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Govt-owned insurers deliberate modernisation measures

Oct 09, 2018

Public sector general insurance companies now have an annual 'insurance manthan' or retreat to look into the issues plaguing the sector. The event was held on 5-6 October. Financial services secretary Rajeev Kumar said in a tweet that this initiative is to develop comprehensive reform agenda in six themes to modernise public sector general insurance companies, reports Moneycontrol.

The six-point agenda discussed included: a fully insured society, customer orientation, digital and analytics for future, sustainable and prudent business, reach for everyone and talent management.

Among the state owned insurers, New India Assurance and reinsurer GIC Re are listed on the stock exchange. Others including Oriental Insurance, United India Insurance and National Insurance are unlisted.

Underwriting losses stay high

The underwriting losses of public sector insurers increased by 43.9% to INR155.910bn in the fiscal year ended 31 March 2017 (FY2017), from INR108.35bn in FY2016.

The Finance Ministry has warned state owned general insurers to improve their underwriting performance and not focus solely on investment income.

In categories like group health insurance, the combined ratios have crossed 130%. This is primarily because state owned insurers price products aggressively to retain large clients.

Since 2015, the Finance Ministry has held an annual two-day retreat for banks and financial institutions, to take forward the government’s commitment to reforms in the financial sector.

From 2017, the event was rechristened 'PSB Manthan' where senior public sector bank officials meet in Gurugram to discuss and brainstorm the banking sector’s troubles and focus on improvement in credit growth and reducing non-performing assets.

With its own "manthan", the public sector insurance sector can address more closely a series of problems including high underwriting losses and lack of young talent. On the technology front too, private insurers are ahead of their public sector peers, be it in policy issuance, servicing or claims settlement. A senior executive said that another focus is on bringing the uninsured under the various social sector schemes.

Source: Asia Insurance Review

Reliance Capital establishes health market's 7th standalone insurer

Oct 08, 2018

Reliance Health Insurance has received the final approval of the IRDAI for a licence to operate as a standalone health insurance business.

A wholly owned subsidiary of Reliance Capital, the new company will commence pan-Indian operations this quarter.

The company has on board nearly 3,500 hospitals as partners, and plans to extend the partnership with 5,000 hospitals in 100 cities by March.

In a statement, Mr Anmol Ambani, Executive Director, Reliance Capital said, ''The scope of health insurance in India is massive and, given the current low penetration, is expected to grow multi-fold over the next few years. Setting up a standalone health insurance company with an extremely experienced and capable leadership will allow us to put the right kind of focus this segment requires. We are making significant investments in our technology and digital platforms which will provide a magical experience for our customers.''

Health insurance in India has been amongst the fastest growing insurance sectors growing at 20% annually and is expected to double to over INR1trn ($13.5bn) by 2021.

Mr Ambani said that three factors—changing demographics (a young India with higher income, higher assets, and more financially aware), the rising cost of healthcare, and an increase in lifestyle-related ailments—indicate significant growth potential.

With the establishment of Reliance Health Insurance, the total number of standalone health insurers registered with the IRDAI is now seven.

Source: Asia Insurance Review

4 in 10 online health insurance buyers opt for US$6,800 minimum cover

Oct 05, 2018

Nearly four out of 10 Indians who purchase health insurance online prefer a minimum cover of INR500,000 ($6,800), a study by the Product and Innovation Centre (PIC) of has revealed. The study took into account the buying behaviour of more than 10,000 consumers purchasing health insurance online across 20 states. The study also indicated that if Indian consumers buy less or more cover, then they have a preference for cover of INR300,000 or INR1m. While nearly 22% of consumers surveyed opted for the INR300,000 cover, more than 12% of the surveyed group chose cover of INR1m.

In terms of age-related findings, the study indicated that consumers in the age bracket of 26-45 years are the ones who are most active online in health insurance purchases, with nearly 75% of the survey audience belonging to this group, while 12% of the online sales were attributed to people between the ages of 45-60 year bracket.

"Healthcare costs are rising at an astronomical rate. Today, any lifestyle disease treatment costs anywhere between INR300,000-1m in a decent private hospital in the urban areas. As such, what was a INR200,000 average health cover bought 2-3 years back has become a INR500,000 cover today," said head of (PIC),, Mr Vaidyanathan Ramani.

"With growing awareness around the need for having a health cover and understanding of the existing treatment costs in hospitals, we expect the Indian consumer to opt for an even bigger umbrella to ensure a better protection for their family over the next few years," added Mr Ramani.

Another major finding of the study revealed that Delhi-National Capital Region consumers are the most active online, with nearly 25% of the purchases made by them in the overall digital health insurance landscape. Maharashtra came a close second, with almost 20% market share in health insurance purchases online. Other states featuring in the top five were Karnataka, 8%; Uttar Pradesh, 7%; and Gujarat, 5%.

Source: Asia Insurance Review

GIC Re gets top priority in reinsurance business

Oct 01, 2018

GIC Re, the sole Indian public sector reinsurer, will continue to retain the first right of refusal to reinsurance business in India.

The IRDAI in its board meeting on 28 September 2018 decided to continue with the current order of giving first preference to GIC Re. The long pending revised reinsurance regulations, now cleared, aim to ensure that the maximum possible reinsurance business is retained within the country.

According to a Bloomberg Quint report, the revised regulations would take effect from March 2019 when reinsurance contracts come up for renewal for the following 12 months.

The order of preference is as follows:

1. India’s largest reinsurer GIC Re;

2. Other Indian reinsurers that have been doing business for at least three consecutive years;

3. In case both GIC Re and Indian reinsurers refuse the business, preference will be given to foreign reinsurance branches in the country. Currently, GIC Re is the sole domestic reinsurer and nine foreign peers have opened local offices.

4. If at least four foreign reinsurance branches refuse to underwrite the risk, the business will go to insurance offices in the International Financial Services Centre, GIFT City—the tax-free hub set up in Prime Minister Narendra Modi’s home state Gujarat.

5. In case they refuse too, the insurer can then obtain best terms for reinsurance from cross-border reinsurers with a minimum credit rating of A- from S&P or equivalent rating from any other international financial and credit rating agencies.

Revised regulations based on Reinsurance Expert Committee (REC) report

The revised regulations are based on the recommendations of the REC which submitted its report in November 2017.

The REC, constituted by the IRDAI and headed by IRDAI former member (non-life) Mr M Ramaprasad, was set up in May 2017 to recommend steps to revamp existing reinsurance regulations and streamline reinsurance operations.

The IRDAI's order of preference has encountered objections from Insurance Brokers’ Association of India; Global Reinsurance Forum that represents over 67% of the world’s reinsurance capacity; and Global Federation of Insurance Associations representing insurance industry of 60 countries that account for around 87% of total insurance premiums worldwide. They had called the suggestions anti-competitive since they allowed GIC Re to maintain its monopoly.

Source: Asia Insurance Review

Kerala floods to have limited impact on strength of rated non-life insurers

Sept 28, 2018

Flooding in the southern Indian state of Kerala is not expected to have a significant impact on the balance sheet strength of rated Indian non-life insurers, says A.M. Best.

However, the losses may add to the unfavourable underwriting performance that the international credit agency has flagged as a negative rating factor for some of these insurers, says a new Best’s Briefing, titled, “Kerala Floods: Limited Impact on Rated Insurers’ Capital, May Add to Performance Issues”.

A.M. Best notes that Kerala represents a significantly smaller portion of the Indian non-life market and the international credit agency rated insurers’ overall gross premiums. Additionally, insurance penetration in India is low and insurance penetration in Kerala is estimated to be below the national average.

The cumulative rainfall this year during the 2018 summer monsoon period in Kerala was significantly higher than normal, and together with the release of waters from dams, created severe flooding in the region.

A.M. Best expects fire and motor to be the most impacted lines of business. Motor own damage is one of the leading sources of business, accounting for 30% of gross premiums in the state. Four large insurers, which wrote an estimated 70% of Kerala’s gross non-life premiums in 2017, are likely to absorb the majority of claims. The affected insurers rated by A.M. Best are expected to have adequate reinsurance protection, with deductibles that are small percentages of their premium base and capital sizes.

A.M. Best will continue to closely monitor developments at its rated insurers as more information becomes available on the ultimate gross and net impact of the floods on their profitability.

Asia Insurance Review

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