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Cyber insurance not enough to cover potential risks: Study

Mar 01, 2017

The scope of current cyber insurance is modest relative to potential exposure, said a study by Swiss Re sigma report. It said that cyber risk is a growing concern for businesses, with recent attacks demonstrating that the costs of a cyber breach can escalate well beyond managing the fallout of lost or corrupted data.

The report, ‘Cyber: getting to grips with a complex risk’, said businesses need to do much more to integrate cyber security into their risk management programmes.

“A dedicated cyber insurance market is developing rapidly, but so far the scope of cover is modest relative to potential exposure. Product and process innovation and also advanced analytics will help foster improved cyber insurance solutions and extend both the boundaries of insurability and reach of cover,” it said.

All types of risks may not be covered and the Swiss Re sigma report said that ultimately, some cyber risks, especially those related to extreme catastrophic loss events, may be uninsurable. For such risks, there may be a case for a government-sponsored back-stop.

Recent high-profile cyber-attacks increasingly demonstrate that the costs of a cyber security breach extend beyond managing the fallout of lost or corrupted data. According to the report, firms must now factor in the potential damage to their reputation, physical and intellectual property, and also disruption to business operations.

Many firms are looking to transfer cyber risks to third parties better-placed to absorb them. Dedicated cyber insurance typically provides core protection against data and network security breaches and associated losses, with capacity limits in the market today ranging from around USD 5 million to USD 100 million.

"A dedicated cyber insurance market is developing, and an increasing number of insurers are looking to write more business in this specialty line," Swiss Re Chief Economist Kurt Karl said.

The report said that a key constraint on the development of insurance solutions is linked to the intrinsic nature of cyber risks. They are complex and difficult to quantify, especially given the fast-changing technological environment and lack of historical cyber-related claims data from which to extrapolate information about possible future losses.

For their part, insurers are looking to develop less complex and more flexible insurance products. These include covers that can be tailored to small and medium-sized businesses, which have hitherto been underserved by insurance and are often less well placed to cope with cyber risks than larger firms.

Another way to increase overall loss-absorbing capacity for cyber risk is by developing investment vehicles that enable capital market investors to take some of the exposures. The report said that there are currently some initiatives to develop insurance-linked securities (ILS) that cover operational-type risks like cyber.

Swiss Re Sigma said more broadly governments have an important role in promoting cyber resilience, including measures to improve cyber information capture and diffusion, and setting laws and regulations about how cyberspace is used and protected.


Role of a point of sale person in insurance

Mar 01, 2017

To increase insurance penetration in the country, the industry needs more distributors to travel the last mile. To achieve that goal, what’s needed is a simple certification process for these distributors. So, to get such distributors on board quickly, the Insurance Regulatory and Development Authority of India (Irdai), in 2015, allowed for a new type of distributor, called the point of sale (PoS) person. Given that these individuals have a lower qualification and training threshold, compared to other insurance distributors such as agents, brokers and corporate agents, Irdai has allowed these individuals to sell only basic insurance products, which don’t require a lot of underwriting.

Mandate of a point of sale person

As per the regulator, products such as motor insurance, travel insurance and personal accident insurance require very little underwriting as they are based on information provided by the prospect. Also, such insurance policies are automatically generated by the system.

Therefore, the intervention required for such products is minimal and the training and exams for such persons could be of a lesser degree than those for a full-fledged distributor.

In fact, last year in November, Irdai had allowed the life insurance industry to use point of sale persons to sell life insurance products. For this, it identified products that are simple to understand, and in which the benefits are stated upfront and they are fixed and predefined.

Accordingly, Irdai identified pure-term insurance plans with and 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 the point of sale persons.

And this year, in order to ensure faster certification of point of sale persons, the regulator has relaxed the certification programme by allowing the insurers or intermediaries hiring them to train and examine these individuals in-house.

A new training programme

Point of sales persons can be engaged either directly by insurers or by intermediaries such as corporate agents and insurance brokers. The minimum educational qualification of such persons is Class 10 and they should be 18 years of age at least. Earlier, as per the rules, Irdai had appointed the National Institute of Electronics and Information Technology (NIELIT) to conduct the examination of certificate for point of sale persons. But in a notification dated 7 February, Irdai removed this condition for the life insurance industry. Training and certification from NIELIT is no longer mandatory. As per an insurance official, this was done after representations were made to the regulator that this could hamper quick on-boarding of point of sales persons.

Accordingly, Irdai has allowed in-house training by the insurer or intermediary engaging the point of sale persons. They will have to conduct an in-house training of 15 hours and an examination thereafter. The insurer or the intermediary will then issue a certificate and maintain the records for at least 5 years. Irdai has, however, prescribed a model syllabus for training purposes. As per the insurers we spoke to, the syllabus has been drafted by the Life Insurance Council and Irdai, and will be used by all the insurers.


Few claim insurance money offered by ATM cards

Feb 09, 2017

At least 2.67 crore debit, or ATM, cards of the State Bank of India (SBI) have been issued to people in Bihar having accounts with its 960-odd branches in the state. Few, if any, debit card holders ever claim the insurance benefit that comes with every debit card free of cost.

According to sources, personal accident insurance comes bundled with debit cards of almost every bank in private and public sectors. The idea is to encourage cashless transaction.

The sum assured ranges from Rs 50,000 to Rs 5 lakh, depending on the type of card one possesses and the nature of injury/loss in any accident.

There are certain banks which even offer air accident insurance with the sum assured ranging from Rs 50,000 to Rs 3 crore, again depending on the type of card of the ill-starred flyer.

Not that only SBI account holders rarely claim the insurance money. Preferring anonymity, officials of several private and public sector banks operating in Bihar told this reporter they have come across few such claims.

"Our Patna-based zonal office has jurisdiction over the eight circles in Bihar and Jharkhand. On an average 65-70 personal accident claim cases come from these circles in the twin states every year," a Punjab National Bank (PNB) official said on Wednesday, adding each circle comprises of several branches.

The poor response to the free offer is attributed to lack of awareness.

"There could be another reason too. Maybe, only few debit card holders meet with accidents and, therefore, only few claim the insurance money," another banker said requesting not to be quoted since banks do not authorize their officials to talk to the media.

The banks also find it difficult to settle such claims as claimants in most cases fail to complete the "documentary formalities". "One of the criteria is that the card must have been swiped for shopping transaction at least once during the 45 days preceding the accident," the PNB official said, adding there are certain other requirements like a copy of the FIR lodged in connection with the accident, legal heir certificate etc.

RuPay card claims, however, are payable if the transaction was made even through ATM within 45 or 90 days in case of Premium and Non-premium cards respectively.

Take, for instance, the case of SBI account holder Dilip Singh who died in a mobike accident near Hilsa in Nalanda on August 30, 2015. "The claim made by his wife Mamata Singh, who resides in Fatuha on the outskirts of Patna, was not supported by documents," an official said, showing the claim application to this reporter on his computer at the SBI's local head office near Gandhi Maidan.

"My husband and I have a joint account. I came to know about the debit card's insurance benefit three-four months after the death of my husband," Mamata told this reporter over phone on Monday, adding though she would apply afresh with the documents asked for by the bank, she feared she might not get the claim as the card had not been swiped for long before the accident.

Source: The Times of India

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.


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