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India : Regulator moves to ensure continuity of benefits for policyholders who switch insurers

Aug 13, 2018

A panel on innovations in insurance and insurance technology and related regulatory aspects, formed by the IRDAI, has recommended portability of customer data when a policyholder moves from one insurer to another.

This will come in handy in the case of short-term products in non-life and health insurance. From a customer’s point of view, this ensures the continuity of benefits,which are based on data, such as no-claim bonus, disease or medical history.

An agency such as the Insurance Information Bureau of India could create the required mechanism for a repository to capture industry data related to insurance customers/policies, reports Hindu Business Line.

The committee has also suggested that insurers may be allowed to capture data as per their product requirements, and they should mention all data elements they wish to capture as part of their product filing procedure with the regulator.

However, to ensure standardisation of data capture across insurers for the creation of a repository of generic data to benefit all, the basic standard data elements could be worked upon by the General and Life Insurance Councils, it added. Stating that technology “could disrupt insurance business model and the insurer landscape”, the working group said big technology firms, with their technological and analytical advantage, will squeeze out traditional insurers.

The regulator, too, needs to reassess the existing guidelines to ensure that customers are adequately protected. “As the risk profile changes, it would be necessary to ensure that regulatory framework continues to adequately capture it,” the committee said.

The IRDAI is currently examining these recommendations, and is likely to issue its decisions soon.

Source: Asia Insurance Review

Lack of awareness, affordability and low understanding hampers health insurance growth

Aug 10, 2018

The IRDAI is pushing for simpler products and greater usage of technology to increase the number of people covered by health insurance plans.

“Low risk awareness, lack of affordability and low understanding of insurance products—these are some of the reasons why health insurance has not picked up so well even though the growth rate is high for the higher income group as a whole,” said Mr Subhash Chandra Khuntia who became IRDAI chairman in May. He was speaking at the Health Insurance Summit organised last week by the Confederation of Indian Industry.

“There should be simplification and rationalisation of health insurance products so that they are understood by the common people,” he said.

The IRDAI moves aim too to make the central government's ambitious Ayushman Bharat-National Health Protection Mission (AB-NHPM) more accessible.

The insurance regulator will work with health insurance companies under the public-private partnership model to implement AB-NHPM, popularly known as Modicare named after Prime Minister Narendra Modi.

“With the increase in life expectancy in the country, the need for improving insurance penetration and coverage is paramount,” Mr Khuntia said.

“The focus should be to make the process online, enhance use of technology, and increase awareness and understanding about insurance products.”

Standardised and simple products under AB-NHPM would reduce cost, increase efficiency and expand the coverage of the health insurance sector, he said.

AB-NHPM aims to cover around 100m families comprising about 500m people.

Source: Asia Insurance Review

Merger of 3 state-owned insurers could be industry game changer

Aug 10, 2018

The Indian government's proposal to merge three state-owned general insurers can trigger a whole bunch of initiatives, yielding positive returns for all the key stakeholders-industry, shareholders and customers, says Mr Rohit Jain, head of India for Willis Towers Watson.

In an article in Livemint, he says that the merger of National Insurance, United India Insurance and Oriental India Insurance can have massive ramifications as the merged entity will end up controlling about one-third of the total non-life insurance market in India.

Game changer

With the merger, one can expect an end to unhealthy competition among the companies and a more prudent underwriting discipline. This merger presents an opportunity for the companies to transform into a new-age entity in today’s fast paced and dynamic insurance market by discarding some of the legacy operating protocols, which have become bureaucratic over a period of time, and reinventing organisational structures.

A merger of this size and stature will provide cost synergies primarily around infrastructure, operational efficiencies fuelled by economies of scale and optimisation around marketing spend. The “InsurTech” space hands a golden opportunity to the merged entity to strongly embrace technology and leverage it as a differentiator while competing with private sector insurers.

Apart from improving customer experience, the merged entity can enhance customer reachability and expand across under-penetrated geographies. With a huge talent pool and wealth of experience in a unique and intricate Indian market, innovative “productisation” can be expected from the stables of the combined entity. Till now, the focus has been restricted to traditional products itself. With the emergence of newer risks in the Indian ecosystem, the new entity can leverage its strength to provide solid risk mitigation and risk transfer capabilities. Some of the speciality risks such as cyber, title, warranties and others still call for more product focus around understanding the risk, communicating it and eventually underwriting the risk.

In addition to accomplishing its goal of deeper insurance penetration in areas like health, personal accident and crop, the government may also be looking at this new vehicle to reduce forex spending as a result of better retention capacity of the combined entity.


Harmonising the different IT platforms into a common one will be a mammoth task. But given that India is home to some of the best tech companies in the world, it can pose only a temporary challenge.

In terms of organisational culture, the integration of people and processes would certainly be onerous. There are more than 50,000 employees across the three entities and redundancies can be expected. The government would need to tread cautiously and may have to pursue reskilling/upskilling aggressively.

Various issues related to the retirement liabilities (integration of gratuity, super annulation, provident fund) of employees will also pose a huge challenge, requiring attention of qualified and experienced actuaries.

Managing treasury investments will also be tricky due to the regulatory and governance framework that defines the extent of investments in any investee company. Also, an entity of such mass and volume can sow the seeds of monopolistic market behaviour. The regulator will have to allay such fear of threat towards customer sovereignty.

Mr Jain says that apart from the prospect of improved valuation and safeguarding investor interest, what probably motivated the government to announce this merger was a combination of the deteriorating financial condition of the three companies, concerns around raising capital from the market and the divestment agenda of the government.

Source: Asia Insurance Review

India: Regulator wants state owned general insurers to inject more funds before merger

Aug 09, 2018

The insurance regulator wants three state-run insurers to inject funds of INR100 billion ($1.47 billion), to boost their capital to meet solvency and growth targets before the insurers merge, reports BloombergQuint. The three general insurers are National Insurance, Oriental Insurance and United India Insurance, whose merger was announced by Finance Minister Arun Jaitley in the Budget for 2018-19.

According to an official present at a Finance Ministry meeting called to discuss the merger process, the IRDAI asked the government to either provide the additional funds or allow the insurers to raise Tier-II—supplementary—capital from the market.

The regulator wants the three companies to bring their solvency ratio up to the mandatory 1.5 times. The three will require at least INR18.95 billion to achieve this ratio, according to BloombergQuint’s calculations based on the insurers' disclosure to the regulator.

However, Mr R Chandrasekaran, secretary general of the General Insurance Council, said that the solvency margin, doesn’t reflect the actual strength of the insurers. “These companies have large hidden reserves that are not reflected in their books, and the solvency margin is estimated conservatively.”

The regulator currently values assets at their cost of acquisition to calculate the solvency margin of general insurers and doesn’t take into account the market value of the assets. “The insurers could utilise these reserves in extreme situations to meet policyholders’ liabilities,” said Mr Chandrasekaran.

But the three companies would also need growth capital as their exposure to the government’s crop and health insurance schemes would increase in the future, the official quoted above said.

Source: Asia Insurance Review

India: Businesses turning to insurance to protect against social media fallout

Aug 09, 2018

Organisations are insisting on new and more comprehensive clauses in their normal professional indemnity and directors & officers' (D&O) liability insurance policies to protect themselves from fallout from social media hate or unintentional corporate goof-ups.

Insurers say companies fear litigation and expenses in the event of incidents such as when a DDI World employee tweeted a hate message against Kashmiris, or when a Kotak Mahindra Bank employee justified the Kathua rape, reports Times of India.

Insurers are responding to the demand by offering specialised covers. For example, ICICI Lombard General Insurance sells media liability cover and Bajaj Allianz General Insurance markets cyber safety policies. These include social media liability.

ICICI Lombard General Insurance chief underwriting officer Sanjay Datta said, “Awareness has been increasing. For corporates, managing possible reputational risk and litigation is important. When the Satyam fraud issue happened, there was an immediate uptick in D&O policies.”

Mr Datta said that businesses need to buy policies that are comprehensive as they face a wide range of risks, such as inappropriate comments on social media and employee dissatisfaction.

However, state owned insurers say that existing policies can protect against social media fallout without the need for a special cover.

“Social media liability insurance may be a new concept with the rising popularity of LinkedIn, Twitter and Facebook. But it basically is a take-off on traditional covers,” said an official of United India Insurance.

Source: Asia Insurance Review

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