SBT, SBI General Insurance ties up for affordable health plan

http://www.thehindubusinessline.com/industry-and-economy/banking/sbt-sbi-general-insurance-ties-up-for-affordable-health-plan/article5401366.ece

State Bank of Travancore (SBT) and SBI General Insurance today jointly launched an affordable health insurance plan for SBT customers.

“SBI General Insurance and SBT today jointly announced the launch of SBI General’s Group Health Insurance Policy exclusively for SBT account holders and their families,” SBI General said in a release.

In terms of affordability, for a 35-year-old adult the policy will cost Rs 1,300 per year to have an Rs 100,000 cover which means Rs 3.56 per day.

The policy has benefits such as multiple coverage options, no pre—policy medical test up to age of 65 years for people with no medical history, 142 day care procedures covered, guaranteed renewal upon option.

Besides, it also offers coverage of pre and post—hospitalisation expenses transparent claim process and cashless treatment across over 3,000 hospitals in the network.

India has one of the highest out—of—pocket health care expenditures in the world. One of the major reasons that India’s poor incur debt is the cost of health, Bhaskar J Sarma, MD & CEO of SBI General Insurance said.

“What we really need is a health insurance which is priced just right and affordable for the vast majority of people. Health insurance that is affordable is the key for penetrating further in semi—urban and rural areas.

SBI General’s Health Insurance Policy is designed to protect the happiness of the family with its affordable premium,” Sarma said.

Investors fail to renew Rs 1.9 lakh cr of insurance policies

http://www.thehindubusinessline.com/industry-and-economy/banking/investors-fail-to-renew-rs-19-lakh-cr-of-insurance-policies/article4727994.ece

A large chunk of insurance policies from private insurers lapsed because investors didn’t pay their renewal premium, data from the IRDA’s Handbook of Statistics reveal.

 The lapse ratio was as high as 51 per cent for Birla Sun Life Insurance, 49 per cent for Future Generali and at 42 per cent and 36 per cent, respectively, for ICICI Prudential and Bharti Axa Life in 2011-12.

Lapse ratio is the proportion of policies where renewal premium was not paid.

The Life Insurance Corporation has, however, maintained lapse ratios at 4-5 per cent over the last few years. 

Clubbing private players and LIC, investors didn’t renew a total of 160 lakh traditional insurance plans of the value of Rs 1.9 lakh crore (total sum assured) in 2011-12, registering a two-fold jump from 2008-09. Traditional plans include term covers, endowment policies and health insurance plans. It excludes unit linked plans (ULIPs). Had ULIPs been included the lapse ratios will be even higher.

 LACK COMMITMENT

The persistency ratio – the number of policyholders who stay with their policy for five years or more – is also low. A majority of private insurers saw less than half their policyholders staying on after the fifth year.

 Why did so many investors not renew their insurance plans? Some insurers say this is a result of investors switching plans due to changing priorities.

Saujanya Shrivastava, Chief Marketing Officer of Bharti AXA said, “Policy lapses are high mainly in the endowment segment where the policy tenure is 10 or 15 years and people lack long term commitment because of changing priorities.”

 Another side to the story could be mis-selling, where agents mis-represent the product to the prospect. The Insurance Ombudsman received a total of 1.07 lakh complaints in 2011-12 on ‘unfair business practices’ in life policies. One-third of these policyholders complained that the product was different from what was projected.

 Changing regulations that see insurers launching new products every year could also play a role.

“Insurers keep launching new products and the message that goes to consumers is that old products are not good enough. They then just try to cut losses and move away (from their older plans),” says Shashwat Sharma, Partner– KPMG (India). 

 Where does the money go?

The next big question is – what happens to the premium collected on lapsed policies?

 When a traditional policy is discontinued after three years, it attains paid-up status and the surrender value as agreed is paid back to the policyholder.

However, when a buyer stops premium payments within three years, “the money is moved to reserves and carried forward for future appropriation or made available to shareholders depending on whether it is a participating or non-participating plan,” says Anish P. Amin, Partner-PwC.

 If ULIPs are included, the lapse ratios would be even higher. In a ULIP, if premium payment is stopped within five years, the money is transferred to a separate fund that earns token returns. At the end of the fifth year, the money is paid to the policyholder.

SBI to discontinue free accident cover for loan customers

http://www.thehindubusinessline.com/industry-and-economy/banking/sbi-to-discontinue-free-accident-cover-for-loan-customers/article4590965.ece

The country’s largest bank SBI will discontinue a free accident insurance cover given to its home and car loan customers from July this year.

In a notification to its customers, the State Bank of India said the complimentary group personal accident insurance cover (death only) for home and car loan customers will be discontinued on the expiry of current Master Policy on July 1, 2013.

“Hence, in case of accidental death of any Home/Car loan borrower on or before July 1, 2013, claims may be lodged for the outstanding amount in the loan account subject to the terms and conditions mentioned in Master Policy,” SBI said.

The bank, however, did not mention the reasons for scrapping the complimentary cover.

SBI said that its home and car loan borrowers, who do not have any insurance cover for their loan liabilities, may opt for the policies being offered by SBI’s insurance venture.

Currently, SBI General Insurance Company Ltd is offering an accident insurance cover of Rs 4 lakh for SBI’s savings bank account holders for an annual premium of Rs 100.

Earlier this year, SBI had said it provided personal accident cover to over 7 million of its account holders across the country in association with SBI General Insurance.

SBI General Insurance Company is a joint venture between the State Bank of India and Australia’s leading general insurance provider Insurance Australia Group.

Rs 71,000-cr worth life insurance policies surrendered in last fiscal

http://www.thehindubusinessline.com/industry-and-economy/banking/rs-71000cr-worth-life-insurance-policies-surrendered-in-last-fiscal/article4439570.ece

Large-scale surrender of insurance policies, particularly unit-linked insurance plans, has forced the regulator to examine the issue. Renewal of insurance policies is measured by a parameter called persistency.

According to IRDA (Insurance Regulatory and Development Authority) data, in fiscal 2012 life insurers had to pay Rs 71,208 crore on account of surrenders (withdrawals), of which, LIC paid Rs 41,531 crore and private sector insurers, the balance.

In fiscal 2012, ULIPs accounted for 68 per cent of the total surrender for LIC, and 97 per cent of the total for private insurers. 

Persistency measures the number of policies retained in the books of an insurer. If a lot of policies lapse (non-renewal), then it could be taken as a sign of mis-selling by insurers. Currently, life insurers are required to provide persistency ratio numbers (percentage of policies on which premiums are still being paid after their sale) to the regulator on an annual basis.

‘Pay and recover’ is the norm in case of third-party liability on insurer

http://www.thehindubusinessline.com/industry-and-economy/banking/pay-and-recover-is-the-norm-in-case-of-thirdparty-liability-on-insurer/article4386551.ece

It is an established principle of third-party insurance that the insurance company will have to honour the claim of the road accident victim even if the insured was remiss in not honouring the terms of the insurance contract.

Thereafter, it can proceed against the insured for violating the terms of the contract and seek reimbursement of what it had paid to the victim.

In National Insurance Company Ltd vs. Dhas and Others, the Madurai Bench of the Madras High Court reiterated the principle of ‘pay and recover’ while directing the appellant to pay up the Rs 2,12,000 ordered to be paid by the Motor Vehicles Tribunal to the family of a road accident victim.

The insured had licence for light motor vehicle but drove a two-wheeler for which he did not have a licence, and killed the victim involuntarily.

The court pointed out that the right of the victim and his family (third party) is statutory, whereas the rights of the parties — the insurer and insured — are contractual.

They are free to enforce their contractual rights but before that the insurer must honour the third parties’ statutory rights.

The third party’s agony should not be compounded by embroiling him in the contractual matters between the two.

IRDA revises norms for life insurance products

http://www.thehindubusinessline.com/industry-and-economy/banking/irda-revises-norms-for-life-insurance-products/article4293481.ece

The Insurance Regulatory and Development Authority (IRDA) has revised the norms for traditional life insurance products at its board meeting held here on Wednesday.

When contacted, IRDA Chairman J. Hari Narayan, told Business Line that the insurance products would now have mandatory minimum death benefit and minimum surrender value.

“The life insurance products have also been aligned with the pension products in some aspects of benefits,’’ the IRDA chief said adding that the aim was to enhance customer protection keeping in view the long-term nature of life insurance products.

“We have earlier reformed linked-products segments and now concentrated on life products,’’' he said.

In June last year, the insurance regulator had circulated draft guidelines on the proposed changes in life insurance products.

It was proposed that the minimum sum assured should be higher by 10 times the annual premium or 0.5 times of the annual premium multiplied by the term of the policy for those who are below 45 years.

For below 45 years, according to the draft, the minimum sum assured is higher by 10 times the annual premium or 0.5 times the annual premium multiplied by the term of the policy or 105 per cent the premium paid as on the date of the policyholder’s death.

A foreign bank threatened to close New India Assurance a/c over Iran issue

http://www.thehindubusinessline.com/industry-and-economy/banking/a-foreign-bank-threatened-to-close-new-india-assurance-ac-over-iran-issue/article4146373.ece

The Government today said a foreign bank had threatened to close down the account of state-owned New India Assurance Ltd if it did not stop providing insurance cover to ships ferrying oil from Iran.

However, the threat was not executed by the foreign bank, Minister of State for Finance Namo Narain Meena said in a written reply in the Rajya Sabha.

“The public sector general insurance companies have not received any such threat except the New India Assurance Co Ltd to whom one foreign bank had threatened to close its account on this issue. However, this bank has now agreed to continue the account,” Meena said.

The Minister further said that there was no deactivation of account of state-run insurers by foreign banks.

He was responding to a query whether several foreign banks had threatened to close the accounts of state-run general insurers if they continue to provide insurance cover to Indian ships ferrying oil from Iran.

Insurance regulator IRDA, Meena said, had informed the government that following the restrictions imposed by the United Nations and the European Union, Europe-based insurers had stopped providing cover to ship owners involved in carriage of cargo or oil consignments from Iran-India-Iran and vice-versa.

Amendments to insurance Bill may be introduced in current session of Parliament

http://www.thehindubusinessline.com/industry-and-economy/banking/amendments-to-insurance-bill-may-be-introduced-in-current-session-of-parliament/article4126520.ece

The Government is likely to introduce amendments to the Insurance Bill in the current session for raising FDI cap in private sector insurance companies to 49 per cent, Parliament was informed today.

“...the official amendments to the (Insurance) Bill are likely to be introduced in the current session of Parliament.

The foreign equity cap is being raised in order to meet the growing capital requirement of the insurance companies,” Minister of State for Finance Namo Narain Meena said in a written reply to the Lok Sabha.

The Bill, which has been pending in the Rajya Sabha since December 2008, provides for raising FDI cap in private sector insurance companies from 25 per cent to 49 per cent.

The decision to hike FDI cap had already been approved by the Union Cabinet, Meena said, adding “the foreign equity cap is being raised in order to meet the growing capital requirement of the insurance companies’’.

The Standing Committee on Finance, it may be recalled, in its report had opined against raising the FDI cap to 49 per cent arguing that it would expose the sector to global vulnerability.

The Insurance Regulatory and Development Authority (IRDA) has favoured increase in foreign direct investment in the sector to 49 per cent, saying that the decision would help the sector in raising funds which are needed for growth.

LIC all set for major recruitment drive

http://www.thehindubusinessline.com/industry-and-economy/banking/lic-all-set-for-major-recruitment-drive/article4061852.ece

In one of its biggest recruitment drives in recent times, Life Insurance Corporation will be taking on board about 5,000 graduates as development officers in the next few months.

This is part of the company's strategy to achieve its 2020 vision of increasing the number of policyholders from the current 40 crore to 100 crore.

“We will be soon coming out with the advertisement for recruiting the development officers.

We currently have a pool of 27,000 development officers, who form the strength of our marketing team,” K. B. Saha, Executive Director, Human Resource Development, told Business Line on the sidelines of an event here today.

The entry-level salary of an LIC development officer is between Rs 12,000 and Rs 14,000 a month.

“However, they can earn significant incentives,” he said, adding in a lighter vein, “some of them are getting a bigger pay packet than our chairman”.

LIC does not have any plans to recruit at the senior level this fiscal, as it recently hired 300 people.

“We may not take in any significant number of people at the senior level, due to our re-engineered business operations with greater dose of technology.

Overall, in the next five to seven years, we may increase our employee strength by 10-15 per cent,” Saha said.

LIC, which has a market share of 80 per cent, employs around 1.15 lakh people. In fact, the number has been brought down from over 1.30 lakh a decade ago, although its business has grown about seven-fold during this period. Increasing online operations have reduced the need for LIC to hire more at the officers’ level.

IRDA warns against refusal of third party cover

http://businesstoday.intoday.in/story/irda-third-party-cover/1/188760.html

Insurance regulator IRDA on Wednesday said "severe" penal action will be taken against those general insurance companies refusing third party motor insurance.

 "Some companies are also declining third party insurance. They will find it not in their best interest to do so because if companies do not abide by the rules we have laid down such companies will be visited by very severe penalties which will be more onerous than the business they are foregone," IRDA Chairman J Hari Narayan said on the sidelines of a CII event.

Private sector insurers try to avoid writing such policies because of the high claim ratio in the commercial vehicle space. This leads to the public sector companies being hit the most.

Recently, IRDA came out with guidelines for implementation of declined risk pool system. The regulator has laid down a method for transferring risks to the newly formed declined risk pool for third-party motor policies.

As per the guidelines, the declined risk pool would apply to commercial vehicles for standalone third-party liability insurance and no comprehensive motor insurance policy can be settled from the pool.

The size of the pool is likely to shrink to a quarter because of the comprehensive policy going out of the ambit of the pool.

IRDA comes out with draft IPO norms for general insurance cos

http://www.thehindubusinessline.com/industry-and-economy/banking/article3914924.ece

General insurance companies planning to tap the capital market for funds should have a 10 year experience and will have to seek prior approval from the sector regulator, Insurance Regulatory and Development Authority (IRDA) said in its draft guidelines.

“No general insurance company shall approach the SEBI for public issue of shares and for any subsequent issue, without the specific previous written approval of the Authority,” IRDA said in the draft norms for initial public offering (IPO) of non-life insurers.

The draft norms —— IRDA (Issuance of Capital by General Insurance Companies) Regulations, 2012 —— states that the regulator would take into account the insurer’s financial position, its capital structure and regulatory record before permitting them to come out with the share sale.

The IRDA has kept with it the powers to prescribe the extent to which the promoters shall dilute their respective shareholding and the shares that can be allotted to foreign investors. Further, the IRDA would also prescribe the minimum lock-in period for the promoters after the share sale.

The IRDA would also look into the purpose for which the insurer is proposing to raise the funds from the market and the insurer’s capital structure.

“An applicant company proposing to raise share capital through a public issue may do so only on completion of 10 years from the date of commencement of business,” the IRDA said, adding that the approval granted by the Authority shall have a validity period of one year.

The regulator has also prescribed additional information —— risk factors specific to insurance companies, an overview of the insurance industry and a glossary of terms used in the insurance sector —— in the offer document for companies to come out with share sale offer.

The IRDA has invited comments from general insurance companies by September 30 on the exposure draft.

Last year, the IRDA had notified the guidelines for life insurance companies to tap the capital market.

Irda frowns upon bank officials joining insurers' boards

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/irda-frowns-upon-bank-officials-joining-insurers-boards/articleshow/16391120.cms

The insurance regulator does not want bank officials on the boards of insurance companies due to conflict of interest despite them being promoters in most cases. 

"When banks have representatives on insurance companies' boards, they influence commission being paid to them," said a senior Irda official. "This is paid out of policyholders' money. There is a conflict as they are shareholders and bank directors." 

The guideline on directors will be part of the new bancassurance guidelines. While clearing the Metlife-PNB deal, the regulator imposed conditions on appointment of directors on the board of the insurer by Punjab National Bank.

The concern is arising from banks' tendency to look for returns in the short term. The accusation against banks is that they look to gain by pushing sales and, in the process, end up mis-selling. 

Companies like ICICI Prudential Life Insurance, SBI Life Insurance and HDFC Life have bank people on their board. The official said that new rules will not be applicable to the existing bank-led companies. Most companies promoted by banks have a substantial stake of 74%. 

According to a report by Irda, the potential of bancassurance to become a significant distribution network is huge as banks have over 80,000 branches across the country. 

At present, the bancassurance channel contributes around 25% to the total premium of life and non-life insurance companies. Non-bank promoted companies have tied up with banks for a term of one to three years as corporate agents. The premium collected through bancassurance was Rs 21,947 crore in 2009-10, according to the latest data. 

Of late, banks are buying a minority stake in insurance cos for a longer duration. Axis Bank, which bought a stake in Max Life for 10 years, started the trend. Irda has been worried about banks buying into insurance firms. It took more than a year to clear Metlife-PNB deal.

Proposal to link tax exemption of Life Insurance policies to the term of the cover

http://www.business-standard.com/india/news/tax-break-in-life-insurance-might-be-linked-to-cover-lic-pushes-proposal/483324/

The Union finance ministry is considering a proposal to link tax exemption of life insurance policies to the term of the cover, rather than the sum assured.

The suggestion was mooted by government-owned Life Insurance Corporation of India (LIC).

The largest life insurer has sought that premiums be linked with the term of a policy and any of 10 years or more should get the exemption.

Currently, tax relief is linked to the sum assured. Under the present system, insurance policies, except pension plans, would have to offer a cover of at least 10 times the annual premium to be eligible for tax benefits under sections 80C and 10 (10D) of the income tax rules. 

Earlier, insurance policies with a sum assured of five times the annual premium used to get the tax benefit. Section 80C allows exemption up to Rs 1 lakh and 10 (10D) gives exemption in maturity proceeds.

Insurers have been arguing that the present system would raise premiums, particularly for customers in the higher age groups as they opt for lower term policies where the mortality rates are higher.

IRDA changes rules for endowment plans

http://businesstoday.intoday.in/story/irda-changes-rules-for-endowment-plans-of-insurance/1/186666.html

Big annual bonuses on endowment insurance plans could be a thing of past. The Insurance Regulatory and Development Authority (Irda) has proposed a minimum death benefit on endowment plans, which means a larger part of the premium may go towards insuring the life of the policyholder.

For regular premium plans, the minimum death benefit proposed for entry age less than 45 years is 10 times the annual premium, or half of annual premium multiplied by the policy term, or 105 per cent of all the premiums paid, whichever is higher. 

For entry age over 45 years, the same is higher of seven times the annual premium, one-fourth of annual premium multiplied by the policy term and 105 per cent of all premiums paid.

The guidelines also link commission paid to agents with the policy tenure. For policies with a tenure of five-nine years, the first-year commission cannot be more than 14 per cent of the annual premium, 28 per cent for 10-14 year tenure, and 40 per cent for 15 years or more (35 per cent for insurers more than 10 years old).

Irda has also proposed to make policies eligible for surrender value if premiums have been paid for two years instead of the current three years

IRDA proposes guaranteed value on surrender of traditional policies

http://www.business-standard.com/india/news/irda-mulls-friendlier-rules-for-life-cover-surrender/482766/

The Insurance Regulatory and Development Authority (Irda), in revised draft guidelines on the design of life insurance products, has proposed a minimum guaranteed surrender value for traditional policies, significantly higher than what is being practiced by insurers.

Accordingly, an insurer will have to pay back at least the premium amount if a policy has been active for more than seven years. Policy holders would get back as much as half their premiums if a policy has been active for at least three years.

In the revised draft, Irda has proposed all individual non-linked life insurance and pension products shall acquire a minimum guaranteed surrender value (GSV). Unit linked insurance plans already have a minimum GSV.

“The minimum guaranteed surrender value would be 50 per cent of the total premiums paid if policy is surrendered in the second and third year. If surrendered in the fourth year, it would be 75 per cent of the total premiums paid and if surrendered during the fifth to the seventh policy year, it would be 90 per cent of total premiums paid. If surrendered thereafter, it would be 100 per cent of the total premiums paid,” the draft norms said.

Insurer accountable to the insured for act of agent: Consumer forum

http://www.thehindubusinessline.com/industry-and-economy/banking/article3687586.ece

When an insurance company accepts without demur personal cheques of its agents, after the agent had collected premium from the insured favouring himself in the first instance, it cannot subsequently wriggle out of its commitment to the insured.

The National Consumer Disputes Redressal Commission in Bajaj Allianz Insurance Company Ltd v. Sali Thomas found the argument of the appellant—insurer, that it was not responsible for the actions of its agent in not paying the premium collected in his personal name and deposited in his personal bank account, untenable after having acquiesced in the act by accepting the first few instalments.

The insurer’s plea that the agent was no longer its employ when the third and the last instalment was collected by him once again in his personal capacity did not wash with the Commission. Had it put its foot down on the pernicious practice of the agent collecting premium in his personal name and then issuing his own cheque to the insurer, its stand would have been tenable. The commission pointed out that the insured obviously cannot be faulted because the insurer had fostered the notion that the agent had apparent authority to collect cheques in his personal name by condoning this act earlier.