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‘Linking insurance policies with Aadhaar, a mammoth task’
Jan 05, 2018
General insurance companies are understood to have sought an extension of the March 31 deadline for seeding the policyholders’ accounts with Aadhaar.
G Srinivasan, Chairman and Managing Director of New India Assurance Company, said, “It will be a mammoth task considering that we do not have the technology in place for seeding of accounts with Aadhaar and in many cases, we do not have the contact number of the policyholder to get on to the job on a war footing.
“We have, over the last couple of weeks, started collecting details from customers who have either sought to renew their existing policy or bought a new policy. Only when the technology is in place, will we be able to link the customer’s account with the Aadhaar number.”
While the company is in the process of putting in place a technology solution to address this issue, Srinivasan said, “When a policy is bought online or when an individual takes delivery of a vehicle, the dealer helps the buyer with the insurance cover. In such instances, we hardly get to see the customer. The seeding of the policy with Aadhaar is therefore, going to be an uphill task for insurance companies.”
The company services 2.7 crore policies, and all these will have to be linked with Aadhaar within the next 11 weeks.
Source: The Hindu Business Line
Strong IPO momentum expected to continue in 2018
Jan 04, 2018
Indian companies raised a record Rs67,147 crore in 2017 through initial public offerings (IPOs), with 36 companies, including India’s biggest insurance companies, going public.
Last year’s fundraising is 89% more than the previous record of Rs37,534 crore reported in 2010, data from primary market tracker Prime Database shows.
Market experts said several factors, including a resilient Indian economy and strong domestic liquidity coming into equities contributed to the buoyant market for IPOs.
“The domestic economy has remained resilient despite several big disruptions including demonetisation and the GST rollout, and this has buoyed foreign and domestic investor sentiment,” said Sumit Jalan, co-head of India Investment Banking & Capital Markets, Credit Suisse.
“We’ve seen record domestic inflows this year due to equity being viewed as a preferred asset class after some time, aided by higher penetration of formal channels for savings such as asset managers, insurers and wealth managers.”
The supply side too has been vibrant with high-quality companies from a wide variety of sectors coming to the market.
“On the supply side, fairly high quality paper with good sponsor-backing has hit the market. Investors have reacted positively to the mix of new sectors, themes and instruments that have come to the market. Secondly, a large portion of the issuance this year has been in the form of offer for sales (OFS) in the secondary market, as sponsors took advantage of the constructive market environment to monetise their holdings,” Jalan added.
One of the standout features of the IPO run this year has been the number of large-sized IPOs that hit the market. The year witnessed four $1 billion plus IPOs—General Insurance Corp. of India (Rs11,175 crore), The New India Assurance Co. Ltd (Rs9,466.9 crore), HDFC Standard Life Insurance Co. Ltd (Rs8,695 crore) and SBI Life Insurance Co. Ltd (Rs8,364 crore).
Experts say that more such IPOs will come into the market in 2018.
The median size of IPOs has been increasing over the past three years with FY17 median IPO size at Rs880 crore, indicating that the companies tapping capital markets are among the larger well-established firms looking to further grow their businesses, along with providing exits to early stage investors, said Shilpa Kumar, managing director (MD), ICICI Securities.
“Retail investors have started actively participating in the equity markets due to muted return and activity from other assets classes such as real estate, gold etc. which were conventionally the dominant asset class,” said Kumar. “This coupled with increased inflows from DIIs (domestic institutional investors), positive outlook of FIIs (foreign institutional investors) on Indian markets and the general positive sentiments in the market, we believe that the Indian equity market has become deep enough to support trades of more than $1 billion.”
Given the four billion-dollar IPOs from the insurance sector and other major issuances, the year was dominated by banking, financial services and insurance (BFSI) sector.
The sector is expected to continue to dominate IPO fundraising in 2018, though a couple of other sectors such as auto and real estate too are expected to shine in 2018.
“The BFSI sectors are expected to continue to dominate the 2018 IPO pipeline, however, the mix will change. We’re likely to see more traditional lenders coming to the market as they require further capitalisation, both for growth and provisions. More service providers such as asset managers, Wealth Managers, Fintech and Registrars will also be in the mix. BFSI is in the sweet spot, where there is a need for capital as well as healthy valuations and yet strong investor appetite,” said Jalan of Credit Suisse.
"Outside of BFSI, we expect telecom, auto and real estate companies in the pipeline for 2018 and incrementally new tech sector companies in 2019," added Jalan.
“The market outlook, maturity of the Indian markets, government’s disinvestment programme as well as the presence of sophisticated PE (private equity) investors in interesting new age businesses which are ripe for listing, all of these factors will continue to bring diversity to the IPO market and provide investors new opportunities to invest in IPOs in FY18,” said Kumar.
The activity in 2018 could see a rush as companies might look to advance their IPOs in light of the general elections in 2019.
“With the coming 2019 general election, we expect many companies who have IPO plans will likely move forward with their transactions in the first three quarters of 2018, resulting in pent-up IPO activity. Also, due to the secondary component, deal sizes can be large, hence while the number of initial public offerings may not increase as much, the quantum of the fundraise would remain large,” said Jalan.
Insolvency professionals to get cover
Jan 04, 2018
Within few months of banks initiating insolvency proceedings against a dozen large corporates, insurers have put together a customised cover to protect the professionals appointed to run these defaulting firms.
The cover is aimed at ensuring that the insolvency professional (IP), who takes on the role of the firm's CEO at the behest of lenders, can take big decisions without fear of legal action.
JLT Independent Insurance Brokers has put together a cover for three of the 12 companies and is in talks with the remaining nine. "The cover is a combination of a Directors & Officers (D&O) policy and a professional indemnity cover with lot of improvisation and client requirement included in the policy wording," said Amit Agarwal, director, JLT Independent Insurance Brokers.
The D&O cover protects top management of a company against unproven claims from employees, shareholders and regulators, while professional indemnity covers are usually taken by professionals against legal action by their clients.
Once lenders are successful in getting an insolvency petition admitted, the board of directors of the company is dissolved and the committee of creditors become the owners and they appoint an insolvency professional to run the company.
IPs are licensed professionals. Most often they are attached to accountancy firm. In the recent cases, the IPs are attached to one of the big four accountancy firms.
"The IP functions as a quasi-director and also as a professional. The risk is higher as this is an outsider who has come in for six months," said Agarwal. While it is the lenders who appoint the IP to run the company and give him blanket permission to take day-to-day decision they do not provide him indemnity for his actions. This has compelled the IP to look for insurance.
The size of the insurance cover depends on the size of the company's debt and the fees of the insolvency professional. Covers usually range from $2 million (Rs 13 crore) to $25 million (Rs 1,625 crore). Despite the modest size (compared to the net worth of the Indian insurance companies) these covers are almost entirely issued on the back of global reinsurance support.
"One of the reasons why these covers have to be backed by special reinsurance agreements is that the they are not covered by the open-ended treaties that insurers have with global reinsurers. This is because the IPs are usually partners in the Big Five accounting firms and these firms are often targets for litigation because they are seen to have deep pockets.
According to Agarwal, class-action suits also cannot be ruled out because most of the companies are listed. "The specific worry is the defence costs. While most of the claims would be in the nature of allegations and would need to be proved, there would be legal expenses involved," said Agarwal.
Source: The Times of India
IRDAI top post: Insurance sector CEOs, bureaucrats in the fray
Jan 03, 2018
A host of serving and former insurance sector CEOs and bureaucrats are in the race for the post of the chairman of the Insurance Regulatory and Development Authority of India (IRDAI). The post will fall vacant on February 21 when present chairman TS Vijayan completes his term.
Among the insurers who have applied for the post are: VK Sharma, chairman, Life Insurance Corporation, G Srinivasan, CMD, New India Assurance. The other applicants include: K Sanath Kumar, CMD, National Insurance, Hemant Bhargava, MD, LIC, Sunita Sharma, MD, LIC, B Venugopal, MD, LIC and Rajesh Kandwal, CEO & MD, LIC, Bahrain. Nilesh Sathe, Member (life), IRDAI is also in the fray. Sources said several serving and retired bureaucrats including Anjuly Chib Duggal, former secretary, Department of Financial Services and former Economic Affairs Secretary Shaktikanta Das are also strong contenders.
A notification issued by the Department of Financial Services, Ministry of Finance, stipulates that an applicant should have at least 30 years of work experience, and he/she should have worked as secretary to the government of India or an equivalent position either at a Central or State level.
However, the ministry had amended the initial notification so that the CMDs of public sector insurers and MDs of LIC who are in the rank of additional secretary could apply. The post is also open to experts from the private sector.
Except Vijayan, all the chairmen of the IRDAI since 2000 have been retired bureaucrats. Vijayan was appointed in 2013 as the then finance minister P Chidambaram had strongly recommended an insurance professional over bureaucrats. This is the first time that the appointment will be done by the Financial Sector Regulatory Appointments Search Committee.
Cabinet Secretary PK Sinha heads the committee while additional principal secretary to the Prime Minister PK Mishra, Department of Financial Services Secretary Rajiv Kumar and Department of Personnel and Training Secretary Ajay Mittal along with Bimal N Patel of the Gujarat National Law University are other members of the panel.
According to the Insurance Regulatory and Development Authority Act, 1999, the chairperson of the authority will hold office for five years, and is entitled to a consolidated salary of Rs 4.5 lakh per month without housing and car facilities. The last date for applying for the post was December 27 and finance ministry sources said the interview for the post may happen during the third week of January.
Earlier in November, the committee had interviewed candidates to select two Members (life and finance) of the IRDAI.
Source: The Indian Express
The significance of the humble insurance proposal form
Oct 16, 2017
Buying insurance requires considerable paperwork. Brochures and key-feature documents need to be read, illustrations and declarations signed, and financial and Know Your Customer information submitted. The most important document, however, is the humble proposal form.
This proposal form comes in different shapes and sizes. In many insurances, it is paper-based and needs to be filled by hand. Sometimes, the information can be provided electronically, and in a few cases such as motor insurance, the proposal form may not even be required.
The form is important, obviously because that’s where you provide information that is the basis of your insurance. But equally valuable is the fact that completing a proposal form requires putting pen to paper or fingers to keyboard. The act of writing forces mindfulness. The few minutes when a proposal form is being completed are when buyers understand the product best, specifically the features they get and the claims that will get paid.
In filling up a proposal form you should be accurate. That’s easier said than done. The most basic information asked is your contact detail. Yet, crores of claims and maturity amounts remain unpaid because insurers are unable to reach policyholders at the numbers and addresses they gave. Do ensure that the address you give is permanent, the phone number is one that you intend to keep and the email is personal. People change jobs more often than they expect.
Provide the information asked and not more. Be to the point. There is little benefit in giving additional information. There have been situations, in health insurance for example, where the applicants opened up about feeling anxious and had their applications declined. In motor insurance, there is little advantage to describing small dents if they are not asked for, particularly if the insurance is getting renewed on time. You will find those damages excluded from your renewed insurance.
Complete the form yourself. That allows you to control what is shared. All too often applicants will sign a blank proposal form and have an adviser do the rest. That’s a recipe for disaster. It’s not that the adviser will deliberately mis-state facts but there may be information the advisers just do not know or, in their wisdom, leave out things they consider unimportant.
When insurers send back a copy of the completed proposal form, read it. That’s an important check to see the basis on which the insurance was issued. Sometimes, information may be altered by someone in the distribution chain and it’s good to look for such inconsistencies.
For life insurance, in particular, the nominee section in the proposal form is key. Previously, the benefits of a life insurance policy were paid to the legal heirs with the nominee being a temporary custodian of the money. However, according to the new insurance Act, if the nominees you select in the proposal form are legal heirs then the entire benefit will be paid to them in the proportion you specify. This gives you much better control over directing who should benefit from your insurance.
Insurers should design their proposal forms to be brief, specific and educative. The length of the forms varies hugely amongst insurers. In home insurance they range from 2 to 6 pages. In health, from 3 to 12. Lengthy forms have two problems. First, the formatting is poor making them cumbersome to fill. It’s often not possible to write legibly in the form. Second, you are never sure which information is mandatory and whether the fields you left out are the ones that will matter when you make a claim.
Specificity is also required. Some common reasons why home insurance claims are rejected are that the basement, where the loss often occurs, was not declared or commercial activity such as an office or clinic was not mentioned or the length of time the house was vacant was not listed. In a good form all these questions should be specifically asked to reduce the possibility of a claim being rejected. Health insurance has a similar need for specificity. All health insurance forms have catch-all medical questions that require applicants to mention diseases they suffer from. Some insurers leave these broad. For example, “Have you had any other illness other than mentioned in the questionnaire (other than common cold)?” or “Any additional facts which affect the insurance & should be disclosed to the insurer?” These catch-all questions always leave applicants doubtful about what to declare. However, some catch-all questions are more specific. For example, “Are you currently suffering from any symptom(s) or complaint(s) persisting from more than five consecutive days?” or “Have you undertaken any surgery or a surgery been advised in the last 10 years?” The specific questions leave less scope for disputes and are better from the customer’s perspective.
Finally, a good proposal form educates buyers about the insurance once more. It will tell buyers that in a home insurance there is a choice between reinstatement value, where cost of reconstruction is paid or market value, where depreciated value is paid. In motor insurance, it will clearly specify the add-ons and exclusions such as engine seizure or tyre bursts. In health insurance, it will remind the insured of the waiting periods for diseases.
Buyers should take their time to fill this form. Remember, those who act in haste repent at leisure.
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