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All you need to know about the new Crop Insurance Scheme

Jan 08, 2016

Agriculture Minister Radha Mohan Singh made a presentation to Prime Minister Narendra Modi on Wednesday on the proposed new Crop Insurance Scheme. Besides premium rate, the discrepancies in the existing scheme were discussed.

The meeting was attended by Finance Minister Arun Jaitley, Home Minister Rajnath Singh, External Affairs Minister Sushma Swaraj, Food Minister Ram Vilas Paswan, Urban Development Minister Venkaiah Naidu and Road Minister Nitin Gadkari. Rural Development Minister Chaudhary Birender Singh, Tribal Affairs Minister Jual Oram, Social Justice Minister Thaawar Chand Gehlot, Chief Economic Advisor Arvind Subramanian, Niti Aayog chief among other senior officials from Finance and Agriculture Ministries were also present.

Here is all you need to know about the proposed new Crop Insurance Scheme:

The Agriculture Ministry has proposed an average premium of upto 2.5 per cent for foodgrain and oilseeds crops and 5 per cent for horticulture crops. However, some sections within the Cabinet want a uniform premium of 1-1.5 per cent for all crops.

The Centre would incur an expenditure of Rs 8,000 crore annually if a premium for farmers was fixed at 2.5 to 5 per cent depending on the risky crops and if 50 per cent of the total crop area of 194 million hectare was insured.

But fixing a uniform premium rate of 1.5 per cent for all crops for 100 per cent coverage would increase the Centre's financial burden to Rs 11,000 crore, which the Finance Ministry officials said was a major concern. The government intends to implement the scheme from the forthcoming kharif season from June.

The proposal on the new crop insurance scheme, moved by the Agriculture Ministry, was once discussed in a Cabinet meeting last year, but the decision was deferred in the wake of differences over the premium rate. In the existing Modified National Agricultural Insurance Scheme (MNAIS), the average premium rate for farmers has been kept at 5.5 per cent, though the premium rate for high risky crops is as high as 40 per cent. Last year, only 27 per cent of the crop area was insured which cost Rs 3,150 crore to the national exchequer.

Besides lower premium rate, the proposed Crop Insurance Scheme aims to settle insurance claims faster by assessing the crop damage using modern technologies like remote sensor. The Agriculture Ministry has already launched a portal on crop insurance and a mobile app as part of the digital India campaign.

Source: Business Today

Insurance companies see drop in growth for engineering segment; may see uptick in 2016

Jan 08, 2016

Engineering segment for insurance companies has seen a drop in growth owing to very few number of projects taking off. According to industry experts, there had been a 10-12 per cent drop in the premiums under fire and engineering policies. However, insurers expect an uptick in 2016.

K G Krishnamoorthy Rao, MD & CEO, Future Generali India Insurance said, "The stalled infrastructure projects would finally kick off in 2016, thereby boosting the engineering insurance sector as well."

Overall, industrial production numbers are also seeing positive signs now. Insurers have also been offering heavy discounts in insurance premium rates for the fire and engineering segment.

This segment largely covers manufacturing plants and large-scale industrial projects from fire and other risks associated with construction and maintenance. Other than manufacturing, fire and engineering policies are offered to sectors such as auto, oil & gas, power, and infrastructure.

"Since not many new projects were not coming up, there was tough competition to retain existing customers and attract those from other insurers. Now, there are signs of green shoots emergingt," said the underwriting head of a private general insurer.

According to industry insiders, after the fire and engineering segment was de-tariffed (price control was removed) in 2007, earlier in some areas there were instances of 60-70 per cent drop in rates, making the businesses un-viable.

Industrial output grew at its fastest pace in five years at 9.8 per cent in October on robust festival demand, official data showed on Friday. A four-and-a-half month high in double-digit growth in manufacturing, particularly consumer durables and capital goods, fuelled industrial production.

Industrial production, as measured by the Index of Industrial Production (IIP), grew 3.6 per cent in September and had contracted 2.6 per cent in October 2014, so the October expansion was on a low base. But, economists warned October could turn out to be a statistical aberration.

Source: Business Standard

General insurance premiums may not go up this year

Jan 07, 2016

General insurance premiums are unlikely to see a sharp rise this year due to falling global reinsurance rates.

According to industry experts, reinsurance premium rates are expected to decline this year as there have been no major catastrophes globally and also due to overcapacity in terms of capital in the market. This is despite India recording high economic losses due to the Chennai floods, which had a Rs.3,000-crore impact on the general insurance industry.

According to Aon Benfield, leading treaty reinsurance broker, for 2015 global reinsurance capacity was about $565 billion, with alternative capital making up about 12 per cent — or $69 billion — of that total.

Insurers apportion a part of their risk to re-insurers by sharing a slice of their business (premium) with the latter so that they don’t have to bear the entire loss in case of an adverse event.

K Sanath Kumar, Chairman and Managing Director of General Insurance Corporation, the country’s sole domestic re-insurer, said reinsurance rates would remain soft this year as the last year had been benign in terms of major catastrophes globally. This could lead to a decline in rates when the reinsurance contracts for Indian general insurers come up for renewals in April.

G Srinivasan, Chairman and Managing Director of New India Assurance, the country’s largest domestic general insurer, also said that he does not anticipate a hardening in reinsurance rates despite high catastrophe losses in the Indian market. This is due to the fall in re-insurance rates globally.

Global reinsurance broker, Willis Re, in its recent report, said: “Reinsurers have also faced difficult renewal dynamics in some specialty markets, with large losses and reductions in original rates not proving sufficient to dissuade further capacity from entering either the aviation or energy markets. This is leading to a prolongation of softening rates.”

Source: The Hindu Business Line

Insurance firms launch consumer awareness drive

Jan 07, 2016

Insurance companies are now taking a slew of steps to promote the concept of insurance among the public. These include awareness campaigns, social media promotions, road-shows and customer meets. The focus here is not brand promotion or advertising, but purely for insurance awareness.

For instance, Bajaj Allianz Life Insurance has carried out an insurance awareness roadshow called ‘Jan Jagruti’ across different rural locations of Maharashtra, Goa and Gujarat. Subrat Mohanty, head of marketing, Bajaj Allianz Life Insurance, said this was a campaign wherein a vehicle equipped with service support materials and representatives goes out to places and a group of artistes perform a street play in the local language. Mohanty said they would soon take this roadshow to parts of Tripura in the Northeast and Haryana.

In the last one-and-a-half years, the company has conducted customer meets in small towns across different parts of the country. Mohanty said the event is called Pehle Aap and “our chief executive officer along with sales officers interact directly with select customers and tell them about importance of having adequate life insurance”.

Insurers are also using their mobile applications for creating awareness not only basic policies but also helping prospective policyholders calculate how much cover of insurance do they need for the various life stages. These tools are integrated in the mobile app, which can then also be used to buy a policy.

Companies with bank partnerships are also utilising the branch networks to educate customers.

Niraj Shah, director marketing, strategy and products, PNB MetLife Insurance, explained they have reached out to schools and colleges to organise sessions on insurance awareness for students. The programme enables the young generation to understand the basics of money management and thereby incorporating the importance of financial planning.

“We have developed a film and a jingle on the importance of life insurance for rural and semi urban India. We are starting with workshops in Haryana and plan to reach out to thousands of people in over 10 villages and taluks,” he added. Shah said an important point to note is they do not promote their products or services through this programme.

Sanjeev Mantri, executive director, ICICI Lombard General Insurance, said they have been conducting insurance familiarisation workshops across the country, including rural markets to help consumers understand and appreciate the need for insurance across health, motor, travel and home segments.

“We have been focusing on specific days, for example, World Heart Day, for health insurance to spread the insurance awareness message and thus make it more relevant for consumers,” he said.

Social media also plays a crucial role in awareness, since smart-phones have made access to internet more convenient and in several rural pockets, introduction to the internet is usually via the phone.

Mukesh Kumar, executive director, HDFC ERGO General Insurance, said on macro level, they leverage social media platforms like Facebook, Twitter and Linkedin to reach out to the digital natives who constitute a large part of the younger generation and can be educated regarding the benefits of insurance thereby ensuring that the future generations are well protected.

“The campaigns are also organised at micro level like road shows, seminars etc across villages as well as through village level entrepreneurs under the Common Service Centre (CSC) programme that enables the rural population to appreciate the benefits of the insurance,” he said,

Sasikumar Adidamu, chief technical officer, non-motor, Bajaj Allianz General Insurance, said the company hosts regular sessions on Google+ which is aimed at demystifying insurance. “These hangouts aimed at building awareness about insurance and invited healthy discussions directly between the customers/audience and the top management of Bajaj Allianz. It has held 8 Google+ Hangouts thus far, with the theme of explaining the finer points of various insurance policies and ways to manage them for steady protection,” he said.

Further, he added that the company runs contests and campaigns to educate users about insurance products such as health, travel, home and motor insurance through social media handles like Facebook, Twitter and YouTube. The company has also made many one-minute films with the objective of increasing insurance awareness.

Insurance penetration, measured as a percentage of premiums to a country's gross domestic product(GDP), has been on a constant drop in India. According to the sigma study from global reinsurer Swiss Re, India's insurance penetration fell to 3.3% in FY15, compared to 3.9% in FY14. This has been the lowest since 2005-06, when the penetration was at 3.14%.

Source: Business Standard

Soon, you could buy vehicle insurance through ATMs!

Jan 07, 2016

The Insurance Regulatory and Development Authority of India (IRDAI) plans to permit insurance companies tie up with banks in this regard, its Executive Director Sriram Taranikanti told BusinessLine.

To begin with, the mandatory motor third-party insurance will be made available through ATMs.

“There are seven crore vehicles plying without insurance, creating a huge social and economic hazard for victims of road accidents, and this needs to be curtailed,” the official said. This also dilutes the safety net and has adverse impact on the compensation available for the common man in case of any grievous injury arising out of use of uninsured vehicles.

The total number of registered vehicles in the country are 15 crore, according to the latest data.

While insurance is automatically bought at the time of vehicle buying, owners fail to renew it after the first year.

The regulator is of the view that easy access to purchase of insurance might ensure better compliance.

As the premium rates for third-party insurance are generally fixed and uniform, there is no question of much competition. The lowest premium for third-party insurance is about Rs.500. On this basis, if all vehicles are insured, it will generate a premium income of Rs.3,500 crore. If one adds up the higher premium for some classes of vehicles, the combined premium income generation could be around Rs.5,000 crore. “Indirectly, this will also trigger demand for own damage component of insurance which might benefit the industry,” Taranikanti said. The total size of vehicle insurance segment in the country is about Rs.15,000 crore.

As most of the banks are already distributing insurance products, making them available is not a big issue for banks and insurers, he felt. The Know Your Customer (KYC) norms are not mandatory while taking a motor insurance policy.

The IRDAI is also actively considering sale of insurance at mobile pollution check centres as part of exploring ways to address the online connectivity issue, which is a must for issuing policies.

Source: The Hindu Business Line

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