, Tata Capital Growth Fund, Alpha TC Holdings and Oman Insurance Company. “Investors of Star Health have called bankers to give a presentation to mandate them to sell the business,” said one of the two quoted above. “There are some minor glitches and a final mandate will be awarded soon.’’

Indian shareholders own 63.76% while the rest is owned by foreign investors, according to the data available until September 2016. The company has been struggling to meet capital requirement, as it is growing at over 30%. Its gross written premium income expanded 39.32% between April and December 2016.

The company, with a capital base of Rs 1,050 crore, is the first standalone health insurance company which deals in personal accident, mediclaim and overseas travel insurance. Star has been attracting investors as Indians are rushing to buy insurance policies with health expenditure going through the roof. Last year, Apis Partners and ICICI Ventures acquired 15% stake in Star Health and Allied Insurance for Rs 320 crore, valuing the company at Rs 2,100 crore.

Source:The Economic Times

Regulatory, digital push for insurance

Jan 05, 2017

The biggest event of 2016 in the life insurance industry was the listing of ICICI Prudential Life Insurance Co. Ltd. This is the first insurer in India to go public. Listing brings better disclosures and recognising this, the Insurance Regulatory and Development Authority of India (Irdai) in August suggested that all insurers should get listed after a period of time. It also suggested that in the run-up to listing, insurers should ensure that the level of disclosure in public domain is brought up to the level of listed entities.

The industry also saw some consolidation as Max Life Insurance Co. Ltd and HDFC Standard Life Insurance Co. Ltd decided to merge. Experts believe the industry could see more consolidation. “There was a mindset block on mergers, but now more insurers are likely to come forward. Not everyone will be able to list, so to achieve scale, a merger is an option,” said Sanket Kawatkar, principal and consulting actuary, life insurance (India), Milliman India Pvt. Ltd.

Also significant was the growth in the industry. “Till last year, insurers were still under the impact of product regulation and couldn’t get their basket of products ready. The growth therefore was negative to lacklustre, and mainly came from the group business. This year, in the past 8 months, the private sector has grown by about 26%, whereas the industry has grown by 39%,” said Anuj Agarwal, managing director and chief executive officer, Bajaj Allianz Life Insurance Co. Ltd.

Product and distribution

In terms of products, this year continued to see an increasing focus on term plans. “The biggest change is the fact that senior management of insurers has started seeing protection as a fundamental driver of sustained profitability. This one change will drive focus, investment and growth in protection,” said Yashish Dahiya, co-founder, Term plans grew by 57% compared to last year in premiums.

The year was also important for insurance distribution as the insurance regulator allowed for open architecture in the corporate agency channel from April. Corporate agents are entities such as banks that solicit business for insurers. The new rules allow them to sell policies of up to three insurers in the same line of business.

However, this year didn’t see much action. “We saw a few banks venture into multiple tie-ups and there were requests for proposal floated by some public sector banks, but all of these are banks that are not promoters of a life insurance company. The foreign banks have not explored the opportunity mainly because most of these banks already have global tie-ups in place,”said R.M. Vishakha, chief executive officer and managing director, IndiaFirst Life Insurance Co. Ltd.

This could change, said Agarwal. “There is a lot of chat behind the scenes, the result of which will be visible next year. We could even see some big banks accepting open architecture,” he added.

Allowing point of sales persons to be engaged by insurers or intermediaries such as corporate agents and insurance brokers to sell simple products was also a positive step. “The nature of the product and the selling process being simplified will lead to products reaching tier 3-4 locations,” said Anuj Mathur, chief executive officer, Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd. Irdai has identified pure term insurance plans with or without return of premium, non-linked (non-participating) endowment plans that state the investment benefits upfront and immediate annuity as products that can be sold by these distributors.

Expenses were also in focus this year. “The regulation on expenses of management defines a cap. Insurers who breach it, will have to pay from the shareholders fund. For customers, this means a better yield in traditional products as insurers will not be able to pad up products with costs,” added Agarwal. For the companies this means taking steps to contain costs. “Overshooting the caps would impact profitability and also eat into capital. Insurers, therefore, will make serious efforts at containing costs. Scaling up through consolidations or seeing leaners organisations is the way forward,” added Kawatkar.


Digitization continued to remain in focus. “Compulsory issuance of policies beyond a threshold limit in the electronic form was a significant step. This will be convenient and ensure safety of the policy document,” said C.L. Bhardwaj, chief compliance officer and chief risk officer, Bharti AXA Life Insurance Co. Ltd.

There was also much focus on developing the digital infrastructure. “Initiatives around digital payments and with e-KYC now a reality, the sales process and premium payment has become much easier. The regulator has also taken many steps to enable this environment. For instance, it allowed for OTP-based customer authentication,” said Mathur.

Insurers see the digital wave continuing in 2017 as well. “Fintech is growing, but the insurance industry has not reaped its benefits so far. The infrastructure is getting set up and next year we will see a big digital push whether it’s about buying policies, renewing policies, controlling costs or even controlling fraud,” said Vishakha.


Insurance brokers come out against IRDA norms

Jan 05, 2017

With a host of global reinsurers set to start operations in India, the Insurance Brokers Association of India (IBAI), the lobbying arm of insurance brokers, has come out against the reinsurance regulations of the Insurance Regulatory and Development Authority (IRDA) and called a meeting with CEOs and CMDs of all general insurers on Thursday.

“IBAI would like to appeal to all the insurers that they strongly represent for an immediate cancellation and repeal of this regressive, anti-policyholder and anti-competitive regulation. IBAI is of the strong view that for a more balanced and policyholder-centric interpretation in line with principal objectives of the regulation, the reinsurance order of preference regulations should be at least deferred for six months till the implications of the same are debated from a policyholder perspective,” it said in a letter to the CEOs of insurers, a copy of which was reviewed by The Indian Express.

Source: The Indian Express

With e-wallets mushrooming, insurance companies move in

Jan 02, 2017

At a time when the government is pushing for cashless transactions and for use of digital payment platforms, the general insurance industry is exploring ways of developing products that will insure such transactions.

According to a top insurance industry executive, there have been preliminary talks on the process of insuring digital transactions and whether mobile wallets could be covered.

“There have been talks on protecting the loss when something happens on digital payments, whether there can be an insurance,” said R Chandrasekaran, secretary general of General Insurance Council, an industry association of insurance companies. You will find more and more insurance products to look at the financial loss, for instance, if a payment made via a mobile wallet doesn’t go through, it’s basically a financial loss,” he added.

A few days ago, mobile wallet company Freecharge launched a wallet protection plan for its users, in tie-up with Reliance General Insurance. Under this arrangement, the wallet balance of all the customers will be insured up to a limit of Rs 20,000, as long as the user is transacting at least once a month.

“Over the course of operations, we have realised that consumer perception of wallet safety is critical to drive both adoption and retention of our customers and hence we are offering this plan to our consumers free of cost,” said Govind Rajan, chief executive officer, Freecharge.

Rival Paytm is also insuring the last transaction conducted by a wallet user up to Rs 20,000, which is currently being underwritten internally.

“The original traditional lines of business like fire insurance, marine insurance, they continue to grow but their market share has gone down. The non-life insurance industry is moving from a traditional insurance to personal insurance to the next level of providing coverage for financial loss,” said Chandrasekaran.

For instance, the market share of fire insurance policies has gone down from 30% earlier to only 10% now as other products have grown.

For the year ending March 2017, premiums in the general insurance industry are expected to touch Rs 1.25 lakh crore, up 30% from Rs 96,000 crore last financial year. Between April-November, premiums had already touched Rs 81,000 crore.

The growth is also being driven by the government pushing schemes like the Prime Minister’s Fasal Bima Yojana (PMFBY), or crop protection scheme, which is expected to contribute around Rs 18,000 crore in premiums this financial year, and the Indian Railways insurance scheme for passengers.

The IRCTC launched optional insurance scheme from September this year, which allowed travelling passengers to get insurance cover up to Rs 10 lakh on booking train ticket online for 92 paise. Since earlier this month, this accident insurance cover is being given for free in the wake of the government’s drive to promote cashless transactions.

Source: The Hindustan Times

Health insurance: Hiding pre-existing diseases can lead to rejection of claims

Dec 09, 2016

IF you have ever bought a health insurance policy, you may have come across a section pertaining to pre-existing diseases while filling up the application. It is one of the most important disclosures that you make while purchasing a health plan. Based on this, the insurer decides on the pricing and whether you are eligible for the insurance cover. People often hide or provide incomplete information in this disclosure that results in rejection of their claims later.

Suppose you are a 35-year-old and have bought a health insurance policy in which you have declared that you have no pre-existing illness. A year before you purchased the policy, you had actually undergone a treatment to get rid of kidney stones but you didn’t bother to mention the same in your application because that medical condition has been taken care of.

Now, two years down the line, you are hospitalised due to some medical emergency. On sending the hospital bill to the insurer, your claim gets rejected. It’s because you did not disclose your pre-existing illness or the operation that you had to undergo to remove your kidney stones. Thus a pre-existing disease clause not only covers any existing medical conditions that you may be having at the time of buying insurance but also any such condition that you may have had before the policy purchase.

Policy denial

Most health insurers do not issue a health policy to an individual who has or has had a pre-existing illness. This is because the chances of falling sick in such cases are higher, thus increasing the risk for frequent claims for insurance companies. For instance, if you are a 40-year-old and suffer from a severe heart ailment, an insurer has the right to reject your request.

Most health insurers do not issue a health policy to an individual who has or has had a pre-existing illness. This is because the chances of falling sick in such cases are higher, thus increasing the risk for frequent claims for insurance companies. For instance, if you are a 40-year-old and suffer from a severe heart ailment, an insurer has the right to reject your request.

Premium loading

Your pre-existing illness has made you a high-risk customer, thus the insurer manages the increased risk by loading your premium. Premium loading is usually the scenario wherein the insurer increases your premium in order to cover additional costs that may arise due to your existing medical condition.

For instance, for a 35-year-old healthy male, a health cover of R5 lakh would be available at a premium of R4,000-10,000. However, the same cover for a 35-year-old individual with diabetes would cost R6,000-19,000 annually. The substantial increase in premium is called loading as the insurer has calculated the additional cost within the premium.

Waiting period

Unfortunately, policyholders with pre-existing medical conditions cannot depend on their health policies in case they have medical emergencies due to their existing illness. This is because insurers have a buffer period of two to four years, called waiting period, for pre-existing diseases. For a 35-year-old individual with diabetes, the waiting period is four years, which means that the insurer will cover his existing illness only after the policy is renewed in the fifth year.

To conclude, a pre-existing illness hikes your health insurance premiums substantiall. However, it does not mean that you should hide your medical history or condition from the insurer. After all, an insurer has the right to reject your claim if you have not been true to them. The only way to buy a health insurance policy at a cheaper price is to buy it early when the chance of falling ill is minimal. The writer is co-founder & CEO,

Source: The Financial Express

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