Insurance News update from leading dailies in India. Read for the latest update…….
Third party motor premiums may go up by 60-70%
Your car/truck insurance bills are set to go up. This could happen as insurance companies may hike premiums by as much as 70 per cent to compensate for losses incurred on third party motor liabilities.Â
The insurance industry regulator is also contemplating increasing the buffer that companies need to provide for this portfolio.
Mr J. Hari Narayan, Chairman, Insurance Regulatory and Development Authority, said that the provisioning requirement for the third-party commercial motor portfolio of general insurance companies could go up from 153 per cent to between 175 and 200 per cent, as prescribed by an independent UK actuary report. He was speaking on the sidelines of the 14 CII insurance summit.
BLEEDING PORTFOLIO
The third party motor insurance is a bleeding portfolio for general insurance companies. Last year, the industry took a hit of Rs 10,250-crore on account of commercial third party motor pool losses. The rise in provisioning may result in additional losses in third party motor pool for non-life insurers.
“We expect premiums to go up by 60-70 per cent for third party motor insurance,†said Mr G. Srinivasan, CMD, United India Insurance.
Mr Ashvin Parekh, Partner and National Leader, Global Financial Services, E&Y, said that the commercial vehicles’ lobby had been sounded out on the proposed increase in motor third party insurance premiums.
“The IPO norms for non-life companies will come out very shortly. There are certain technical aspects that need to be cleared with the SCODA committee of SEBI,†he added.
Mr Narayan acknowledged that the time between designing an insurance product and approval from the regulator needs to be reduced. It is working on defining certain features for insurance products which will make the approval procedure for insurer’s less tedious.
SIMPLER PRODUCTS
“I was wondering whether we can have a system of dos and don’ts for different types of products that might make the regulatory process smoother or more transparent,†Mr Narayan added.
http://www.thehindubusinessline.com/industry-and-economy/banking/article2633399.ece
Third-party motor pool Reserve to be raised to 175%
The reserve or provisioning requirement for the third-party commercial motor portfolio of general insurance companies might be raised to 175 per cent from 153 per cent. If implemented, the industry might take a hit of Rs 10,000 crore.
The Insurance Regulatory and Development Authority (Irda), based on feedback from an independent review by a UK Actuary, might take a call on this over the next few weeks. The earlier report “underestimated†the total losses on the account of commercial third-party losses, Irda chairman J Hari Narayan said at the CII’s 14th Insurance Summit here .
“The UK actuary report, which studied the asset-liability of the third-party motor portfolio, has indicated that industry requires higher provisioning. They have given us a range. We are discussing with the industry,†he added.
According to industry sources, the UK actuary has prescribed a reserve requirement of 205 per cent on the third-party motor pool portfolio. The UK actuary was assigned with the task after the earlier committee report by actuary K P Sharma suggested a provisioning of 153 per cent. Consequently, in March 2011, Irda increased the provisioning requirement from 136 per cent to 153 per cent.
The insurance regulator is also considering tweaking some of the investment norms for life insurance companies. The move assumes importance as the returns provided by different insurance companies on similar instruments are not “consistentâ€.
“While examining the returns provided by different insurance companies on various schemes we have found that the difference between a highest return and lowest return is nearly four times. That is, on an average, annual returns on certain schemes could be as high as 27 per cent, whereas some companies provides return as low as six per cent. This gap is worrying,†Hari Narayan, said.
He added that though the proportion invested in equities and in debt might not be changed, but investments norms in certain categories of debt and securities might be tweaked.
“By and large the proportion of funds invested in debt and equities by the Indian insurers are similar to those followed by global insurance companies. So there is no need for major changes, but there might be some tweaking in certain securities bucket based on volumes,†Hari Narayan said in the sidelines of CII Insurance Summit.
MICRO INSURANCE
The insurance regulator is also contemplating some wholesale changes in the micro insurance regulations, to increase its penetration in the rural areas as the existing norms has failed to deliver the desired result. To start with Irda might change the definition of micro insurance where the product might be defined on the ticket size of the premiums rather than the existing practice where the definition is based on pay-outs.
“Under the current framework any pay-out of less than Rs 50,000 is considered as micro insurance policy, which is not the right way as the premiums in some cases are as low as 25 paise. The better way perhaps is to define a micro insurance policy on ticket size say Rs 2,000-5,000. Then the scope for product innovation increases,†he said.
He also added that micro insurance policies should have continuity and to ensure that industry could adopt the concept of “Lead Insurance†on lines of the RBI’s Lead Bank Scheme.
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http://business-standard.com/india/news/third-party-motor-pool-reserve-to-be-raised-to-175-/455762/
3rd-party motor pool provisioning to rise
The insurance regulator favours an increase in the reserves or provisioning required for third party motor insurance portfolios of non-life insurance companies.
“The motor pool losses are quantified through an actuarial method. Irda feels the provisioning done by various companies are much lower than the actuarial results show. Certain aspects of the calculation require some re-examination. Our estimates are showing an underestimated figure. This gap should be bridged well by the insurance companies,†J Hari Narayan, chairman, Insurance Regulatory and Development Authority (Irda), said at an event organised by the Confederation of Indian Industry on Wednesday.
The third party motor pool built by a non-life insurance company meets its claims payment requirement for third party liabilities. The provisioning or reserves signify the buffer it has to provide such covers.
According to Section 146 of the Motor Vehicles Act 1988, any vehicle that plies on the roads needs to have a third party insurance cover.
Irda had earlier increased the provisioning to 153% from 126% for commercial vehicles.
An independent actuarial report from the UK had said the provisioning requirements for Indian general insurers were very low. They must be increased 175-200%, it said.
G Srinivasan, chairman-cum-managing director, United India Insurance Co Ltd, suggested an increase in premiums, too.
“Premium for the third party liability cover should be increased to 60-70%,†he said.
“The premiums of third party cover may go up by April 2012. The insurance industry and the regulator have approached the commercial vehicle lobby for increasing motor third party insurance premiums,†said Ashvin Parekh, partner and national leader, global financial services, Ernst & Young.
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http://www.dnaindia.com/money/report_3rd-party-motor-pool-provisioning-to-rise_1613595
IRDA suggests banking model for insurance
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Insurance companies should also explore a bankinglike 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 the 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.â€
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.
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Banking Correspondents model for insurance sector suggested
Insurance Regulatory and Development authority Chairman J. Hari Narayan on Wednesday said that continuous engagement was necessary to promote micro insurance in the country besides exploring the Banking Correspondents model for increasing the reach of insurance products in rural areas.
Mr. Hari Narayan observed that the Indian insurance industry was quite young and still evolving. He viewed that in the last couple of years, pension products were on the increase but these needed to be defined aptly as often they were more of a financial accumulation product, said Mr. Hari Narayan while addressing the Confederation of Indian Industry’s (CII) 14th Insurance Summit here.
He also highlighted the importance of increasing the penetration of micro insurance products throughcontinuous engagementand going beyond mere numbers.
Delivering the keynote address, Mr. Hari Narayan observed that there were some structural issues in micro insurance products in terms of benefits payout.
He also added that there was a lack of efficient delivery of the products by the industry and hence rural and social sector obligations might suffer.
He underlined the lack of continuous engagement on the part of companies and agencies and stated that the products introduced are annual products.
http://www.thehindu.com/business/Economy/article2633333.ece
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Irda may consider relaxing investment norms for insurers
The Insurance Regulatory and Development Authority (Irda) may consider relaxing investment norms for insurance companies to allow them greater flexibility.
“Our pattern is largely on par with global standards. But within the available architecture, we are thinking what can be done for insurers,â€â€ƒIrda chairman J. Hari Narayan said in Mumbai on Wednesday. “We have to keep in mind that the best return by a product was 27%, and the least, 6%. So there is a huge gap.â€
This assumes significance in the backdrop of a lack of high-quality debt paper and the ongoing equity market lull. Irda allows investment in only highly secured AAA-rated and AA-rated debt paper.
The norms allow at least 50% in government securities, 15% in infrastructure-related securities and the rest in equity, mutual funds, corporate bonds, debentures and money-market instruments.
Hari Narayan was addressing the Confederation of Indian Industry ’s 14th Insurance Summit.
Savings and low-maturity products are gaining popularity and the rising trend in interest rates is a major concern, said Ashvin Parekh, partner and national leader, Global Financial Services, Ernst and Young.
Of the total debt holdings, current norms mandate that an insurer allocate a minimum of 75% in instruments with AAA credit rating. Insurers are finding it difficult to mobilize funds because of a shortage of such high-quality paper as a result of a slowdown in the overall investment scenario and delays in projects.
If the rules are relaxed to allow investment in lower-quality bonds, insurers may get more investment opportunities, holding out prospects of better returns. Bonds with lower credit ratings typically fetch higher returns.
At present, there are 24 life insurers that have total assets of more than Rs.13 trillion.
Hari Narayan was critical of the way the insurance industry has been selling pension products. Irda had mandated a guaranteed benefit of 4.5% on all such pension products in September 2010 to make unit-linked pension plans transparent and more useful.
Following this, insurers had to withdraw all old products but could not afford to introduce new ones as it was difficult to attach such benefits to pension plans. Last week, the regulator allowed insurers to offer pension products without the 4.5% guaranteed benefit clause, but with certain non-negative guarantees. Irda has made it compulsory for policyholders to buy annuities on pension products from the same insurer. The new rules will allow insurers to invest in equities as well and aim to improve returns.
“There has been a considerable slowdown in the sales of retail pension plans,†said S.B. Mathur, secretary, Life Insurance Council, an industry lobby group.
Hari Narayan said, “We need to ask ourselves honestly, were we really selling pension plans? What was being sold was not pension but some kind of accumulation product. Either sell pension product or create a new category of products.â€
He also highlighted the importance of increasing the penetration of micro insurance products through continuous engagement and going beyond mere numbers.
“There are some structural issues in micro insurance products in terms of benefits payout,†Hari Narayan said.
There is a lack of efficiency in delivery and hence rural and social sector obligations may suffer, the Irda chief said, adding that the annual products offered by insurers may not be suitable.
Hari Narayan suggested the industry adopt the concept of Lead Insurance along the lines of the Reserve Bank of India’s Lead Bank Scheme to ensure continuous engagement of crucial products such as health insurance.
On the distribution front, he suggested that it was feasible to have a well-mentored agency model including business correspondents and tied agents. Irda asked the industry to focus on an appropriate ticket size that promotes economies of scale, reliability of operations and above all assured guarantee to end customers.
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http://www.livemint.com/2011/11/16230030/Irda-may-consider-relaxing-inv.html?atype=tp
SBI General Insurance crosses Rs 1bn in Premium income in FY 11-12Â
SBI General Insurance, a subsidiary of State Bank of India, has successfully garnered a Premium Income of Rs. 1.17bn at the end of October 2011.Â
SBI General commenced its operations in FY 10-11 and closed the financial year with a Premium of Rs. 430.2mn
Commenting on the business achieved, R.R. Belle, MD & CEO, SBI General Insurance said, “SBI General Insurance commenced its retail business towards the end of last financial year and its SME business, in March 2011. The crossing of Rs. 100 crore Premium is its first milestone, riding on back of a strong corporate, retail & SME performance. It is a significant development as it is an outcome of focus on select products, available on the IT Platform.â€
The current financial year also saw the total number of policies issued by SBI General crossing the 1 lakh mark. SBI General currently operates out of 20 locations pan-India and generates 50 per cent of its business from the retail segment. The corporate segment makes up for nearly 42 per cent of its business, while SMEs account for almost eight per cent.
Since its launch, the company has rapidly expanded its foot print to cover some rural areas as well. The rural sector accounted for 10% of its premium income in the first half of the financial year.
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SBI General garners Rs 117 cr in premium collection
SBI General Insurance, a subsidiary of State Bank of India, today said it has garnered Rs 117.02 crore premium by the end of October 2011.
“We commenced our retail business towards the end of last fiscal and our SME business, in March 2011. The crossing of Rs 100 crore premium is our first milestone, riding on back of a strong corporate, retail and SME performance,” SBI General Insurance Managing Director and CEO R R Belle said.
The current financial year also saw the total number of policies crossing the one lakh mark. Â SBI General currently operates out of 20 locations pan-India and generates 50 per cent of its business from the retail segment.Â
The corporate segment makes up for nearly 42 per cent of its business, while SMEs account for almost eight per cent. Â Since its launch, the company has expanded its foot print to cover some rural areas, which accounted for 10 percent of its premium income in the first half of the financial year.Â
The general insurance company is a joint venture between the State Bank of India and Insurance Australia Group (IAG), Australia’s leading general insurance provider.
It serves three customer segments – retail segment that caters to individual and families, the corporate segment including mid to large size companies and the SME segment.
Currently, SBI General covers motor and home insurance for individuals, fire, marine, package, construction and engineering, group health and miscellaneous insurance for businesses.
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