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National census to collect info on insurance cover for the first time

Sept 05, 2018

India's decennial Census exercise is likely to collect data on bank accounts per household as well as penetration of insurance services, for the first time ever.

The Census 2021 questionnaire is currently being finalised in consultation with various central ministries and departments. Sources in the Home Ministry told Times of India that as part of ongoing consultation for designing the questionnaire for houselisting/enumeration for the next census, the Finance Ministry has sought to refine the 2011 question of whether there was a bank account held by the household, to how many bank accounts are held by members of the household.

Another important information that the Finance Ministry wants collected is about insurance acquired by a household. “The questionnaire is being redesigned to widen the scope of information being collected so that it can be applied to improve the delivery of various government schemes. The responses will be further codified so that collation of data is faster. We are looking at releasing complete data within three years of conducting the census,” said a Home Ministry official.

Source: Asia Insurance Review

Cabinet approves MoU with US in insurance regulatory sector

Aug 30, 2018

The Indian union cabinet has approved the signing of a memorandum of understanding (MoU) between the IRDAI and the Federal Insurance Office (FIO) of the US.

Framework for cooperation and coordination

According to a statement issued by Press Information Bureau of Government of India yesterday, the MoU provides a framework for cooperation and coordination, including for the exchange of information and research assistance with respect to each regulator's overview and other lawful responsibilities.

Under the agreement, both countries intend to share their experiences on various regulatory functions and to provide mutual assistance including training activities.

Collaboration in many areas of insurance sector

India and the US have also agreed to continue to facilitate cooperation on international standard-setting activities, financial stability and the development and implementation of consumer protection through sound prudential regulation of the insurance sector.

Opening up lots of possibilities for investment in Indian insurance

The US is one of the major contributors of foreign direct investment in India and many companies have set up joint ventures with US based insurers.

With the foreign investment cap in Indian insurance sector at 49%, there is tremendous scope for foreign investments in Indian insurance sector particularly from US based companies. Hence the bilateral MoU between IRDAI and FIO holds lot of potential for the two countries.

Source: Asia Insurance Review

State owned insurer to reorganise business

Aug 27, 2018

Government-owned United India Insurance is looking to reorganise its business by consolidating its presence in some "loss-making" portfolios such as group health. It also aims to enhance focus on liabilities and fire segments.

The restructuring is likely to be completed over the next 12 months, and will help shore up profitability, Mr KB Vijay Srinivas, director and general manager of United India, told Hindu Business Line.

“We are in the process of reorganising our businesses by right-sizing some unwanted and loss-making portfolios such as group health where pricing has been under pressure. We are trying to create a portfolio which is profitable,” Mr Srinivas said.

For the year ended 31 March 2018 (FY2018), the general insurer reported a net profit ofINR10.03bn ($144m), compared to a loss of INR19.14bn in FY2017, backed by significantly lower underwriting losses. The underwriting losses fell by almost half to INR25.42bn in FY2018, compared to ?4,444 crore in FY17.

Its gross premium income, driven primarily by motor, health and crop, grew by 9% to INR174.30bn in FY2018. “Liabilities and fire, put together, currently account for about 7% of our total business; we would expect it to increase to 12% in the next one to two years,” he said.

Apart from reorganising its business, the company is also looking into rationalisation of expenses to improve profitability. It is in the process of identifying loss-making branches.

“We have around 2,100 branches spread across the country. We have set up a team to study loss-making branches. We are trying to assess how to rationalise them,” he said.

When asked about the status of the talks to merge the three general insurance companies – National Insurance Company, United India and Oriental India Insurance – into a single entity, he said: “The background work is on; an advertisement has been floated to call for expression of interest for appointing a consultant to look into the process of merger.”

Source: Asia Insurance Review

Govt's plan to provide universal health coverage to offer opportunities to insurers

Aug 24, 2018

The launch of universal health coverage is credit positive for India's insurers because it will help grow health premiums and provide insurers with cross-selling and servicing opportunities, according to Moody's Investors Service.

An article in yesterday's edition of Moody’s Credit Outlook notes that on 15 August, Indian Prime Minister Narendra Modi announced that the Ayushman Bharat, or National Health Protection Mission (ABNHBM), will launch on 25 September 2018. The AB-NHBM aims to provide more than 100m families up to INR500,000 ($7,100) of health insurance coverage each year and total INR50trn of coverage in aggregate.

However, 23 of India's 29 states have chosen to run the scheme as a trust model, which will diminish insurers' growth prospects.

Trust models entail government funds being allocated to a trust fund rather than to insurance premiums, and the trust fund making disbursements for claims, rather than insurers disbursing claims. When the trust fund is depleted, the government will need to provide additional funds. This differs from the insurance model, under which the premiums paid would be the maximum limit of exposure for the government and insurers take on all of the coverage risk.

States can chose a hybrid model wherein there is insurance protection purchased for claims in excess of particular limits. “As a result, we expect that health insurance premiums will increase, albeit by only INR100bn for the additional coverage of 100m families (approximately 500m people). This is much lower than the current INR304bn of coverage for 440m.

Health insurance contributes around 23% of general insurance premiums and is one of the main drivers of growth for insurers. Health premiums have grown at a compound annual growth rate of 18% during the 2012-17 fiscal years. The fiscal year in India ends on 31 March.

“When the Indian government first announced AB-NHBM as part of the 2018 budget as a move towards universal health, we had expected that premium growth would accelerate as the government sought to expand healthcare coverage to India's 1.32 billion population. As of fiscal 2017, only 440m people were covered, and we expect that AB-NHBM will increase that number by 500m,” the report said.

Under the insurance model ,the increased coverage would have resulted in significant growth opportunities for insurers over the next two to three years, particularly for large healthcare and general insurers. Large insurers would have been able to benefit from their scale, resulting from superior claims management, strong provider networks and capacity to cross-sell other products.

“Although providing the health coverage as a trust model will diminish insurers' growth prospects, we still expect that insurers with scale advantages and track records of managing large insurance schemes will benefit from the health programme. Additionally, the programme will provide these insurers with opportunities to cross-sell other products and services to this new customer base,” the report added.

The writers of the report were Mr Mohammed Ali Londe, AVP-Analyst, Mr Antonello Aquino, Associate Managing Director, and Ms Sally Yim, Associate Managing Director, all three from the Financial Institutions Group of Moody's Investors Service.

Source: Asia Insurance Review

Govt's crop insurance plan turns profitable for insurers

Aug 21, 2018

The government-backed crop insurance scheme Pradhan Mantri Fasal Bima Yojana (PMFBY) has turned profitable in the first quarter of FY2019 (April to June 2018) after bleeding for two years. Better pricing coupled with low claims have led to underwriting profits in crop insurance.

Launched in 2016, the PMFBY loss ratio for most insurers was 140-145% in the first year.

The agriculture ministry’s data showed PMFBY had a sum insured amount of INR1,900bn ($27bn) and premium volume of INR243.5bn in FY2018. In the fourth quarter too, losses stayed in the range of 120-130%, reports Moneycontrol.

Since the crop cycle of kharif (monsoon crop) and rabi are seasonal, the first few months of calendar year 2018 saw losses on the rise again. However, towards May 2018 when the pricing stabilised and technology was being used in a widespread manner for crop-yield determination, the loss situation has changed.

For instance, the country's largest general insurer New India Assurance’s crop insurance portfolio had an underwriting profit of INR439.8m in 1QFY2019 compared to a loss of INR78.9m a year ago.

As the central government plans to increase coverage of PMFBY to 50% of total crop area in FY2019, insurers say that this will spread the risks across a wider base and will help lower losses further over the next three quarters of the current fiscal year ending 31 March 2019.

Source: Asia Insurance Review

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