Latest Updates from Industry
Life Insurance Corp. of India or LIC is ranked as the country's 11th largest insurer in terms of loans. It owns significant equity stakes in Indian banks which makes the Reserve Bank of India (RBI) nervous, as the banking regulator ponders the possible systemic implications of these linkages.
The global financial crisis of 2008 led regulations across the world, to pay close attention to institutions that were seen as "too big to fall". LIC, with assets under management of about Rs.17 trillion, would arguably fall in that category in the Indian context.
While RBI has put in place more stringent norms for systemically important banks and will start disclosing their names from August, institutions such as LIC which span different sectors, fall in a grey area.
The life insurance industry has sold additional 60% Group Single Premium policies, mopping up Rs.12,861 cr in the quarter as against Rs.8,016 cr in the same period last year. 54.6% is the Group Single Premium income in total, contributing to the new business. In respect to the sale of policies, the industry sold 46,44,333 policies in the reporting period, with an upward trend of 22% as against 38,19,547 policies sold in the last year.
After witnessing de-growth since 2010, insurance sector leader LIC and 23 other private players mobilized Rs.23,570 cr in the new premia reaching to 20% from Rs.19,702 crore in the year-ago period. The insurance industry continued an overall higher growth, despite the largest private sector player ICICI Prudential Life recording a negative growth. Similarly, Reliance Life, Max Life and India First have also shown negative growth in the first year premium during the quarter.
The upward trend in growth was witnessed with LIC which clipped at over 31% in the quarter, mopping up over Rs.5,700 crore in new premium, while from the private sector side HDFC Life and Bajaj Allianz Life reported growth of 35% and 71% respectively in new premium income.
Life Insurance Corporation (LIC) is continuing with its trend to place female employees in a bigger role. The trend began with the appointment of Usha Sangwan, who was the first female Managing Director a couple of years ago.
The insurance behemoths elevated two more women to top level in 2015-16. While Sarojini Dikhale has taken over as Chief Executive of LIC, Nomura Mutual Fund; Mini Ipe has been elevated as head of LIC Housing Finance.
The Insurance Regulatory and Development Authority of India has imposed Rs.85 lakh penalty on Reliance Life Insurance Company Ltd. for violation of norms pertaining to outsourcing, among other violations.
An independent audit by chartered account firm should be commissioned to look into the entire transactions of payments made to the service providers and the structure/shareholding pattern/commission and the existence of all these entries, including the relevance of payments made by Reliance Money Infrastructure to various entities, IRDAI said.
The company was asked to review and examine the outsourcing policy and related activities of the company and initiate necessary steps to bring about compliance in letter and spirit to the regulatory provisions.
The Insurance regulator under the proposed new rules has decided to reduce the commissions that take a big bite out of initial premiums, as much as 25-30% of the first payments on policies mostly without the customer's knowledge. A decades-old practice of big commissions paid to distributors that have been weighing down returns for policyholders, these mostly go under the radar and are only discovered, for instance, at the time of early surrender of a policy, experts said.
The regulator has also proposed the scrapping of upfront commissions that some insurance companies pay to distributors such as banks, which could put a question mark on such tie-ups. A note by the regulator Irdai announcing the new rules are yet to be notified. The move by the regulator will help reduce mis-selling of policies. "This will bring in transparency and discourage force selling of insurance products", said S. B. Mathur, former chairman of the state owned Life Insurance Corp. of India (LIC).
IRDAI has proposed a policy for the allocation of expenses for various segments. It said that, no insurer should spend more than an aggregate 10% of all first year premiums and 4% of all renewal premium on policies granting deferred annuities for more than one premium, 5% of premiums received during the year on single premium annuity products and 1/20th of 1% of the average of the total sums assured by policies excluding single premium policies.
The proposed rule changes may lead to some immediate pain, but will have a beneficial effect in the long term, said an executive.
The government's New Accident and Life Insurance covers have already received more than 300 claims in nearly three months since its inception.
The official data reads out that the Pradhan Mantri Suraksha Bima Yojana (PMBSY) which provides an accident insurance cover has received 76 claims, while the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), which is a life insurance scheme, has got 288 claims.
Prime Minister Narendra Modi had launched the two insurance schemes along with the Atal Pension Yojana on May 9 this year to improve social security and insurance coverage in the country.
Finance ministry data reveals that 27 claims under PMSBY have already been cleared by the insurers while more than 100 claims of life insurance under the PMJJBY have also been paid by the insurance company. Officials however, point out that given the high number of enrollment for the schemes, the claims have not been very high.
"A large number of people have signed up for these schemes that provide insurance cover at very affordable rates. Insurers do the required due diligence while processing the claims", said an official.
Public sector general insurers have promoted their 21 young officials to the posts of General Manager. General Manager is an important post in a Public Sector General Insurance Company and future CMD of the industry will be selected from among these newly elevated officials. In this space GMs are 2nd in ranking and equivalent to Executive Directors at state run banks.
The largest player New India Assurance has elevated seven of its deputy GMs, while United India and Oriental Insurance promoted five each. It was followed by National Insurance and GIC Re, which promoted two each.
In the latest promotional exercise, many officials at GIC Re, New India Assurance, United India Insurance, National Insurance Company, Oriental Insurance, with long years of residual service, have been promoted as General Managers.
New India Assurance reported a 42 percent jump in net profit at Rs.441 crore in the first quarter ended June 31, 2015, as against Rs.311 crore in the year ago period. Premium from India and overseas increased 14 percent each (year-on-year) to Rs.3,877 crore and Rs.711 crore respectively.
Investment income edged up marginally to Rs.965 crore (Rs.938 crore in the year ago quarter). The combined ratio, which is an indicator of profitability of an insurer, improved to 110 percent from 115 percent in the year ago quarter. The incurred claims ratio also improved to 76 percent from 87 percent.
Chairman & Managing Director, G. Srinivasan, attributed the improvement in the combined ratio to reduction in claim ratio and expenses and increase in premium earnings. While the retail line of business continues to grow, he pointed out there was also a recovery in the corporate segment, with some select large corporate undertaking expansion plans.
Looking forward, the company is eyeing a global premium of Rs.18,000 crore; Rs.15,000 crore from domestic operations and balance from overseas in FY 2016.
Currently, retail line of business accounts for 65 percent of the total business. The balance is accounted by the corporate segment. With regard to the plans of expansion, Srinivasan said his company will open 300 micro offices this year, taking the number of such offices to 1,500. It will also open a representative office in Qatar.
The insurer has tied up with 237 banks to push the Pradhan Mantri Suraksha Bima Yojana. These tie-ups have resulted in enrolments of about Rs 1.30 crore as of June and the premium procured was Rs.11.3 crore. So far, the insurer has received 16 claims, of which it has settled 13.
Roughly around 400 million people do not have the access to essential health services, as per the report shared by the World Health Organization and World Bank. They described it as a "wake-up call" about the challenges to achieving universal health coverage.
The report also said that at least 6 per cent of people in 37 low-and-middle-income countries are living in poverty because of the money they spend on health. The finding alone suggested that the poorest could be left further behind by rising global health costs.
"The world's most disadvantaged people are missing out on even the most basic services", Marie-Paule Kieny, assistant director-general for health systems and innovation at the WHO, said in a statement announcing the 98-page report, which was released online and at a news conference at United Nations headquarters in New York.
While the findings in the report, "Tracking Universal Health Coverage," were not surprising, its creators said that they had nonetheless established benchmarks for measuring both health coverage and financial protection from the cost.
In assessing how much consumers of health care must pay, the report found that in low and middle income countries, 6 percent of the population had been reduced to poverty - defined as living on $1.25 a day - because of out-of-pocket health expenses.
India's life insurance industry is likely to grow by 12% to 15% in the current financial year due to improved market scenario and the governments push to improve insurance penetration in the country according to rating agency ICRA.
The sector is expected to grow this fiscal on an Annual Premium Equivalent (APE) basis compared to 9 per cent decline in FY15 on the back of improved capital market scenario, initial signs of improvement in economic indicators and stronger thrust by the government ICRA said in a report.
"We believe that key structural drivers for the industry remain intact and an expected recovery in the economy could provide impetus to the industry" ICRA senior vice-president and co-head Financial Sector Ratings, Karthik Srinivasan told.
Private insurer HDFC and Standard Life, is looking at a near 15-per cent growth in first year premium this fiscal. The company had reported first year premium collections of Rs.3,341 crore last year. This include single premium collections.
According to Sanjay Tripathy, Senior executive Vice-President (Marketing, Product, Digital and E-Commerce), HDFC Life, the company is targeting to grow around 2-2.5 times GDP in FY16. The company's total premium collections grew 23 per cent in FY15 to Rs.14,830 crore and the Mumbai-headquartered insurer reported a net profit of Rs.786 crore during the period.
Health insurers are now looking to get their customers fit, along with paying their medical bills. Some are even extending this concern for a healthy life to their employees as well. Likewise, Apollo Munich has a series of tests to ensure the wellness of their customers. At Max Bupa, employees are encouraged to walk up to their colleagues in the office instead of making a call to ensure they stay fit.
Apollo Munich Health Insurance Chief Executive Officer Antony Jacob described 'Energy' as a wellness programme for diabetic patients.
Anika Agarwal, head, marketing, Max Bupa Health Insurance, said employees of the company are encouraged to walk up to their colleagues if they want to talk instead of calling. The company also has an annual initiative called 'Walk for Health' to sensitize employees and customers about the benefits of walking.
"We encourage individuals, families and communities to inculcate walking in their daily routines," said Agarwal.
Max Bupa is also going to launch apps for customers to begin their fitness regimen, make right food choices and show them how small lifestyle changes can improve their looks and health.
Discounts are also part of the strategy to have a fitter customer base. As part of Apollo Munich's Energy, a customer can get up to 25 per cent cash discount on renewal and another discount up to 25 per cent of the premium, which can be reimbursed, as expenditure for buying healthy food, visiting spas, and doctor consultation fees.
V. Jagannathan, CMD, Star Health and Allied Insurance, said they already have a provision of 10 per cent discount on the premium for their senior citizens red carpet insurance when they are able to produce certain tests revealing satisfactory basic health parameters at the time of proposal. He said they are also working out on plans to give impetus for health maintenance among policyholders.
"We are working on some plans to motivate our policyholders through technology platforms. We have tied up with a few providers for supplying diabetes monitor at concessional rates to policyholders who are diabetic. We also have provided medical records storage facility in electronic form, free of cost", said Jagannathan.
A committee constituted by the IRDAI in its draft plan, has suggested a health savings product to extend the reach of health insurance in the country.
Currently, anyone who wants a medical expense cover has two options. He can either buy an indemnity plan - that is, a medi-claim policy where the hospitalization expenses of the policyholder are reimbursed - or a critical illness policy where on the diagnosis of the named illnesses, the sum assured is paid to the policyholder and he can use the money for any purpose - not necessarily for medical expenses.
The new health savings product will have features similar to an endowment plan in life insurance, with the difference being that the risk cover will be for health and the amount from the policy can be only used for expenses related to medical treatment.
In the new health savings plan, the cover will be linked to a health policy the customer already holds. Suppose, you have a Rs. 5-lakh health cover, the new health savings plan will promise you cover when your expenses exceed Rs. 5 lakh - basically it will function like a top-up plan.
The draft paper proposes agent commission of 15 per cent of the annual premium in the first year, 10 per cent in the second year, and 5 per cent in the third, fourth and fifth years.
The recent amendment to the Insurance Act, where agent commission for traditional plans capped at 35 per cent in the first year, has been removed. The new health savings plan is likely to have a three year lock in and a minimum investment of Rs. 25,000.
Chhattisgarh had surpassed the national average in the implementation of the national health insurance scheme in the state. According to health department officials, 89.3% of the target families in state had been covered under the scheme in Chhattisgarh as against the national average of 54%.
Officials said, Kerala had achieved 84% target while 49% of the target families in Madhya Pradesh have been issued cards under National Health Insurance Scheme. The state government had set a goal to enroll 37,24,248 families under the scheme.
Exide Life Insurance plans to hire about 20,000 agents in the current financial year in order to strengthen its distribution network and grow its business to newer heights. Also, the Bengaluru-headquartered private life insured plans to launch a couple of new products for which it is awaiting the regulator's approval.
"We will be recruiting about 20,000 agents this year," said Kshitij Jain, Managing Director and CEO, Exide Life. Currently the company has some 35,000 agents operating from around 200 offices across the country. Last financial year, Exide Life added about 15,000 agents to its agency channel, after its major distribution partner ING Vysya Bank parted ways with the insurer following its merger with Kotak Mahindra Bank.
SBI Life Insurance has introduced 'Connect Life', a tablet-based service to digitize the entire documentation process with the aim to go paperless.
It has a built-in analysis calculator that offers a customs products to choose from, with the facility of paying premiums and uploading necessary documents from the tablet. Not only this the distribution partners from all of SBI Life's sales channels can sell insurance products through this facility.
The product brochures and videos help them make an informed choice with recommendations from the need analysis report and expert distribution partners.
The customer can fill in the proposed form, upload his/her documents, instantly pay the premium and be assured of making an informed and right decision, it added.
Around 80,000 insurance agents from 750 SBI Life offices and a network of 20,000 SBI Group branches along with its five associated banks will be deploying this technology.
The recent observations has brought that the average cashless claim disbursal is nearly double that of reimbursement claim payouts in case of several ailments.
For instance, the average claim payout during 2013-14 for diseases of the circulatory system (including cardiac ailments) was Rs 81,384 through the cashless facility, but it was just Rs 38,048 under the reimbursement mode. Similarly, for diseases involving blood and blood-forming organs and immune disorders, the average claim paid out through the cashless mode was Rs 35,958 while that through the reimbursement route was just Rs 17,726. Activists believe that reimbursement claims get partially settled as individual policyholders do not have the bargaining power at that stage, while hospitals can get claims fully settled due to their relationship with insurers.
The disclosure on reimbursement and cashless claims is an outcome of the ongoing court proceedings concerning the case where it was found that out of the 22 diseases, reimbursement amount is lower in all cases except mental disorder. Insurers, however, insist that this does not qualify as an apple-to-apple comparison.
The Centre is working on a new farm insurance and income scheme that will help increase earnings of farmers and lessen their plight, home minister Rajnath Singh said.
Singh said the central government was committed to improve infrastructure in villages and initiate development programmes. He also listed out social security schemes and programmes of the NDA government for the benefit of the poor.
Singh said same, steps need to be taken to improve law and order situation in the state and also offered to deploy additional central security personnel, if required.
Future Generali is shifting focus for using the data on millions of customers that outlets such as Big Bazaar or Home Town generate, instead of trying to selling any product to anyone walking into the stores.
The insurer has decided to use data analytics to study the need of the Future's customers and push the right risk policy to boost growth. Future Generali India Insurance Company is working on to enhance its call centre facilities to enable them to handle the large flow of data, said KG Krishnamoorthy Rao, its MD and CEO.
He said that Future Group, which owns 74% of the insurance company, sees with 30 billion footfall every year at its stores. Italy based Generali holds 26% into the insurer with Rs 710 crore paid-up capital.
"We had tried mall-assurance a few years back but it proved to be a loss making proposition. The sales did not cover the cost of selling policies in malls, Now, we have shifted our focus to using the customer data from the 300 outlets of Future Group" Krishnamoorthy Rao told.
ICICI Lombard has introduced a "Photo Quote" feature on its mobile app "IL Insure". The feature is aimed at enhancing customers' purchase experience.
Sanjeev S, Head (Marketing and E-Channel), ICICI Lombard, said, "This will enable customers wanting to purchase the company's motor insurance policy receive a quote by simply clicking on a picture of their existing policy using a smartphone camera. On submission of the picture, the customer will receive an automated message from ICICI Lombard containing a detailed quote and vehicle information pre-populated."
"Our offering addresses this need gap and provides customers a unique and unparalleled experience in their motor insurance policy purchase process," he said, adding that customers can use a host of other features installed in the app. "Besides purchasing/renewing health and travel insurance they can also locate the nearest network hospitals, OPD centres and pathology lab."
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