Latest Insurance News from leading dailies

Read the latest developments in Insurance Industry from the leading dailies in India on 24th November


Banks can partner insurance cos, sell multiple products

BS Reporter / Mumbai November 24, 2011, 0:37 IST

In a radical move, the Insurance Regulatory and Development Authority (Irda) proposed to open up a bancassurance distribution channel, where banks would be allowed to tie-up with one set of insurance companies (life, non-life and standalone health insurance company), in one state.

This indicates, in a particular state, a bank would be allowed to sell insurance products of only one life insurance company, one general insurance company and one standalone health insurance company. However, in another state, the same bank can sell the product of any other life, non-life and standalone helath insurance company.

In the draft guidelines, to provide a level playing field for all insurance companies, Irda has divided all states and Union territories into three zones (A, B and C), based on the insurance penetration. Zone A consists of 13 states and Union territories, and an insurance company cannot have a tie-up with a particular bank in more than nine states in the zone. Similarly, in Zone B, an insurer is restricted to tie-up with one particular bank in six states.

This means, for instance, a life insurance company like SBI Life, whose bancassurance partner is State Bank of India (SBI), can have bancassurance tie-up with SBI Life in nine states of Zone A but would have to opt for different partners for the remaining four states in the zone.

However, an insurance company could have a same bancassurance partner for all the states under Zone C.

“We welcome the draft guidelines on Open Architecture and support this move. Allowing such a structure for distribution of insurance products through banks under a corporate agency would help customers and the insurance industry as a whole. With multiple tie-ups, banks would be able to offer optimum products to its customers. For example a bank can offer the best term product offered by one life insurer and the best pension product or child product offered by another life insurer,” said T R Ramachandran, CEO & MD, Aviva India.

The draft recommended that any upfront payments or equity discount offered by insurers to banks should be treated as advanced commission and be amortised within three years of the deal. The discount is defined as the difference between the market consistent embedded value and purchase value of the equity of the insurer.

Besides, Irda has capped the commissions to banks at 85 per cent of the commissions received by the individual agents.

IRDA plans to limit insurers’ bank tie-ups
24 Nov, 2011, 04.27AM IST, ET Bureau

MUMBAI: In what would affect the businesses of bank-led insurance companies like ICICI Prudential and SBI Life, the insurance regulator is proposing to limit the insurers’ bank tie-ups in big cities. The IRDA has suggested state-wise regulatory changes, dividing the country into three zones.

The draft norms have proposed to limit insurers to tie up with not more than nine states or union territories in Zone A and six states or union territories in Zone B. Zone A has 13 states and cities, including Maharashtra, Gujarat, Kerala, Andhra Pradesh, Mumbai, Delhi, Chennai and Hyderabad. IRDA has asked for comments by December 12, 2011. This means that companies with pan-India presence will have to shut down their businesses in four out of 13 places.

The idea behind opening up state-wise channel is to ensure better use of bank’s infrastructure. This is expected to increase insurance outreach in the number of bank branches. As per an IRDA study, 7,000 bank branches out of 80,000 sell any kind of insurance product.

According to the exposure draft, IRDA said that one bancassurance agent should not tie up with more than one life, one non-life and one standalone health insurance company in any of the states, in addition to one each specialised insurance company.

Also IRDA has proposed a limit on insurers to tie up with any bancassurance agent to only nine states or union territories in Zone A and six states or union territories in Zone B.

If the general insurer does not have any health product to distribute, the bancassurance agent may tie up with one more general insurance company, carrying on exclusively business of health insurance. Any licence would be in force for three years and thereafter renewed.

“Due to recent changes in charge structure in unit-linked products, a number of insurers have exited semi-urban and rural areas as direct agency channels have become increasingly unviable. Allowing banks to enter in to multiple tie-ups will facilitate insurance companies to reduce the cost of distribution,” said Aviva Life MD and CEO T R Ramachandran.

Irda looks to revamp micro-insurance plans
By Shruti Verma Khare Nov 23 2011 , New Delhi

The Insurance Regulatory and Development Authority (Irda) is working on guidelines to revamp micro-insurance products. Irda wants to increase the life cover offered in these policies and reduce the premium, an Irda official said.

Irda will also look at allowing insurers to look at different forms of distributions such as a banking correspondent-like model to increase the reach of micro-insurance policies.

The new guidelines are aimed to improve the penetration of micro-insurance policies. Micro-insurance products are small ticket-size insurance policies.

“The regulator is of the view that penetration of micro- insurance should increase from the present levels. We are also looking at taking steps to bring down the premium of micro-insurance products,” the official said.

Irda is looking at changing the definition of micro- insurance policies to broaden the scope of micro- insurance. Micro-insurance policies are generally sold under group schemes.

For distribution, insurers tie up with agencies such as micro-finance companies, cooperative banks and non-government organisations (NGOs). “There is a lack of efficient delivery of micro-insurance products. We are examining the various options that insurance companies can look at for distribution,” added the official.

At present, all insurance companies, both life and non-life, are mandated to do 20 per cent of their business from micro and rural insurance policies. Micro-insurance is not a profitable business segment for insurance companies because the premium generated is very low. For most insurance companies, distribution costs of micro-insurance products is often more than total premium earned.

In 2009-10, life insurers earned new business premium of Rs 401.641 crore from micro-insurance policies.

Recently at an industry conference, Irda’s chairman J Hari Narayan expressed concerns over the low penetration of micro-insurance products. He said, “There are some structural issues in micro-insurance products in terms of benefits payout. We are examining that.”

Among the least profitable across Asia
Niladri Bhattacharya / Mumbai November 24, 2011, 0:40 IST

At a time when the country’s life insurance industry is facing a downturn in premium collection, it has earned itself a dubious distinction of being one of the “least” profitable market across Asia.

According to a study by McKinsey, the returns and profit margins in India are one of the lowest in the region. The study shows, the return on reserves from the life insurance sector in the country is the lowest, at — 27 basis points, whereas it is 110 basis points in China. Similarly, the profit margins or the new business adjusted profit (NBAP) margins are at 18 per cent, faring poorly with China, where the NBAP in the same period stood at 30-60 per cent.

“In the past decade, ending 2010-11, the total capital invested by private sector life insurers was over $7.5 billion, of which 50 per cent or close to $4 billion was invested to fund accumulated losses, which have largely been incurred to create distribution capacity,” the report said.


(in bn $)

GWP in %

Share of
global GDP
growth in


in basis



















South Korea


















GWP: Gross written premium till 2010 NBAP: New business adjusted profit
ROR: Return on reserves Net profit divided by statutory reserves
Source: McKinsey

Therefore, it is not surprising that a few of the 22 private life insurance companies operating in India have been able to achieve their break-even targets set out in their original business plan.

Till March 31, only three private life insurers have registered accounting profits for five years of their operation while a further four players have registered profits in three years of their operations.

“In the early years there tended to be a land grab, and we went into second, third, fourth tier cities. Everyone was trying to build a scale. So, the new regulation was just a pull back of that earlier land grab strategy where we did build some scale, but didnit get the value. What we are seeing in India is a natural transition,” Mark Tucker, group chief executive and president, AIA, recently said during an interview with Business Standard.

Accordingly, most private life insurance companies have dropped their expansion drive and and adopted various rationalisation exercises in terms of branch network, agency force and distribution network, to cut cost and preserve capital.

The report expects the current slowdown in premium collection in the Indian life insurance industry to continue for another 12-18 months, as insurers are looking to adapt their business model in accordance with the regulatory changes.

However, it indicated, in the medium to short-term prospects for the Indian life insurance sector remain attractive. It is estimated a growth rate of 13-14 per cent on a cumulative basis over 2010-2015, taking the total industry gross written premium at $110 billion.

Since the new regulatory norms were introduced in September 2010, the sector has been witnessing a drop in the premium collection. During October-September last year the first year premium collection for the industry was down by seven per cent.

This slide continued in the first six months of the financial year as well, when insurers witnessed a 21.35 per cent drop in premium collection.

Given the changes in the regulatory stance, McKinsey expects that the Indian life insurers will shift their focus towards desigining products providing long term savings and protection for the economy.

“The current low levels of protection in India indicates that the upside for growth in the industry remains significant. This will entail a significant shift in the proposition of the industry — from deriving short-term investment linked products to increased focus on meeting the long term savings and protection objectives of the economy,” the report said.

Fact suppression ground for risk claim denial: Consumer forum
Published: Thursday, Nov 24, 2011, 8:00 IST
By Mustafa Plumber | Place: Mumbai | Agency: DNA

A renewed insurance policy means a new contract between the insurance company and the insured, ruled the National Consumer Disputes Redressal Commission. The commission ruled in favour of Life Insurance Corporation (LIC) of India and rejected the claim of a deceased insured’s wife.

A two-member bench of president Ashok Bhan and member Vinita Rai was hearing an appeal filed by LIC against the order of State Consumer Disputes Redressal Commission, Himachal Pradesh, which had directed it to clear the claim of Shakuntala Devi.

According to LIC’s appeal, her husband, Babu Ram, had taken out an insurance policy for Rs50,000 from March 26, 1999. Babu Ram paid the premium amount regularly to the authorised agent, but the latter failed to deposit the same with LIC and hence, the deceased was termed a defaulter. After his death on November 26, 2001, his wife’s claim was repudiated.

The wife moved the District Forum on grounds of deficiency in service and prayed for being given the claim of Rs50,000 along with other bonuses as admissible, and compensation of Rs50,000.

However, LIC argued that after the policy lapsed, it was revived in November 2001. As Babu Ram had revived the policy after his hospitalisation and suppressed the fact that he was suffering from tuberculosis, LIC repudiated the claim.

The district consumer forum directed the LIC to pay Rs50,000 along with interest at the rate of 9% from the date of filing the complaint till the date of realisation and Rs1,000 as litigation cost due to the fact that there was nothing on record to prove that his disease was incurable.

This order was challenged by LIC, stating that there was adequate evidence that the deceased had deliberately concealed facts regarding his health. Agreeing with LIC, the National Commission repudiated the wife’s claim.

‘Life Insurance sector may grow at 13-14% over four years’
24 Nov, 2011, 04.24AM IST, ET Bureau

MUMBAI: Indian life insurance industry is likely to grow at 13-14% over the next four years and contribute 10% to total global premium income growth, according to a report by McKinsey.

Indian life insurers’ total premium income is expected to reach 5,50,000 crore by 2015. The insurance industry in Asia’s third-largest economy will be one of the few major markets globally to grow at double digits during the period, the report said.

In the half-year ended September, total premium income of Indian insurers grew at 2% from a year ago. Appropriate strategic choices to adapt business models to regulatory changes can improve economic performance of top insurance players by 25-30%, the report said.

“The players who emerge as clear winners will be those who can adapt swiftly to the new paradigm by redefining their business models with careful consideration to strategic issues around agency, bancassurance, innovation, geographic footprint, and value of existing customer franchises,” the report said.

Insurance firms here are currently in the process of modifying their business models, following regulatory changes that were introduced in life insurance industry in September 2010. The level of insurance protection in India, measured by sum assured to GDP ratio, is around 55% of GDP, against the developed market benchmarks of 150-250%.

ICICI Lombard Wins Frost & Sullivan’s 2011 India Voice of Customer Award as the “Overall Best Vehicle Insurance Company” in the Competitive Indian Automotive Market
23rd Nov 2011, 16:29 (IST) | Mumbai, Maharashtra, India – Frost & Sullivan

(Business Wire India): ICICI Lombard General Insurance Company Ltd. has been bestowed with Frost & Sullivan’s 2011 India Voice of Customer Award as the “Overall Best Vehicle Insurance Company” in the competitive Indian automotive market. The Award was presented to ICICI Lombard for demonstrating excellence in customer service, documentation process, and for claim management.

ICICI Lombard has a loyal customer following, who have rated it as the Number #1 brand. It is also noted that users of other vehicle insurance companies also perceive ICICI Lombard as #1 compared to the competitors. On the basis of its superior performance, ICICI Lombard has been selected as the recipient of Frost & Sullivan’s 2011 “Overall Best Vehicle Insurance Company” as per the choice of Indian vehicle owners.

The Frost & Sullivan Voice of Customer Award for Overall Best Vehicle Insurance Company is bestowed upon the organization that demonstrates excellence in customer service, documentation process, and claim management. In June-July 2011, Frost & Sullivan surveyed 1,588 vehicle owners (from mini, regular compact segment, super-compact and mid-size segment, and utility vehicle segment) who purchased their vehicle between 2007 and 2009, using a face-to-face survey methodology.

Survey respondents were selected purposively across 10 cities viz. Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Chandigarh, Ahmedabad, and Jaipur. The respondents had to be the primary decision makers about purchase of vehicle, and preferably drive it themselves. Age of the respondents was between 18 and 55, and both male and female respondents were interviewed.

Mr. Bhargav Dasgupta, MD & CEO, ICICI Lombard GIC said, “We are delighted to receive this prestigious award of best vehicle insurance company from Frost & Sullivan. At ICICI Lombard, we constantly work towards delivering superior service and value to our customers. In the insurance industry, the “moment of truth” is when the customer makes a claim and we, at ICICI Lombard, take this aspect of servicing very seriously. It is always very encouraging and inspiring to know that our efforts are being recognized and applauded. We will continue to build on the momentum and cater to our customer requirements to the best of our ability”.

Mr. Anand Rangachary, Partner and Managing Director, South Asia & Middle East, Frost & Sullivan, said, “This Award conferred on ICICI Lombard is an acknowledgment of its best practices and their focused efforts to provide a comprehensive solution to the Indian four-wheeler owners. It has also adopted several unique programs like issuing online insurance policy, cashless claim in several garages, personal accident cover, and doorstep surveyor facility. ICICI Lombard’s easy documentation process, unparalleled customer service, and smooth claim services are some of the areas highlighted by the consumers and this has been recognized by Frost & Sullivan with this Award.”

The Vehicle Insurance market is getting increasingly competitive by the day, as banking and other financial services companies are foraying into this segment. To become a market leader, one has to be consistent and always come up with unique programs or services that would benefit the consumer. Some of the key benefits that ICICI Lombard is providing its customers include the digitally-signed policy issued immediately through an online facility; and access to nearly 3,000 garages for cashless claim across the country.

United India continues to reject insurance claims
November 23, 2011 04:31 PM | Raj Pradhan

Its business as usual even after two months of the IRDA circular which asked insurers to not reject claims on technical grounds. With no warning or penalty for specific insurers, will the IRDA circular be taken seriously?

Two months ago the Insurance Regulatory and Development Authority (IRDA) issued a circular to life and non-life companies asking them not to reject claims on technical grounds like a delay in filing. Some insurers including United India Insurance were rejecting claims mechanically based on delay in hospitalisation intimation and claims filing. Claims continue to get rejected even after IRDA circular.

For starters, there is no warning or penalty for insurance company to reject claims mechanically on grounds of late filing. The IRDA circular is not an ‘order’ directing any particular insurance company to strictly adhere to the claims rejection on technical grounds. By not naming the errant insurers, the companies can feign ignorance of the snag happening under their nose.

According to industry sources, “The end result is that there is no directive given by insurers like United India to its regional/division offices or third-party administrators (TPA) to take necessary remedial action. There is no change at the ground level which makes the IRDA circular completely ineffective.”
Another source confirms that there is no relaxation on the strict deadlines and condone requests will be rejected in most cases.

United India has strict deadline of hospitalisation intimation within 24 hours and claims submission with seven days of hospital discharge. Minor delay results in claims rejection and condone request is usually refused. Moneylife has examples of some claims rejection even when the strict deadlines were met. Moneylife has done cover story (3 November 2011) on ‘Insurance Claim Rejected’

Interestingly, United India is the only government-owned general insurer which has shown profits and has aggressive plans for business growth. The company’s CMD was quoted saying they have premium target of Rs8,000 crore this year at 25% growth rate in business. They plan to bring down underwriting losses—premium less claims outgo—to Rs900 crore from last year’s figure of Rs1,760 crore.

He adds, “Better underwriting, proper pricing of group policies, tightening of claims procedures in respect of health insurance and audit of claims settling agents resulted in reduction in health claims outgo.” The ‘tightening of claims procedure’ surely includes claims mechanically rejected on flimsy grounds of any minor delay (or no delay in some cases) in hospitalisation intimation or claims submission. It did not matter that the company happily collected premiums from same customer for decades.

According to one Moneylife reader, “United India has instructed its offices to send soft data, to the TPAs, of health insurance renewals once a month only, usually on the last day of the month. As a result when an insured is admitted to a hospital a week or two after his policy has been renewed and he contacts the TPA, he is told that as per their records his policy has not been renewed and therefore they are unable to register his claim even though he had called them within the mandatory 24-hour deadline! As a result he is also denied cashless facility and has to go in for reimbursement which again will be denied on the grounds that the claim was not reported within 24 hours!”

He adds, “Another ploy being perpetrated on the policy holders is the raising of queries pertaining to the claim by the TPA wherein it is stated that if the insured does not respond within 15 days the file will be closed. This communication in most cases is not posted to the policy holder whereas a copy of the same is kept in the insured claim file. In cases where it has been despatched the letter usually arrives just a day or two before the deadline giving the insured no chance to reply in time.

Once the file has been closed, only a letter from the regional manager will be accepted to reopen the file. The branch (division) mangers have no say on this issue! But if an insured has the tenacity to fight his claim will no doubt be settled. United India is fully aware that a lot of policy holders will not go that far and will simply bemoan their fate and this is United India’s way of trying to keep claim ratios within tolerable limits! Policyholders are warned!”

There is no initiative from IRDA to monitor the ground reality of mechanical claims rejection. Will IRDA get the statistics on claims rejection and reasons given by insured for delay? Will it do an analysis on how many requests to condone delay were approved and rejected? Does IRDA intend that insurer follow its advice from the date of circular?

What about the claims which are already rejected and condone requested? What about claims which are already rejected, condone rejected and cases closed? The mechanical rejection has been going for long time and the relief has to be applicable for past cases, too. Will IRDA review such cases and give justice?

IRDA needs to check if the insurance company and TPA have a 24X7 system in place to receive intimation and give confirmation number. They should insist on such system being 24X7 customer care and not force the insured to send fax or email within 24 hours of hospitalization. Fax and email for hospitalisation intimation are disputed as being not received or not legible. It is a perfect excuse for claims rejection.

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