Pvt Life insurers’ policy issuance dips 35% since April

Life insurance premium collection down 20%.

The pension saga continues to take toll on the life insurance industry, particularly for the private players, as the number of policies issued by them is down by nearly 35 per cent, in the current financial year.

During April-October period, the number of policies issued by the largest life insurer, Life Insurance Corporation (LIC) of India, too, declined by eight per cent in the same period. As a result the first year premium collection of the life insurance industry, was down by 20.04 per cent to Rs 55,737.84 crore as against Rs 69,707.92 crore in the corresponding period last year.

According to the data collected by the Insurance Regulatory Development Authority (Irda), during 2011-12, life insurance industry sold close to 19.6 million policies, 15.31 per cent lower, compared to 23.14 million policies sold in the same period last year. In the same period, number of policies issued by the private players came down to 4.15 million from 6.34 million.

“Pension plans, which consisted of about 30 per cent of the sales, especially for the private players till the new regulations came into force in September 2010, now account for only 1.7 per cent of sales. Hence, the sales are down,” said S B Mathur, secretary of the Life Insurance Council.

The Council says premiums collected from pension plans dwindled to Rs 600 crore in the first six months of the 2011-12, compared to Rs 18,000 crore during 2010-11. "With the commissions on unit-linked plans (Ulips) coming down, many agents have left the industry, which has impacted the sales of private life insurance companies,” said, K Sahay, CEO of Star Union Dai-ichi Life.

During April-October, the premium collection of LIC fell 18.5 per cent; for its private peers, the collection was down 24.2 per cent. While LIC collected Rs 41,259 crore by writing new policies, the private insurers collected Rs 14,479 crore.

Considering the choppy equity market and the high inflation scenario, Ulip sales are unlikely to pick up this financial year and experts fear growth of the life insurance industry is likely to remain subdued over the next six to 12 months. In a recent report on the sector, McKinsey predicted the current slowing in premium collection might continue for 12-18 months, as insurers would be looking to adapt their business model to the regulatory changes.

As for the general insurance industry, the gross written premium grew 23.8 per cent during 2011-12, compared to the year before. According to data collated by insurers, the industry collected premiums worth Rs 33,047 crore by writing new policies during April-October, as against Rs 26,700.5 crore last year.

While, private insurers registered 24.9 per cent growth to Rs 13,690.7 crore, the four state-owned general insurance companies' collection was higher by nearly 23 per cent, to Rs 19,356.6 crore.

IRDA plans to limit insurers' bank tie-ups

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.

Life Insurance sector may grow at 13-14% over four years

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%.

Life insurance premium collection down 2%

The life insurance industry reported 2 per cent dip in premium collections to Rs 1,22,661 crore in the first half of this fiscal because of fall in new business.

Total premium collected by the life insurance industry stood at Rs 1,25,179 crore during April-September 2010-11, according to the Life Insurance Council.

"The fall in total premium is due to the drop in new business premium collection," it said.

The total new business premium for the industry has decreased 21 per cent year-on-year to Rs 49,046 crore from Rs 62,362 crore.

The decline was on account of low sales of unit-linked products, especially individual pension segment, which has fallen drastically this year to 1.2 per cent from an average of 26 per cent for the earlier two years for the same period.

"It is evident from the data that voluntary contribution from retail investors under individual pension segment has dried up," said S B Mathur, Secretary General, Life Insurance Council.

According to the council, the life insurance industry, however, has added more than 5,400 direct employees and 26,000 new agents as compared to last quarter.

Click to apply Best Pension Plan

Overall, the outlook for the remaining six months this fiscal appears to be better in view of lack luster performance of the industry in the first half.

However, companies need to introduce new products at regular intervals to sustain the interest of the consumers, the council said.

Kotak Life launched two traditional child plans

Private insurer Kotak Mahindra Old Mutual Life (Kotak Life Insurance) today launched two traditional plans aiming at securing financial requirements of children and adolescents.

Kotak Child Edu Plan addresses the future financial requirements of children aged between 0 (newborns) and 10 years and Kotak Child Future Plan aims at catering to the financial needs of adolescents aged between 11 and 15 years, the company said in a statement.

The Child Edu Plan provides defined benefits at specific milestones - 'Edu Boosters' at 15, 17, 19 and 21 years to support the child's education and skill development.

Kotak Child Future Plan too provides defined benefits at specific milestones - 'Future Boosters' at 23 and 25 years to financially support the child's pursuit of career or life goals without any worries.

The child plan has a fixed premium payment term of 10 years from the date of entry.

Both plans also offer enhanced protection in the unfortunate event of death of life insured (parent, grandparent, etc).

The plans have optional riders, which provide additional protection in case of death, accidental death and permanent disability.

Health insurance biz to touch Rs 35,000 crore by 2014-15

Rising middle-class incomes, inflationary pressure on healthcare costs and the popularity of state-sponsored healthcare schemes will help the health insurance business in India touch the Rs 35,000 crore mark by 2014-15, says the ‘India 2011 – Insurance Industry Report’ released by India Insure Risk Management and Brokerage Services.

The health insurance business has been growing at a steady pace over the past few years and accounted for 25 per cent of the overall business of the general insurance companies in 2010-11, against 23 per cent in 2009-10 and 20 per cent in 2008-09, retaining its second position after motor insurance. The sector earned a net premium of Rs 8,528 crore in 2010-11, against Rs 6,241 crore in the previous financial year.

According to the report, health insurance has been the fastest growing market segment registering a compounded annual growth rate (CAGR) of 32 per cent for the past six years. The growth drivers include an ageing population, increasing healthcare costs, improving per capita income and awareness and increasing employer-sponsored health insurance cover.

“Increased coverage under government schemes like Rashtriya Swasthya Bima Yojana (RSBY), innovative products to reach the rural sector, reduction in premiums and switching from hospitalization cover to health managed programmes under insurance, will all result in the health insurance sector growing to about Rs 35,000 crore by the year 2014-15,” the report says.

According to the report, the healthcare spend in the country is expected to double and touch Rs 2,25,000 crore by 2014 and with just 3 per cent health insurance penetration in the country, there is a huge market for health insurance in India.

The attitude of the Indian middle class towards the need for health insurance is also changing with factors like increase in lifestyle diseases, apart from rise in healthcare costs.

The report also questions why the industry focused only on hospitalization, which was only 20-25 per cent of an individual’s healthcare, spend, ignoring 75 per cent of the market. The insurance industry could also do well to develop new and innovative products in segments, such as micro-insurance health products and ‘health plus life’ products that provide life cover, along with health insurance to subscribers.

IRDA suggests banking model for insurance

Insurance companies should also explore a banking like correspondent model to boost penetration of insurance products in the country, said J Hari Narayan, chairman, Insurance Regulatory and Development Authority (IRDA). “It is feasible to have a well-mentored agency model including business correspondents and the tied agents for distribution of insurance products,” said Narayan, while addressing the Confederation of Indian Industry’s (CII) 14th Insurance Summit.

In order to increase the penetration of banking services in the rural areas, Indian banks have adopted low cost business correspondent model in which a person, with a help of handheld device, provides the basic banking services in the villages.

He also suggested that the industry could adopt the concept of “Lead Insurance” on lines of the RBI’s Lead Bank Scheme to ensure continuous engagement of crucial products like those of health insurance.

He further added: “The industry should focus on the appropriate ticket size that promotes economy of scale and reliability of operations.”

He also highlighted the importance of increasing the penetration of micro insurance products through continuous engagement with customers. He added that there is a lack of efficient delivery of the products by the industry and hence, rural and social sector obligations may suffer.

Ashvin Parekh, partner and national leader, global financial services, Ernst &Young, stated that in the past a lot of attention has been devoted to the investors but equally important are the areas of product designing and distribution. He expressed that it is time that once again the industry works in close association with the regulator and helps it with the tasks of insurance penetration.

SB Mathur, secretary general, Life Insurance Council said that Direct Tax Code (DTC) needs a review given that it is based in the older tax regime where insurance and mutual fund products overlapped.

PSU to handle revised health insurance scheme

The state government has finally set the ball rolling for the Chief Minister's Comprehensive Health Insurance Scheme that would benefit 1.34 crore families in Tamil Nadu. One of the most popular welfare schemes of the previous DMK regime, it is now in the process of a revamp with the new government replacing the earlier private health insurance company with a public sector firm.

On Monday, the Tamil Nadu Health Society, the implementing agency for the revised scheme, convened a pre-bid meeting to clarify doubts. The first round of unsuccessful bidding saw nine firms, including the Star Health and Allied Insurance Company (Star Health), which managed the scheme under the earlier DMK government. In the latest round, only four firms - United India Insurance Company, New India Insurance Company, Oriental Insurance Company and National Insurance Company - took part after the state restricted it to public sector companies. "The decision to choose among public sector firms was taken by the cabinet. The government thought it would be hassle free and there would be more transparency in the operations," said a senior official. Bidding is open till November 21.

"The new scheme will have extensive benefits as it covers more than 900 surgical procedures, including life saving interventions like cardiac, renal, neurological procedures and neonatal/ pediatric procedures which were hitherto not covered," said a senior official.

The scheme has been allotted Rs 750 crore for the current fiscal. After negotiations with the 12-member State Empowered Committee, Star Health, the lowest bidder in the previous round, reduced its offer to Rs 508 from Rs 510 towards premium per family. But it was still high for the state-sponsored scheme.

As per the plan, the sum assured is Rs 1 lakh per annum per family, while Rs 1.5 lakh for certain specific procedures like renal transplantation and more than one cardiac valve replacement. Under the new scheme, a family which has an annual income of Rs 72,000 is entitled to avail the benefits.

The successful bidder will have to ensure the availability of a minimum of 50 networked hospitals in Chennai, 20 networked hospitals each in the districts of Coimbatore and Madurai, six networked hospitals each in other districts excluding government hospitals. There will be a minimum of 50 networked hospitals in the areas under each region of the state.

New Insurance Product Launched by Future Generali

Future Generali India Life Insurance launched its new product — Secure Income Plan — a mix of traditional endowment with once a year income benefits here.

The Future Generali Secure Income plan was available for customers in the age group of 0 to 60 years and for terms ranging from 15 to 65 years. On completion of the premium payment period, accrued compounded reversionary bonuses are paid.

After the chosen premium payment period, every year 5.5(%) per cent of sum assured was paid as guaranteed annual cash back in addition to cash bonus till the end of the policy term. On maturity, the policyholder would receive the sum assured plus the terminal bonus. The plan could be purchased from a low ticket size of Rs.10, 000 onwards.

The company, which collected premium amount of Rs.168 crore on various products, expects to touch the Rs.600-crore mark by the end of fiscal year. The last quarter would be crucial to give maximum business. About 9 per cent of the business was from rural market, he said.

Speaking to media persons here, Deepak Sood, Managing Director and CEO of the insurance company, said another five new products were planned this year and they were awaiting clearance from the regulatory authorities.

Max Bupa aims to breakeven by 2015

Max Bupa Health Insurance, one of the hottest players in the health care insurance business in India, hopes to reach a break-even in operations by 2015. The company, which started operations in mid-2010, is 76:24 joint ventures between Analjit Singh promoted-Max India and UK-based BUPA.

The chief financial officer of the company Neeraj Basur said, Max Bupa Health Insurance has an equity assurance of Rs 700 crore from the joint venture partners, of which, over Rs 300 crore has been infused so far. “We hope to break even in the 5^th year of operations as we had targeted,”

Being one of the most recent players in the business, Max Bupa has been trying to decide itself from other players by present unique products and special services. For instance, the company was the first to offer health insurance products with a sum insured of over Rs 15, 00,000, after which many other companies jumped into the fray, according to Basur.

In an industry where the average size of sum insured in health insurance covers is Rs 2, 00,000, Max Bupa offers health insurance products with covers ranging from Rs 15, 00,000-50, 00,000.

“We have a decent number of customers who have taken our Rs 50, 00,000 products. It depends on the customer needs. There is certainly a segment that sees value in these kinds of products. Those customers who want to ensure there are no hassles or running around when there is a health problem and if they can afford to pay that kind of premium, they go for it,” Basur observes.

Also, with the increasing medical costs and inflation driving prices up, people find it essential to move to policies with higher sum insured to ensure that they have enough coverage in the next ten years, he says.

Being a pure play health insurance player, Max Bupa has no insurance intermediaries or third party administrators, which makes the claims settlement process easy for the customers. Also, unlike most players, who get a bulk of their business from group health insurance schemes, the individual, retail customers are the focus for Max Bupa.

The company, which clocked a new business premium of Rs 46 crore for the first half of this financial year, hopes to complete its first full year on a strong note. “We have already crossed the 100,000 mark in customer base, which is pretty good for a 14 month old company. We hope to close this financial year with a total premium of Rs 70 crore,” Basur said.

United India Insurance targets Rs.8, 000 crore premium

Logging an average business growth of 27 percent this fiscal, public sector non-life insurer United India Insurance Company Ltd Thursday said it is targeting a gross premium of Rs.8,000 crore and large reduction in underwriting losses.

"We are targeting a premium income of Rs.8, 000 crore this year at 25 percent growth rate in business," United India Insurance Company Ltd chairman and managing director G. Srinivasan told reporters here.

"We plan to bring down our underwriting losses - premium less claims outgo - to Rs.900 crore from last year's figure of Rs.1,760 crore," he added.

Last fiscal, the company had earned a premium of around Rs.6, 376 crore.

Srinivasan said the company would focus the retail, and small and medium enterprises (SME) segments for growth.

"We have around 48,000 agents and we are in the process of adding further. We will also open around 100 one-man offices across the country. Currently, we have around 400 such micro-offices bringing in around Rs.275 crore premium," he said.

Meanwhile, a steep reduction in management expenses, claims outgo and an increase in premium income across segments has enabled the company to post 57 percent growth in net profit for the first half of the current fiscal.

"We closed first half of the current year with a total premium income of Rs.4, 033 crore and an after tax profit of Rs.341.07 crore," company general manager and financial advisor B.M. Thakkar said.

"The management expenses came down to 25 percent from 37 percent while the underwriting loss came down to Rs.406 crore from Rs.605 crore as compared to previous year's first half figures," he added.

The company closed the first half of last fiscal with a premium income of Rs.3, 178 crore and a net profit of Rs.218 crore.

"The loss ratio in health and motor third party portfolio's came down to 96 percent and 119 percent respectively from 115 percent and 168 percent," Srinivasan said.

According to him, 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.

United India earned Rs.803 crore from its investments during the first six months of the current year.

The market value of the company's investments at the end of second quarter stood at Rs.15, 803 crore and net worth Rs.4, 587 crore.

Tests get tougher for insurance agents

Things were much easier for life insurance agents before. But it all changed after October 1, 2011, when the new syllabus took effect.

A simple comparison will help. The older syllabus would see at least 7 out of 10 clear the test. However, under the new framework - which is considered much tougher - only 4 out of 10 applicants are expected to get past the hurdle.

“After the new syllabus, the examination has got stricter. But this will only help us in producing quality and professional agents.

Earlier, the passing percentage was as high as 70% against the current 38% for the industry,” said Rajesh Sud, managing director and CEO at Max New York Life Insurance.

“Agents contribute 90-95% to our premiums received. Candidates will take time to get hold of this new examination. Passing percentage and rapid recruitment both have definitely taken a hit,” says RR Dash, zonal manger, Life Insurance Corporation.

Experts say this switch in the syllabus has a bigger purpose: to help agents grasp the nuances of the market and understand the needs of the customer better. Also, a revamped pattern, they add, will be useful in enhancing their product selling skills to meet the customer’s requirements.

“Recruiting life agents has always been challenging for the industry. Some 30% of our business comes from the our agency force, and now with the falling success ratio, recruiting may get affected too,” says Aneesh Khanna, senior vice president head- marketing & product management, IDBI Federal Life Insurance.

There is a contrarian view though. Some say the change in the syllabus is beneficial up to the extent of only producing quality agents as the cost incurred by the players does not measure up to the outcome. “Cost for training of agents has gone up at least 6-7 times as against the cost incurred when the older syllabus was in place. Also, the new syllabus is not very different and advantageous from the older one,” says GN Agarwal, chief actuary at Future Generali Life Insurance.

“The cost of training has definitely shot up, but compared to private players, we have not been much affected as we have our in-house training department,” added Dash of LIC.

In addition, this has not only affected the performance of urban candidates, but also the participation of candidates from rural areas which has slipped significantly. If the passing percentage continues to remain low, this may also impact the business of those insurers whose major chunk of business comes from their agency force.

Max New York Life posts net profit of Rs 375 crore

Max New York Life Insurance (MNYL) would be launching three traditional plans over the next few months but the insurer did not specify what kind of plans they could be. Releasing the insurer’s earnings report, its chief executive officer and managing director Rajesh Sud said Max New York has an accumulated loss of Rs 500 crore as on dates that it expects to wipe off in the next financial year.

MNYL recorded an 8 per cent increase in gross revenue to Rs 2,873 crore for the first six months of 2011-12, compared with a gross revenue of Rs 2,665 crore in the first half a year ago. Net profit stood at Rs 375 crore for the first half of this year, against a loss of Rs 50 crore in the year-ago period. The company broke even in FY2010 with a net profit of Rs 24 crore, which was Rs 283 crore in FY11.

MYNL’s AUM stood over Rs 14,708 crore, a growth of 20 per cent over H1FY10, while solvency margin increased to 456 per cent. The company’s paid up capital (including share premium) as on September 30, 2011, was Rs 1,976 crore.

“The impressive rise in net profit was a result of continued revenue growth coupled with better productivity and cost efficiency. The company does not require additional capital with solvency margin at 456 per cent,” Sud said.

The life insurer’s cost ratio improved 11 percentage points, compared with September 2010 to 31 per cent in September 2011.

10% selloff in insurers may fetch 3k cr

The government could realize close to Rs 3,000 crore by divesting a mere 10% stake in non-life insurance companies because the value of real estate they hold is worth almost the total value of their business.

The government has conducted a valuation of the four companies. And, although their financials are not in the best of shape thanks to motor insurance losses, they have a market value of over Rs 30,000 crore because of investments in financial securities and real estate, both of which are currently at historic peaks.

TOI reported on November 7 that the government is considering a disinvestment in the four state-owned non-life companies -New India Assurance, National Insurance, Oriental Insurance and United India. The process is expected to kick off with the divestment of New India.

The non-life business in the country is going through a rough patch as all insurance companies have to make huge provisions for losses arising out of motor-third party claims (claims from accident victims) after an audit by the regulator showed the earlier provisions were grossly inadequate. But despite the poor state of business the companies hold value because of real estate assets.

New India Assurance, for instance, owns several properties in Mumbai which would be currently valued at several thousand crore. The properties include its head office in Fort, another New India Centre building housing its regional office besides blocks of residential apartments at Malabar Hill and Andheri. Similarly, the three other companies-National Insurance, United India and Oriental Insurance-have substantial properties in Kolkata, Chennai and Delhi, respectively, where they are headquartered.

According to consultants, a listing would bring in a host of benefits to the four companies. "It will bring a new order of governance into the companies. They will have a broad-based board and be accountable to a larger shareholder group," said Ernst & Young's national leader (global financial services) Ashvin Parekh.

According to Monish Shah, director at Deloitte Consulting, while pricing will be determined by timing of the offering, price is only one of the factors for an IPO as divestment is a business positive in the long term and will add to their valuation. "Listing will bring to the company more efficiency in terms of better market practices and better cost management."

Insiders say that the non-life industry today is like what the banking business was in the '80s, when there was very little product innovation with focus more on top line. The underwriting margins of the companies have continued to be under pressure and have not yet stabilized as senior management attempts to prove themselves by achieving topline growth at the cost of profits.

Save Non life insurance Govt companies-Govt to disinvest

There is news that Indian government is in consultation to sell stakes in major Non life insurance companies. These are New India Assurance, National Insurance, oriental and United India. Is this move done to get more cash for government or it wants to modernize these players.

In Non life segment- the two major categories come are -
1. Health Insurance
2. Motor Insurance

With these companies who have large market share - it will certainly change the industry.
For customers - what this can do.

These companies are considered honest in terms of claims but to get claim in these companies is a very tedious work.

With selling the stake- may be new teams will get appointed who will look after the concerns in delay of claims etc.

The other motive behind this govt move can be to insure these companies do not get into large losses and with public participation in capital, they make find there way to profitability.
To comply with norms all these companies will have to have independent directors which will help in restructing.

LIC Housing sanctions 100 plus crore loans in 3 days

LIC Housing Finance sanctioned over Rs 100 crore toward home loans during a three-day property exhibition that concluded in the city today, a senior company official said.

The company organised the 'Home for All Expo '11', starting November 4, at Pragati Maidan to attract home loan seekers.

"We have sanctioned more than Rs 100 crore to home seekers in this three-day property show. The majority of the people are looking for better housing projects at affordable prices in the Delhi-NCR region," LIC housing finance regional manager Ajay Grover said in a statement.

He added that the idea behind having such expo was to give people better deals to buy their dream houses.

Grover said that people from different walks of life were seeking more affordable housing and nearly 5,000 families from various parts of the Delhi-NCR and neighbouring cities visited the expo.

The expo showcased projects of developers like Amrapali, Vipul, Assotech, Supertech, Sidhartha, Gaursons, Omaxe and Earth, among many others.

Government plans to list general insurance companies

The government has started consultations on listing public sector general insurance companies besides selling shares in small lots at a time when it is facing a cash crunch.

Senior government officials told TOI that the finance ministry has started internal discussions on listing of the four general insurance companies - New India Assurance, National Insurance, Oriental Insurance and United India Insurance.

At the same time, the four companies are unlikely to hit the market together. Instead, listing of these companies will span a period of time just like public sector banks, where Punjab & Sind Bank was listed only last year, while State Bank of India has been listed for several years.

Given that New India is the largest player in the business, it is likely to be the first off the block.

UPA-2 has usually sold shares in small lots along with listing or follow-on issues by public sector companies. Punjab National Bank is the only instance of the Center disinvesting its stake in a financial sector company at the time of listing.

Listing of state-run players will also set the stage for some of the private sector general insurance companies tapping the markets.

But listing the public sector players is not going to be easy as their accounts are usually delayed. Most will also need to restructure their boards to comply with the listing norms, including a set of independent directors.

Rejig on at four PSU general insurers

While the government is planning to list public sector general insurance companies, over the last few years, it has tried to improve corporate governance standards and initiated an organizational rejig at four general insurers that are wholly-owned by it.

For instance, the insurance companies have started adopting core solutions, which is an electronic interface, allowing customers to transact across the country much like banks where you can now deposit or withdraw funds at any of the branches.

They have been asked to factor in the possible claims into their accounts since settlement in cases such as motor insurance takes years.

During the last fiscal, the state-owned general insurance companies saw a decline in their net profit on account of lower investment income as also due to higher provisions for motor insurance losses.

For instance, United India reported net profit of Rs 130 crore against Rs 707 crore a year ago, while National's profit fell to Rs 75 crore from Rs 225 crore in the previous year. Oriental Insurance bucked the trend reporting profit of Rs 54 crore against losses in 2009-10.

For general insurance companies, especially the public sector players, profit is usually a function of income from investment. For instance, New India Assurance's asset base was estimated at nearly Rs 40,000 crore at the end of March.

Similarly, the market value of United India's investment was almost Rs 16,000 crore. Thanks to their pre-nationalization legacy, they are major shareholders in the top companies in India which helps them cover the losses they incur on their insurance business.

Aviva Life Insurance Looks Out For a Bank Partner

Aviva Life Insurance is looking for a bank partner for expanding its insurance network and the deal is likely to be finalized by December-end. “We are in talks with different banks for a tie-up. The negotiations are at initial stages. We expect to close the deal in 2-3 months,” Dabur Group Director Mohit Burman said.

Burman, who is a member of the promoter family of the Dabur Group, holds a majority stake in Aviva Life Insurance, while the UK-based Aviva Group has 26 per cent stake in it. He added that the company is scouting for a bank partner for tie-up. They are yet to decide on whether there will be a stake sale or fresh equity.

He said Aviva Life has participated in the RFP (Request for Proposal) floated by PSU lender Syndicate Bank and is also in talks with other lenders. Aviva Life Insurance is a joint venture between the Dabur Group and UK-based Aviva Group with a paid up capital of over Rs. 2,000 crores.

At present, Aviva Life Insurance sells products through partner banks - Punjab & Sind Bank, IndusInd Bank and RBS. A bank partner would help Aviva Life, which started operations in May 2002, to expand its reach using the bank's branch network. For the full fiscal 2010-11, Aviva Life reported a net profit of Rs 29 crore and total premium collection of Rs 2,345 crore.

Now-a-days, insurance companies are showing interest to sell stakes to banks to have access to their wide branch network.

Hero Cycles to Tie Up With Insurance Firms

The world’s largest bicycle maker Hero Cycles said it is in talks with insurance firms to provide health cover to its rural customers as part of its initiative to uplift the poor.

The company, which has tied up with Allahabad-based Sonata Finance for financing bicycle by providing loans of Rs 100 per week in rural areas, is considering paying health insurance premium for the poor customers on purchase of the company's bicycles.

“About 500 million people in India cannot afford to buy a bicycle. We want to give them mobility and for that we have tied up with a micro finance firm to offer loans. Now, we want to secure their lives,” Hero Cycles Managing Director Pankaj Munjal said.

He said the company is currently talking to one public sector and one private sector health insurance provider to tie up for this purpose. The company will introduce the health insurance services soon, he added.

“Hero Cycles want to contribute with its limited strength by giving them a sense of security. These people will be given health insurance policies when they come to buy our bicycles,” Munjal said.

Pension plan: Now, a person can draw annuities at 55 years of age

The insurance regulator plans to lay a floor of 55 years of age for a person to draw annuities from pension plans as it moves to reduce risks for insurance companies and revive a pension market that's ignored by private insurers. However, the move may throw a spanner in the works of those planning early retirement.

The plan, which is still in the discussion stage, is also partly aimed at encouraging private insurers to share the burden of the state-owned Life Insurance Corp, which now bears the burden of the entire annuity risk, said two people familiar with the discussions.

"Fixing the age of annuity will solve the problem of longevity risk,'' said an official at Irda who did not want to be identified. "We are finding out how regulators in other countries manage the pension risk." Pension policies that promise to pay a fixed annual sum to a policyholder till death are seen as risky with rising life expectancy on higher incomes and better healthcare facilities.

Reducing Risk

If an insurer sells a pension policy to a 22-year old with annuity starting at the age of 40, the risk is seen higher if the person ends up living till 80 as the insurer will be paying for 40 years. If the minimum age is fixed at 55, the payments are for just 25 years.

"The risk is more at the younger age," said G N Agarwal, Chief Actuary at Future Generali Life Insurance. Many insurance companies, to market policies easier, had peddled pension policies with annuity payments as early as 35 years which is considered the beginning of the best earning period of individuals. But these companies bear only the lumpsum payment at the end of policy, and the remaining risk of annual payments is borne by LIC, for historical reasons since it has the capabilities.

But the regulator now wants to change that so that one company does not bear the risk and the remaining do not sell policies indiscriminately. "The idea behind fixing the age is that it should not be made to look like a short-term product," said S B Mathur, Secretary General, and Life Insurance Council. "It will increase persistency and bring down the risk in the industry.'' The regulator has been taking steps, including mandating at least a 4.5% annual return on pension policies. But that has backfired with private insurers just dumping the product itself.

Pension products were almost a fifth of the total insurance policies sold in the country till fiscal March 2011. But that has plunged to just 2% of the total in the first half of this fiscal, data from industry representative’s show.

Click here to apply Pension Plan

The regulator circulated a draft norm for insurance companies on pension products. As per the draft norms, policyholders had to take a compulsory annuity of two-thirds of the corpus at the time of the beginning of annuity payments and the remaining one third could be withdrawn after the lock-in period ends.

This plan if implemented will also bring the pension market almost on par with the New Pension Scheme backed by the government and regulated by the PFRDA. Under NPS, the retirement age is fixed at 60 years. Also, one can withdraw 40% at exit and use the remaining for buying annuity. "Most of our annuity plans are sold to group. We encounter early annuity in case of dependents. Restricting an age could take away choice from the customer. The regulator should look at fixing only the minimum age," said Sanjiv Pujari Appointed Actuary SBI Life Insurance.

Berkshire to enter life insurance biz in India

Seven months after debuting in India, Warren Buffett's Berkshire Insurance is now spreading its wings in the country. The company plans to enter the life insurance space in India, by launching an online term cover.

Berkshire India, a joint venture between Nebraska-based Berkshire Hathaway and Allianz, would start life insurance operations as a corporate agent of Bajaj Allianz Life Insurance Co.

“We have a corporate agency licence with Bajaj Allianz Life, and in the coming six months, we would launch an online term insurance product,” Berkshire India chief executive officer, Arun Balakrishnan, told Business Standard.

Though the product would be launched under the Bajaj Allianz brand name, its underwriting would have some imprint on the insurance behemoth.

“We would give some inputs to the underwriting team, and these might be incorporated. Whether it would sill be an exclusive product to be sold by Berkshire remains to be seen,” Balakrishnan said.

Berkshire India started its operations in India in March, as a corporate agent of Bajaj Allianz General Insurance. The company's entry into the general insurance space coincided with Buffett’s maiden visit to India.

The company is expected to increase its product suit in the general insurance space by launching a health insurance product. It already enjoys presence in the motor and travel insurance space.

The sale of online term plans is fast gathering pace in India, since an online product does not involve agents. Hence, companies are able to save on various costs to customers.

Various private life insurance companies have already launched online term plans, and these policies are more than 30 per cent cheaper than offline products (products not available online). The country's largest life insurer, Life Insurance Corporation (LIC) of India, also has plans to launch such products.

In the first month of its operations, Berkshire, through a carefully-planned marketing strategy, managed to sell 300 motor insurance policies online, in return for the chance to spend an evening with Warren Buffett, also known as the Sage of Omaha. Customers who bought motor insurance policies for $48 could secure an invite to meet him in New Delhi.

“Invites, which aren't transferable, are restricted to one per policyholder, and available on a first-come, first-served basis,” Berkshire Hathaway Inc had said in an emailed statement on the eve of its India launch. The other novelty, as the company website put it, was the fact that Berkshire had “opened an office in India by not opening an office”.

However, as the initial euphoria died down, sales dived to less than 30 a month—a tenth of the initial figure. In August, Berkshire came up with a revamped version of its website. The company claims this has improved results.

“The real launch happened only from August. Marketing activity started from August, only after we launched the revamped website. Since then, monthly sales numbers have crossed the peak of 300 policies,” Balakrishnan said.

“Customer feedback on the new version has been very good. The enquiries are increasing and sales numbers, on a monthly basis, are also rising. Internet selling requires a continuous approach. We keep on upgrading the model, based on customer feedback. Based on the data, we are trying to develop different segments in the market, and would launch products accordingly,” he said.

Claim tax benefits for your medical expenses

It is rightly said that “health is wealth”. To ensure good health of ourselves and our families, medical costs are usually on the higher side, which may include medical insurance premium, medicines and hospitalisation costs, among other things. There is, however, some relief from taxes for such expenses.

Medical insurance: In times of rising medical costs, it is wise to invest in medical insurance for yourself and your family. By doing so, one not only ensures medical cover for oneself and the family during a medical emergency, but also gets relief from tax benefits associated with the expenses.

As per Section 80D of the Income Tax (I-T) Act,1961, a deduction can be claimed by an individual for the premium paid towards medical insurance or any contribution made to the Central Government Health Scheme. The deduction can be claimed up to Rs 15,000 per annum or the amount paid, whichever is lower. Here, family would mean spouse and dependent children of the individual.

In addition to the above, an individual can also claim deduction for the medical insurance premium paid up to Rs 15,000 per annum for parent(s) or the amount of premium paid, whichever is lower. Further, these deductions are increased up to Rs 20,000 per annum in case the premium is paid for a senior citizen (65 years old or more).

For example, if a person buys health insurance for himself and his parents, who are senior citizens, then the total premium that can be deducted from his taxable income will be Rs 35,000 per annum (Rs 15,000 for self plus Rs. 20,000 for parents).

It is imperative to note that for claiming an exemption under Section 80D, the payment for the same should be made by any mode other than cash. In addition, only medical premium paid under the medical insurance scheme of General Insurance Corporation, approved by the central government, or any other insurer, approved by the Insurance Regulatory and Development Authority (Irda) shall be eligible for the tax benefits specified above.

Reimbursement of medical expenses of employees: Reimbursement of expenditure actually incurred by the employee for his or his family member on medical treatment (domiciliary medical expenses) is exempt for up to Rs 15,000 per annum. Any reimbursement that is above the said limit would be liable to tax as income in the hands of the employee. Family for this purpose includes spouse, children, parents, brothers and sisters of the individual or any of them wholly or mainly dependent on the individual.

Generally, the employers insist on submission of original medical bills by the employee before making the said reimbursement prior to providing an exemption.

Dependent with a disability: In case an individual has incurred any expenditure on a dependent with a disability, then he would be allowed maximum deduction of Rs. 50,000 per annum or Rs 1,00,000 per annum, depending on the severity of the disability of the dependant under Section 80DD of the I-T Act. The expenditure could be on account of the medical treatment (including nursing), training and rehabilitation or an amount paid/deposited under any scheme framed in this behalf by the Life Insurance Corporation of India (LIC) or any other insurer for maintenance of the dependent.

Few specified diseases: An individual can claim a deduction up to Rs 40,000 per annum (Rs 60,000 in case of senior citizens) under Section 80DDB of the I-T Act for expenses incurred on treatment of certain prescribed diseases or ailments, such as malignant cancers and AIDS, among others, subject to fulfillment of conditions prescribed under the I-T Act.

Therefore, it can be said that while medical costs have increased substantially, the silver lining is that one may claim tax deductions available for these expenses.

LIC for deeper penetration of low-cost insurance schemes in UP

Public sector insurer Life Insurance Corporation (LIC) aims at deeper penetration of its low cost insurance schemes in Uttar Pradesh.

LIC is concerned over rather low level of awareness among the masses towards such low premium and social security schemes, wherein the government provides 50 per cent premium subsidy from its corpus of about Rs 100 crore. Under the Aam Admi Bima Yojana, which is a low cost insurance scheme for people living below poverty line, LIC has so far settled 1,573 death claims cases amounting to over Rs 5.30 crore in UP.

LIC partners with non-government organisations (NGOs) for these social security schemes at the local level.

“Since UP is such a vast state, these schemes should have more penetration, but the level of awareness is rather missing for bringing a major chunk of beneficiaries under its net,” LIC senior divisional manager Mohd Azeezuddin told Business Standard here.

In the Lucknow and Faizabad regions, LIC has partnered with about 20 NGOs for these social security schemes.

Under the Aam Admi Bima Yojana, about 2.38 million people in 75 UP districts are covered and LIC aims at increasing the base to 3 million this year.

The company provides Janshree Bima Yojana coverage to self help groups (SHG), primitive tribal groups, anganbari workers, handicrafts’ artisans, Mahatma Gandhi Bima Bunkar Yojana, Khadi and Village Industries Commission and various other 45 groups.

Earlier, LIC has also already been engaged by the UP government for executing the annuity scheme under the new land acquisition policy of the state. Since annuity under the land acquisition policy is valid for 33 years, the government felt it would be difficult for the respective district magistrate office to ensure timely and regular payment of annuity to the farmers.

Life insurance premium mop-up declines 21%

Indian life insurers recorded a 21.35 per cent drop in premium collection during the first six months of the current financial year. During the April-September period, 23 life insurance companies collected premium worth Rs 49,046 crore by writing new policies, against Rs 62,361 crore in the corresponding period last year.

According to data collected by the Insurance Regulatory and Development Authority, in the same period, premium collection of Life Insurance Corporation (LIC) of India fell 19.6 per cent, while for its private peers, the collection declined 26.1 per cent. LIC collected Rs 36,721.39 crore, while private insurers collected Rs 12,325 crore.

However, compared to August, premium collection in September was down 39.4 per cent to Rs 8,393 crore. During August, the industry had collected premiums worth Rs 13,858 crore, up 62 per cent from Rs 8,511 crore in July.

“The base effect is still showing on the sales numbers. Growth would slowly start to show in the coming months, as the industry is still adjusting to the new regulations which came into effect last September,” said K Sahay, chief executive of Star Union Dai-ichi Life. The gross written premium of the general insurance industry rose 25.8 per cent so far this financial year, compared to the year before. According to data by insurers, the general insurance industry collected premiums worth Rs 28,605 crore by writing new policies during April-September