Latest Updates from Industry
SBI Life Insurance has launched higher income individual focused market-linked life insurance plan - Smart Privilege.
The product provides both life insurance as well as the opportunity to increase wealth through investments in eight select funds (in any combination of customers choice), with the flexibility of fund switching and premium redirections, unlimited number of times, throughout the term of the plan, SBI Life said in a release.
The minimum entry age is 8 years for regular or limited premium policies and 13 years for single premium policies and the maximum age is 55 years. The policy term is 10 to 30 years for regular or limited premium policies and 5 to 30 years for single premium policies.
The premium paying frequency options are single, yearly, half yearly, quarterly and monthly.
Two of India's leading private-sector insurers are looking to raise over $1 billion this financial year in the sector's first initial public offerings (IPOs), as insurance companies' rush to take advantage of a change in ownership rules.
ICICI Prudential Life Insurance and HDFC Standard Life Insurance will likely be followed by SBI Life Insurance in reacting to a relaxation in foreign investment regulation last year that made share sales more feasible, in a country where most life insurers are part-foreign owned.
"The business potential for insurance companies is large. But too many players are in the market, competition is going up," said New Delhi-based R.K. Gupta, Managing Director at Taurus Asset Management.
Insurers, particularly those promoted by non-banking companies, are likely to see a major boost in insurance distribution, as banks can now start selling products of multiple insurers.
Future Generali Life, which did not have a bancassurance partner, announced a partnership with Saraswat Bank, which has a tie-up with HDFC Life for distribution of life insurance products.
Industry experts say that other non-bank-promoted insurers, such as Birla Sun Life, Reliance Life, Bajaj Allianz, Aegon Life and Shriram Life, are also likely to get into similar tie-ups with leading banks.
Nilesh Sathe, Member-Life at the Insurance Regulatory and Development Authority of India (IRDAI), said 25-30 banks will start distributing products of more than one insurer.
At present, most major public and private sector banks, such as State Bank of India, Union Bank of India, Bank of Baroda, Canara Bank, Bank of India, Punjab National Bank, Andhra Bank, ICICI Bank and IDBI Bank, have promoted insurance companies.
Edelweiss General Insurance Company (EGIC) cleared the first step in becoming an insurance company in India with the Insurance Regulatory and Development Authority of India (IRDAI) approving its registration application, as disclosed by Edelweiss Financial Services Ltd. in a corporate filing.
EGIC will be a wholly owned subsidiary of Edelweiss Financial Services Ltd., according to the corporate announcement.
Edelweiss mainly focuses on general insurance broking market and its services include risk monitoring and management in business firms, managing insurance portfolio, designing insurance programs for companies and management services.
The company also offers insurance products covering asset/property insurance, marine insurance, personal insurance, business interruption insurance, liability insurance and financial insurance.
Electronic insurance will become mandatory for annual premium equal to or above Rs 10,000 (single/annual premium) in life insurance policies. IRDAI in its Issuance of e-Insurance Policies Regulations, 2016, said these norms would come into force from October 1.
Customers would have an e-insurance account, which will be an electronic account opened by a person with an insurance repository where the portfolios of insurance policies of a policyholder are held in an electronic form.
IRDAI has asked every insurer soliciting insurance business through electronic mode to create an e-proposal form similar to the physical proposal form approved by IRDAI.
Such a form should enable capturing of information in electronic form that would enable easy processing and servicing. The e-proposal form will also have a provision to capture the electronic Insurance Account (eIA) number. Micro-insurance policies are exempt from these norms.
IRDAI is planning to put in place an insurance self-network platform which could be used by an agent to sell and service products on behalf of registered insurers.
"The insurance self-network platform will be available as a regular internet website or as a mobile app or both," Randip Singh Jagpal, Senior Joint Director, IRDAI, said.
The objective is to promote e-commerce in the insurance space, which will lower the cost of transacting insurance business and bring higher efficiencies and greater reach.
"E-commerce is seen as an effective medium to increase insurance penetration and bring financial inclusion in a cost-efficient manner," Jagpal said.
All products approved under the regulations will be allowed to be sold through these platforms and they should be prefixed with the letter "i-" to distinguish them from regular products.
From both the industry and consumer angles this move will have significant implications. Till now, only insurers and web-aggregators were allowed to sell online. But now, many others in the distribution chain will also be able to sell online, according to Sanjay Tripathy, Senior Executive Vice-President - Marketing, Product, Analytics Digital & E-commerce, HDFC Life.
"This is the first time that IRDAI has recognised such a platform with robust security features. Even differential pricing of products will be permitted," he said, adding that the move will help insurers cut costs.
Oriental Insurance has for the first time tied up with a private online insurance broker 'Coverfox' to sell its comprehensive motor insurance product for both four and two wheelers and for Coverfox too this is the first engagement with a public sector general insurer. Coverfox operates the online insurance portal coverfox.com.
Currently, auto insurance is the largest selling category for Coverfox. Founded in 2013, Coverfox sells insurance online and offers car, health, home and travel insurance.
Talking about the partnership, Varun Dua, CEO and Co-Founder, Coverfox.com, said, "We are indeed thrilled by this partnership with Oriental Insurance, one of the most prestigious PSUs (public sector units) in the insurance sector today.”
"We appreciate the trust that Oriental Insurance has placed in us through this collaboration. This broadens and gives much-needed depth of choice to our customers",he added.
Coverfox is the second-largest online auto insurance provider in India. It also sells health and travel policies. It sells nearly 10,000 policies (auto, health and travel put together) a month and is witnessing steady growth of about 20 per cent month-on-month.
Insurance companies are enthusiastic about the proposed guidelines on selling and servicing of policies through e-commerce platform that aims to do away completely with any kind of physical intervention.
The Insurance Regulatory and Development Authority of India (IRDAI) has come out with the exposure draft on selling and servicing insurance policies through e-commerce platform for comments before final regulation is notified.
"This will go a long way in penetration of insurance products. It is a great effort and it will induce lot of benefits to the customers of smaller towns not encouraged by agents and advisors due to lack of adequate remuneration for them," Bajaj Capital group CEO and director Anil Kumar Chopra said.
Chopra said the country's accumulated number of issued polices is 12.5 crore and coverage of population will be far low as there would be multiple policies by a single person for health, motor and life.
National Insurance Corporation Chairman and Managing Director K. Sanath Kumar said the company is examining the e-commerce selling and servicing front.
With an increase in number of Indian tourists indulging in Adventure Sports like bungee jumping, parasailing and mountaineering, insurers see a new market. Bajaj Allianz has for the first time come out with a specialized personal accident policy to cover such risks, which until now were excluded.
The Global Personal Accident Cover is targeted at travelers who engage in adventure sports and allows them to choose from a host of covers, such as adventure sports, air ambulance evacuation and accident hospitalization. While most of the covers are available worldwide, the air ambulance evacuation is available only in India.
"The personal accident cover that is sold in India is a 40-year-old product. But the customer behaviour has changed considerably. Today, many travelers engage in adventure sport activities like bungee jumping or mountaineering. An accident would require immediate response within the golden hour, which is not available under the conventional policy," said Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance.
For a premium of Rs 4,000, the policy covers personal accident cover up to Rs 50 lakh and will also cover accident hospitalization and air ambulance. In addition, the policyholder can also get EMI protection, where the insurance company will pay the monthly instalments of any personal loan taken by the insured. Singhel said that the cover is available for everyone within 70 years of age at the same premium. "We have seen senior citizens also engage in adventure sports," he said.
The new premium collected by life insurers rose by 26.6 per cent in May to Rs 10,610.10 crore. The insurers had collected new premium of Rs 8,382.67 crore in the same month of 2015.
Of all the 24 life insurers, private sector companies witnessed an increase of 25.8 per cent in new premium collection at Rs 3,248.35 crore for the month of May. It was at Rs 2,580.89 crore a year ago, data from insurance regulator IRDAI showed.
However, for Life Insurance Corporation of India (LIC), the collection from new premium rose to Rs 7,361.75 crore in May, up 27 per cent from the year-ago period. Its new business premium stood at Rs 5,801.78 crore in the same month of 2015. Among the top private sector performers, SBI Life, HDFC Standard Life, Exide Life, Kotak Mahindra Old Mutual Life showed healthy rise in their new business premium.
Their new collection rose to Rs 842.08 crore, up 156 per cent (from Rs 328.62 crore year ago); Rs 502.59 crore, up 38.3 per cent; Rs 127.46 crore, up 256 per cent and Rs 197.66 crore, up 41.4 per cent, respectively.
"We have effectively activated the various channels of our premium collection. Of the four-five such channels, individual agents and bank channels have been activated the most. Earlier the company was tapping potential from only a limited bank branches", Arijit Basu, MD & CEO SBI Life Insurance said.
Reliance Life Insurance's chief executive of three years, Anup Rau has quit the company, said three people familiar with the development.
Rau's exit from the company comes after it posted a Rs 200 crore loss for fiscal year 2016 and a possible dispute over priorities of the company as competition cripples growth, they added.
"Anup Rau has put in his papers that he quits due to differences over business goals with the management," said one of the people cited above. "Rau's focus was on improving reserves and persistency."
The company declined to comment about the issue and Anup Rau did not respond to calls and messages.
Indian life insurers are getting squeezed by competition from HDFC Life, Max, and Prudential who have turned aggressive after the government increased foreign direct investment to 49% from 26%.
Reliance Life's persistency, the proportion of policies that are kept alive, rose to 60% from 57% a year earlier. Yet another reason for the loss has also been a fall in income from unclaimed premium lying with the company.
Exide Life Insurance has announced India cricket team captain Mahendra Singh Dhoni as its brand ambassador. Dhoni, who represents the aspirations of millions, has a strong mass appeal and following compared to any other sporting icon in India, Exide Life Insurance said in a statement.
Dhoni has appeal that cuts across geography, gender and age groups, it said, adding, he is one of India's most celebrated cricketers, and the most successful captain of the Indian team and we are extremely excited to be associated with him.
Speaking about his partnership with Exide Life, Dhoni said, "This is my first endorsement deal in the insurance category. It helps Indians prepare financially for their long and happy life. Long term relationships build trust and I have always planned for the long term in all aspects of my life”.
Heavy discounts in insurance segments such as group health would soon come under the scanner of the Insurance Regulatory and Development Authority of India (IRDAI).
The regulator has come up with a new set of norms for maintaining the solvency ratio of insurance companies, based on each line of business. For segments like health, motor and liability, the insurer would be required to maintain a higher solvency ratio since not only the premiums, the incurred claims are also high. With the regulator asking insurers to maintain higher solvency for these segments, insurance companies would be required to reinvent their business strategies.
According to IRDAI, Available Solvency Margin (ASM) is calculated as, the excess of value of assets over the value of liabilities. Solvency ratio means the ratio of the amount of ASM to the amount of required solvency margin. The higher the solvency ratio, the more financially sound a company is considered to be. The required solvency ratio, according to IRDAI norms, currently is 150 per cent, which is the minimum amount to be maintained at all times.
"Bigger insurers have made pricing so tough that it is difficult for others to offer such rates. Now with the regulator's command, these practices would have to discontinue since additional solvency has to be maintained if claims are high," said the head of underwriting at a mid-sized private general insurer.
IRDAI has granted special approval to 23 Cross Border Reinsurers (CBR) for the year 2016-17.
This will allow Indian insurers to make reinsurance placements with a large number of reinsurers. Cross-border reinsurers are those who do not have a physical presence in India but carry on reinsurance business with Indian insurance companies.
According to PJ Joseph, Member (Non-Life), IRDAI, approvals were given on the basis of submissions made by CBRs and the recommendations made by the insurers and GIC Re in line with the guidelines issued by the authority. The approved CBRs include Ingosstrakh Joint Stock Insurance Company (Russia), Asian Reinsurance Corporation (Thailand), Trust Re (Bahrain), United Overseas Insurance Company (Singapore), Equator Reinsurances Ltd (Bermuda), East Africa Reinsurance Company Ltd (Nairobi), Vietnam National Reinsurance Corporation (Vietnam), CICA Re (Kenya), Arab Insurance Group (Labuan) and Union Insurance Company (UAE), among others.
Reinsurance assumes significance as it is important to maintain solvency of the insurer and to ensure that the claims/other clauses are honoured as and when they arise.
IRDAI has released comprehensive corporate governance guidelines, including a cap on salary of CEOS and policy on whistle blowers. The revised guidelines, which came against the backdrop of changes in the Companies Act, 2013, combine the conditions regarding the corporate governance practices, appointment of MD/CEO/Whole Time Director and other Key Management Positions as well as the appointment of statutory auditors of insurers.
Insurers are well advised to put in place a 'whistle blower' policy, where-by mechanisms exist for employees to raise concerns internally about possible irregularities, governance weaknesses, financial reporting issues or other such matters, it said.
Ships entering or leaving Indian ports are not required to pay a piracy-related additional insurance premium now, a move which will help thousands of the vessels.
The development has come after seas close to the country's western coast were removed from the list of the High Risk Areas (HRA) for piracy. About 22,000 ships that called on Indian ports between 2010 and 2015 paid an estimated additional war risk premium (AWRP) of about Rs 8,500 crore.
"Ministry of Shipping took up the issue of redrawing of the High Risk Area (HRA) Line back to 65 Degrees E (from 78 deg E) in the International Maritime Organization and as a result the HRA was redrawn at 65 deg E," the ministry said in a statement. "Thereby, the ships coming to or leaving Indian ports do not have to pay AWRP now," the statement said.
Close on the heels of mutual funds (MFs) disclosing remuneration of its top executives following a directive from SEBI, insurance companies have also been asked to provide information on executive pay. The Insurance Regulatory and Development Authority of India has directed insurance companies to disclose details of remuneration paid to MD, CEO and key management persons in its revised guidelines on corporate governance.
"These (revised) guidelines are applicable from FY 2016-17," it said.
Though insurance companies disclose the remuneration of MDs and CEOs in their annual reports, they do not contain details on the pay of key officials such as Chief Investment Officer, Chief Risk Officer and Chief Actuary. Moreover, incentives paid to key management persons are also typically not included.
Further, insurers should provide details of remuneration paid to independent directors. "All pecuniary relationships or transactions of the non-executive directors vis-à-vis the insurance company shall be disclosed in the annual report," IRDAI said.
Financial performance including growth rate and current financial position of the insurer should also be disclosed, it said. The new guidelines are, however, not applicable for reinsurance companies and branches of foreign reinsurers in India.
Having faced the worst of droughts, farmers have started taking crop insurance seriously with more than 50,000 of them in Gujarat registering for the new crop insurance cover PMFBY via the Gujarat state portal.
Under the Pradhan Mantri Fasal Bima Yojana (PMFBY) launched this year, farmers' premium has been kept lower between 1.5-2% for foodgrains and oilseed crops and up to 5% for horticultural and cotton crops. There is no cap on the premium.
"Farmers in drought-hit states have taken crop insurance seriously this time. More than 50,000 farmers have so far enroled for PMFBY for the 2016-17 kharif season in Gujarat via the state portal on crop insurance," a senior Agriculture Ministry official told.
Gujarat is the only state at present which is enrolling farmers under the scheme strictly through its e-portal. In other states including Uttar Pradesh, farmers are being registered by concerned agencies including banks, Primary Agricultural Credit Society (PACS).
"So, the exact number of farmers registered for the scheme both online and through other ways would be known later. Once the banks upload the details of insured farmers on the central crop insurance scheme portal, it will be known to all stakeholders," he added.
An apex-level coordination committee meeting was organized between Corporation Bank and The New India Assurance Co Ltd, at the bank's corporate office. Jai Kumar Garg, managing director and chief executive officer of Corporation Bank and G Srinivasan, chairman and managing director, The New India Assurance Co Ltd, along with other executives of both the organization were present in the meeting.
The meeting was scheduled to discuss and strengthen business relationship between the two organizations and it concluded with an exchange of memorandum of understanding entered between the bank and the insurance company for renewal of corporate agency.
LIC will "shortly" announce setting up of a credit enhancement fund to provide guarantees for infrastructure sector companies to help them access funds from domestic and overseas markets at lower cost.
"We expect LIC to announce it shortly," Secretary in the Department of Economic Affairs Shaktikanta Das said.
When asked about the impact of this move, he said if infrastructure sector companies "get a credit enhancement, they will be able to access funds from the market both domestic and overseas at lower cost because of the credit enhancement which they get." The infrastructure companies, Das said will be able to leverage on this and get credit enhancement.
The fund would help in raising the credit rating of bonds floated by infrastructure companies and facilitate investment from long term investors.
The move assumes significance as infra firms are finding it difficult to raise adequate funds at competitive which are needed for projects with long gestation period.