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Monday, April 18, 2011

Third party premium rises by up to 70%

The Insurance Regulatory and Development Authority (Irda) has increased the third-party motor premium by up to 70% from April 25. 

The regulator had issued an exposure draft in January, suggesting an 80% increase on all third-party motor policy. Irda said that based on the concerns expressed by various stakeholders during discussions, premium for goods carrying and passenger carrying vehicles has been brought down by 15% and so the real change is 68%. 

In the draft circular, the regulator had suggested an increase of 85% for goods and passenger carrying vehicles. Similarly, private car and two wheeler premium is increased by 10%. The regulator said that the rates are revised at an interval of 4-5 year and such long intervals cast an avoidable strain on policyholders as well as on insurance companies. 

The new rates will be based on parameters, like average claims cost for each class of vehicle, frequency of claims for each class of vehicle and cost inflation index for the year of review. Insurers have made an excess provision of Rs 3,500 crore towards thirdparty motor pool. Insurers, however, are not allowed to cancel the current insurance policies and issue fresh policies to effect new premium rates. 

The regulator has asked companies to be mindful of the concerns expressed by vehicle owners about both the rates and availability of insurance. Moreover, the regulator said that it will treat any complaint of non-availability of insurance or use of methods to deny or delay the client seeking insurance cover, seriously.


Monday, April 11, 2011

Oriental provides Rs 34 cr cover to Dhoni, 5 IPL teams

State-owned Oriental Insurance Company has provided highest ever personal accident cover of Rs 34 crore to the captain of Indian cricket team Mahendra Singh Dhoni, who is also the skipper of the IPL team Chennai Super Kings. The cover includes travel risk, medical emergencies and loss of baggage. Last year, he was given an insurance cover of Rs 10 crore. Besides Dhoni, Oriental has provided insurance cover to five IPL teams -- Chennai Kings, Rajasthan Royals, Deccan Chargers, Pune Warriors and Kochi Tuskers Kerala.

Deccan Chargers, winner of the second edition of IPL 2009, have been provided cover of about Rs 98 crore, said an official source. Indian Premier League is starting on Friday and will continue till May 28. This will be the first time that the league will feature 10 teams with the inclusion of Pune Warriors and Kochi Tuskers Kerala. The cash-rich Twenty 20 cricketing extravaganza gets underway at the MA Chidambaram Stadium in Chennai where Dhoni's Chennai Super Kings (CSK) takes on Gautam Gambhir led Kolkata Knight Riders (KKR).Ten teams would contest for the IPL trophy and there will be total of 74 matches.
Oriental Insurance provided an insurance cover of more than Rs 1,000 crore to the Board of Control for Cricket in India (BCCI), the apex governing body and the owners of different franchises in the last edition. There were 8 teams in the last season of the IPL.

India focuses on insurance ills

In a radical effort to curb misrepresentation of financial products, India's insurance regulator has introduced tough guidelines on telemarketing that will come into force in October.The rules by the insurance regulatory and development authority (Irda) require insurance agents to record all calls while soliciting new customers by telephone.

If an insurance policy is bought, the agent must disclose his commission from that transaction. The customer will be entitled to a copy of the recording at any time until the settlement of the claim."Full disclosures shall be made to the clients under all modes of distance marketing, and the requirements of confidentiality, privacy and non-disclosure shall be complied with," Irda said. The rules are the latest tough regulations introduced in recent years to bring about transparency in India's fast-growing insurance sector, in which malpractice such as the misrepresentation of financial products is common.

In recent weeks, Irda has also run large advertisements in newspapers warning the public against fraudsters masquerading as insurance agents. "BEWARE" screams a signboard held by a comic character dressed as Superman in an ad. "There are certain fraudulent phone calls by persons claiming to be employees of Irda trying to sell insurance policies," it says, advising readers to report such calls to the nearest police station.
India's financial services sector contributes 15 per cent to the country's GDP. The sector's contribution is expected to exceed 17 per cent this year as the country's high savings rate - 34 per cent and expected to reach 35.3 per cent next year - offers the financial markets new opportunities to grow.

Non-life insurance like motor and health will gradually get costlier: Irda

The Insurance Regulatory and Development Authority (Irda) on Monday said that policy holders will gradually have to pay more for motor, health and other general insurance covers as costs would go up due to companies setting aside higher funds for claim settlements. "I think the demand and supply position in the non-life industry will be such that prices should harden and I expect to see evidence of that in the course of next few years. And I would like to make it even harder as we go along," Irda Chairman J Harinarayan said.

Harinarayan, who was speaking at the 'Ficci National Conference on Insurance', said the non-life insurance companies would need to bring in changes in marketing, pricing and modes of claim settlement to become profitable. "Because of the requirement of increase in provisioning, there will be a reduction in capacity and because of that there will be a hardening of prices," Harinarayan added.

Irda has already proposed to increase provisioning requirement for insurers providing motor insurance covers. Irda had increased the provisions made for motor pool to 153 per cent of book value for the four years till March 31, 2010, against 126 per cent maintained by companies.This is aimed at enhancing solvency margins and make higher provisioning for third-party motor pool.

Solvency margin is the minimum surplus on the insurer's assets over liability set by the regulator and the insurance companies are estimated to have provided about Rs 3,500 crore till March 31, 2010, for maintaining this margin.

Harinarayan said in the next three years the insurance companies will see changes in distribution set up, marketing techniques, channels of distribution and also terms of regulatory development. "The agency model that we see right now has serious deficiencies and that requires to be strengthened. I do not think the agency distribution model is going to last very long," he said.

He said agency model in the traditional form has vanished in large markets across the world. "...I do not see why India will be any exception to that particular development," the Irda chief added. He said even as the market widens, "it is not going to go down to the poorest of poor". "The total size of the market we are looking at (for insurance penetration) may be 500-600 million in terms of kind of product we have to offer," Harinaryan said.Going forward in general insurance space, he said, the health and annuity or pension-linked insurance products will gain predominance.

Friday, April 1, 2011

IRDA Draft Guidelines Will Limit Indian Web Insurance Aggregators

India’s insurance regulator IRDA is now looking to regulate online insurance aggregators, and, through the insurance companies it regulates, define the terms under which web based insurance aggregators operate, including the business model and renumeration, and will force the industry to switch from a cost-per-lead model to a cost-per-sale model. Some provisions we culled out from the draft guidelines for web based insurance aggregators and insurance companies in India, followed by our comments:

1. Only Approved Web Aggregators: Only IRDA approved web aggregators can generate insurance related leads for insurance companies. The IRDA shall grant approval for a period of three years to the web aggregator. The Authority may appoint one or more of its officers as an inspecting authority to undertake inspection of the premises of the web aggregator to ascertain and see how activities are carried on, and also to inspect the books of account, records

2. Minimum Net Worth: The web aggregator shall have a minimum net worth of not less than rupees fifty lakhs at any time during the previous three consecutive years. 3. At no point of time of its functioning, a web aggregator shall have net worth below rupees fifty lakhs.

3. Deal terms: Insurer/Broker shall enter into an “agreement” with the web aggregator approved by the authority which shall necessarily include details relating to, among other things, the Fee/Remuneration for the leads to be shared. The agreement shall be valid for a period of three years from the date of grant of approval by the Authority.

4. Lead Limits: If the client evinces interest in buying insurance but does select an Insurer, then the lead may be transmitted to no more than five Insurers in the same class of insurance business, or to more than one Broker. The same lead cannot be shared with both. Web aggregator shall transmit the data of clients to Insurer/Broker within five days of the client’s visit to the web site.

5. Payment terms: No advance payments. Payments shall be made to web aggregators only towards such leads that result in the sale of a policy. The fee for the lead shall not exceed twenty five percent of the commission payable on the first year premium sold on the basis of the lead obtained from the web aggregator. The Broker shall pay a fee not more than twenty five percent of the Brokerage receivable on the first year premium sold on the basis of the lead obtained from the web aggregator. The insurer/broker shall not pay any fees for renewal, or towards incidental web aggregator costs such as maintenance of the data base, infrastructure, training, entertainment, development, communication, advertisements, sales promotion etc.

Source: Medianama