SBI General Insurance begins operations in Mumbai

SBI General Insurance, the non-life subsidiary of public sector lender State Bank of India, on Saturday formally announced the launch of its operations beginning with Mumbai.
“Initially, we will write policies in Mumbai. We will start full-fledged operations pan-India once our IT infrastructure is put in place,” SBI Chief General Manager (New Initiatives), R.K. Garg, told PTI here.
The company expects to start full-scale operations by Q2 of the next financial year, he said.
“To begin with, we propose to offer 2-3 products in commercial segments,” he said.
The company has filed for 22 products, both in retail and commercial segments with the Insurance Regulatory and Development Authority (IRDA) and is expecting approval for the rest of the products soon, he said.
SBI General Insurance is a 74:26 joint venture between State Bank of India (SBI) and Australia-based Insurance Australia Group (IAG).
The company, which would be the 22nd player in the general insurance industry, received its R3 approval for starting the company in December last year.
The Managing Director and Chief Executive Officer of (CEO) of the company is R.R. Bele.
A representative of IAG-Rob Logie-has been appointed as the Deputy CEO of the company.
The company has a capital base of Rs. 653-crore, including premium.
SBI also has a life insurance joint venture-SBI Life Insurance with BNP Paribas Assurance.

Public non-life insurers’ employees to strike

Around one lakh employees of four Indian government owned non-life insurers will strike work for two hours March 31, demanding 40 percent pay hike and an option to join pension scheme. They claim they have “done well and the management should reciprocate”.All the unions in the four companies — National Insurance Company Limited, New India Assurance Company Limited, Oriental Insurance Company Limited and United India Insurance Company Limited — called for a two-hour walk-out from work places preceding the lunch recess March 31, the last working day of the current fiscal.
The unions warned of serious action if their demands were not met.
“The four government owned non-life insurers have clocked a gross premium of Rs.18,222 crore up to February 2010 this fiscal, logging a growth of 12.21 percent over the corresponding period of the previous year. On the other hand, leading private non-life insurers have logged negative growth,” J.Gurumurthy, secretary of All India Insurance Employees Association (AIIEA), told IANS Thursday.
He said the wage talks are still at the level of general manager level of the individual companies, steadfast on their offer of 17.5 percent salary hike, made at Kolkata Dec 22 last year.
The Governing Board of General Insurers Public Sector Association (GIPSA) Feb 5 informed the unions that it did not find it possible to improve the offer.
After the rejection of the offer of 15 percent increase, the GIPSA came up with a revised offer of 17.5 percent.
The AIIEA had demanded 40 percent wage hike so that there is pay parity with that of the private sector.
“The chairman and managing directors seem to feel that it is not their responsibility to find a satisfactory solution to the wage demand of the employees and officers in consonance with growth, productivity and competitive environment,” Gurumurthy added.
He said wage talks were resumed in Life Insurance Corporation of India (LIC) after the unions rejected the 17.5 percent hike offered.

SBI General's imminent debut ruffles existing players

Likely to kick off operations in end-March or early April.
Public sector insurance players are likely to lose their dominant market share soon, as the country’s largest lender, State bank of India (SBI) gets ready to make a splash in the general insurance space through a joint venture in the next few days.
SBI General Insurance Co, a 74:26 joint venture between SBI and Insurance Australia Group (IAG), is expected to start operations by the end of the March or early next month, according to a source close to the development.
At present, four public sector general insurance companies — New India Assurance, National Insurance, United India Insurance and Oriental Insurance — collectively enjoy about 60 per cent market share.
The biggest setback will be for New India Assurance, as SBI is its bancassurance partner. Out of the Rs 400-crore annual premium that New India earned from the bancassurance channel, SBI accounted for nearly half, or Rs 200 crore.
"We have plans to recover from the loss. We are also in talks with three-four other banks for a partnership," said a New India Assurance executive. The company enjoys around 17 per cent share of the general insurance market.
"It (SBI) is a big player, has a huge reach through a large number of branches and has financial strength. It can create a dent in the market. SBI can reach almost all major clients. Its entry will affect us because New India has a distribution tie-up with SBI," M Ramadoss, chairman and managing director, New India Assurance, had said earlier.
"There might be some impact on the market share of public sector insurance companies, once SBI General Insurance comes into the market. But, we will have to see what strategy they adopt," said a National Insurance spokesperson.
Also, marginal repricing of some products could not be ruled out in the short term, even though premium for fire and engineering insurance had fallen after de-tariffing, said insurance company officials.
"This year, the market might have been erratic due to new entrants, but it should be more disciplined by next year," said an Oriental Insurance spokesperson.
SBI General Insurance has already filed for products across segments.
"The company has made a lot of progress. It will have full range of products," said RR Bele, managing director and chief executive officer, SBI General Insurance. SBI has invested Rs 111 crore for its 74 per cent equity, while IAG has pumped in about in Rs 542.10 crore (including about Rs 500 crore premium) for its 26 per cent stake.
By timing its foray now, SBI would eye corporate clients, as that was the time when most of them renew policies, the source said. The company is also hoping to leverage SBI’s 10,000-plus branch network and borrowers, mostly in retail and small & medium enterprises segments.

Insurance premium may touch Rs. 1 lakh crore by 2015: Assocham

Industry body Assocham on Thursday said it estimates the premium from general insurance to touch Rs. 1 lakh crore in the next 5 years as awareness and income about insurance products among the rural masses are on the rise.
Currently, insurance premium collection is estimated at Rs. 35,000 crore, the chamber said.
In rural areas, awakening levels (regarding insurance) are rising and their income is surfacing because of the various social schemes of the government, it said.
“...because of the social schemes of the government a large chunk of the rural population is getting inclined for insurance...It is one of the reason which will drive growth for insurance premium and reach projected levels of Rs. 1 lakh crore by 2015,” it added.
As over 60 per cent of the population, largely in rural areas has yet to be tapped by insurance industry, micro- financing institutions should explore possibilities in rural areas for wider coverage of general insurance, it said.
The government’s initiatives on mass insurance would also gradually open the reach of general insurance to a large part of the country.
High growth in automobile sector, huge strides in the healthcare will also open up health insurance potentials substantially, it said.

Insurance cos join hands with Visa cards for premium payments

Visa and 20 insurance companies in India have joined hands to make paying life and general insurance premiums "faster and easier" through a range of new payment options for Visa cardholders.Participating companies are: Aegon Religare, Bajaj Allianz Life, Bajaj Allianz General, Bharti AXA Life, Birla Sunlife, Future Generali, HDFC Ergo, ICICI Lombard, ICICI Prudential Life, IDBI Fortis, ING Vysya Life, Kotak Life, Max New York Life, Metlife, Reliance General, Reliance Life, Royal Sundaram, SBI Life, Tata AIG General and Tata AIG Life.
The consumers can pay their annual insurance premiums for participating companies with a click of a mouse and their Visa Debit or Credit card by logging on to or the participating insurance company websites, Visa said in a statement here.
For cardholders who prefer other payment channels there are options to pay over the phone through their insurance company call centre or sign a standing instruction with their bank to pay their insurance company through their Visa card. Visas payment options also help insurance companies enhance operational efficiency by enabling timely payment, the statement said.
Payment via Visa cards also helps insurance companies reduce handling costs through automating the payment process, which in turn can speed up customer service and improve consumer perceptions.

LIC's new biz grew 23 pc during April-Feb 2009-10

The new busineses of the country's largest insurer Life Insurance Corporation (LIC) grew by over 23 per cent, with Rs 54,320 crore collected in the first eleven months of the current fiscal. During the April-February period of last fiscal, LIC mopped up first year premium of Rs 43,883 crore, sectoral regulator Insurance Regulatory and Development Authority (IRDA) said in its monthly data. Overall, life insurance industry collected premium of Rs 83,891 crore in the first eleven months of this fiscal compared to Rs 72,017 crore in the corresponding period last fiscal, thereby growing by over 16 per cent. The private life insurers grew by 5 per cent during April-February period of the current fiscal. The 22 private players mopped up new businesses of Rs 29,570 crore in the eleven months of the current fiscal compared to Rs 28,133 crore same period last year. The largest private player SBI Life mopped up Rs 5,266 crore during the April-February period compred to 4,348 crore collected in the same period last year

IRDA advertisement stirs up debate

Is it appropriate on the part of a regulatory body to recommend investment in a product that is regulated by it?
An advertisement issued by the Insurance Regulatory and Development Authority (IRDA) last week, asking investors to consider Unit Linked Pension Plans, has raised just such a debate.
“If you have not already provided for regular income/pension during your retired life, consider a Unit Linked Pension Plan,” says the advertisement, which goes on to ask investors to keep in mind five points of advice before deciding to buy a ULIP (Pension).
SEBI missive
The advertisement must also be seen in the light of the recent dispute that arose between IRDA and the stock markets regulator SEBI when the latter wrote to insurance companies asking them to show cause why they did not get its approval for ULIPs, which partly invest in the capital markets.
“It is a possibility that through this advertisement, IRDA simply wanted to signal that ULIP falls clearly within its territory. But in principle, a regulator should not recommend investment or disinvestment in any product that it regulates,” said a legal expert who deals with SEBI-related disputes.
An official at IRDA said it must be seen as an exercise in investor awareness, which as a development authority, IRDA had the right to do.
However, the advertisement's sentence asking investors to consider ULIPs was not acceptable, said the legal expert. “
If it were merely an educational advertisement, it should have stopped short of saying this. It could merely have said that investors putting their money into ULIPs must keep in mind certain points,” he said.
Ban on entry load
The development must also be seen in the light of SEBI banning of entry load on mutual fund investments from August last year.
This caused much heartburn among MF companies who felt that agents would now push ULIPs, which offer commissions as high as 30 per cent.
‘Wrong priorities'
“IRDA have got their priorities all wrong,” said Mr Sandeep Parekh, regulatory expert and faculty member at IIM-Ahmedabad. “They are protecting the industry rather than the investor. It is the only industry perhaps in the world that allows commissions as high as 30 per cent. If Rs 30 out of Rs 100 put in by an investor goes into commissions, then to get his Rs. 100 back itself the investor may have to wait for three or four years.”
Many experts felt that if the advertisement was really “educational”, it should have asked ULIP investors to check the amount of commission paid out.

General insurance rates set to go up

General insurance rates are set to go up in the coming fiscal. With all-time low tariff rates, general insurance companies are considering reducing the discount rates on renewals of industrial fire and engineering policies from April.
Instead of offering across-the-board discount, insurers this year will try to negotiate with corporate policyholders in areas such as deductibles and add-on covers, according to industry experts. Deductibles are the portion of claims borne by policyholders.
The first day of the new financial year is a preferred renewal date for most large industrial houses, with nearly 25-40 per cent of group renewals in a year taking place on the day.
“With the reinsurance rates expected to go up in some policies, price discount may not be the preferred choice year. If the price cut is checked and deductibles increased, the claims ratio could come down in 2010-11,” Mr Alok Agarwal, Director (Corporate), ICICI Lombard, said. Claims ratio in these (fire, engineering) policies are now currently in the range of 70-80 per cent, up from about 40 per cent during the tariff-era.
“The general insurance industry is slowly moving towards better pricing. We may see a check on indiscriminate discounting with the concessions to some corporates being reduced from nearly 90 per cent to about 50 per cent,” Mr Rahul Agarwal, CEO, Optima Insurance Broking, said.
Add-on covers would serve as a selling point during renewals, Mr Alok Agarwal pointed out. The Insurance Regulatory and Development Authority of India recently allowed clubbing of add-on covers with main policies.
Some of the important add-on covers on offer are compensation for damage of employee belongings, civil infrastructure, customer goods lying in factory premises and overhead cost of shutting down plants.
A senior official at National Insurance Company, however, said, “Add-ons cannot become the unique selling point because all insurers would be offering the same set of benefits.” Group insurance business would continue to be price driven, he added.

LIFE AND GENREAL INSURANCE IN INDIA

General insurers face higher liabilities

For the first time, global reinsurers have turned their back on primary general insurers in the country by under-subscribing treaty obligations. That means general insurance companies in India will have to absorb liabilities themselves and will require more capital.
Highly placed officials said that the under-subscriptions were mostly in marine hull, marine cargo and miscellaneous accidents categories. This business accounts for almost 20 per cent of India's general insurance. Marine Hull refers to shipping business. The officials said that the under-subscription in all these businesses varied from 25-35 per cent. At least 55 per cent of private sector business and about 25 per cent of public sector business is ceded to cross-border reinsurers.
Reinsurer under-subscription, the officials said, is largely on account of low risk premiums quoted by domestic general insurers. Since deregulation, the domestic general insurance markets have witnessed steep undercutting of risk premiums, going down by as much as 80 per cent since 2007.
Domestic insurers are likely to face capital stress in the coming weeks, already partially evident from the reduced business intake. For the first 10 months of the current year, two of the largest private sector general insurers, ICICI Lombard General Insurance Company Ltd and Bajaj Allianz General Insurance Company Ltd showed negative growth rates of 10.18 per cent and 8.22 per cent respectively. The gross premiums collected by these two insurers were Rs 2,730 crore and Rs 2,032 crore respectively for the period.
It appears some insurance lines covered by annual treaties are likely to be restricted further. Most of India's cross border treaty reinsurance placement is with either Munich Re or with Swiss Re although there are other smaller treaty reinsurers that include Hannover Re and to some extent Lloyds group.
Officials of Bajaj Allianz said, “It has been found that some new reinsurer would offer their support to the market whereever participation was restricted / reduced by an existing reinsurer, as witnessed in the FY 09-10.”
Treaty negotiations
Treaty negotiations this year are yet to be concluded. Reinsurance arrangements are normally expected to be completed at least 45 days before the beginning of the next financial year. ICICI Lombard's Head, Reinsurance, Mr Rajiv Kumaraswamy, said, “We have already submitted the draft reinsurance programme to the regulator. We are now in discussions with the reinsurers for finalising our programme for the next year.”
But with global capacity under pressure, domestic companies are reconciled to looking for spot market reinsurance placement in the form of Facultative Reinsurance (an arrangement where ceding insurers offer individual risks to a reinsurer, who has the right to accept or reject each risk). Spot placements would essentially translate into higher costs for reinsurance wiping out the little commission that primary insurers earned through such cession.

National Insurance opens motor business hub

In order to facilitate speedy settlement of motor claims of Maruti customers, the National Insurance Company has launched a motor business hub in the State.
Mr N.S.R.Chandraprasad, Chairman-cum-Managing Director inaugurated Kerala's first NatMar Business hub at the Kochi divisional office of the company.
National Insurance has a tie up with Maruti Suzuki Ltd for online issuance of policies at dealer outlets since May 2002.
The alliance with Maruti, popularly known as NatMar Insurance is one of the company's largest portfolios in motor insurance.
According to company officials, surveys will be arranged, reports will be received online and claims will be processed instantly. The hub will provide hassle-free and cashless settlement of damage claims, officials said.
The company plans to open more such hubs in Thiruvananthapuram and Kozhikode.

Insurers propose 80% hike in third party motor risk premium
In a decision that will hurt auto owners in the commercial vehicle (CV) segment, domestic general insurers have finally taken the initiative to increase premiums for third party motor insurance by almost 80%. General Insurance Council (GIC), the official representative body of the domestic general insurers, met in Hyderabad on Friday and passed an resolution to this effect. "We have decided to initiate the process to hike third party motor insurance rates by 80% since losses from the portfolio are no longer sustainable," said the chief of a public sector general insurance company. Over 50% of the premiums of general insurers come from motor insurance. The third party insurance covers the risks of financial losses arising out of a situation where a vehicle damages a third party in an accident. In India, third party motor insurance has a provision for unlimited liability and many cases end up in prolonged litigation with courts awarding large financial compensations to victims. Third party motor premiums account for the largest share of revenues of general insurers. However, the business makes big losses too with the loss ratio for the portfolio exceeding 120-130% every year. It is legally mandatory for vehicle owners to buy this cover and this is the only segment where the premium is still regulated and needs to be ratified by the government. General insurers claim they are at the receiving end while selling third party insurance covers. Since the cover is mandatory, they have to sell them even if the portfolio incurs losses, eating into the profits of other segments. In order to simplify the third party motor insurance business, insurance companies had created a mechanism in April 2007 wherein all insurers would transfer their premiums collected to the Indian Motor Third Party Insurance Pool. General Insurance Corporation of India is the pool administrator and claims that are paid out of the pool depend on each insurance company's market share. During 2008-09, 17 members of IMTPIP had contributed Rs 2,822.96 crore of premium to the pool, which had paid Rs 3,258.54 crore towards claims, thereby taking a hit of Rs 650.30 crore. A proposal by insurance companies to increase third party motor premiums by 150% in January 2007 was met with stiff resistance from the All India Motor Transport Congress (AIMTC), which has over 3,400 affiliate associations and members owing over 4.5 million vehicles. Finally, the government had to relent, allowing a 70% hike.

Centre should retain power to decide LIC agents' service conditions: House panel
A Parliamentary panel has opposed a Government proposal to entrust Life Insurance Corporation of India (LIC) with the power to decide on the terms and service conditions of its agents.
The Standing Committee on Finance, headed by the BJP leader, Dr Murli Manohar Joshi, in its report on the Life Insurance Corporation (Amendment) Bill 2009 suggested that it would be "preferable to continue with the existing legal provisions relating to the terms and conditions of service of LIC agents".
The report was tabled in the Lok Sabha on Friday. The LIC Amendment Bill 2009 has proposed to do away with the existing system of the Centre framing the rules on terms and service conditions of LIC agents. Simultaneously, the Bill sought to confer upon LIC the power to frame regulations on the terms and service conditions of the agents.
The Bill also proposes to take away the power of LIC to specify the form and manner in which policies may be issued and the contracts binding on the corporation may be executed.
A large section of the LIC agents' community is keen that the power to decide and specify the service conditions should not be vested with LIC. Allowing LIC to frame regulations on the service conditions of the agents would dilute the legal protection that such agents currently enjoyed, sources said.
The whole idea behind the proposed amendments is to bring the status of LIC agents on a par with that of agents in any other insurance company that is governed by the Agents' Regulations of the IRDA, sources added.
The Insurance Regulatory and Development Authority (IRDA) had in a written submission to the Standing Committee on Finance noted that the responsibility of issuing and renewal of Agents' licences is proposed to be assigned to the insurers, but with checks and balances. Also, the IRDA would regulate the licensing procedure by way of detailed regulations.

Andhra Bank, BoB and L & G insurance venture gets final nod

Life insurance joint venture of Bank of Baroda, Andhra Bank and the U.K.-based company Legal and General (L&G) — IndiaFirst Life Insurance — has received final approval from the Insurance Regulatory and Development Authority (IRDA) and will start operations in December. “We have received approval R3 (the final approval required for starting an insurance company) from the IRDA, and we will be in the market in December,” IndiaFirst Life Insurance Chief Executive Officer P. Nanadagopal told reporters here on Monday.
Four products
The latest entrant in the life insurance market, IndiaFirst had filed for four products, including three unit linked products, with the insurance regulator, he said.
“Once the product approval from IRDA is received, we will start the operations,” Mr. Nandagopal said.
23rd player
In the joint venture company, Bank of Baroda has a 44 per cent stake, Andhra Bank 30 per cent and Legal and General 26 per cent.
The 23rd player in the life insurance market, IndiaFirst, has a capital base of Rs. 200-crore and plans to enhance it to Rs 2,500-crore over ten years. “Our initial paid-up capital is Rs. 200-crore. All the three promoters would increase the base to Rs. 2,500-crore over the next 10 years,” Mr. Nanadgopal said.

Finmin wants PSBs to exit insurance

The finance ministry has circulated a proposal that aims to ask state-run banks to exit noncore businesses, notably insurance, to force greater capital efficiency and ensure that periodic capital infusion into them goes into increasing the spread of banking rather than propping up money-losing ventures. “The money provided through recapitalisation support is for core banking activities such as increased lending and branch expansion. Banks with interests in other areas may divert the funds, which is not desirable,” a senior finance ministry official told ET. The proposal, which is in the early stages of debate and discussion within the ministry, reasons that noncore businesses such as insurance are highly capital intensive and can take up to 10 years to be profitable. India’s life insurance industry posted a combined net loss of Rs 4,878.49 crore in 2008-09 , up 43% from a year ago. Of 22 life insurers, only four have reported profits, data from insurance regulator Irda shows.

Govt for level playing field in insurance sector

Union Finance Minister Pranab Mukherjee on Tuesday said in the Rajya Sabha that the UPA Government was providing a level playing field in the insurance sector and informed that private sector insurance companies had more than three times the outstanding number of death claims on individual insurance policies compared to state-owned Life Insurance Corporation (LIC).
Replying to a question by Brinda Karat (CPM) and subsequent supplementaries during Question Hour, Mr. Mukherjee said the outstanding number of death claims, as on March 31, 2009, as a percentage of total number of claims intimated to the companies in 2008-09, stood at 7.75 per cent for private firms. The same for LIC was 2.21 per cent, he added.
For group policies, private sector companies had 3.93 per cent outstanding claims while LIC had 0.24 per cent. Mr. Mukherjee said private sector insurance companies started operations eight years ago while LIC has been in the business since 1956. “There certainly is a difference (between outstanding claims with private and public sector firms). This difference will have to be looked into but forming a committee for this is not a solution,'' he said.
The Finance Minister said the government's role was limited to providing level playing field to private and public sector companies.
Minister of State for Finance Namo Narain Meena said there were 23 insurance companies operating in India, of which 22 were private. He said the claim pendency ratio of private firms was higher than LIC but it had come down due to intervention of the Insurance Regulatory and Development Authority.
The pendency ratio of private firms was 13.32 per cent in 2006, which came down to 10.88 per cent in 2007 and to 7.75 per cent in 2008-09.

Employees protest against amendment in LIC Act

On the call of Northern Zone Insurance Employees Association (NZIEA), employees working in LIC of India, on Saturday, registered their protest against the proposed amendments in insurance law and LIC Act, pending in the Parliament. The employees demanded that Insurance Laws (Amendment) Bill, 2008, was placed in Rajya Sabha on December 22, 2008, and LIC (Amendment) Bill, 2009, was placed in Lok Sabha on December 7, 2009.

They said, "The bills were referred to the standing committee on finance on September 9 and 14, 2009, respectively, and these proposed amendments are detrimental to the interest of policy-holders and national economy." Through Insurance Laws (Amendment) Bill, 2008, the government wants to hike FDI capital in insurance sector from the present limit of 26% to 49%, to amend General Insurance Business Nationalization Act (GIBNA) permitting four public sector general insurance companies to approach the capital market to raise the capital for their business activities. "By LIC (Amendment) Bill, 2009, the government wants to increase the capital of LIC from Rs 5 crore to Rs 100 crore and to dilute the pattern of sovereign guarantee," the employees said. Discussing their demands, Harbans Singh, president of NZIEA said, "The hike in foreign equity will increase the ability of private companies to manipulate and exploit the insurance market. Nearly 50% funds of private companies are invested in equities thus limited funds are available for infrastructural investments. Therefore the government should amend these decisions."

Opening up of insurance sector opposed

Plans to further liberalise Indian insurance industry and allowing more foreign equity participation and privatisation of public sector companies must be given up in view of the international stress on taming financial markets and also public investment for building infrastructure, All India Insurance Employees' Association president Amanullah Khan has said.
Delivering the key-note address at a seminar on ‘A decade of liberalised insurance industry – way ahead' organised by the Centre for Social Science Research and the Department of Economics and Visakhapatnam Insurance Institute (VII) on Thursday, he criticised the excessive obsession with foreign capital and said insurance, especially life insurance, mobilised long-term funds and the government should exercise control over them.
The hike in foreign equity would only succeed in giving greater access and control to foreign capital over domestic savings and “this is simply against national interests.”
In spite of 30 to 35 per cent of new premium income, private companies are yet to make large-scale investments for infrastructure.
Privatisation
The Insurance Laws (Amendment) Bill 2008 and LIC Act (Amendment) Bill 2009 have been tabled in Parliament and are being scrutinised by the Standing Committee on Finance. They intend to hike foreign equity participation and privatisation of public sector companies.
Opposing the suggestion to abolish agency system, he stressed the need to cover rural people and those in the unorganised sector, and health insurance should not be left in the hands of private sector.
He warned against “mis-selling” and lapse of policies in the private sector.
Tracing elaborately the opening up of the sector in the face of popular opposition, Mr. Khan attributed the growth in the insurance industry (new business premium increased from Rs.19,857.28 crores in 2001-02 to Rs.87,006 crores in 2008-09) to growth of economy, levels of income and disposable income and not due to competition.
Belying predictions, LIC was holding 70 per cent of the market share in number of policies and 65 per cent in new business premium.
Pat for LIC
Insurance Institute of India Secretary-General Sharad Srivastava raised questions over the silence on sum insured while lives insured and first premium hog the limelight.
Andhra University Vice-Chancellor Beela Satyanaryana lauded LIC for growing in spite of so many players.
Crop insurance should evolve to prevent farmers' suicide.
LIC of India Senior Divisional Manager D. Nageswara Rao, who presided, saw a host of products, bigger needs of smaller families, popularity of unit-linked schemes and potential for pension market as characterising the insurance scenario.
Another 25 players were likely to be added to the present 25 by 2012 and the growth prospects were unprecedented.
Head of the Department of Economics R. Sudarsana Rao wanted the insurance sector to set up a Chair in the department.
Seminar convener and Director of AU Centre for Social Science Research K. Sreerama Murthy, Chief Regional Manager of Oriental Insurance Company P.S. Haranadh and seminar co-convener B.L. Narayana of VII spoke.

'Pvt insurance firms have more death claims than LIC'

New Delhi, Mar 16 (PTI) Private sector insurance firms have more than three times the outstanding number of death claims on individual insurance policies compared to state-owned LIC, Finance Minister Pranab Mukherjee told the Rajya Sabha today.Replying to supplementaries during Question Hour, he said the outstanding number of death claims, as on March 31, 2009, as a percentage of total number of claims intimated to the companies in 2008-09 stood at 7.75 per cent for private firms.The same for public sector Life Insurance Corporation of India (LIC) was 2.21 per cent, he said.For group policies, private sector companies had 3.93 per cent outstanding claims while LIC had 0.24 per cent.Mukherjee said private sector insurance companies started operations eight years back while LIC has been in business since 1956.

LIC reverses declining trend in market share: FM
New Delhi, Mar 16 (PTI) State-owned Life Insurance Corp has reversed the trend of losing its market share by registering a hefty growth in the current fiscal, Parliament was informed today."In the current fiscal year, up to February 28, 2010, the LIC has increased its market share in terms of first year premium to 65.06 per cent and in terms of policies to 70.79 per cent," Finance Minister Pranab Mukherjee informed Rajya Sabha in a reply.The life insurance behemoth had 61.12 per cent market share in terms of first year premium income and 70.52 per cent in terms of insurance policies in 2008-09, he said.LIC had been losing its market share since the life insurance market was opened up to the private sector in 2000- 01. As on date, there are 22 private insurance companies against one public sector life insurer LIC.

Centre should retain power to decide LIC agents' service conditions: House panel

A Parliamentary panel has opposed a Government proposal to entrust Life Insurance Corporation of India (LIC) with the power to decide on the terms and service conditions of its agents.
The Standing Committee on Finance, headed by the BJP leader, Dr Murli Manohar Joshi, in its report on the Life Insurance Corporation (Amendment) Bill 2009 suggested that it would be “preferable to continue with the existing legal provisions relating to the terms and conditions of service of LIC agents”.
The report was tabled in the Lok Sabha on Friday. The LIC Amendment Bill 2009 has proposed to do away with the existing system of the Centre framing the rules on terms and service conditions of LIC agents. Simultaneously, the Bill sought to confer upon LIC the power to frame regulations on the terms and service conditions of the agents.
The Bill also proposes to take away the power of LIC to specify the form and manner in which policies may be issued and the contracts binding on the corporation may be executed.
A large section of the LIC agents' community is keen that the power to decide and specify the service conditions should not be vested with LIC. Allowing LIC to frame regulations on the service conditions of the agents would dilute the legal protection that such agents currently enjoyed, sources said.
The whole idea behind the proposed amendments is to bring the status of LIC agents on a par with that of agents in any other insurance company that is governed by the Agents' Regulations of the IRDA, sources added.
The Insurance Regulatory and Development Authority (IRDA) had in a written submission to the Standing Committee on Finance noted that the responsibility of issuing and renewal of Agents' licences is proposed to be assigned to the insurers, but with checks and balances. Also, the IRDA would regulate the licensing procedure by way of detailed regulations

Par panel for raising minimum capital of LIC to Rs 100 cr

parliamentary panel has favoured raising the minimum paid-up capital of state-owned Life Insurance Corporation from Rs 5 crore to Rs,100/-crore, a move which will bring it on par with private insurers. The Standing Committee on Finance, however, wanted the government to make it clear that any further increase in the capital beyond Rs 100 crore must also be infused by the government only, instead of the insurer raising it through public offers. It had submitted its report recently in Parliament. At present, private insurers have to maintain a minimum paid up capital of Rs 100 crore before they get licence as per the Insurance Act, 1938. However, LIC's minimum capital requirement is Rs 5 crore, sought to be increased by Rs 95 crore through the amendment to the Life Insurance Corporation (Amendment) Bill, 2009. The panel also asked the government to further amend the bill for allowing LIC to raise money through debt and preferential capital. The amendment in its current form restricts LIC to raise capital only by equity, leaving aside these other forms of generating funds. The committee, headed by BJP MP Murli Manohar Joshi, said, "Raising of the paid-up capital of LIC in line with the provisions of the Insurance Act, 1938 and as applicable to the Life Insurance companies in general may, perhaps
be appropriate."

Insurance employees protest for immediate rivision of wages
The Insurance Corporation Employees Union (ICEU) under the banner of All India Insurance Employees Association has staged a dharna outside the Life Insurance Corporation of India (LIC) Divisional Office here demanding immediate revision of wages.Addressing the agitating members yesterday, ICEU general secretary B B Ganesh said wage revision for LIC was long pending since August 2007 and the Corporation was showing a very indifferent attitude on the issue despite its tremendous growth during this period.The total premium Income of LIC has increased from Rs 1,27,782 crore in 2006-07 to Rs 1,57,186 crore in 2008-09 and the total number of polices has increased from 12.58 crore to 26 crore, he said.He alleged that the Centre, instead of intervening to solve the issue was creating hurdles by imposing new conditions like new pension scheme for employees joining after April, 2009. These counter conditions are not acceptable to the employees, he added.

Employees protest against amendment in LIC ActOn the call of Northern Zone Insurance Employees Association (NZIEA), employees working in LIC of India, on Saturday, registered their protest against the proposed amendments in insurance law and LIC Act, pending in the Parliament. The employees demanded that Insurance Laws (Amendment) Bill, 2008, was placed in Rajya Sabha on December 22, 2008, and LIC (Amendment) Bill, 2009, was placed in Lok Sabha on December 7, 2009. They said, "The bills were referred to the standing committee on finance on September 9 and 14, 2009, respectively, and these proposed amendments are detrimental to the interest of policy-holders and national economy." Through Insurance Laws (Amendment) Bill, 2008, the government wants to hike FDI capital in insurance sector from the present limit of 26% to 49%, to amend General InsuranceBusiness Nationalization Act (GIBNA) permitting four public sector general insurance companies to approach the capital market to raise the capital for their business activities. "By LIC (Amendment) Bill, 2009, the government wants to increase the capital of LIC from Rs 5 crore to Rs 100 crore and to dilute the pattern of sovereign guarantee," the employees said. Discussing their demands, Harbans Singh, president of NZIEA said, "The hike in foreign equity will increase the ability of private companies to manipulate and exploit the insurance market. Nearly 50% funds of private companies are invested in equities thus limited funds are available for infrastructural investments. Therefore the government should amend these decisions."

Bancassurance

Bancassurance symbolises the convergence of banking and insurance. The term has its origins in France and involves distribution of insurance products through a bank's branch network. While bancassurance has developed into a tremendous success story in Europe, it is a relatively new concept in Australia and Asia.Most new insurers have entered into memoranda of understanding with banks to use their branches as outlets for marketing standard products. State Bank of India, Vysya Bank and J&K Bank already have joint ventures in life insurance. Vijaya Bank and Punjab National Bank are in the midst of finalising life and non-life ventures.The Insurance Act allows only those companies registered under the Companies Act to become corporate agents. This gives the new generation and old private sector banks a head start over Public sector banks , which are technically not eligible to sell risk products. IRDA, IBA & RBI are in discussions to iron out the various issues, as public sector banks will play a key role in the distribution of products.

Union Budget 2010: Hidden gems for policyholders, insurance agents

There are hidden gems for policyholders and insurance agents in the union budget. Last year a provision to impose service tax on all charges levied by life insurers on ulip policyholders has been reworked so that service tax is now applied only on fund management charges. Life insurance agents too can rejoice as the government has now raised the limit for exemption from tax deduction at source to Rs 20,000 from Rs 5,000 earlier. Insurers say that agents will have to bring in insurance premium of over Rs 1,00,000 in a year to come under the TDS. Under the revised limit more than half the life insurance agents will be exempt from tax deducted at source.

According to Gaurang Shah, managing director, Kotak Mahindra Life Insurance the removal of the service tax on other charges will result in an improvement in yield for the policyholder ranging from 20 basis points to 30 basis points depending on the tenure and size of the policy. Two years back the government had decided to tax the life industry under a formula which was brought out by an illustration in the finance bill. In terms of the illustration if the total premium paid for ULIP was Rs 100, and the risk premium (towards life protection) was Rs 10 and the amount actually invested was Rs 85, the balance Rs 5 (Rs 100- Rs 10 - Rs 5) would be subject to service tax. The budget has clarified that service tax will now be imposed only on fund management which is only Rs 1.35 on every Rs 100 invested.
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Insurance unions oppose pre-set wage revision

Unions and associations in the public sector general insurance companies have opposed the General Insurers Public Sector Association's (GIPSA) move to put pre-conditions for wage-revision. The unions are planning a one-day strike in March after the protest dharna to be held on Tuesday (Feb. 23) at all the regional centres, according to Mr P.P. Mohanan, Kerala State Convenor of the Joint Action Committee of General Insurance Employees and Officers. He said that the offer of 17.5 per cent wage increase with conditions was not acceptable to the unions/associations. The pre-conditions or ‘organisational agenda' offer includes increase in the limit of 150-km distance for the transfer of Class-III employees, provision for compulsory retirement, short-term appointments at various levels in the officers cadre, further outsourcing, flexible pay and flexible working hours. The wage revision is due from August, 2007.

Motor claims ratio improves in 2008-09

But general insurance industry sees deterioration
Insurance companies have managed to reduce the losses incurred on the motor insurance portfolio, that accounts for nearly half the business underwritten by them.
According to the latest data released by the Insurance Regulatory and Development Authority (Irda) in its annual report, general insurers lowered the incurred claims ratio to 88.84 per cent during 2008-09 from 92.31 per cent in the previous year.
Claim ratio is the proportion of claims incurred to the premium underwritten by them. In simple terms, it means that insurance companies paid Rs 88.84 in claims on a premium of Rs 100 that they earned.
The reduction in claims has once again pushed insurers, who avoided underwriting the motor business due to claims exceeding the premium income to once again look at the segment. One of the key reasons for the portfolio earning handsome profits is Irda’s decision to keep third party insurance outside the ambit. Now, the premium on the annual third party business, which continues to be fixed, is transferred to a pool and all general insurance companies share the losses.
Despite the improvement in the claims ratio for the motor business, the overall claims ratio for the industry deteriorated from 84.88 per cent in 2007-09 to 86.30 per cent in 2008-09.
A part of the reason for the increase was the dent in the fire and marine portfolios. During the last financial year, marine saw the highest jump in the claims ratio from 86.68 per cent in 2007-08 to 102.90 per cent in 2008-09 mainly due to high severity in the segment and steep discounts offered by companies to garner business.
As a result, insurers paid more claims on the marine business — which includes hull, cargo and offshore energy — than the premium they earned during the year.
Health claims improved marginally from 107 per cent to 106 per cent. "Insurers are trying to reduce discounts in health," said ICICI Lombard Chief Financial Officer Rakesh Jain.
Group health has been a bleeding portfolio for most insurers while most of them are making underwriting profits in retail health. Similarly, fire saw a slight increase from 68 per cent to 75.72 per cent. This segment has been highly discounted and insurers were offering 90-95 per cent discount.
During the last financial year, the underwriting losses of the general insurance companies increased to Rs 5,326.11 crore from Rs 3,899.49 crore in the previous year. However, there appeared to be a slowdown in the growth of underwriting losses in 2008-09 which stood at 36.58 per cent. The slowdown in growth rate was observed in the case of all public insurers. In contrast, the private non-life insurers continued to witness high growth in underwriting losses, which increased to 83.54 per cent.
Whereas net profit of the four public sector companies dropped by 81 per cent to Rs 426.81 crore as against Rs 2,205.48 crore. Oriental Insurance reported a net loss of Rs 52.66 crore, as against a profit of Rs 9.30 crore during the previous year.
National Insurance incurred a loss of Rs 149.21 crore though the same company reported a net profit of Rs 163.43 crore in the earlier year. Six private players reported losses during the year including Reliance, HDFC Ergo, Future Generali, Universal Sompo, and newly established insurers such as Shriram and Bharti AXA.

GIC's natural disaster fund to start by Apr 1

The natural catastrophe pool being set by General Insurance Corporation (GIC) for insurance and reinsurance companies in Africa and Asia will have an initial capacity of $500 million. The pool will be functional by April 1, 2010.
GIC Re, the state-owned national reinsurance company, has been entrusted with creating the pool, to be called ‘FAIR Natural Catastrophe Pool’, by a voluntary industry organisation, the Federation of Afro-Asian Insurers and Reinsurers (FAIR). GIC has been given the responsibility to create and manage the pool for members of FAIR.
"We are in talks with members of several countries and will start with 20-30 members. We are looking to make the pool operational by April 1, 2010," said Yogesh Lohiya, chairman and managing director, GIC. He added that each member would have to put in a minimum of $50 million to become a part of the pool. GIC will have 5 per cent stake as the manager of the fund.
The re-insurer is expanding its international footprint by entering into Malaysian and South African markets. It has applied for a branch licence in Malaysia and will later go to Johannesburg. GIC Re has a branch in Dubai and a representative office in Moscow.

Insurance Bill hits opposition wall

Serious political differences and time constraints will prevent the Manmohan Singh government from passing the contentious Insurance (Amendment) Bill in the current session of Parliament. The bill seeks to raise foreign direct investment limit in the insurance sector to 49 per cent from 26.
The Insurance Bill was introduced in Rajya Sabha in December 2008 by the first UPA government — by the then Finance Minister P Chidambaram — as part of the UPA’s financial sector reforms. It is seen as crucial by foreign investors to India’s commitment to reforms in this sector.
When asked if he expects the bill to be passed in the Budget session, Finance Minister Pranab Mukherjee last night said traditionally little legislative business is done during the Budget session. The Parliamentary Standing Committee on Finance, to which the bill has been referred, has held two meetings so far and is unlikely to finalise its report before April. At these meetings, sources say, not just the BJP and the Left parties, but even UPA allies like the Dravida Munnetra Kazhagam (DMK) have opposed the government’s move to expand the scope of foreign capital in the insurance sector.
"Our party asked why, when several big insurance companies have failed on foreign soil, the government is so keen to open up India’s insurance sector further to allow them to recover their losses from the Indian masses," Moinul Hassan, CPI(M) member in Rajya Sabha and member of the Standing Committee on Finance told Business Standard.
Another key bill — the Life Insurance Corporation Amendment Bill that seeks to raise the minimum capital of LIC to Rs 100 crore from the current Rs 5 crore — will face hurdles from the finance standing committee as well.
According to sources, the committee may not approve the government’s plan to raise LIC’s capital base. The committee, which met last month, has convened another meeting on March 10 to discuss its draft report on the LIC bill. The committee, led by BJP’s Murali Manohar Joshi, will challenge the government’s argument for expanding LIC’s capital base.