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New Irdai norms to ensure faster growth of general insurers: Industry leaders

Mar 08, 2016

The Rs 84,000-crore general insurance industry feels that the 'use and file' norms unveiled recently by Irdai will ensure faster growth in the industry, though the regulations may lead to price rise of such products.

The new norms, coming into force from April 1, will allow marketing of corporate products even before the regulatory approval.

"The new system would enable insurers to adapt faster to the requirements of commercial entities. All of these changes are positive, indeed path breaking," ICICI Lombard General Insurance managing director and chief executive Bhargav Dasgupta told PTI.

"We have asked the industry body General Insurance Council (GIC) to prepare the common wordings while designing covers for the corporates," New India Assurance CMD G Srinivasan, who is also the chairman of GIC, said.

"A price rise across the segments is very much expected", he said without divulging any further details.

According to Srinivasan, the new norms will bring in a great deal of discipline in the general insurance industry improving the financials of the industry.

"With the stipulation that the general insurers have to operate under 100 per cent combined ratio, the industry should see rate hardening which over a period of time would ensure underwriting profits," SBI General senior vice president, marketing and product development Gunjan Ghai said.

In some of the competitive risk areas, this would likely improve the profitability of insurers as a whole, he added.

Post detariffing in 2007 under which pricing of general insurance products are being determined by the market forces, the general insurance industry has seen a cut throat competition in pricing of the products leading to losses in the industry. The only exception is third party motor premium which is the only product whose price continues to be fixed by Irdai.

Sasikumar Adidamu, chief technical officer (non-motor), Bajaj Allianz General Insurance said that "the Irdai norms would facilitate insurance companies to adopt a more structured approach while designing products, pricing and diligently manage the operations of the entire product lifecycle. This change will stand in good stead for companies, as they will be able to create more innovative and need based products."

"The new norms would check under pricing as the pricing would require actuarial and technical justification that has to be approved by a product management committee, a special committee to be formed by the concerned company", he added.

"The general insurers who are already doing business in the current market will be benefited to sell new products. This will contribute growth in gross written premium for the year 2016-17," Future Generali India Insurance MD and CEO Krishnamoorthy Rao said.

Rao advised that the new norms should be applicable for retails lines too on the plea that 'use and file' guidelines can help insurers offer varieties in retail products which can take care of consumer needs on day to day basis and it will result in boosting the growth under retail lines."

However, a section of the industry is not in its favour.

"Industry is yet to mature to be empowered. In order to protect retail customers' interest, regulatory oversight is desirable at this juncture", Tata AIG General Insurance president M Ravichandran said.

Source: The Economic Times

93% respondents do not own home insurance policy: Survey

Mar 08, 2016

Around 93 percent of respondents of a recent survey conducted by ICICI Lombard do not own a home insurance policy.

This, despite the fact, that 62 percent of those surveyed were aware of the benefits of a home insurance policy, a company statement said.

It revealed that most home owners did not feel the need to get their homes covered and 59 percent of the respondents said that they would buy a home insurance policy if the premiums were lower and the claims process was made easier.

"Home insurance, as a segment, is hugely under-penetrated. Although a home insurance policy can help ease the financial burden that arises out of severe disasters such as floods, storms, earthquakes and riots," ICICI Lombard chief Underwriting and Claims Sanjay Datta said.

The survey was conducted across a user base of 2,000, half of whom were in the age group of 36-40 years. 62 percent of the respondents had acquired their homes only in the last three years.


Irdai sets up panel (to) establish insurance service centres

Mar 03, 2016

Insurance regulator Irdai today set up a 7-member committee for establishment of insurance service centres with an aim to provide prompt servicing of policyholder in the most cost efficient manner.

The proposed company neutral centres will help insurers in reducing the costs which are involved in setting up brick and mortar offices to service policyholders.

"These service centres can accept requests from the policyholder of any insurance company and pass on the same to the respective insurance company in a cost efficient manner.

"These service centres will not only increase the touch points that will become available to the customers but will bring insurance at the doorstep of the customer. The insurance companies would also gain by saving on investments to be made in the traditional brick and mortar offices," Irdai said.

The expert committee would be headed by Rajesh Relan ex-MD, PNB Metlife Life Insurance Company Limited. It would include Munish Sharda (CEO, Future Generalli Life Insurance), Neelesh Garg (CEO, TATA-AIG General Insurance) and Anuj Gulati.

Irdai said the committee would study the legal structure of the centres, capital requirements, and operational model, among other issues.

The regulator said insurance companies have been able to achieve some success in increasing insurance penetration in the country by largely employing insurance agents or insurance intermediaries.

"However, the desired goal of prompt servicing of policyholder in the most cost efficient manner is yet to be achieved," the Irdai's office order said.

Source: The Economic Times

Budget 2016: Government plans to list four public sector general insurance firms

Mar 01, 2016

Investors will probably have something new to add to their portfolio soon, not a flashy startup, but ancient general insurance firms which until now have been privately held.

The finance minister has proposed to list four general insurers, adding spice to a market that has been bereft of new themes and establishing a benchmark for private firms that would list later.

IPOs of New India Assurance or National Insurance could breathe new life into a market which has seen issues such as Coffee Day Enterprises, Prabhat Dairy, and Quick Heal, where investors have lost money.

Investors who have been cold to some of the share offerings from the government stable, could find these insurers a novel business and may rush to buy them.

Also, they would hope to make profits since the pricing could be a lot more reasonable than the ones from the private sector.

Jaitley said public listing of general insurance companies is among the major reforms that the government intends to do.

"PSU insurers are fairly ready for listing shares," G Srinivasan, CMD of New India Assurance told ET. "If market conditions are good, we can consider listing in 2016-17 itself."

The Insurance Laws (Amendment) Act 2015 enables the government to dilute equity stakes in PSU insurance companies by up to 51% to "raise capital, keeping in view the need for expansion of the business".

"There is a lot of embedded value in public sector insurers given the brand and trust it enjoys from public," K Sanath Kumar, MD of National Insurance Company told ET. But, huge underwriting losses goes against their valuation, he said.

Source: The Economic Times

Foreign Direct Investment: Rules eased for insurance, pension, securities and NBFCs

Mar 01, 2016

Finance Minister Arun Jaitley announced on Monday all 49 per cent of foreign investment limit in private insurance companies could come through the automatic route. However, management and control of insurance companies would have to be in the hands of Indian entities.

Foreign investment rules were also eased for asset reconstruction companies and non-banking financial companies (NBFCs) in the Budget for 2016-17.

Beside, cap for a foreign investment was also raised for stock exchanges.

The Insurance Laws (Amendment) Act, 2015, had increased the foreign direct investment (FDI) allowed from 26 per cent to 49 per cent, if it was routed through the Foreign Investment Promotion Board (FIPB). However, it had maintained foreign investment beyond 26 per cent would be through the FIPB route. An application had to be made to FIPB for approval, after which the insurance regulator had to clear the proposal.

Now applications need to go only to the Insurance Regulatory and Development Authority of India (Irdai). It is not clear what will happen to applications pending with FIPB.

Bhargav Dasgupta, managing director and chief executive officer (MD & CEO), ICICI Lombard, said this had made it easier for increasing FDI in general insurance. ICICI Lombard's earlier proposal for an FDI hike by its foreign partner is pending with FIPB.

Fairfax Financial Holdings has said it will increase its stake in ICICI Lombard General Insurance to 35 per cent, from 25.7 per cent.

"In the past one year there has been no primary infusion of capital in insurance companies. Making the process automatic will make it easier for new companies to enter, leading to more capital in the insurance sector," said Shashwat Sharma, partner, management consulting, at KPMG in India.

When the threshold was raised last year, it was expected Rs 10,000-20,000 crore would come in as FDI into the insurance sector. While deals to hike foreign partners' stakes to 49 per cent have been concluded, it has largely been an exchange of funds between shareholders.

Sandeep Patel, MD & CEO, Cigna TTK Health Insurance, said his company would benefit from the latest decision because it had just begun the process of seeking approval for an FDI hike.

The same rules will apply to pension funds because the Pension Fund Regulatory and Development Authority (PFRDA) Act automatically links the foreign investment threshold in the pension sector with the insurance sector.

Also, the investment limit for foreign entities in stock exchanges will be enhanced from the present five per cent, to 15 per cent. Beside, the 10 per cent FDI allowed in asset reconstruction companies (ARCs) will be allowed through the automatic route. Foreign portfolio investors (FPIs) will be allowed up to 10 per cent of each tranche in security receipts issued by ARCs subject to sectoral caps.

The 24 per cent limit for investment by foreign portfolio investors in central public sector enterprises, other than banks, that are listed on stock exchanges will be increased to 49 per cent. The basket of eligible FDI instruments will be expanded to include hybrid instruments subject to certain conditions.

Beside, FDI will be allowed in the automatic route beyond the 18 specific NBFC activities to other activities overseen by financial regulators.

Source: Business Standard

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