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Life insurance to be cheaper while health insurance becomes more expensive

Nov 30, 2018

Buying life insurance is likely to get more affordable, while health insurance could get dearer. Improved life expectancy among the insured population will keep the cost of life cover down, but the cost of health covers is expected to move up because of various court directives asking insurers to cut out exclusions.

Mr Sanket Kawatkar, head of life insurance at actuarial consulting firm Milliman, said that there is an improvement of around 10% in the new mortality table, which is prepared by the Institutes of Actuaries of India, according to a report in Times of India.

According to Mr Kawatkar, insurers may choose not to reflect the new tables because life insurance premiums are already the lowest in the region.

Global reinsurers are bullish on India as it is seen as the market with the highest latent demand. “The protection gap in India is estimated at $9trn, making it one of the biggest markets in terms of potential,” said Mr Kawatkar, consulting actuary with Milliman.

Health insurance is expected to see an increase in rates. According to Mr Lalit Baveja, senior health management consultant at Milliman, the scope of health insurance in India is set to increase due to court interventions for covering hitherto excluded illnesses like HIV, mental ailments and congenital defects.

“Insurance companies will have to rework all their existing products to address these exclusions and file them with the insurance regulator with revised pricing,” said Mr Baveja.

Source : Asia Insurance Review

SBI General Insurance targets public listing in 2020

Nov 28, 2018

SBI General Insurance plans to launch an initial public offer (IPO) in 2020, the company's deputy CEO has said.

Ms Lisa Jeffrey told the Indo-Asian News Service that the insurer, which is a joint venture between State Bank of India (SBI) and Insurance Australia Group (IAG), aims to be among the top five non-life insurers in India by investing in technology and launching new products. The company also plans to boost the number of agents and other distribution channels, and focus on health insurance policies.

"We are investing in digital technology and looking at digital strategy. Now there are insurers that are purely into digital technology. The investment is part of our overall budget for information technology," Ms Jeffery said.

At a time when the industry is registering a 12% growth, SBI General Insurance is clocking about 30% business growth. "We hope to log about 35% growth in our gross domestic premium income (GDPI),” she said, adding that during the first half of the current fiscal year which ends on 31 March, the GDPI growth was about 30% at INR2,067 crore ($292m) and the net profit was INR270 crore. She said SBI General Insurance was one of the few players to have posted an underwriting profit.

Ms Jeffery said that IAG International was not planning to increase its stake in the company from the current 26% to the maximum permissible 49%. This overturns a stock exchange statement by SBI in 2015 that IAG would raise its stake to 49%. In September, SBI sold a 4% stake in SBI General Insurance at INR482 crore, in what was seen as a price discovery exercise. The sale valued the company at about INR12,000 crore. After the deal, SBI holds a 70% stake in the venture.

Source : Asia Insurance Review

Centre eases insurance claim rules for farmers

Nov 27, 2018

The Union government has introduced several norms tightening the Pradhan Mantri Fasal Bima Yojana (PMFBY), its flagship farm insurance scheme. One of the new rules taking effect on November 30, reviewed by Hindustan Times, says that claims of farmers not cleared by insurance firms within two months of harvest will be “automatically approved”.

As with any insurance policy, claims need to be approved by insurance firms for policyholders to get compensation.

The new rule means insurance firms will not be able to verify claims or carry out further checks to ascertain the validity of claims of farmers if they don’t do it within two months.

“Beyond the two-month deadline, all claims will be auto approved by the PMFBY portal (website),” an official said, requesting anonymity.

With this new “auto approval” guideline, the government hopes to deal with what a major reason of farmer angst concerning the scheme: delayed payments.

If farmers don’t get insurance payouts for one season in time, it affects their ability to invest in crops for the next season.

A centralized website governing the farm-insurance programme has been updated with an in-built feature to make this “auto approval feature” operational.

Among key changes to the politically important scheme, participating insurance companies will now have to spend 0.5% of the gross premium collected on raising “awareness about the scheme among farmers”.

State governments will have to devote 2% of their annual budget to a slew of measures tied to the farm insurance programme.

These include administrative expenses to speed up processing of claims. This 2% share will also go towards meeting expenses for yield and loss assessment, crucial for timely payouts.

The 2% share from the budget will also be used for purchase of smart phones through which yield losses need to be estimated via an android app developed for the purpose. Other expenses include setting up of state technical support teams.

According to Ashok Gulati, an economist with the think-tank ICRIER, if the Pradhan Mantri Fasal Bima Yojana scheme is to achieve its most critical goal — timely payouts to farmers — it can’t fly without a raft of highend technological fixes, from drones to even a new constellation of satellites for accurate crop damage assessments.

In an earlier round of changes, the government had decided to slap a 12% interest on insurance firms (to be paid to farmers) for delay of more than 2 months in claim settlement.

Moreover, a 12% interest must be paid by states too for delay of more than 3 months in releasing their state of subsidy. Under the Pradhan Mantri Fasal Bima Yojana, farmers have to pay between 1-2% of the total premium. The rest is shared between the Centre and states equally.

Source: Financial Express

Remembering 26/11: Insurance claims of Rs 376 crore settled after Mumbai attacks

Nov 26, 2018

Insurance claims of over Rs 376 crore was settled after the Mumbai attacks in 2008. The fund that covered most of the claims was the Indian Market Terrorism Risk Insurance Pool (IMTRIP) which was formed in the wake of the September 11 attacks on the World Trade Centre in the US in 2001.

The losses of up to $10 billion in the 9/11 attacks had forced the global insurance industry to rethink and develop a new strategy for terror cases . Before the WTC attacks, terrorism risk was included in "all-risk" insurance policies at no added cost.

After WTC attacks, terrorism risk cover was withdrawn from insurance policies. Existing policies were cancelled and new insurance policies were issued, excluding terrorism cover. Now, terrorism coverage is generally offered separately at a price.

In India, the IMRTRIP covered the affected locations in the Mumbai attack. IMTRIP has a growing corpus stacked up during the course of more than 15 years and adequate resources available to meet liability arising out of any unfortunate incident. Combined with a decline in claims ratio, risk pools such as IMTRIP have a comfortable premium reservoir.

Just like other countries, terrorism cover is an optional add-on cover in India too. It provides cover to individuals and businesses for potential losses due to acts of terror. The premium charged varies as per the risk occupancy and sum insured. Mid-term inclusion of terrorism is also not allowed.

Most corporates are opting for terror cover for their employees and buildings. Plants owned by nearly all top corporates are covered. Large energy companies such as ONGC have diffrent types of insurance and terrorism insurance. Some of the large infrastructure projects such as Metro projects, ports, airports and flyovers have also started taking terror insurance cover.

Source: Business Today

Industry sees proposed changes in insurance products consumer friendly, competitive

Nov 22, 2018

The proposed changes in various insurance products will be consumer-friendly and provide a flexibility to insurers in offering better services, industry experts say. The Insurance Regulatory and Development Authority of India (Irdai) in a draft guideline for insurance linked and non-linked products late last month has proposed changes in norms for various insurance products, including those related with payment to nominees in case of death of policy holders.

The minimum death benefit has been made 7 times for regular premium products and 1.25 times for single premium products for all ages, Irdai has proposed in the draft exposure. “The current limit for life cover for 45 years and low is ten times the annual income and for those above 45 years is seven times their annual income; the proposal is to make it seven for everybody. “Though there is no clarity on the tax benefit yet but the new proposal will most likely be available under section 80C of the Income Tax Act, as only then it will be in favour of the consumer. It will make sense for people to buy it only if it is covered under tax,” said Santosh Agarwal, Associate Director and Cluster Head- Life Insurance,

Canara HSBC Oriental Bank of Commerce Life Insurance MD & CEO Anuj Mathur said the exposure draft of the new product regulations was long awaited by the industry, to review and revamp the 5-year old guidelines. “The key theme appears to be to simplify the regulations, and provide more flexibility to customers to meet their financial needs through insurance products. At the same time, the regulations encourage innovation and nudge the industry towards offering better value to customers through product design,” Mathur said.

Among others, Irdai has proposed non-linked policies to acquire guaranteed surrender value after 2 years; extension of revival period for a policy to 5 years from 2 years at present for non-linked products; option of commutation up to 60 per cent in pension products as well as settlement option period can be extended till 10 years or original policy term whichever is lower.

“We believe that savings products should focus on maximising savings and are not the right products to address the protection gap. In the draft proposal, the regulator has rightly reduced the minimum sum assured requirement from 10 times to 7 times the annual premium,” said Vighnesh Shahane, CEO and Whole Time Director, IDBI Federal Life Insurance.

Further, the proposal to allow customers to have the option to reduce premiums after 5 years for linked products up to 50 per cent as per their needs is welcomed, as it will help to keep the policy alive and boost persistency, he said. “We also feel that the proposed norms on pension products are encouraging. It allows up to 60 per cent of the accumulated corpus to be commuted. It is also beneficial for the customer as he has a choice of open-market options, allowing him to choose the annuity provider,” Shahane said.

The proposed changes, if implemented, will expectedly make life insurance product structures more flexible as well as customer friendly – such as increase in revival period, reduction in nil surrender value period from three to two years, longer settlement period, allowance for fund switches; and other flexibilities in term of product structures, said Vivek Jalan, Head, Insurance Consulting and Technology, Willis Towers Watson, India.

On the proposal for a partial withdrawals in case of linked pension plans, Agarwal of said that by this the regulator most likely mean the money can be allowed to be withdrawn in dire need, like in certain events of critical illness, disability or an accident or any other health issues for which the policyholder would want to withdraw the corpus for survival.

“So, flexibility of withdrawing money at key incidents will be helpful for the policyholders,” Agarwal said. The proposed changes also provides for insurers to design individual term, group term and credit and micro insurance products, among others. Allowing insurers more flexibility around creation of both retail and group products means faster turnaround time and adjusting to market scenarios better, said Agarwal. He also said that suggestion to allow policyholders to buy annuities from any insurer will further competition among insurance companies as they will not want to lose customers and will be compelled to provide better interest rates.

Currently, the policyholder has to annuitize their pension income from the same insurer at the interest rate that they have to offer. Irdai had constituted a ‘Committee on Review of Product Regulations Life’ for reviewing the 2013 regulations on linked insurance products and non-linked insurance products. The panel was set up as there have been significant changes in the trends in product structures driven by the customers’ needs, wants and preferences since 2013.Source: Hindustan Times

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