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In H1, United India tops public sector non-life insurers in premium income growth

Nov 4, 2016

United India Insurance (UII) said entry into new segments and strengthening of existing businesses helped the non-life insurer achieve the highest growth in premium income among public sector players during the first half of this fiscal.

UII topped the table among the public sector units with Rs.1,797 crore of gross direct premium underwritten (GDPU) in September this year, over twice that of Rs.875 crore in September 2015.

Also, in the first half, the company recorded the highest growth (among PSUs) of 27 per cent in GDPU at Rs.7,650 crore, compared with Rs.6,034 crore in the year-ago period.

The company attributed the impressive performance to its recent entry into two new segments —agriculture (crop insurance) and automobile. Also, restructuring of premium rates, aimed at boost in the bottom line, and limiting discounts in the motor segment, helped the company.

Crop insurance

“We entered the agri sector under the Pradhan Mantri Fasal Bima Yojana crop insurance scheme. We have got around Rs.800 crore in a few States. Since kharif is over, we are now trying for the rabi season, for which tender is on for many States and we are bidding for the same,” A Hoda, Chairman and Managing Director (Officiating), UII, told BusinessLine.

The company has firmed up its premium rates and conditions in order to shore up its bottom line. “We are not doing it at loss any more. Since we have got enough market share, we revised our premium rates that are sustainable. In this process, in spite of losing some premium in the beginning, we have been a gainer,” he added.

UII has decided to limit its discounts in the motor policy segment, which has lately seen stiff competition. Though there was some loss of premium initially, the company managed to firm up motor premium rates.

The company’s tie up with Maruti a year ago has also been giving some business in the recent months.

After testing the standards of UII, Maruti started giving more areas to UII from June onwards. The States include Tamil Nadu, Kerala, Gujarat and Uttar Pradesh. “We are getting, on an average, Rs.1 crore per day through this pact,” said Hoda.

Amid intense competition and rejig in rates, the company is maintaining double-digit growth in motor and health segments.

While topline growth is expected to be robust, UII expects bottom line to show improvements from the third quarter of this fiscal as the first half will have higher provisioning. “Our annual results will be much better than that of last year,” he added.

Source: The Hindu Business Line

Tata row may trigger insurance claim

Nov 3, 2016

The sacking of Cyrus Mistry and its fallout might trigger a claim under the Directors & Officers (D&O) insurance cover purchased by Tata Sons.

A D&O policy covers the top management of an organisation from legal actions initiated by employees, shareholders or authorities against the decisions taken by the top brass in the course of their duties. Besides damages, the policy covers the cost of legal defence of directors, even in their individual capacity, where the company is unable to defend them. Insurance industry insiders are worried that trading of allegations might lay the ground for legal action by investors or directors, triggering a claim.

Like many companies, Tata Sons too has a D&O cover, which is understood to have been for $50 million three years ago. However, in 2014 Tata Sons is learnt to have sought an increase in the cover, which is provided by Tata AIG General Insurance and arranged by Howden Insurance Brokers. However, the insurers declined to comment.

Apart from providing insurance to the directors of Tata Sons, the policy also acts as a cover for group companies. In response to a TOI query, a Tata Sons spokesperson said that the company purchases different kinds of covers according to its requirements but did not elaborate.

Insurers say that the most potent development in the Tata battle is the letter from ousted chairman Cyrus Mistry where he raised the issue of impairments and made a statement that Tata Motors was taking loss-making decisions on emotional grounds. "The risks of investor actions are very high in the US where the company is listed," said an insurance official. In case of proceedings in the US, the defence cost itself runs into millions of dollars and these have typically comprised a large chunk of D&O claims.

Source: The Times of India

Sebi issues disclosure norms for listed insurance companies

Oct 26, 2016

The Securities and Exchange Board of India (Sebi) on Monday came out with norms for listed insurance companies in disclosing their quarterly results, less than a month after the first-ever listing of an insurer.

The decision by Sebi was taken in consultation with Insurance Regulatory and Development Authority of India (IRDAI).

ICICI Prudential Life Insurance made its stock market debut on 29 September. becoming the first insurer to list on the Indian bourses. The company raised over Rs6,000 crore through its initial public offering.

In a circular, Sebi said insurance companies (life and non-life) will have to submit disclosures pertaining to financial results, segment-wise revenue and capital employed for quarters ending 30 September 2016 and 31 December 2016 in the format as specified by IRDAI.

With respect to the format for newspaper publishing purpose (standalone/consolidated), the insurance companies would follow the format specified by Sebi. Besides, additional disclosures should be made as prescribed by IRDAI.

Mandatory listing of insurance firms on hold

Oct 17, 2016

Insurance companies will not be asked to compulsorily list themselves in the stock market, as the Insurance Regulatory Development Authority of India (Irdai) is having second thoughts about it after a nudge from the finance ministry.

“We had never insisted on it (listing). It is only a discussion paper and should be seen in that perspective,” Irdai Chairman T S Vijayan told Business Standard.

He also said he had received comments on the paper from many companies asking for a reconsideration of the proposal. “We are willing to wait”, he added.

In August, Irdai surprised the 55 life and non-life insurance companies in India, when it issued a discussion paper on the need for them to get listed. The regulator gave the companies a short timeframe of less than a month to respond. “The hurry created an impression among firms that the final regulations would be in place soon”, said the CEO of an insurance company.

Several companies have since approached the finance ministry, too, to discourage Irdai from making the plan operational. A highly placed government official said they have asked Irdai to go slow on the plan. In an unusual move, the government has since appointed former secretary (expenditure) in the finance ministry Sushma Nath as part-time member to Irdai. This is only the second such instance since 2003, when former revenue secretary C S Rao took over as chairman of Irdai, that a top finance ministry officer has moved into it.

The official said the appointment of Nath shows the government is keen to tighten its control over Irdai. Currently, it has a joint secretary level officer from the finance ministry as a part-time member.

Irdai has been asked to place the controversial listing plan for a detailed discussion at the next meeting of the insurance advisory committee. While in the normal course a discussion paper goes to the committee and is then made a regulation by Irdai, in this case, the process of consultation with industry is likely to begin afresh after the committee deliberates on it. In any case, since the advisory committee includes 25 members including life and general councils representing those insurance companies who have objected to the proposal, the chances of it moving further are dim. The committee was reconstituted in July for a wider representation of all shades of opinion in the sector.

The official said the ministry would suggest that instead of Irdai taking a position, insurance companies can decide on whether they will go public. “It should be their decision. Those who want can test the waters”. A report in Business Standard shows for FY13, leaders, especially in life segment, have seen a healthy rise in profitability; but most of this has come from underwriting income and because of their exclusive tie-ups with banks.

In Budget 2016-17, Finance Minister Arun Jaitley had announced plans for listing on stock exchanges of non-life insurance companies owned by the government. The move was meant to ensure higher levels of transparency and accountability within these firms once they were subject to the discipline of the market. Irdai expanded the scope of that with its compulsory listing plan. Vijayan said Irdai does not distinguish between private and public sector entities. It implies just that as compulsory listing would impact both, a possible decision to rescind this would impact both, too.

The only insurance company to float a public issue is industry leader ICICI Prudential. Smaller insurance companies have argued that compulsory listing will lead to excessive consolidation within the sector. “This, in turn, will lead to greater control of insurance pricing by a few insurers. While greater rationality in the pricing of risks in the Indian market would be welcomed we do not believe a regulator will be thanked for the facilitation of the consolidation of pricing power,” a note by these firms argues.

According to them, to comply with forcible listing, insurance companies with lesser amount of capital will find it difficult to obtain a proper price and struggle to improve their share price. “This will not only impact (their) ability to attract equity investors, but this weakness will also impact investor confidence in the company, leading to more expensive pricing of capital for the company, which will have to be passed on to policyholders”, a sector specialist said.

That they have a point comes out clearly in a CII-EY paper on technological changes in the sector. “Insurance bundling on e-commerce platforms has enabled greater customisation in product and pricing, thereby, targeted marketing to customers”, it says. This sort of positioning is not possible except for niche companies.

An Assocham report on the health insurance sector, for instance, says “health insurance ecosystem for India should have more private players. Only 60 million people are covered under private insurance schemes, which should go up substantially.” The same paper notes that India stands 15th globally with respect to premium income.

Source: Business Standard

After the floods, a boom in the insurance sector

Oct 3, 2016

In the aftermath of the December floods, insurance firms have witnessed a 40-50 per cent increase in policy sales in Chennai and the surrounding areas. “Call it ‘fear psychosis’ or ‘being extra cautious’, Chennaiites have become more alert when it comes to protecting assets. If you rewind back to a few months ago, the insurance claims touched Rs 5,000 crore after the floods,” an insurance analyst pointed out.

The total losses due to the floods were estimated to be at least $2 billion. Insured losses were $0.8 billion, making the floods the second costliest insurance event in India on sigma records. “A large part of the losses originated from commercial lines as Chennai is home to many manufacturing companies, particularly in the motor industry,” according to an analysis by Swiss Re on natural catastrophes and manmade disasters in 2015.

While individuals are opting for household insurance and motor insurance, industries are covering their properties under fire policy, machinery insurance and motor insurance. According to Bajaj Allianz General Insurance, their home insurance portfolio has grown by 30 per cent since the floods. The premium generated has also substantially gone up by 124 per cent post the floods in December. Sasikumar Adidamu, Chief Technical Officer, Non motor, Bajaj Allianz General Insurance, said, “From January to December 2015, the company saw a month-on-month rise of 25 per cent in its home insurance premium and a 12 per cent increase in the number of home insurance policies sold in Chennai and surrounding areas.”

A senior official from The New India Assurance Company Limited said that most of the individual houses were insured only for the depreciated value or cost incurred by them at the time of construction many years ago. “Hence, they could not get full claim for their loss as the property was not insured for the current re-instatement value. House owners are now opting for renewing the policy on present replacement value to make sure they get full protection,” the official added.

Industries are also taking add-on covers such as removal of debris, architect fees, temporary removal of stocks, loss of rent and additional rent for alternative accommodation during the event of any loss. The MSME sector, where more than 14,000 units suffered loses to the tune of Rs. 11.8 lakh, is also opening doors to insurance firms.

“Before the floods, most of the industries financed by banks insured their property only to the extent of their loan amount. They are moving towards re-visiting the value for which their property was insured and revising insurance for the current value,” said an official from New India Assurance. “Entire assets including the compound wall are insured and more emphasis is given to adequacy of insurance. They are now cautious enough to get comprehensive cover for the full value of their property.”

Insurance agents agree that business has boomed after the floods. Madhavan, an insurance agent in T.Nagar, said, “In the last six months, I have enrolled people for various policies and my business has increased by 200 per cent post floods. Customers are looking at comprehensive coverage that would include their appliances. People are also willing to shell out more from their pocket for the premium,” he added.

Source: The Hindu

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