Hi! Welcome to NIASoM Blog. NEWS: National Insurance Academy welcomes all members of PGDM 2011-13 Batch.Congratulations..!!!

Tuesday, September 13, 2011

Curtains on highest NAV guarantee cover plans

In a move that may further dent sales of unit-linked life insurance plans (Ulips), the Insurance Regulatory and Development Authority (Irda) is set to scrap the highest Net Asset Value (NAV) guarantee products.
Highest NAV guarantee products accounted for a fifth of Ulip sales after pension plan sales dried up following the stringent norms on Ulips from September 2010. Under the highest NAV guarantee products, customers are guaranteed returns based on the highest NAV a policy has achieved during the entire term of the insurance plan.
According to insurance industry sources, the insurance regulator is wary of a “systemic risk” associated with the way the funds are managed. Such products lay more emphasis on debt instruments and run the risk of a heavy sell-off in equities in case of a stock market fall.

* Notification by month-end
* Irda not renewing any such products
* Irda won’t approve new schemes based on highest NAV guarantee
* Highest NAV products comprise 20% Ulip sales
* MF players not allowed to have such schemes

Leading private insurers like ICICI Prudential Life, HDFC Life, Bajaj Allianz Life and Birla Sun Life all have at least one such product still in the market, but it is very unlikely that any new ones would be launched. The insurance regulator is neither renewing any existing products nor approving any new products. The markets regulator, Securities and Exchange Board of India, does not allow mutual fund houses to sell such products. Life Insurance Corporation of India (LIC) had launched two products — Wealth Plus and Samridhi Plus — which ensured returns based on the highest NAV. However, both have been withdrawn.
The insurance regulator is not comfortable with the way these products are being pitched to customers. According to industry experts, these products are not expected to do as well as simple equity oriented schemes, since insurers tend to invest substantial amounts in debt.
In addition to these, insurers are also charging an additional “guarantee charge” in these products, which ranges between 0.10-0.50 per cent of the fund value.
Over the last one year, all major life insurance companies launched highest NAV guarantee products and some of the companies also came up with more than one version.
The Life Insurance Council is also examining the issue with insurance companies and is likely to take up the matter with the regulator.

Saturday, September 3, 2011

LIC joins online play with pure term policy

 Life Insurance Corporation will sell its policy through the internet for the first time soon with the launch of a pure term plan.

"We are in the process of designing a pure term product which would be sold through both online and through agents," LIC's ED- marketing S Roy Chowdhury. "The rates will be lower than what is charged at the moment," he added.

LIC currently charges higher premium for its term plans than private competitors. For example, a 30-year-old non-smoker has to pay an annual premium of 7,300 for a 25-lakh policy under LIC's term plan Amulya Jeevan, while she can buy online policies such as ICICI Prudential's iProtect for 3,350 and Kotak Life's e-term plan for 2,750.

LIC plans to reduce this gap with the launch of its online term policy, where it can save on agent commission. Its move is expected to make private insurers reduce their rates further. The state-owned insurer is also betting big on Bancassurance, or selling policies through bank branches.

LIC's ED Vipin Anand said the insurer has set a target to double its income from Bancassurance this financial year to 5% of its total new business income. The insurer is targeting new business income of 54,000 crore this year. At present, 20 banks, including United Bank, UCO Bank, Central Bank, Corporation Bank, BoM and PNB, sell LIC policies.

LIC has announced a bonus of 21,580 crore for its policyholders for 2010-11, which is 95% of its net surplus of 22,716 crore. The rest 5% has gone to the government.

It has announced a higher bonus rate under seven with-profit plans, namely Jeevan Anand, Jeevan Tarang, Jeevan Madhur, Child Future Plan, Jeevan Shree I, Jeevan Bharti I and Jeevan Pramukh. It also announced loyalty additions for the first time in other seven plans.

Health insurers must update customers about list of hospitals

New Delhi: Health insurers offering cashless facility have been directed to keep their customers updated about any change in the list of hospitals as well as about alternative options in the vicinity, Parliament was informed on Friday.

Citing an IRDA report for 2008-09 and 2009-10, Minister of State for Finance Namo Narain Meena in a written reply informed the Lok Sabha that cashless basis of settlement is costing more for all type of diseases.

He was replying to a query whether the cashless health insurance facility was being misused by hospitals.

Meena further said to ensure that interest of policy holders is not adversely affected when the insurers make changes in their partner network of hospitals, directions have been issued to them.

"...It has directed all insurers... to inform the policyholders at all times, the nearest possible alternative hospitals, where the cashless facility is available and the conditions thereof," he added.

Insurance companies negotiate rates for certain medical procedures and normally include in the network only those hospitals, who have agreed to the rates.

Last year customers were left in a quandary following a deadlock between the four PSU insurers and major private hospitals over resumption of cashless facilities.

The four PSU insurers -- New India Assurance, United India Insurance, National Insurance and Oriental Insurance -- have suspended the cashless service at select hospitals from July 1, 2010, alleging over-billing by them.

Later on the Insurance Regulatory and Development Authority (IRDA) came out with a guideline asking insurers to constantly inform customers about the hospitals which offer cashless treatment.

Life insurers can invest in VC funds

The insurance regulator has opened the doors for life companies to invest in venture capital funds - a move that is likely to result in VC funds making a beeline for the Life Insurance Corporation of India which will have a headroom of close to Rs 30,000 crore to invest in such funds.

Until now life insurers were allowed to invest in VC funds but it was subject to the condition that the investment would be predominantly in infrastructure . Insurers say that this will create new investment opportunities for them. "This is a positive move as it opens up new avenues for investments.

Although for most private companies the size of the traditional portfolio is relatively small, it is growing steadily and should be sizeable going ahead" said Puneet Nanda, ED, ICICI Prudential Life Insurance. In a circular , IRDA said it had received a lot of queries from insurers on whether their investment were restricted only to infrastructure .

"The IRDA after inviting coments and concerns of insures clarifies that ...insurers may invest in any venture fund registered under Sebi Regulaion, which includes VC funds investing in small and medium enterprises," the circular said. IRDA has however barred insurers from investing in funds promoted within the group or by an investment manager, who is indirectly controlled or managed by the insurer or promoters. Insurers also say that this will give companies to participate in promising business at an early stage.

"Today most private companies go for a round of private equity or venture capital funding before they get listed. By the time they go for a listing, it is at a significant premium," said the investment head of a private life company. Incidentally , all Sebi regulated private equity funds are registered as venture capital funds. While IRDA has widened the scope of venture funds, it has retained the investment limits. Overall investment in VC funds will continue to be a part of the 'other investments' of a life company, which stands capped at 15% of the life fund. The maximum that a life company can invest in a venture fund would be 3% of the life fund size.

Thursday, September 1, 2011

Reliance Capital, Nippon Life to explore broader tie-up

 Reliance Capital and its Japanese partner in life insurance, Nippon Life Insurance, will explore strategic tie-ups in finance, initially in the asset management and private equity businesses of the Indian group.

Any strategic collaboration would boost Nippon Life's presence in India, while giving Reliance Capital better access to capital and expertise, analysts said.

Reliance Capital, controlled by billionaire Anil Ambani, manages assets of over $23 billion across mutual funds, pension funds, managed accounts and hedge funds. Its other businesses include insurance, broking, consumer and commercial finance.

The two firms will also explore possibilities for a distribution tie-up in India for Nippon Life's funds. Japanese companies are stepping up the pace of their overseas expansion after the devastating March 11 earthquake provided another spur to escape a moribund domestic economy.

Reliance Capital's net profit in the June quarter more than halved with income across its core businesses dropping.

Last month, brokerage ICICI Direct said it expected the firm's asset management business to improve due to a greater focus on the retail segment while Citigroup said stiff competition, sluggish inflows, and weak recovery prospects would hurt in the near-term.

In March, Nippon, the world's No.7 life insurer, agreed to pay $680 million to buy a 26 percent stake in Reliance Life Insurance, valuing the business at $2.6 billion.

Indian rules bar foreign firms from owning more than 26 percent in insurance joint ventures with local firms.

Reliance Capital saw a 59-percent fall in its annual premium equivalent in its insurance business for the quarter to end-June, but analysts expect the fund infusion by Nippon to boost its valuation.

Shares of Reliance Capital have fallen about 43 percent in 2011 so far, but analysts see this as a good opportunity to buy.

Shares in Reliance Capital closed up 1.8 percent at 384.2 rupees in a firm Mumbai market on Tuesday. Indian markets remained closed on Wednesday and Thursday for religious holidays.


Wednesday, August 31, 2011

Hurricane Irene FAQs: What Is Covered–Or Not–In Your Insurance Policies

Insurance companies are already handling claims and working to get people back to normal after the devastation caused by Hurricane Irene this weekend. Because of the widespread scope of hurricane damage, insurers give those who suffered the most damage first priority. Claims adjusters are already on the scene of the most severely impacted neighborhoods, and in addition to settling claims, they are answering many questions about how insurance works following a natural disaster. The Insurance Information Institute has outlined some of those questions below.


1. Is damage from hurricane winds covered under my homeowners insurance policy?
Property insurance covers damage from windstorms, such as hurricanes and tornadoes, to the “residence premises,” whether it is a single-family home, a duplex where the policyholder lives in one of the units, or any other building where the policyholder resides as shown on the insurance declarations page. Dwelling coverage also applies to an attached structure, such as a garage or deck. A standard homeowners policy also covers “other structures” that are unattached, such as a separate garage building or shed and swimming pools. The policy also includes coverage for damage to contents.
Damage from flooding, including flooding generated by hurricane-generated storm surge typically is not covered under a standard homeowners policy. Flood insurance is available from the National Flood Insurance Program (NFIP).
2. Does my renters insurance cover damage from hurricane winds?
A “tenant homeowner policy” or renters policy covers personal belongings that may be damaged from the storm by wind. Damage from flooding may be covered under some renters policies, although most require separate policies be purchased from the NFIP. Damage unrelated to your personal possessions, such as part of the apartment’s structure like walls and floors, is covered under the policy of the building owner.
3. Are flood losses covered under my homeowners insurance policy? How will insurers handle claims that involve both wind and flood damage?
While there are a few exceptions, the vast majority of homeowners and renters insurance policies do not cover flood damage. Flood coverage requires a separate policy from the federal government’s National Flood Insurance Program (NFIP). If you purchased a flood policy, in most cases you can file a flood claim with your insurer, although some companies may have you file directly with the NFIP. Some companies may send a single adjuster to handle both the flood and wind claim, while others may send two claims professionals who specialize in distinguishing between the two types of loss. Determining the precise cause of damage is necessary to properly pay the claim.
4. Is storm surge considered flood damage?
Yes, the insurance contract has a clause that excludes the liability for damage caused by flooding, and storm surge is flooding.
5. I live in a condo/co-op. Am I covered for hurricane damage to my unit?
If you have purchased a homeowners policy tailored to condominiums or a co-op, you would be covered for damage to the interior space of your home. The condo association’s insurance might have coverage for your fixtures, wiring or plumbing, or it may only provide coverage from the “bare walls” and not what is behind them, so you should obtain a copy of the master policy to understand what is covered.
6. Is flooding covered under a condo/co-op insurance policy?
Flood damage to the building is covered only if the condo/co-op association purchased a separate flood policy, either from the NFIP or through a private insurance company. This flood insurance would cover only the structure itself, including common areas; the condo-co-op flood insurance policy will not pay for damage caused by flood waters to the personal belongings of individual tenants. Tenants would have flood damage coverage only under their own flood policy, if they purchased one.
7. My car was flooded in the storm. Is it covered?
Flood damage to vehicles is covered if you have purchased comprehensive coverage, also known as “other than collision” coverage, which is optional with a standard auto policy.
8. If I make temporary repairs to my home, will I get reimbursed?
Yes. Do not wait until a claims adjuster arrives to make temporary repairs needed to prevent further damage. Most policies have a provision to reimburse you for the expenses of reasonable and necessary repairs that protects against more damage, up to a specified dollar amount. Be sure to save all the receipts from your repair purchases.
9. The power went out during the storm and food in the refrigerator and freezer were spoiled. Is that covered?
Following a hurricane, most insurance companies include food-spoilage coverage, usually for a set amount that can range from $250 to $500 per appliance. In a non-storm situation, however, if you lose electrical power without damage to the residence, it is typically not covered in the insurance policy.
Most policies include coverage for “sudden and accidental damage from artificially generated electrical current,” meaning that a power surge would be covered that damaged the building and items considered part of your home, such as a built-in range or heating/air conditioning system, but not damage to transistors, computer chips and other similar items. This means damage from a power surge would not cover items such as televisions, VCRs, and computers.
10. Should I file a claim if the damage is less than my deductible?
Yes. Sometimes there may be additional damage that becomes evident in the months following a significant storm. Filing a claim, even if the damage total is under your deductible, will protect you in the event further repairs are needed. And if your home suffers damage from more than one storm in a single season, the damage from the first storm may apply toward the deductible amount.
11. My home was not damaged, but can I file a claim for the large tree that fell in my yard?
Homeowners insurance policies do not pay for removal of trees or landscaping debris that did no damage to an insured structure. If a tree hit your home, that damage is covered. If your tree fell on your neighbor’s yard, his or her insurance company would pay for the damage; however, if the felled tree was poorly maintained or diseased and you took no steps to take care of it, their insurer may seek reimbursement from you for the damages.
12. My home is uninhabitable. Does my policy cover temporary living expenses?
Most policies cover additional living expenses, which are the extra charges over and above your customary living expenses incurred when you are displaced from your home and need temporary shelter. The amount is generally 20 percent of the insurance you have on your home. Some insurers pay more than 20 percent; others limit additional living expenses to an amount spent during a specific time period. You should always check with your insurer to be sure you understand what this coverage allows. Keep all your receipts to document your expenditures.
13. If I evacuated due to the storm, are my evacuation expenses covered?
It depends on what is stated within your insurance policy. Generally, mandatory evacuation expenses are covered under certain conditions.
14. I have a percentage deductible for hurricane damage. How do I know what my out-of-pocket costs are?
The declarations page of your insurance policy details the exact dollar amount of your hurricane deductible. Whether a hurricane deductible applies to a claim depends on the specific “trigger”, which can vary by state and insurer and is usually linked to wind speeds. Percentage deductibles were adopted by many coastal states to lower the cost of annual insurance premiums and have those impacted by the storm more directly pay for recovery costs.
Source- Insurance Information Institute.

Sunday, August 28, 2011

Irene's Caribbean rampage could cost insurers $1.1bn - AIR

Insured losses from Hurricane Irene's rampage through the Caribbean will cost insurers between $500m and $1.1bn, risk modelling firm AIR Worldwide estimates.

The modeller expects losses from the Bahamas, which Irene hit yesterday, will account for 60% of the total - between $300m and $700m.

AIR said the estimate includes wind and precipitation-induced flood damage to insured onshore residential, commercial and industrial properties (and their contents), automobiles, and business interruption losses. The estimate covers the Bahamas, Puerto Rico, Dominican Republic, Turks and Caicos, and other Caribbean territories.

As of 08.00 Eastern Time on Friday Irene was rated category 2 on the Saffir-Simpson scale and was located 375 miles south-southwest of Cape Hatteras, North Carolina. The storm is expected to make landfall on the Outer Banks of North Carolina on Saturday afternoon local time as a category 3 storm.

Forecasts suggest Irene could make a second landfall on Long Island, New York, as a category 1 storm on Sunday. Risk modelling firm RMS said there is a high potential for New York City to be affected by the storm. Irene's large windfield could mean that some effects of the storm will extend beyond the Tri-State area of New York, New Jersey and Connecticut, the modeller said.