Latest Updates from Industry
The life insurance industry is bearing the brunt of a 90 per cent fall in pension business due to a special tax treatment for the New Pension System and a regulatory clause that makes it mandatory for life insurers to offer guaranteed returns to subscribers. The pension business of life insurance players is down to a meagre Rs 2,000 crore in 2014-15, from Rs 20,000 crore in 2009-10.
Pushed to the wall, the industry has called for a level-playing field. The plunge has been more pronounced since the introduction of the clause in 2009-10 which made it compulsory for life insurers to offer guaranteed returns on pension products.
The Budget provision of Rs 50,000 worth of additional tax-free incentive to NPS investment over and above the existing Rs 1.5 lakh has only made their life harder.
Future Generali India Insurance Company, a joint venture between retail giant Future Group and Italian insurance major Generali, expects to post a 20-25 percent growth this fiscal, said the company's MD and CEO K. G. Krishnamoorthy Rao. This will be well above the expected general insurance industry growth of about 15 percent this fiscal, he added.
Last year, the company grew at 14 percent even as the sector recorded its slowest growth in several years, at 9 percent. The pickup in the economy and a couple of regulatory changes are expected to usher in faster growth this fiscal Rao said.
This is contingent on auto sector sales reviving since motor insurance premium contributes about 55 percent of the company's revenue. Last year, Future Generali had recorded a 50 percent jump in profits at Rs.60.9 crore on a gross premium income of Rs.1,480 crore.
Solvency ratios are comfortable and there is no immediate requirement to infuse capital, Rao said. He expressed hope that insurance regulator IRDAI will lift the current cap on commission payable to intermediaries to reflect current realities. The surveyor fee which has remained fixed at Rs.20,000 for very long, now needs a change and an upward revision would actually help the industry and customers to complete claim settlements quickly, he said.
Rao also called for a standardized approach for providing awards/compensation for road accident victims. Besides, the lack of any time bar for filing third party claims often creates problems, Rao said, adding that there is a need to limit both the time within which a claim can be made as well as the amount.
Future Generali India Insurance MD and CEO K. G. Krishnamoorthy Rao called for a standardized approach to providing compensation for road accident victims.
The country's biggest banking network SBI along with its insurer is planning to expand bancasurance channel by 50% alongside raising the field force by about 10% to push business growth. The company aims to grow business by 30% this fiscal. SBI has a 16,333 strong branch network with 50% of it selling SDBI Life's policies. SBI Life's Managing Director Arijit Basu said that, its average business per branch is about Rs.8 lakh while it would be around Rs.50 lakh for its nearest rivals.
SBI Life, the 74:26 joint venture between SBI and BNP Paribas Cardif was the largest private insurer in terms of new business at the end of March 2015 while it was third among private players in terms of total premium collection, the company official said.
It plans to raise the number of agents to 90,000 by the end of this fiscal from 83,000. According to Basu, SDBI Life's existing agents are running in highest productivity and therefore, the company needs to expand the team to push growth.
The company's bancassurance model accounts for 55% of its business with the balance coming through retail agencies. It reported a total business of Rs.12,867 crore in 2014-15, with the first year premium collection growing 18% to Rs.5,528 crore and the balance coming from renewal premium.
SBI would have 10% of its stake in the insurance company in favour of BNP Paribas Cardif as the government allowed up to 49% foreign holding. SBI Life has an authorized capital of Rs.2,000 crore with a paid up capital of Rs.1,000 crore.
The Life Insurance Council, an apex industry body of life insurance companies, is planning to put in place a centralized database of insurance policies by December to detect and prevent fraudulent claims. "We are working on a fraud monitoring framework for the life insurance sector. It is expected to be ready by December", said V. Manickam, secretary-general of the Life Insurance Council.
According to him, the council was in the process of short-listing the vendor who would offer the technology to build and maintain a common database where all 24 life insurance companies can share their policy data. A meeting is scheduled to finalize the terms of reference.
As banks get benefits from Cibil, this proposed fraud monitoring mechanism will help insurance companies get details of customers and detect any fraud in disclosure and claims by policyholders. The database could also help the council to study claim patterns.
The Life Insurance Council also plans to approach the State Governments to request waiver of stamp duty on the Pradhan Mantri Jeevan Jyoti Bima Yojana. However, as insurance is a state subject and they needs to be a discussed with the State Governments. Of 24 life insurance companies in the country only 10 have joined the scheme so far according to Manickam.
Insurance companies are getting ready to bid aggressively for Air India $9 billion (around Rs.57,420 crore) cover, coming up for renewal on 1 October. State-run Air India, which floated a global tender for the policy to cover its 126 aircraft expects to buy the policy at a reasonable discount, given the rise in the number of underwriters and its safety record, said two Air India executives.
"Air India's (including its subsidiaries, affiliated companies and joint ventures (JVs)) aviation insurance policies are due for renewal effective from October 1, 2015 for an agreed fleet value of around $9 billion. We invite technical bids in sealed envelopes from Indian insurance companies duly registered with IRDAI (Insurance Regulatory and Development Authority of India)" the airline said in its global tender posted on its website.
"Premium rates are softening in the international market as there were no major aircraft accidents barring German-wings. Also, there are more underwriters flocking to the international market. Therefore, we are expecting a reasonable discount in the premium", said the executive. Air India paid $24 million last year for its policy from state run firm New India Assurance Co. Ltd, which offered it in partnership with American International Group Inc.
Insurance premiums had increased for both aviation insurance and reinsurance following the disappearance of a Malaysia Airlines plane in March, 2014 and the alleged shooting down of another aircraft of the same airline over Ukraine. On 24 March 2015, a German-wings Airbus A320 crashed in the French Alps while flying from Barcelona to Dusseldorf.
A joint study by the Confederation of Indian Industry (CII) and Towers Watson has revealed that even though the upper limit of foreign direct investment (FDI) in insurance has been raised to 49 percent, the valuation of insurance companies is still a novelty for investment analysts in India.
According to the study, 'Indian Insurance sector: In Pursuit of Value', the sector faces challenges such as regulatory changes, growing competition, mis-selling and a prolonged economic slowdown, necessitating insurers to constantly reassess their business strategies.
It noted that insurers remain upbeat about the sector's prospects and seek growth momentum and value. Sanjiv Bajaj, Chairman, CII National Committee on Insurance and Pensions and Managing Director, Bajaj Finserv, said the government has created a positive environment for the sector to unlock value through FDI.
Vivek Jalan, director (risk consulting) at Towers Watson India, added how effectively insurers are able to utilize the expected capital infusion from foreign partners will decide the growth of the sector.
The Life Insurance Council has elected its first Executive Committee. The Executive Committee will have one representative each from Life Insurance Corporation of India (LIC), Reliance Life Insurance, Bharti AXA Life Insurance and PNB MetLife Insurance. LIC chairman S. K. Roy will be chairing the committee.
Secretary General of Life Insurance Council, V. Manickam said that these members were elected by ballot voting. He added Sandeep Ghosh, Managing Director and Chief Executive Officer (MD & CEO) of Bharti AXA Life, was elected in the first round, Tarun Chugh, Managing Director and CEO of PNB Metlife, was elected in the second round and Reliance Life CEO Anup Rau was elected in the third round.
"The executive committee will have nine members - four of whom have been elected and four will be nominated by the regulator (Insurance Regulatory and Development Authority of India or IRDAI). One member will be from a self help group", said Manickam. LIC has been unanimously chosen the permanent representative due to its sheer size and volume of business. LIC chairman will be the chairperson of the council.
The four members nominated by IRDAI will be from four fields - one from agency, one from policyholders, one from intermediary and one eminent personality. Manickam said these members are expected to be nominated by the middle of August.
Till now, the council was led by D. D. Singh, member (distribution), Irdai, apart from V. Jayanth Kumar, Joint director (life), Irdai. The objective of the council is to create a positive image of the insurance sector and enhance consumer confidence.
The council will organize pro-active discussions with government, lawmakers and regulators on issues plaguing the sector. It will also conduct research on life insurance, publish monographs and contribute to development of the sector.
PNB MetLife India Insurance has strengthened its portfolio of online insurance solutions with the launch of a new term plan - MetLife Mera Term Plan (MMTP). The new term plan is available in online version only. It aims to enable customers to create their own financial protection plan and buy it online through a hassle-free process.
"We have gone forward in our online journey with the launch of MMTP. Our research showed that consumers value flexibility around products. It is this aspect that prompted us to have 'flexibility' in the core design of the product", Tarun Chugh, Managing Director and CEO, PNB MetLife India Insurance told.
MMTP covers a customer's need ranging from a simple term cover, monthly income for the family, child's education expense, joint cover for the spouse, option to increase sum assured depending on life stages, among other benefits.
Life Insurance Corporation (LIC) - India's top life insurer has emerged as the market leader in Bahrain, part of the Gulf Cooperation Council (GCC), despite tough competition from close to 60 global insurance companies. It has also emerged as the third largest player in the UAE with a strong presence in cities like Dubai.
LIC's Bahrain operations occupy the top position in the overall international operations of the corporation. As far as the new business is concerned, it contributes over 80 percent of the total share. India's top life insurer operates in five GCC countries - Bahrain, UAE, Oman, Qatar and Kuwait.
"LIC has 43 percent market share in premium income and 89 percent in policies in Bahrain. The customer base in the countries we are operating in the region mainly comprises of non-resident Indians, though we do sell to the local nationals wherever we are licensed to sell", according to Rajesh Kandwal, CEO & MD, LIC International, Bahrain.
"Despite the intense competition, we are the market leader in Bahrain. Brand LIC has a very strong connection with the NRIs and quite accepted in the region, thereby making NRI segment as a 'niche' market for us. There are around 60 insurance companies operating in the GCC countries", Kandwal quoted.
LIC has operations in 13 overseas countries, including Fiji, Mauritius, the UK, Singapore, Nepal, Sri Lanka, Kenya, Saudi Arabia etc. The major contributing factors for high performance are attractive products, high trust level of the brand and success of bancassurance in the UAE.
The firm has been doing very well in terms of new business in this year. According to the firm, it has already achieved total first premium income target of $299 million as in June 2015 and shall surpass out target in first premium income by a good margin at the end of the year.
"The year so far has been quite encouraging. In terms of number of policies, we are growing at the rate of over 12 percent and in non-single premium, the growth rate is over 36 percent which is satisfactory", Kandwal said.
The bancassurance partners play a significant role in selling to the other nationals, particularly locals. The firm distributes its products through tied channels, banks, brokers and corporate agents. BBK and SBI (in Bahrain), FGB, Emirates NBD, ADCB and RAK Bank (UAE) and Doha Bank (Qatar) are the major bancassurance partners. LIC has also signed an agreement with prominent a broker recently. Lastly, Kandwal said, "In order to deepen bancassurance relationship, co-branded credit card with our bancassurance partner First Gulf Bank (FGB) was launched".
With the growing demand of technology-based changes to make crop insurance full proof the regulator has sent communication to the State Governments of Madhya Pradesh and Punjab to launch field level pilot programs to test some new measures.
The government and IRDAI had commenced the exercise to address problems on the crop insurance from early this year and proposed the launch of a pilot programme. It is analyzed that, if things move ahead as planned, these two States will be roped in to introduce measurement of acreage or/and yield on the basis of satellite images in place of physical measurement being used now.
The Insurance Regulatory and Development Authority of India has put norms against forced selling of insurance policies by banks. In a recent meeting, IRDAI decided to seek an undertaking from the CEO and the Chief Financial Officer (CFO) of the corporate agent (including banks) that there is no forced selling of an insurance product to customers at periodic intervals.
This would be on the line of commission/remuneration received by these banks and other corporate agents that are disclosed usually on a quarterly basis. Often, banks and financial institutions that act as corporate agents force the customer to buy insurance from a particular insurer.
It was suggested that the head of the banks (and other corporate agents) should be extra cautious to ensure that no product is forcefully sold. This would be part of the regulations on registration of corporate agents. The head of a private life insurer said that there have been instances of banks trying to persuade customers to buy an insurance product. "It could be a life cover or a personal accident cover with low premiums that are pushed with a loan or account opening.
Unless a customer wants the product, they should not be made to buy it", he said. This would mean those insurers without a bank partner or promoter would still have to wait longer to get business from banc assurance. The regulator has said an insurer can have tie-ups with up to three insurers in any line of business-life, non-life or health.
The IRDAI is set to bring out a number of new rules to conform to the New Insurance Act which will be implemented from as early as December 2015. The Insurance Laws (Amendment) Act 2015 has made fundamental changes in the way insurance is conceptualized, sold and bought. It will bring out regulations on claim rejection, expense management, and solvency ratio too.
Adding further to the development, three committees on life, non-life and health have been constituted for speedier execution and finalization of new norms. These committees consist of members from the insurance sector to deliberate and come up with appropriate recommendations in their report on these issues.
"Now that the regulatory body has all full-time members, it is ensuring that all the new laws are brought out in time so that we have adequate time to adapt to the new norms", said by the CEO of a large private life insurer. However, there are divergent views on some areas such as expense management and claims rejection. For instance, the new Act says no claim, even if fraudulent, can be rejected after three years. Insurers say that fraudsters will take advantage of these norms.
Similarly, a new compensation and incentive structure will be brought out for agents, which might impact the outgo from customer premiums. Insurers also don't agree with the regulator's view that fixed remuneration would reduce agent attrition. According to sources the draft norms on agent commissions will be brought out in a few weeks.
By December, the laws on Indian Management and Control of Insurance Companies will be finalized. This will decide how an Indian insurance firm will run, the composition of its board and top management and what are the rights given to the joint venture partners. Several foreign joint venture partners had expressed their discontent on the restriction of their rights in board appointment and voting for strategic decisions. Insurers said that the regulator would take a middle path to ensure that the rights of both partners in an insurance venture were protected.
Impact of New norms on Policy Holders
- No claim rejection after three years: After three years of a policy being in force, the claims cannot be rejected under any circumstance. Hence, customers won't have to wait for the claim to be approved.
- Agent remuneration to be more balanced: Agent commission, deducted heavily from the first-year premium, will now be more balanced towards second, third and fourth year. More customer premium will go towards saving/investment component.
- Solvency ratio higher for some products: Since insurers would have to maintain higher capital for products such as group health, this would result in higher premiums.
Chhattisgarh government had decided to implement the National Agriculture Insurance Policy and cover seven crops for the current Kharif season. The crops to be covered under the national agriculture insurance scheme includes paddy, Makka, Soyabean, Groundnut, Arhar pulses, Udad and Moong. The state cabinet had approved the draft of the National Agriculture Insurance Policy in May this year. The spokesperson said the agriculture department after consultations with the union agriculture ministry had given final share for the implementation of the insurance policy.
The agriculture department officials said that the policy would cover all the farmers, no matter whether they had taken loans or not. The share croppers would also be entitled for the crop insurance.
The Modi government is planning to have cashless treatment facilities in more parts of the country during the 'golden hour'. Addressing the nation through his radio broadcast series "Mann Ki baat," Modi said every four minutes a person is killed in a road accident. "My biggest concern is that almost one-third of those who died belonged to age group of 15-25 years", he said while appealing to parents to create an environment for road safety in families.
He also announced that the government is going to bring a new legislation called, 'Road Transport and Safety Bill'. In his 10th monthly address on radio, Modi also paid his respect to the Kargil martyrs. The Prime Minister efforts will be to provide the best treatment for the victim possible, regardless of whether the victim can afford it or not. He further added that the project will begin from the Gurgaon-Jaipur-Vadodra highway and later expanded to the Mumbai-Ranchi-Rangaon-Mondia national highway.
Senior executives of private insurance companies, bureaucrats and officials of IRDAI can now apply for the post of Chairman and Managing Director in public sector general insurance companies keeping in lines of the norms for state-run banks.
There are two vacancies at present in state-owned General Insurance Companies. Though IRDAI officials are allowed to apply, the regulator is also looking to fill three vacancies at the Insurance Regulator and Development Authority. These include member life, member non-life and member actuary. The chairman's post has been vacant in National Insurance Company for more than a year.
The government has given additional role to Agriculture Insurance Company's CMD P. J. Joseph as chairman of the Kolkata-based insurer. The post of chairman at India's designated reinsurer General Insurance Corporation will fall vacant in October.
The government appointed Rajesh Agarwal, joint secretary, department of financial services, as in-charge of National Insurance on May 19.
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.
ACTUARY: Common Entrance Test(ACET) for Actuarial Exam December 2012- Registration closes on 24th October 2012User Rating: / 0
The Institute of Actuaries would be conducting the common entrance test 2012 on 4th and 5th December 2012 in 41 centres in India. The registration for the exam shall close on 24th October 2012.
With a minimum of 10 +2 or even a maximum of PhD in Mathematics or Statistics or any other, Take Actuarial Common Entrance Test (ACET) on 4th & 5th DecemberÂ 2012 in 41 cities across India.Â After clearing ACET become a student member of Institute of Actuaries of India and pass 15 papers to be part of this noble profession.Â Â (Log on to http://www.actuariesindia.org/acet.html )
Actuarial science is the discipline that applies mathematical and statistical methods to assess risk in the insurance and finance industries.Â Â It is a niche profession with strict standards for qualifying and is also a global profession as it is recognized in most countries.
The actuaries attract competitive salaries globally and it is consistently rated as one of the best jobs in America US News and World Report, the Jobs Rated Almanac, CNN Money, and others all agree: few other occupations offer the combination of benefits that an actuarial career can offer.Â Actuaries balance their role in business management with responsibility for safeguarding the financial interests of the public. The duty of Actuaries to consider the public interest is illustrated by their legal responsibility for protecting the benefits promised by insurance companies and pension schemes. The professions code of conduct demands the highest standards of personal integrity from its members.
Actuaries are experts in assessing the financial impact of tomorrow's uncertain events or Risks. They enable financialÂ decisions to be made with more confidence by:
Â· Analyzing the past
Â· Modelling the future
Â· Assessing the risks involved, and
Â· Communicating what the results mean in financial terms.
Actuaries work in the Insurance industry (Life, General, Health Insurance & Reinsurance), Private corporations, Consultants, the Government, Pension Funds, Banks and Investment companies, Risk Management, Banks, Colleges and Universities, Public Accounting firms.
Qualification and Skills required
Actuarial work is interdisciplinary and actuaries are engaged in creative problem solving and critical thinking on a daily basis, their analytic, mathematical, and intellectual abilities are continually stretched and tested. Actuarial work is smart, challenging, and creative faced with technical and intellectual challenges, influenced by outside forces such as current economic conditions, energy costs, legislation, judicial decisions, and technological innovations.Â It takes a combination of strong analytical skills, business knowledge, and understanding of human behavior to be a successful Actuary
Any person with minimum 18 years of age and having a high degree of aptitude for mathematics and statistics can take up this course and become an Actuary. The skills required by successful actuaries include an excellent business sense with knowledge of finance, accounting, and economics; keen analytical, project management, and problem solving skills; Math and Statistics knowledge; strong computer skills; and solid written and oral communication skills.
What sets actuaries apart from other professionals is their ability to learn and assimilate a wide range of information and communicate it effectively.
In a fast-changing world, with emerging risks, there are constant opportunities for personal and professional growth for Actuaries to come out with daring solutions and meet the challenges of change.
For more information log on the official website of the Institute of Actuaries of India www.acturiesindia.org .