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ICICI Prudential Life will hit the capital markets with its initial public offer (IPO) during the current financial year, ICICI Bank's Managing Director and Chief Executive Chanda Kochhar said.
"It will be our endeavour to launch the IPO during this financial year itself depending on the approval by the regulator and market conditions. The board cleared the IPO plan in April 2016," Kochhar told on the sidelines of the 22nd annual general meeting of the lender.
Refusing to share the size of the IPO, she said the intent is to come out with a primary issue this financial year. It will be the first IPO from a life insurance company in the country.
ICICI Prudential Life Insurance is a joint venture between ICICI Bank and Prudential Corporation Holdings. On fund raising plans for the bank, she said it plans to raise Rs 25,000 crore through non-convertible securities, including bonds and non-convertible debentures, in one or more tranches.
Life insurance coverage in percentage terms in India has slipped to the level it was 15 years ago to about half the global average, according to a recent Swiss Re report, which said this will rise as government initiatives take effect and economic growth gathers pace.
"Insurance penetration in India remained low at 3.44% in 2015 compared to the global average of 6.23%, reflecting large untapped potential", said Swiss Re. "Robust economic growth and government enabling policy actions and initiatives are expected to increase insurance penetration and will act as a catalyst for future growth of the industry", it added.
Life insurance coverage peaked to 4.6% in 2009, after which it started sliding and was at 2.6% in 2014. The reason for this: changes in product norms and in commission structures.
After private companies were allowed to enter the life insurance business in 2000, penetration had risen consistently to 4.6% in 2009 from 2.15% in 2001.
The drop in sales of unit-linked insurance plans (Ulips), a combination of investment and insurance and among the most popular products until 2010, was a primary reason for the decline in persistency.
Pension plans offered by life insurance companies haven't gained momentum compared with the National Pension System (NPS), Employees' Provident Fund (EPF) and other instruments, partly due to lack of liquidity and poor returns.
"The yields offered by most pension plans are also not competitive when compared to existing FD (fixed deposit) rates," said Yashish Dahiya, Chief Executive of Policybazaar.com.
In immediate annuity plans, there is no liquidity as the entire corpus gets locked in and can't be withdrawn in case of any emergency.
IRDAI had prescribed capital guarantees for all pension plans, banned partial withdrawal and made it mandatory for policyholders to buy annuities from the same insurer.
"Unlike NPS and EPF, there is no open market option available for policyholders investing in pension plans of insurance companies," said Rajeev Kumar, Chief Financial Officer at Bharti Axa Life Insurance.
Life insurance companies can no longer force claimants into signing a receipt for having received 'full and final payment' as a pre-condition for releasing claim dues. A new directive from the Insurance Regulatory and Development Authority of India (IRDAI) enables claimants to reserve their right to pursue claims even after receiving a lesser payment.
The regulator has asked companies not to force claimants to sign a discharge voucher (a form of a payment receipt collected in advance) before settling a claim. Companies ask for a discharge voucher as a form of a declaration that the claim has been settled and all liabilities discharged.
According to the regulator, where there is no dispute, companies can ask for such discharge vouchers. They can also ask for the vouchers at the time of making policy payments, including a free-look cancellation. However, when the policyholder or claimant is unwilling to provide such a discharge, the insurance company cannot make it conditional for releasing the policy payment.
"In such an event, the life insurer shall not withhold or delay the payment for this reason but make the policy payment to discharge its contractual obligations," the IRDAI said in a circular to all life insurers. The regulator has said that instead of insisting on a receipt, the company can preserve proof of making the payment.
IRDAI has put a cap of Rs 1.5 crore on the annual salary of Chief Executive, which could be paid from the policyholders' fund.
"In case the annual remuneration of the MD/ CEO/ Whole Time Directors exceeds Rs 1.50 crore (excluding perquisites plus bonuses etc. by whatsoever names) such excess shall be borne by shareholders' account," IRDAI said in the guidelines on Remuneration of Non-executive Directors and Managing Director.
No revision in remuneration shall be permitted till the expiry of one year from the date of earlier approval, it said.
It noted that the need to bring in professionalism to the boards of insurers cannot be overemphasised.
"In order to enable Insurers to attract and retain professional directors it is essential that such directors are appropriately compensated. Accordingly, the Authority has finalised the guidelines on remuneration for non-executive Directors, as under for implementation by the private sector insurers," it said.
The Insurance Regulatory and Development Authority of India (IRDAI) has directed life insurance companies not to withhold or delay payment of claims when the policyholder or claimant expresses unwillingness or has objections to execute the advance discharge voucher or to accept the amount.
In a circular, IRDAI has said in such instances of dispute, the life insurer should not insist on the discharge voucher or make it conditional for releasing the policy payment.
When executed, discharge vouchers indicate that a claim has been resolved between the insurer and the insured. It indicates that insurer's contractual liability is extinguished.
IRDAI has, however, said life insurers may call for advance discharge vouchers in normal course at the time of making policy payments including free-look cancellation. "The discharge voucher sent to policyholder/claimant should necessarily contain policy number and the nature of payment and amount of claim under different heads including deductions and other relevant details," the insurance regulator has said.
United India Insurance Company (UIIC) plans a big digital push this year as it aims to more-than-double its profit to about Rs. 500 crore from Rs. 221 crore in 2014-15. The public sector general insurer is looking at digital enablers to increase online sales and, thereby, improve its bottom-line.
"It is not just going to be online push, there will be end-to-end offerings too. From sales and claims settlement to grievance redress, we plan to facilitate everything online," A Hoda, Chairman and Managing Director (Officiating), United India, told.
While UII is reported to have built the necessary infrastructure for its digital push, the only missing link is a call centre to guide customers online. "It will be an outsourced project. The blueprint for a call centre is ready and we hope to finalise the service provider soon. We expect to start the pilot during the first week of July. Our target is to make this effective in Tamil Nadu and south India, and within six months our digital operations will be pan-India," he added.
The Centre's flagship crop insurance scheme, Pradhan Mantri Fasal Bima Yojana, is likely to be rolled out in several parts of the country as the bidding process for selecting insurance companies is over in at least ten States and a Union Territory and many others are in the midst of it.
All top insurance companies such as Tata AIG, Iffco Tokio, Reliance, Bajaj Allianz and ICICI Lombard have expressed interest in the new scheme and participated in the bidding process."We just held a review meeting with States and the response has been very encouraging. Many have already finished bidding and evaluating, some are in the process, while others are preparing for it," Agriculture Secretary Shobhana K Pattanayak told.
The Secretary said that States will notify the crop insurance scheme soon after the bidding process was over and the insurance companies identified.
The US-based Liberty Mutual Insurance Group is looking to increase its shareholding in Mumbai-based Liberty Videocon General Insurance to 49 per cent from 26 per cent now, a top official of the Indian insurer said. "Regulatory approval has been sought from IRDAI recently for this transaction," Pankaj Arora, Country Head-Retail SBU, Videocon General Insurance, told.
Arora said Liberty Mutual's shareholding increase will take place through fresh issuance of shares by Liberty Videocon General and, therefore, the funds from the transaction will flow into the company. "Liberty is committed to India. Our focus is on achieving exponential growth and so the expansion plan on increasing the number of offices," Arora said.
The finance ministry is working on a plan to list state-run insurance giants, starting with New India Assurance. Others on the list include Oriental Insurance, National Insurance and United Insurance. New India and GIC have already taken board approvals to float initial public offers (IPOs).
Officials said the IPOs could be issued after the companies split their shares to make them affordable for retail investors. However, the main target of the float will be financial entities such as banks, pension funds, mutual funds, FIIs and sovereign wealth funds.
New India, which was founded by the Tatas at the end of World War I and nationalised in the 1970s, has assets of over Rs 60,000 crore and premium income of over Rs 18,000 crore. It is rated as one of the biggest insurers in the country. Analysts believe a 10 per cent share float in the insurer could fetch Rs 5,000 crore.
According to the IRDAI's annual report for 2014-15, of the total 23 private life insurers, only 11 have a claim-settlement ratio in excess of 90% in terms of number of policies, whereas Life Insurance Corporation of India had the best claim-settlement ratio of 98.19%.
The average settlement record of private life insurers was 89.40%. Max Life, Birla Sun Life and Tata AIA have a claims settlement record of close to 95%.
"A direct comparison of claims ratio of young insurance company vis-a-vis an established one could tend to misleading conclusions," said Sandeep Ghosh, CEO of Bharti AXA Life Insurance. At the bottom of the chart are Shriram Life at 65.66%, Edelweiss Tokio 57.14% and DLF Pramerica Life at 57.19%. According to IRDAI's annual report, private insurers' claim-rejection ratio was 7.78%. LIC had 2.08% claims pending at the end of March 2015.
By all counts, the successor to SK Roy, who has unexpectedly tendered his resignation as LIC Chairman, may come from within organization itself. Tradition has it that most of those who were appointed LIC chairmen had come from within the life insurer, said several LIC watchers and insurance experts.
Indications are that this time too, the task of identifying the next chairman will rest with the committee appointed by the Department of Financial Services (DFS). The panel will recommend names for the Appointments Committee of Cabinet (ACC) to take a final call.
Official sources said that the DFS is likely to start the process of finding a successor to Roy only after ACC gives approval for this purpose. The ACC is yet to accept Roy's resignation, which came two years ahead of completion of his five year-term.
Life Insurance Corp of India (LIC) has said it is willing to participate in India's maiden sovereign wealth fund National Investment and Infrastructure Fund (NIIF) as the state-owned company's own core focus is also on infrastructure investment. LIC has enough funds to invest in NIIF. LIC's core focus is infrastructure investment.
The government has set up the Rs 40,000 crore NIIF to facilitate funding in infrastructure projects. NIIF has already signed MoU with Russia's Rusnano, ADIA of Abu Dhabi and Qatar sovereign wealth fund QIA to study investment
opportunities in India's infrastructure sector.
To provide relief to 2nd hand property buyers facing legalities for property ownership, the Insurance Regulatory and Development Authority of India (IRDAI) has set up a committee to launch Title Insurance.
Popular in the US and Europe, the policy protects an owner's or lender's financial interest in property against loss because of title defects and other matters. "It defends against a lawsuit contesting the title, or reimburses the policyholder for the monetary loss incurred, up to the amount of insurance provided by the policy," says an official of a general insurance company. The official says this will be a product essentially for the retail individual category but will be sold to institutions such as banks and non-banking finance companies.
"The current method is expensive and time consuming. Though courts do favour buyers who have done due-diligence, it can take decades to finally win the case at different courts. Title insurance can further minimise such risks," says Ashutosh Limaye, head of research & REIS at property advisory firm JLL. He says it can be cheaper for a flat and more expensive for a piece of land. That's because evaluating a land title is more cumbersome where a lawyer would need to go through multiple government offices and development plans over the years.
IRDAI has given its first phase of licence to ITI Reinsurance, thus clearing the first ever Indian private sector reinsurance company in the country.
The IRDAI board in a meeting in Hyderabad approved the initial license - known as R1 in regulatory parlance - to ITI Reinsurance, promoted by a firm controlled by Sun Pharma co-promoter Sudhir Valia.
Four global players - Munich Re, Hannover from Germany, Swiss Re from Switzerland and French major SCOR - have also received R1 licences and they are awaiting final clearance from the regulator. Lloyd's of London has also got the initial clearance from the IRDAI.
ITI Reinsurance is owned by Fortune Financial Services, in which Valia and others have a majority stake. PK Shah who had earlier worked in New India Assurance and Reliance Industries has been appointed as the MD & CEO of the company.
After providing the R1 clearance, the regulator now is conducting the due diligence for granting the final approvals (R2) to the global reinsurers to set up direct operations and the process may take some time.
GIC Re has been the country's sole reinsurance company so far. "We don't see any threat. There's ample room for anyone - both domestic and foreign - in India. Growth is in this part of the world and we are an established reinsurer," GIC Re chairman and MD Alice Vaidyan said on the imminent entry of several global reinsurance companies into India.
The insurance regulator has banned life insurers from offering indemnity-based health products, which constitute 90 per cent of the health insurance market, dealing a blow to their business plans.
Indemnity-based plans are those where one can claim reimbursement after visiting a doctor.
The Insurance Regulatory and Development Authority (IRDAI) has asked insurance companies offering these products to withdraw them by giving three months' notice to policyholders and to continue the existing contracts till the end of their policy term.
"We will have to withdraw our indemnity health insurance products," said RM Vishakha, MD and CEO, IndiaFirst Life Insurance. IRDAI has allowed insurance companies to offer a combined health and savings product.
It has allowed general and standalone health insurance companies to offer long-term health insurance products for a minimum period of one year and a maximum period of three years with no premium changes. These do not include personal accident and travel.
New India Assurance and General Insurance Corporation have obtained board approval from their respective boards for listing of their shares in an initial public offering (IPO). With the companies looking at selling around 10-15% of their equity, the government could raise close to Rs 10,000 crore from the sale of shares.
"Our board has already approved listing of the shares and we have sent our proposal to the government for approval," said G Srinivasan, Chairman New India Assurance. He said that he expected the company to go for a listing within six months of the government's approval. Although listing of these two public sector insurance was part of the budget announcement, typically PSU divestment is cleared by the cabinet.
The General Insurance Corporation (GIC Re) - the only reinsurance company in the country -has also obtained its board clearance for an IPO. This was disclosed by the corporation's chairman Alice Vaidyan while unveiling the financial performance.
Lloyd's of London chairman John Nelson has said the 325-year old insurance giant can help support the expansion of insurance penetration in India and limit the economic impacts of catastrophes and other major events that can hamper the growth of the insurance industry and the economy in general.
The world's largest insurance platform is gearing up to start its India operations in Mumbai by early 2017. Lloyd's has already applied for a license to insurance regulator IRDAI to operate in India and currently underwrites Indian business on an off-shore basis.
"We will start our India operation with just couple of syndicates and would scale up gradually. We would target 8-10 per cent growth in Indian markets,'' Nelson said. Currently Lloyd's underwrites around $175-200 million of business in different segments like marine, liability, property, aviation and energy.
The Comptroller and Auditor General (CAG) will conduct a performance audit of crop insurance schemes in nine states to examine the efficacy of providing relief to farmers in the event of crop damage.
The performance audit will include examination of records of Department of Agriculture Cooperation and Farmers Welfare, Agriculture Insurance Company of India Limited, State Agriculture Department and other departments, the RBI said while asking banks to provide access to related records to CAG.
"This audit is proposed to be conducted in Andhra Pradesh, Assam, Gujarat, Haryana, Himachal Pradesh, Odisha, Maharashtra, Rajasthan and Telangana with the help of the offices of the Principal Accountant General/Accountant General (Audit) in the respective states," the RBI said.
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.