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Irdai wants public sector general insurers in crop insurance scheme

Mar 24, 2016

Insurance Regulatory and Development Authority of India (IRDAI) will take up the matter of non-inclusion of public general insurance companies in the Pradhan Mantri Fasal Bima Yojana. At present, they are not part of the scheme.

Nilesh Sathe, Member-Life, IRDAI said that they will take up the issue with the government. These state-owned insurers have about 300,000 agents that sell insurance products in rural and urban areas.

G Srinivasan, chairman and managing director of New India Assurance said that the scheme will be successful only if they are made part of the scheme. "Our branch network and people on ground are very high. This can make a big difference to the scheme in rural areas. We are hopeful that we would be made part of the scheme," he added. Public sector non-life insurers have more than 9,000 offices across the country.

The government is planning to spend Rs 5,500 crore for the crop insurance scheme that was announced earlier. In his budget speech finance minister Arun Jaitley said that the farmers will pay a nominal premium for the coverage.

The Pradhan Mantri Fasal Bima Yojana has been approved by the cabinet in January. Here, there will be a uniform premium of 2 per cent to be paid by farmers for all Kharif crops and 1.5 per cent for all Rabi crops. In case of annual commercial and horticultural crops, the premium to be paid by farmers will be only 5 per cent. The balance premium will be paid by the government.

Here, there is no upper limit on government subsidy and even if balance premium is 90 per cent, it will be borne by the government. Insurance executives said that the Modified National Agricultural Insurance Scheme (MNAIS) had high premium rate due to which farmers could not afford it. It is anticipated that there would be clusters that would be formed of districts to implement the scheme. Senior insurance officials said that that how the clusters are classified will define how the premiums will be fixed.

Apart from this, Regional Rural Banks also raised the issue of providing coverage to crop damage due to attacks by wild animals. Several cases of crop damage have been reported due to attacks on the farm land by elephants, which have destroyed the crops. However, ministry officials said that they will look into this issue.

The use of technology has been mandated in the PM Crop Insurance Scheme unlike the other schemes prior to this. The idea was to have one scheme that had the best features of all previous schemes incorporated into it, with weakness removed.

PMFBY will have actuarial yield-based scheme with provision for upfront premium subsidy to be released to insurers. The sum insured will be same for both loanee and non-loanee farmers. Also, there would be no capping and there will be full claim amount paid against the sum insured. This scheme will also cover localised risks like inundation and post harvest losses.

Source: Business Standard

With a Rs 330-crore insurance cover, Rajinikanth sets another record with Robot 2

Mar 21, 2016

Forthcoming Rajinikanth star vehicle 2.0 or Enthiran 2 (Robot 2) has been tipped as India's most expensive film ever. Set for release next year, it's already set a record in insurance cover for an Indian movie— Rs 330 crore, surpassing Rs 300 crore for PK (2014), starring Aamir Khan, said two people involved in writing the policy. State-run New India Assurance, Oriental Insurance and United India Insurance will underwrite the production, they said. When the film goes into the cinema halls, total insurance amount will double— distribution cover will equal that on production, they said.

Remuneration for the top four stars of film, which is being made in Tamil and possibly other languages, is also among the highest at Rs 150 crore. Apart from the Tamil star, they include Akshay Kumar and Amy Jackson, who takes over from Aishwarya Rai, who was the heroine of Enthiran. S Shankar will direct again.

"This is the highest ever insured movie after Aamir Khan starrer PK and Salman Khan's Kick," said Sumant Salian, business head, media and entertainment, Alliance Insurance Brokers. "Insurance cover for Robot 2 would double when the movie is ready and it goes for distribution."

State-run general insurance companies have a penchant for movies with star casts as the risk of them flopping are low. Producers are increasingly opting for insurance to protect themselves against projects getting delayed because of star tantrums and other unforeseen reasons.

Insurance covers risk from preproduction till the first copy of the movie. Various contingencies such as shoot cancellation, property risk, personal accident and thirdparty liabilities are also covered. Production insurance covers loss of life or property on film sets. The media liability policy is a kind of errors and omissions liability insurance, mainly insuring against legal issues arising out of a movie's content. The policy also covers post-release issues as a result of riots or strike.

Film insurance has become a part of the movie-production process in the mainstream Indian film industry as costs have increased.

Baahubali, a two-part film in Telugu and other languages written and directed by SS Rajamouli, had production insurance cover of Rs 200 crore. Director and producer Subhash Ghai was the first to buy insurance cover for his film Taal, which was released in 1999.

Source: The Economic Times

Govt allows 49% FDI in insurance under automatic route

Mar 21, 2016

Seeking to attract more foreign investment, the government has relaxed FDI norms for the insurance sector by permitting overseas companies to buy 49 per cent stake in domestic insurers without prior approval.

Currently, up to 26 per cent FDI is permitted through the automatic approval route. For FDI up to 49 per cent, the approval of the Foreign Investment Promotion Board is required.

“The foreign investment proposals up to 49 per cent of the total paid up equity of the Indian insurance company shall be allowed on the automatic route subject to verification by the Insurance Regulatory and Development Authority of India,” said a Government notification.

There are 52 insurance companies operating in India, of which 24 are in the life insurance business and 28 in general insurance.

During April-December 2015, FDI into the country grew by 40 per cent to $ 29.44 billion.

Source: The Hindu

BS Insurance round Table: 'Listing of insurance firms to become a reality'

Mar 18, 2016

Listing of insurance companies in the country will soon be a reality, said the panelists at the Business Standard Insurance Round Table here on Thursday. Finance Minister Arun Jaitley said in the Union Budget 2016-17 that public sector general insurance companies would be listed, and hopes have been raised for the first listing of an insurance company in the industry.

G Srinivasan, chairman and managing director, New India Assurance said that the listing process was possible in a short span of time. "While we have to go through the process, all four public sector insurers are in a position to list, though it could take six to nine months. New India Assurance will be one of the first companies to be listed."

Apart from Srinivasan, the other panelists in the Round Table included HDFC Life MD & CEO Amitabh Chaudhry, SBI Life MD & CEO Arijit Basu, Religare Health Insurance MD & CEO Anuj Gulati, Marsh India Insurance Brokers CEO Sanjay Kedia, and Life Insurance Corporation of India Executive Director Vipin Anand.

Getting insurers to list on the stock exchanges has been an area of focus for the insurance regulator. The regulator has even said that they may nudge insurers to list if they feel a need to do so. Among private insurers, only HDFC Life has announced its plan to list on the markets, though it has not specified any timeline.

Chaudhry said the impact of listing will be huge on existing and prospective customers if it is done at the right price and if the post-listing performance is decent. "The confidence will improve and the trust deficit will come down. As we become owned by customers, we have to sign up for standards which are higher than what we are at today," he said.

According to him, the Insurance Regulatory and Development Authority of India (Irdai) has been pushing for listing because it wants them to stand on their own feet and not depend on promoters. "We are looking forward to it as and when it happens," Chaudhry added.

A lot of expectations have been generated on if and when Life Insurance Corporation of India (LIC) would list. While LIC's Vipin Anand said that this was a government decision and there is not development on this front as of now, he added that the scrutiny that LIC faces as a public sector insurer is much higher than some of the listed entities.

While New India's Srinivasan said listing would help improve the profile and image of the industry, Anand explained that even after 15 years of private sector insurers, LIC continues to be the dominant player in the market and its image among customers remains the best.

"Listed or not listed, a competent performing public sector insurer can hold its own," Anand added.

Adding to this, Religare Health's Anuj Gulati said, "The level of financial reporting we do, the amount of data we put up on our website is no less than what listed entities do."

Distribution of insurance products was an important point of discussion, where there were opposing views on open architecture between insurers having bank partners and those that didn't.

SBI Life's Arijit Basu explained that mis-selling is very low in the bancassurance channel, and is about one-fifth of that in the agency channel.

He said enforcing open architecture at banks would not be beneficial. "We have 80 per cent of our sales through the bancassurance channel, and we are still covering only 30 per cent of State Bank of India's branches. That is the problem. Insurance itself is a nascent activity for banks. If you were to impose something, it would be detrimental," he said. However, he added that bancassurance would eventually go the open architecture way in the next few years, a thought shared by other panelists as well.

In the past, banks have not agreed to become insurance brokers, preferring the corporate agency route. Marsh India's Sanjay Kedia said that any insurer owned by a bank, would not prefer open architecture.

"Open architecture will work for banks that have no insurance subsidiary or partner, but the bank will be driven by which insurance company offers the higher commission and incentives for volumes and will promote those products," he said.

Among distribution channels, agents account for the lion's share in terms of size and number of policies that they contribute to the industry. LIC's Anand explained that to sell insurance to the 300 million young people, there is a need to attract younger generation to the profession. He added that while youngsters are joining the profession, the numbers are much below the demand.

To make India an insured population, the country needs at least five million new insurance agents, he added. There are currently about two million agents.

Insurance also remains a push product, which has led to low penetration and density. Srinivasan said that there is a situation of insurance inertia in the country wherein people are aware of the need for insurance, but are still not buying it.

He stated the example of the recent Chennai floods where there were heavy damages to households. While it was expected that this would motivate people to buy home insurance, the actual data showed that home insurance purchase has not happened.

The solution, according to the panelists, was to have simple products at affordable costs. Citing data from the recent Pradhan Mantri Jan Suraksha Yojana, where millions have been insured in a short span, the insurance executives said that the country needed simple and cheap products that could compete in the market.

Source: Business Standard

Insurers hiring specialists to improve service

Mar 17, 2016

Insurance companies are hiring specialists to not only meet the needs of the business but also to deal with policy-servicing requests of customers.

Being a long-term product, insurers are required to deal with requests at all times including assistance during the policy tenure and at time of claims.

In case of health insurance plans where claims are to be paid either as cashless or reimbursement. Here, doctors are being hired to assist policyholders.

Amit Bhandari, head- Health & Agricultural Insurance, Underwriting & Claims, at ICICI Lombard said that they have brought doctors on board who also help customers get a second opinion if they are not satisfied with the diagnosis done by their doctor.

Most of these services are usually part of the policy as a value-added component intended to provide more than just insurance cover.

Both public and private general insurers are increasingly hiring doctors in their team not only for health claim but also for complicated cases. So even if a disputed claim has to be resolved at the Ombudsman office, the doctor is present to give information about the medical terminology.

Apart from insurers, third party administrators who handle health claims as well as insurance ombudsman office take help of doctors.

For instance, insurance companies provide road-side assistance in motor insurance. This provides assistance during motor vehicle repairs, damage on roads. For this, insurers like ICICI Lombard have hired engineers who can suggest basic solution to motor repairs based on description provided by customer over phone before a professional from nearby garages can come and provide assistance.

In the life insurance space too, insurers are looking at hiring at specialists like counsellors who can come of help of policyholders at time of death claim.

Going forward, these niche professionals would be available round to the clock so that whenever any grievance comes up, they are able to handle it in a timely manner.

Source: Business Standard

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