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Thursday, March 31, 2011

India's non-life insurance biz outlook revised to -ve: S&P

Global rating agency Standard & Poor's today revised business outlook of India's non-life insurers from stable to negative, as underwriting business is expected to decline. "The negative outlook on India reflects our view that underwriting performances are likely to stay very weak this year despite strong growth potential for premiums," S&P said in its report titled 'Asia-Pacific Nonlife Insurance'.

At present, there are 24 non-life insurance companies in India. Of them, the four government-controlled entities command a market share of about 60 per cent. "We believe underwriting performances (in India) are unlikely to significantly improve in the next 12 months, despite signs that prices are stabilising," S&P said. It said the industry was maintaining its profitability through investment income, and cautioned against likely shocks due to vulnerability in investment market.

S&P conducted comprehensive review of 12 non-life insurance markets-- Australia, China , Hong Kong, India, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan and Thailand. The review assessed the impact of several catastrophes in the region over the past year among many other factors.

"We revised the outlooks on three markets to negative from stable-- Japan, New Zealand and India," it said.
Severe natural disasters and diverging economic forecasts have affected the growth prospects for several Asia-Pacific non-life insurance markets, the S&P said. "We revised the outlook on Japan and New Zealand's non-life markets to negative from stable because we expect the recent earthquakes there to affect (their)earnings and capital strength," S&P credit analyst Paul Clarkson said. "We took the same action on India's market due to the likelihood of very poor underwriting performances," he added.

Wednesday, March 30, 2011

Swiss Re’s new sigma study reveals that natural catastrophes and man-made disasters caused economic losses of USD 218 billion and cost insurers USD 43 billion

 According to Swiss Re’s latest sigma study, worldwide economic losses from natural catastrophes and man-made disasters were USD 218 billion in 2010, more than triple the 2009 figure of USD 68 billion. The cost to the global insurance industry was more than USD 43 billion, an increase of more than 60% over the previous year. Approximately 304 000 people died in these events, the highest number since 1976.

In 2010, severe catastrophes claimed significantly more lives than the previous year: around 304 000 were killed, compared to 15 000 in 2009. The deadliest event in 2010 was the Haiti earthquake in January, which claimed more than 222 000 lives. Nearly 56 000 people died during the summer heatwave in Russia. The summer floods in China and Pakistan also resulted in over 6 200 deaths.

Natural catastrophes cost the global insurance industry roughly USD 40 billion in 2010, while man-made disasters triggered additional claims of more than USD 3 billion. By way of comparison, overall insured losses totalled USD 27 billion in 2009.

High earthquake losses

Earthquake losses accounted for almost one third of all catastrophe losses in 2010. The February 2010 earthquake in Chile and the September earthquake in New Zealand were the two costliest events in 2010, and led to insured losses estimated at USD 8 billion and USD 4.4 billion respectively. Overall natural catastrophe claims in 2010 were in line with the 10-year average due to unusually modest US hurricane losses and in spite of notably high earthquake losses.

Incidentally, earthquake losses for 2011 will also be above average as the total insured claims for the February 22 earthquake in Christ-church, New Zealand, are estimated to be between USD 6 billion and USD 12 billion. The massive Tohoku earthquake that struck Sendai, Japan on March 11 is also expected to trigger significant insured losses.

Ten events each triggered insured losses of at least USD 1 billion

In 2010, ten events triggered insured losses of USD 1 billion or more. The two biggest insured losses were caused by earthquakes – the February earthquake in Chile (USD 8 billion) and the September earthquake in Christchurch, New Zealand (USD 4.4 billion). The third costliest event was winter storm Xynthia in Western Europe, which led to insured losses of USD 2.8 billion. Three storms in the US and two storms in Australia also generated losses of over USD 1 billion. Property claims from the BP Deepwater Horizon explosion in the Gulf of Mexico are estimated at USD 1 billion. Given the complexity of the claims, the latter figure is still subject to substantial uncertainty. The overall insurance loss is higher, as liability losses are not included in the sigma numbers.

Natural catastrophes and man-made disasters cost society

In 2010, worldwide economic losses from natural and man-made catastrophes were estimated at USD 218 billion. This represents a sharp increase over 2009, when economic losses totalled USD 68 billion. Asia was the hardest-hit region with total damages of approximately USD 75 billion. Pakistan and several large regions in China experienced extraordinary rainfall during the summer, resulting in devastating floods.

Thomas Hess, Chief Economist of Swiss Re, comments: ”2010 was not only characterised by severe earthquakes that ranked among the deadliest, costliest and most powerful in history, but also by a series of extreme weather events, such as major floods. Some of these flood events sadly affected countries with poor emergency preparedness and underdeveloped insurance markets.”
Source-Swiss re.

Sunday, March 20, 2011

Star Wedding Gift

Star Health launched a policy — Star Wedding Gift — designed with newly-weds in mind. The policy offers basic health cover for the couples on a floater basis. The policy also provides for child delivery expenses. The qualifying age-bracket for availing the benefits of the policy is 18 to 40 years.

 Three years after the purchase of the policy, it will cover child-birth-related expenses, any congenital diseases of the child, and provide medical insurance for the parents and the children. Company officials said there were medical insurance products in the market that also covered child-birth expenses, but Star Wedding Gift is more specific to child-birth with general medi-insurance riding alongside.

Now, insurance is about covering uncertainty and chance occurrence, while the delivery of child in a wedlock is not that. How does an insurance company make money on a policy like this, where the claim is more or less certain?

Company sources explained that infertility rates in India are about 30 per cent—divided between men and women—therefore, the claims are roughly 70 per cent. Moreover, there is a waiting period of 3 years for the policy to become operational. Therefore, the policy is remunerative for the insurer. The customer would also find it useful because it has many beneficial features such as cover for post delivery complications and lump sum payments if the child is born with Down's Syndrome or Cerebral Palsy.

Star Health and Allied Insurance Company expects to close the current year with a topline of Rs 1,250 crore. Last year, it made a profit of Rs 5 crore. Company officials say that current year's profits will be substantially higher.

Max Bupa Survey

Max Bupa recently released an international survey highlighting that more than one-third of Indians (39 per cent) go online for health information. This is higher than China (32 per cent), Brazil (29 per cent) and Mexico (27 per cent) and equals Russia. The ‘Bupa Pulse Survey part III' reveals that Internet searches are favoured both as a second opinion over doctor's diagnosis and also as an alternative to high cost of face-to-face consultations with medical professionals.

“The insight about how healthcare is consumed is important to us. Since health insurance is quite under-developed in India, people prefer checking online to avoid paying out of their pockets,” said Ms Shefali Chhachhi, Director (Marketing), Max Bupa.

Max Bupa is an year-old joint venture between healthcare and insurance firm Max India and UK-based Bupa.

EV Disclosures

Embedded value is the total of the net worth of the company and the future profits from policies that have already been sold. It also takes into account lapse of policies, mortality charges and other expenses.With the disclosure of the embedded value, it becomes easier to calculate the valuation of life insurance companies. For arriving at the actual valuation, other factors such as goodwill and business potential will have to be taken into account. The EV disclosures will pave the way for insurance companies to list.

HDFC Standard Life was the first private insurance company in India to disclose the embedded value.

Embedded value

The Embedded Value (EV) of a life insurance company is the present value of future profits plus adjusted net asset value. It is a construct from the field of actuarial science which allows insurance companies to be valued.

Life insurance policies are long-term contracts, where the policyholder pays a premium to be covered against a possible future event (such as the death of the policyholder).Future income for the insurer consists of premiums paid by policyholders whilst future outgo comprises claims paid to policyholders as well as various expenses. The difference represents future profit.For companies, the net asset value is usually calculated at book value. This needs to be adjusted to market values for EV purposes.

EV measures the value of the insurer by adding today's value of the existing business (i.e. future profits) to the market value of net assets (i.e. accumulated past profits). It is a conservative measure of the insurer's value in the sense that it only considers future profits from existing policies and so ignores the possibility that the insurer may sell new policies in future. It also excludes goodwill. As a result the insurer is worth more than its EV.

Embedded Value is calculated as follows:


EV = Embedded Value
PVFP = present value of future profits
ANAV = adjusted net asset value

Source: Wikipedia

Save Tax - Under Sec 80C, 80CCC, 80D

Life Insurance premium

Any Premium in excess of 20% of sum assured is not eligible for tax rebate under sec 80C. E.g. You have policy of sum assured Rs. 4,00,000/- and you are paying premium every year Rs. 85,000/-. Than you can claim maximum up to Rs. 80,000/- under section 80C. So invest in life insurance after keeping in mind the above rule.


If you are looking for tax rebate under ULIPs policies, than you must note that you have a lock-in period of 5 years for 80C deduction purposes. So next time if any sales person tell you that just invest for 3 years, get good return and exit after 3 year. Think twice. Taxman will catch you.

Health Insurance Premium

The annual deduction under sec 80D is of Rs. 15,000/- from taxable income for payment of Health Insurance premium for self, spouse, children. For senior citizens, the maximum deduction is Rs. 20,000/-.

Pension Funds

The aggregate deduction under Sec. 80C and the contributions to annuity plans or pension funds under Sec. 80CCC or Sec. 80CCD should not exceed Rs. 1 lakh.The maximum amount deductible under section 80C is Rs. 1,00,000. Also the total amount of deductions under sections 80C, 80CCC and 80CCD is Rs. 1,00,000.

Surrender value

Surrender value receive is taxable in the year of receipt in the hands of the assessee or nominee.

Eqecat predicts Japan industry loss of $12bn-$25bn

Modelling firm Eqecat estimates that the insured loss from the Japanese earthquake will be between $12bn and $25bn, which is significantly under AIR Worldwide's forecast of a $15bn to $35bn industry loss.
The estimate includes damage from the earthquake and ensuing tsunami and fires, as well as losses from automobiles, marine, life and personal accident insurance line. Commercial costs - one area where it is expected costs will be passed onto the international reinsurance markets - were not mentioned. Eqecat predicted $8bn-$15bn in quake-related losses, of which about a quarter or $2bn-$4bn will be ceded to the Japan Earthquake Reinsurance Pool (JERP).

In contrast with AIR, the firm said that tsunami flooding losses are modelled as they are covered under earthquake policy endorsements.

Life losses were put at $2bn-$3bn. Eqecat noted the average life insurance policy limit was about $360,000 and that at least 10,000 people are currently confirmed dead or missing. Eqecat predicted that marine losses would make up $1bn-$3bn of the total insured costs, while personal accident lines would constitute $1bn-$2bn and auto losses would be up to $1bn.
The firm noted that few damaged cars would have earthquake cover as standard policies exclude the peril.

Its marine estimates included losses to ships, piers and wharves, as Eqecat cited reports that 90 large commercial ships and thousands of smaller vessels have been pushed far inland by the tsunami.

Eqecat previously forecast that total economic losses from the disaster would exceed $100bn.

Chartis faces $1bn Q1 cat losses

AIG said its P&C arm Chartis faces an estimated $1bn in Q1 pre-tax net catastrophe losses, including $700mn from the Japan quake and tsunami. The $1bn total also includes losses from last month's New Zealand earthquake, US winter storms, northeast Australian floods, Cyclone Yasi, and the Brazil floods, and is equivalent to 1.1 percent of total AIG shareholders' equity as at 31 December.

However, the Japan estimate does not include losses from AIG's general insurance operations in the country that participate in the Japanese Earthquake Reinsurance Company (JERC).
The company said it had excluded losses from JERC - the exclusive provider of earthquake cover for homeowners' property and contents in Japan - because the industry loss "remains unquantified at this time".

The insurer added that, in accordance with Japanese accounting rules, it had previously established catastrophe reserves of around $500mn for potential claims in relation to quake damage on personal dwellings, and has deposited funds for a "substantial portion" of the reserves with the JERC. The deposits go towards paying the quake claims, reducing the impact on the liquidity of the operations, explained AIG.

With US GAAP prohibiting cat reserves to be set up before a cat event has occurred, the maximum pre-tax loss AIG's general insurance operations in Japan can incur from quake claims on homeowners' property is $575mn, the insurer said.

The figure includes exposure from its 54.66 percent stake in Fuji Fire and Marine Insurance Co.

Friday, March 18, 2011

Term Insurance v/s ULIPs

Term insurance plans and unit-linked insurance plans (Ulips) are two completely different products and, therefore, cannot be compared. While, term insurance plans cover the life risk of the policyholder, Ulips are predominantly investment products laced with life risk cover. Term insurance plans are suggested over Ulips is that they are focused on risk cover which is the prime objective of opting for insurance policies. Also, since premiums in term insurance plans are low, one can go in for adequate amount of cover for relatively lower premium costs.

Source: ValueResearchOnline

Thursday, March 17, 2011

Rashtriya Swasthya Bima Yojana

RSBY is a unique scheme which empowers the card holder to get treatment from all RSBY network hospitals across India - public as well as private. The beneficiaries under the scheme will have to pay a nominal registration fee of Rs 30 to get them enrolled under the scheme. Up to five members of a BPL family can get enrolled and avail benefits in any of the network hospitals for hospitalisation - surgical and non-surgical expenses and listed day care treatment. All pre-existing diseases are covered. The scheme also covers transportation cost of Rs 100 per visit with an overall limit of Rs 1,000 per year.

High Insurance Retention - Japan

Insurers are optimistic that the impact of the quake on world markets would be less than Katrina because unlike the US, Japan has a very high level of insurance retention. For instance losses to residential properties due to an earthquake are covered under a government supported programme.

Business-Interruption Insurance

Most U.S. manufacturers have some form of business-interruption insurance, which generally covers profit lost following damage to their property, in this case, for example, if a U.S. company had a plant directly damaged by the quake. If a U.S. business has to stop production because a supplier can't deliver needed
parts, it can only collect from its insurer if it has bought additional protection, called contingent business interruption insurance.

ONGC is the holder of the biggest insurance policy in India.

ONGC India is expected to face a 'hard' market when it approaches international underwriters next week to renew its $28.5 billion insurance policy. ONGC is the holder of the biggest insurance policy in India. On the other hand, Reliance Industries-the largest private sector insurance policy holder-has managed to get its policy renewed without any significant hike in rates since its contract fell due more than a fortnight before the deadly earthquake struck Japan.

Last year, ONGC was fortunate as its policy was renewed weeks before BP Deepwater Horizon explosion, which caused a massive oil spill in the Gulf of Mexico pushing up rates for offshore rigs worldwide. For 2010-11, ONGC managed to insure its offshore assets which were worth well over $26.5 billion for $30 million. The policy was renewed because of support provided by international reinsurers. This year the state-owned company has shortlisted United India Insurance, which has appointed top international broking firms, including Aon, Marsh and JWT, to help it secure cover from international reinsurers. Reliance Industries has had its policy renewed by New India and ICICI Lombard.

Other Indian companies which have their policies due for renewal in April are finding that they may have to wait for a while. "Most reinsurers have put on hold quoting for risks until they have a better assessment of their own exposure to the loss," said Gaurav Garg, MD, Tata AIG General Insurance. "However, there is a possibility that India might still emerge as an attractive market to Cat (catastrophe) reinsurers as compared to some other markets," said Garg. This was because there have not been many major disasters in recent years and also the fact that whenever there have been disasters, insurance losses have not been very high because of the low level of insurance penetration.

For insurance buyers, the earthquake will only compound their woes. End-March insurance companies were hit by a Rs 3,500 crore provisioning required to be made on their motor-third party insurance portfolio. This provisioning will erase profits and reduce the capacity of insurance companies to provide cover. Now with reinsurers increasing the pressure from the other end, insurers will be forced to increase prices wherever possible. Japanese reinsures like Sumitomo have emerged major underwriters in the international market in recent times. It is not clear whether the capacity of these Japanese underwriters will take a hit in light of domestic losses.

Wednesday, March 16, 2011

Life insurance cos stare at highest natural disaster bill

Insurance officials feel that life insurance claims in Japan following last week's earthquake and the resulting tsunami will be the highest among all natural disasters so far. While the number of casualties have not been established, there are reports that 3,373 people are dead and another 6,746 are missing. There have also been statements from officials that the toll could go touch 10,000. This would be almost twice the 5,100 deaths which took place in Japan in 1995 following the Kobe earthquake. Although last week's disaster is among the worst in recent years, there have been several events, including the Indian Ocean tsunami in 2004 which caused higher casualties. For the insurance market, the difference this time is that the casualties have taken place in Japan, a country with one of the highest levels of insurance penetration and per capita income.

Tuesday, March 15, 2011

Nippon Life to take 26% in Reliance Life for $680 m

Reliance Life Insurance, a wholly-owned subsidiary of Reliance Capital Ltd, has decided to rope in Nippon Life Insurance Company as a strategic partner with 26 per cent stake. The Japanese insurance major will invest Rs 3,062 crore ($680 million) for acquiring the stake.

Nippon Life on Monday signed an agreement with Reliance Capital to acquire stake in Reliance Life.


The transaction pegs the total valuation of Reliance Life at around Rs 11,500 crore ($2.6 billion), according to a joint statement issued by Reliance Capital and Nippon Life.
Reliance Capital, however, did not disclose how the deal has been structured — whether it will disinvest 26 per cent stake to Nippon or as a combination of partial disinvestment and issue of fresh shares.
The financial services company has interests, among others, in asset management and mutual funds; life and general insurance; commercial finance; stock broking; exchanges; private equity.

Japan's biggest
“Nippon Life is the largest insurer in Japan and has been in operation for 121 years. As a strategic partner, it will bring vast experience, expertise and global best practices in areas of product development, underwriting, investment management, distribution, customer relationship management and risk management,” said Mr Sam Ghosh, CEO, Reliance Capital.
Reliance Life's strengths

The disinvestment by Reliance Capital comes at a time when the insurance industry is keenly awaiting guidelines on initial public offers from the Insurance Regulatory and Development Authority. According to industry officials, the regulator is unlikely to allow life insurers that have been in business for less than 10 years to come out with an IPO.
Reliance Life started its operations in 2005 after acquiring Chennai-headquartered AMP Sanmar Life Insurance company.
The company recorded an aggregate business premium of over Rs 6,600 crore ($1.46 billion) as on March 31, 2010 and managed assets of more than Rs 17,000 crore ($3.7 billion) as of December 31, 2010. It has a distribution network of nearly 1,250 offices and over 215,000 advisors.
Of the 22 private sector life insurance companies in India, Sahara India Life Insurance is now the only company that does not have a foreign partner and continues to operate as a standalone company.
Shares of Reliance Capital rallied on the BSE on Monday, closing at Rs 561.80, up 9.72 per cent (or Rs 49.75) over the previous close of Rs 512.05 on expectation that a chunk of the proceeds from sale of 26 per cent stake in Reliance Life to Nippon Life will boost the bottomline.

Monday, March 14, 2011

“India Market’s Rapid Growth Poses Profitability Issues”

The full potential for growth in India’s non-life and life insurance markets is far from being reached, although the challenges to operating in a desirable, though competitive, market are mounting, according to a new report by A.M. Best Co.

The report, “India Market’s Rapid Growth Poses Profitability Issues,” suggests that the global financial downturn has impacted India’s insurance market to a far lesser degree than insurance markets in some other countries. India’s economic prospects continue to offer great opportunities for non-life and life insurers, with drivers including strong economic growth, which coincides with a growing middle class in the world’s second-largest population. However, the report adds, as the attractions of operating in an emerging economy become more evident to international insurers and reinsurers, the challenges facing companies operating in India are immense.

“Non-life insurance penetration is low because policyholders tend to feel there is little financial benefit from purchasing cover, and a growing number of insurers are competing for a relatively small consumer base. Motor and health insurance, in particular, have been loss making,” says Yvette Essen, head of market analysis.

Philip Chung, senior financial analyst, added: “Insurers appear to be taking steps to improve profitability, although A.M. Best believes underwriting results for non-life insurers are unlikely to turn positive in the foreseeable future. Non-life insurers have become dependent on investment return to compensate for poor underwriting results.” The report also draws comparisons between India and China’s insurance markets. It examines regulation, reinsurance and distribution trends in India, and the role of public and private insurers. It discusses how an increase in the foreign direct investment limit could help insurers raise additional capital, increase resources and bring in new management skills and knowledge.

To access a copy of this report: Click here

Insurance and Finance

Insurance and Finance is a research programme set up by the Geneva Association, also known as the International Association for the Study of Insurance Economics. This research programme on insurance and finance comprises academic and professional research activities in the fields of finance where they are relevant to the insurance and risk management sector.The aim of the research programme is dedicated to making an original contribution to the progress of insurance through different initiatives in the field of insurance finance. It engages in: highlighting issues of key importance, promoting studies of the function of finance in insurance, discussing the relevance of financial concepts and instruments to the industry, detecting new and promising theoretical developments, and diffusing knowledge and the results of research worldwide.

Sunday, March 13, 2011

To meet Warren Buffet buy a Motor Insurance Policy.

Berkshire Hathaway is now in India, and Warren Buffett will welcome all policyholders* of BerkshireInsurance.com at an event specially hosted for them.
To become a policyholder and to buy a motor insurance policy click here or call 1800 1800 800.

For more details visit: http://www.berkshireinsurance.com/

Berkshire Hathaway enters India insurance market

Billionaire Warren Buffett's Berkshire Hathaway says it is entering India's insurance market. Berkshire India said it will start by selling auto insurance as an agent of India's Bajaj Allianz General Insurance and may move into other lines of insurance as well.Its focus will be on direct sales, via internet and phone. Foreign companies have been eager to break into India's booming insurance market but have been stymied by strict ownership limits.


India’s Insurance Regulators Issue New Norms.

The Insurance Regulatory and Development Authority, India’s insurance industry regulator, issued new rules that relaxed solvency ratios for India’s general insurers, the Financial Express newspaper reported, citing M. Ramadoss, the chairman and managing director of New India Assurance. Under the rules, the solvency ratio for general insurers has been reduced for March 2011 to 130 percent from 150 percent, the report said. The newspaper also cited the regulator as saying that general insurers wouldn’t be allowed to pay any bonus, dividend and other incentives unless they maintained a solvency ratio of 150 percent.

Tendulkar highest contributor to our child fund: Rel Life

Private insurer Reliance Life today said that Sachin Tendulkar, who has just completed his 48th one-day century, also becomes one of the highest contributor for children in its philanthropic initiative.The insurer has taken initiative to contribute Rs 25,000 to underprivileged children for every 'six' scored in the cricket World Cup.The insurer has taken initiative to contribute Rs 25,000 to underprivileged children for every 'six' scored in the cricket World Cup. For this, it has joined hands with the International Cricket Council (ICC) and Room to Read---a global non-profit organisation promoting literacy and gender equality in education for this campaign. Tendulkar has so far hit 8 sixes, just behind West Indies' K A Pollard. Other Indian players who have contributed to the initiative include Virender Sehwag and Yusuf Pathan who hit 7 and 5 sixes, respectively.

"Over 5,000 children have already benefited under the Reliance Life Insurance 'Boundaries for Books Initiative' as players hit nearly 150 sixes in World Cup," the insurer said in a statement. Every single six will provide at least 30 underserved children with access to fully functional libraries with local language and English books as well as trained teachers. In addition to contributing for every six hit in the world cup, Reliance Life also contributed Rs 10,000 for every four in the India-England match to the NGO under the same initiative, the company said.

Wednesday, March 9, 2011

Health insurance portability

Health Insurance Portability allows you to shift from one health insurance provider to another, without having to lose any of the benefits that your current health insurer provides.

What are the reasons for its introduction into the system?

The main reason why the Insurance Regulatory and Development Authority (IRDA) decided to allow health insurance portability is to improve service and delivery in the insurance industry. Insurance Regulatory and Development Authority in its new regulation claims "Persons shifting from one region to other regions are many times put to disadvantage due to lack of insurers' office providing necessary policy servicing at the new location.

Further, employees shifting from one organization to another organization many times lose health insurance cover due to lack of portability of the health insurance policies. It is essential to protect the policyholders against discontinuity and consequential loss of Pre Existing Diseases (PED) cover by making the health insurance plans portable across the insurance companies." The portability feature will allow the policyholder to shift from one insurer to the other without the fear of losing the cover of PED

What are its enhanced features?

Health Insurance Portability is going to be implemented from 1st July 2011. The most important feature is its portability, the feature that will allow switching to other companies without incurring losses. This will be beneficial for people who are not satisfied with their health policies or the services being provided. It will also be helpful:
a) For people with pre-existing illnesses.
b) For those who are eligible for bonuses and are compelled to continue with their existing policy providers due to the fear of losing benefits.
c) For someone moving to another city or state, where their present policy provider company does not work.

The main features of portability are:
1. The credit from the waiting period already completed can be carried forward to the new insurer.
2. When you switch from one insurer to another, the new insurer will provide some cover, at least up to the cumulated sum assured in the old insurance policy
3. The timelines for requesting for portability is available in the IRDA (Protection of Policyholders' Interests) Regulations and guidelines.

What are the benefits from the consumer view point - in terms of convenience, features and other aspects?

Portability helps to carry forward the waiting period of pre-existing diseases to the new plan. For instance, let us assume that the new policy covers a pre-existing disease only after three years but you have been in possession of another policy for two years. In such a case, portability will ensure that you have to wait just one year for the claim while earlier you would have to wait for another three.

There is a waiting period of 30 days when a new policy is bought and diseases incurred in those 30 days are not covered. Under the new Insurance Regulatory and Development Authority policy, the waiting period will be waived off.

What does one need to watch out for?

The following are some of the conditions for which you should consider switching your policy:
a) Maximum renewability age: Certain policies do not let you renew them after you reach a certain age. In that case it is better to change to a policy with the maximum possible renewable age.
b) Exclusions: There are certain exclusions in each policy and if the same is covered under some other policy then you should switch.

Insurers are still not clear about a few things with regard to portability. It is difficult to transfer credits from some specific policies to another like from a benefit policy to an indemnity policy.

Another point which is being discussed is that it will also be difficult to transfer credits from group insurance policies to individual policies.

What is the impact of this new intro by IRDA on the overall industry?

This reform is expected to bring about a positive change in the insurance industry as a whole. The industry players have welcomed this development. Health Insurance Portability will bring about a higher level of competition within the health insurers in order to retain the existing customers. This will ensure there is constant innovation and improvement in the efficiency standards and services.

Keep posting guys

Saturday, March 5, 2011

Insurers to lose 3.5k cr on motor claims

The non-life insurance industry stands to lose almost three times the profit it made last year by way of additional provisions for motor third party insurance claims. The government has said that the non-life industry runs the risk of insolvency if motor insurance premiums are increased.

"The insurance companies would incur a loss of approximately Rs 2,500-3,500 crore in the current year (2010-11) on account of this (motor insurance) business of which a substantial portion will be borne by the public sector insurance companies," minister of state for finance Namo Narain Meena said in a written reply to the Lok Sabha on Friday. Last year, profits made by the non-life industry had managed to touch Rs 1204.51 crore after growing three-fold over the previous year.
The non-life industry is suddenly staring at a Rs 3500cr hit on its profit and loss statement because it now turns out that companies had under provisioned for third-party claims by grossly underestimating the compensation awarded by courts.
In January, the Insurance Regulatory and Development Authority (IRDA) had proposed a review of motor insurance premium rates for third party liability cover. If the draft is implemented, it would result in a 10 per cent increase in premium for private cars and two wheelers and up to 80 per cent for goods carriers.

Insurance cos working on 'drive less pay less' policies

Drive less, pay less. That's going to be the selling point of at least three motor insurance companies . Modelled on the popular model followed in Italy, this policy lets you pay the premium according to the miles you drive. If you are not a frequent user of your vehicles, you get to pay less premium when your motor insurance policy comes up for renewal.

Bajaj Allianz, ICICI Lombard and Bharti AXA General Insurance are working on versions of the so-called pay-as-you-drive policies. ICICI Lombard has, in fact, initiated a pilot project under which it has installed tracking equipment on a set of vehicles - a mix of owner-driven and commercial.

The equipment are currently tracking data like distance traversed, condition of roads used, driving time - like day or night. "We started the pilot project some six months ago and are now collecting data. Once the volume of the data reaches a critical level we will engage our actuaries - persons who do all the mathematics while designing an insurance product, to design a 'pay-as-you-drive' policy," said Amitabh Jain, head motor customer services at ICICI Lombard.

Allianz owns 20% in Berkshire India, documents show

German insurance company Allianz SE, which owns 26% of Bajaj Allianz, is also a minority stakeholder in Berkshire India, according to the company’s filings with the Registrar of Companies.
Allianz SE holds 45 lakh shares, or 20% of the share capital of Berkshire India.
The remainder is owned by BHG Structured Settlements, a Berkshire Hathaway company.

Kamesh Goyal, chief executive officer of Allianz Asia Pacific, was one of the first directors of Berkshire India, but had stepped down from the board before it became a corporate agent. Another director was Debadatta Sengupta who too is no longer with the board, said a Berkshire India spokesperson. Among the other directors were Ajit Jain from Berkshire Hathaway’s reinsurance business, and Forrest N Krutter and Kara Raiguel, also from the Berkshire Hathaway Group.
The stock of Bajaj Finserv, which holds 74% stake in Bajaj Allianz, has risen more than 20% since its tie-up with Berkshire was announced.
Berkshire India declined to comment on Allianz’s stake in the company.

The memorandum of association for Berkshire India suggests the company would primarily act as distributors or advisors in the insurance segment. The main objects of the company on incorporation have been listed as ‘soliciting or procuring insurance business’, acting as an ‘insurance agent, corporate agent and/or insurance broker’, acting as ‘assessors, values and surveyors,’ or ‘advisors and consultants’.

Berkshire India had on Wednesday issued a statement saying it would act as a corporate agent for Bajaj Allianz General Insurance.

The announcement followed months of speculation about Warren Buffett picking up stake in Bajaj Finserv, which the company has denied.

Friday, March 4, 2011

Life insurance business nose-dives in crucial month of January

January, February and March are crucial months for the life insurance industry. The new business premium collection for January was 20% lower than December 2010 for individual single premium policies, while it was 10% lower for individual non-single premium policies. It is surprising to note that new business premium (NBP) for January was 20% lower than the NBP of December 2010 for individual single premium policies. NBP for January was 10% lower than the NBP of December last year for individual non-single premium policies.

Insurance companies are coming out with new traditional plans due to business shifting away from ULIPs (Unit-linked Insurance Plans). However, this does not explain why NBP has dropped substantially. Even the behemoth Life Insurance Corporation (LIC) of India was not spared.

PNB will buy stake or plan tie-up for insurance foray

Punjab National Bank will buy equity stake and enter into a corporate agency tie-up with one of the 10 life insurers it has shortlisted, according to a release issued by the state-run lender.
The firms are Aegon Religare Life, Aviva India, Bharti AXA Life, Birla Sun Life, DLF Pramerica Life, Future Generali Life, HDFC Life, Max New York Life, MetLife and Reliance Life.

According to chairman KR Kamath, PNB, which is keen to buy stakes in life as well as non-life firms, has received applications from 42 insurers. At present, PNB has a referral arrangement with the Life Insurance Corporation of India (LIC) for selling insurance products. It's an arrangement where banks or finance firms receive commissions for selling insurance products.
PNB had earlier joined hands with Vijaya Bank for a life foray but the proposal was later dropped. Another PSU lender, Syndicate Bank , has hired Ernst & Young to help choose a partner.
Public sector banks generally prefer three-way JVs like India First where Bank of Baroda , Andhra Bank and Legal & General UK hold shares.

After recent regulatory changes, insurers are under pressure to bring down distribution cost. As far as banks are concerned, the central bank has certain reluctance in allowing small and mid-sized banks buying significant stakes in insurance firms due to their huge capital requirement.

Thursday, March 3, 2011

Bajaj Finserv spurts by 20% after Berkshire Hathaway deal

Shares of Bajaj Finserv shot up by 20 per cent on the BSE on Thursday following reports that Warren Buffett's Berkshire Hathaway has struck a deal with the company's unit Bajaj Allianz General Insurance.

US-based Berkshire Hathaway, a diversified holding company with subsidiaries that include GEICO, National Indemnity, on Wednesday announced its plans to enter the Indian insurance sector as a corporate agent of Bajaj Allianz General Insurance. Berkshire India, a majority-owned unit of Berkshire Hathaway Inc has been incorporated to sell and distribute general insurance products in India through their online distribution portal — www.berkshireinsurance.com. The company's stock surged by 20 per cent to touch an upper circuit of Rs. 527.45 on the BSE on the back of heavy buying.

"Berkshire India will sell insurance directly to the consumer by utilising the internet portal and tele-marketing. Initially, the focus will be on motor insurance, but the company will continuously update its business model to meet the needs of the fast-evolving Indian insurance sector," it said.