Private insurers too may axe cashless mediclaim

Private sector general insurers may follow their public sector counterparts in discontinuing the cashless facility to hospitals that do not agree to the package rates proposed by the insurers.Health has been a loss making segment for the industry.

With public sector insurers taking the lead in removing errant hospitals from their preferred provider network (PPN), the private sector players consider this the right time to follow suit.

Public sector insurers have almost 60 per cent share in the health insurance market.

Private players are waiting for the hospitals and the public sector insurers to resolve the issue before evolving an industry-level framework on PPN. “There has always been a need to control the claims payout in health as the loss ratio in the health insurance segment is as high as 120-130 per cent. For Rs 8,000 crore premium collected by the industry, the claim outgo is more than Rs 12,000 crore. We will look to evolve a basic framework at an industry level to restrict the hospital network,” said an official with a private sector company.

Collective guidance

Mr S.L. Mohan, Secretary-General, General Insurance Council, said that once the issue is settled between public sector insurers and hospitals, the council could help the private companies by giving them collective guidance.

“A basic framework could be evolved by the industry that hospitals would have to agree to for being a part of the PPN,” said Mr Mohan.

A senior official from New India Assurance Company said private insurers have shown interest in joining the preferred provider network.

“With our move, the momentum has been built. Other stakeholders are also likely to follow suit,” the official added.

The four public sector players — New India, Oriental, National and United India — had removed some of the leading hospital chains across Mumbai, Bangalore, Delhi and Chennai from the preferred provider network from July 1. This meant that even though customers could go to these hospitals for treatment, they could not avail themselves of the cashless facility. They would have to make payments and later apply to the insurance company for reimbursement.

Inflated bills

Insurance companies removed these hospitals from the list as it was found that they were overcharging customers, thus leading to inflated bills. The PSU insurers wanted these hospitals to fall in line with the rates prescribed to them to check their losses.

Earlier, each third party administrator would have its own network of hospitals. Now with the agreement among the four public sector players, the 20-22 TPAs servicing the four PSUs will have a common list of hospitals in these four cities.

Irda's fiat on insurance agents finds many supporters

Insurance Regulatory and Development Authority’s (Irda) latest proposal to make life insurance agents more responsible while selling policies has elicited mixed reactions from life insurers.

While some are of the opinion that the move is a step in the right direction and will bring in much-needed accountability, others feel the conditions prescribed are too stringent, resulting in many agents winding up their businesses.

The insurance regulator’s proposal, which was placed in the public domain last week, proposes to de-license agents who fail to achieve a persistency ratio of at least 50%. Persistency is defined as the proportion of policies remaining in force at the end of the period, out of the total policies in force at the beginning of the period. It is an indicator of the number of policyholders who have chosen to renew their policies, broadly signifying their satisfaction with the product sold to them.

The move follows widespread complaints of mis-selling by agents who carry out their task with an eye on commissions rather than policyholders’ needs, eventually leading to the latter deserting policies, which typically entail a tenure of more than 10 years, mid-way.

“The move is aimed at ensuring that the agency force acts more responsibly while selling policies. In that direction, we support it. The interests of insurers, distributors and customers have to be aligned, and persistency is a key factor here,” said Max New York Life MD and CEO Rajesh Sud. “The emphasis on persistency will be approved by one and all — agency as well as industry bodies. In our case, we already follow this principle,” added Reliance Life president and executive director Malay Ghosh.

In addition, Irda has put forth certain other recommendations as well. If the draft norms are implemented, an agent will have to sell a minimum of 20 policies every year and bring in a first year premium income of at least Rs 1.5 lakh. Should they fail to fulfil either of the criteria, they will have to achieve proportionately more in either one to make up for the shortfall in the other, states the proposal.

“Agents in India are not full time as most of them enter the agency force as a stop-gap arrangement and the successful ones stay on. After the revision in charge structure, commissions have come down and it has become even more difficult for an individual to earn a living as an agent,” said the CEO of a life company on condition of anonymity.

In India, the commission paid to banks and corporate agents are in many cases higher than the commission paid to individual agent. The proposed

guidelines will leave individuals at the mercy of banks and corporate agents who have a bad track record in terms of mis-selling. The new guidelines will hurt the agency channel,” he added.

“Some of the conditions seem harsh, considering that nearly 30-35% of agents in the country are unable to sell even 12 policies in a year. If these norms come into play, many agents could go out of business,” pointed out GN Agarwal, chief actuary of Future Generali Life Insurance.

Some also feel that since many agents do not meet the requirements at present, the regulator needs to allow a reasonable transition period to enable companies to train agents and boost their productivity. Irda has set July 31 as the deadline for receiving comments and suggestions on the draft norms from the general public, life insurers and other stakeholders.

PNB to decide about entry into life insurance in next 3 mths

Punjab National Bank has set up a committee to evaluate the prospects of entering the life insurance business after its earlier attempt to enter the sector along with US-based Principal fell through.

"The board of the bank has set up a board committee to decide on the (life insurance) business... We are now free to go ahead... once the board committee decides, which may take another 2-3 months," Punjab National Bank Executive Director M V Tanksale told.

"We will come out with document thereafter. We will have a definite business plan what way we should drive our insurance business," he said, adding that the board would take a comprehensive look at the various opportunities in the sector.

Last month, the bank decided to part ways with two of its partners in a planned life insurance joint venture. It was decided that PNB will buy the entire 26 per cent stake held by Principal Financial Group and 32 percent participating interest of domestic firm UK (Berger) Paints in Principal PNB Life Insurance Company Ltd.

PNB's stake currently stands at 30 per cent in the proposed joint venture, while the remaining 12 percent is with Vijaya Bank.

Post-regulatory approval, the stake of PNB in the venture would go up to 88 percent.

Principal PNB Life Insurance was incorporated in 2005 with an authorised capital of Rs 110 crore to commence the life insurance business.

The paid-up capital of the company stood at Rs 2 crore and PNB's stake is Rs 0.6 crore. For picking up the 58 per cent stake held by Principal and Berger, PNB will have to shell out 1.16 crore. Meanwhile, PNB posted a 28 percent jump in net profit to Rs 1,068 crore for the June quarter compared to Rs 832 crore in the same quarter of the previous fiscal. Total income during the quarter grew by 11 percent to Rs 6,863.38 crore against Rs 6,177.59 crore in the same period previous fiscal.

The NII of the bank rose by 45.4 percent to Rs 2,618.5 crore. At the same time, net interest margin (NIM) improved to 3.94 percent from 3.24 percent.

However, treasury income declined to Rs 121.11 crore from Rs 358.47 crore in the same quarter of the previous fiscal.

Total business crossed Rs 4.52 lakh crore at the end of June. At the same time, deposits rose by 16.6 percent to Rs 2,18,960 crore, while advances jumped by 24.6 percent to Rs 1,57,979 crore.

L&T General Insurance gets regulatory nod to start businress

L&T General Insurance Company has received final approval from the insurance regulator to commence business. The company is promoted by the $9.8-billion engineering company, L&T, which controls 100% equity in the non-life company.

The company, which will be headed by CEO Joydeep Roy, already has 100 employees on board and plans to increase its headcount to 300 by the end of the financial year. Mr Roy, who was formerly with Tata AIG Life Insurance, said the company will launch standard non-life products in the next 60-80 days. The company has already designed 20 products, which it will soon lodge with Irda for approval.

Mr Roy said the company will commence operations with a paid-up capital of Rs 175 crore against the statutory requirement of Rs 100 crore. Most of the additional capital will be invested in building up an information technology backbone. The company would use technology to lower its cost of operations. “We are starting our operations with 10 branches and will gradually extend our network to tier-II and tier-III centres, added Mr Roy.

He said health would be a major focus area for the company and L&T Insurance would eventually have its own health claim management team. For the short-term, however, it would outsource claims management to third-party administrators until its own infrastructure was in place.

L&T has a presence in the financial services sector through its three wholly-owned subsidiaries — L&T Finance (LTF), L&T Infrastructure Finance (LTIF) and L&T Mutual Fund, which was acquired from Cholamandalam. “Given the size and the opportunity, L&T considers financial services as an important business in its portfolio. We are very confident of building a world class insurance business in India,” said YM Deosthalee, whole-time director & chief financial officer, L&T.

Mr Deoshthalee said the non-life company would tap into the ‘entire L&T ecosystem’ to generate new business. This would include selling covers to corporate customers of L&T, borrowers of L&T finance and investors in L&T Mutual Fund. He said L&T, at present, had no plans to get into the life insurance business because it required a distribution reach that was not available with the group.

L&T was earlier in discussion with US insurer Travellers for a partnership. However, the talks fell through and L&T decided to go ahead with the venture on its own. Responding to a query on whether L&T would seek a partner, Mr Deosthalee said joint ventures with multinationals were constrained by the product design and overall strategy of the insurance partner. He pointed out that among present joint ventures, in many cases the foreign partner had a major say in running the business despite having a minority stake of only 26%.

Pvt life insurers may do away with renewal commissions to agents

Insurance agents are perturbed that some private life insurance companies have decided to discontinue payment of renewal commission after five years in the case of select categories of policies.According to them, under pressure to meet the cap on charges on unit-linked products, some life insurance companies have restructured products in a manner which offer no renewal commissions to agents and distributors after the completion of the first five years of the policy term. They fear this ‘unhealthy practice' could result in more policies getting lapsed.Most insurance companies have reduced renewal commissions. Earlier, distributors used to get an average commission of 2.5-4 per cent for the whole policy term. Now, it has been reduced to 1-2 per cent.“Companies like Aviva and ICICI Prudential have gone ahead and removed renewal commissions after five years,” said Mr Sanjiv Bajaj, Joint Managing Director, Bajaj Capital, a distributor of insurance products.This practice will lead to more policies getting lapsed as distributors will not have any incentive to persuade policy holders to pay renewal premiums on time. This will benefit companies as they have to pay the guaranteed yield only if the customers continue with the policy for the full policy term, said Mr Bajaj.However, Aviva Life in an e-mail response said: “While the renewal commission structure varies from product to product (it is beyond 5 years in some cases), what is uniform across all products is guaranteed Loyalty Additions and Maturity Additions to reward customers for staying invested over long term.”According to ICICI Prudential Life Insurance, the company has brought down renewal commissions by around 1 per cent for some products but has not completely removed renewal commissions paid to agents after five years.” We do not have any product where we do not pay renewal commission after the fifth year. We pay commission right from the first to the tenth year of the policy. After the products are reworked to meet the cap on ULIP charges, we have optimally rationalised the return to the customer and the commission to the agents, under renewal premiums,” said Mr Pranav Mishra, Senior Vice-President and Head-Products, ICICI Prudential Life.Earlier also companies used to cap commissions due to their aggressive pricing tactics. But it was only for low-cost products, such as products for high net worth individuals where acquisition costs are low. But after the cap on charges, they have extended it to most of their unit-linked products, said Mr Rahul Aggarwal, CEO, Optima Insurance Brokers.The concept of acquisition and servicing of clients has changed. Nowadays, some companies use agents only to acquire customers and then use technology to follow up with customers for renewals. Be it via SMS or emails, companies are exploring cost-effective channels to keep in touch with their customers, said Mr Aggarwal. However, even though these channels can be used effectively in the urban markets, they will have to rely on agents and distributors in the rural markets if they want to prevent policies from lapsing.

Pvt life insurers post improved results on better market conditions, cost controls

Cost controls and better capital market conditions helped private life insurance companies post improved performances on the profitability front in 2009-10.
Insurance companies were able to reduce costs as they focused on improving the productivity of their branches and agents rather than indiscriminately opening new branches. There was also less strain of new business on profitability as insurers went slow on growing their business, said industry officials.
Bajaj Allianz Life Insurance reported the highest net profit among life insurers that have declared their results till now. Its net profit soared to Rs 427 crore in 2009-10 from Rs 41 crore in the year ago period. The company's new business premium growth was flat at Rs 4,451 crore (Rs 4,491 crore).
“We were able to control our expenses. We focused on improving the productivity of the distribution network. The focus will be on growing the business without increasing the branch network,” said Mr Kamesh Goyal, Country Manager, Allianz and CEO, Bajaj Allianz Life Insurance.
The company's expense ratio came down to 16.5 per cent (19.2 per cent).
SBI Life Insurance was back in the black posting a net profit of Rs 276 crore, against a loss of Rs 26 crore. The company had one of the lowest expense to gross written premium (GWP) ratio of 6.5 per cent.
ICICI Prudential Life Insurance achieved accounting profitability for the first time since its inception. It reported a net profit of Rs 258 crore, against a loss of Rs 780 crore in the year ago period. However, the company's new business growth shrunk by seven per cent to Rs 6,334 crore.
Kotak Life Insurance's net was higher at Rs 69 crore (Rs 14 crore).
Companies such as HDFC Standard Life, Birla Sun Life and Reliance Life were able to bring down their losses.
Along with cost controls, improved capital market performance due to favourable investment climate also helped boost the net of companies, said Mr Gaurang Shah, Managing Director, Kotak Life Insurance.
Most of the players were able to increase their assets under management.
SBI Life's AUM grew 96 per cent to Rs 28,551 crore. ICICI Prudential increased its AUM by 75 per cent to Rs 57,319 crore. Bajaj Allianz Life's investments grew by 95 per cent to Rs 33,422 crore.

Life insurers to abide by IRDA's directions, says Council
Life insurance industry association Council on Sunday said insurers will abide by IRDA's direction and would continue business as usual. The 14 life insurers would abide by the IRDA's direction to continue business as usual," Life Insurance Council Secretary General S B Mathur said when asked if the insurance companies would continue to sell ULIP policies following the regulator IRDA's directions. Market regulator SEBI on Friday last week banned 14 life insurance companies from raising funds through unit-linked insurance policies, which invest the money collected into equity and debt markets. Insurance sector regulators IRDA, however, yesterday rejected the SEBI ban and asked the insurance companies to do business as usual. Unit-linked equity products (ULIPs) are insurance plans sold by life insurers where the money collected from consumers is invested into equity and debt markets and returns are linked to the same. Regulation of ULIPs has become a bone of contention between the two regulators. The turf war concerns the nature of ULIPs which account for over 50 per cent of the total life insurance business in the country. As on March 31, 2009, total funds under the management of life insurance sector stood at over Rs 9 lakh crore of assets, according to the Life Insurance Council's figure. The life insurance companies against whom SEBI passed the order are SBI Life, ICICI Prudential, Tata AIG, Aegon Religare Life, Aviva Life, Bajaj Allianz, Bharti AXA, Birla Sunlife, HDFC Standard Life, ING Vysya Life, Kotak Mahindra Old Mutual Life, Max New York Life, Metlife India and Reliance Life.

Clouds of uncertainty over ULIPs
The controversy about Unit Linked Insurance Plans (ULIPs) has reached an inflexion point with SEBI on Friday banning of 14 of the 25 insurance companies from marketing ULIPs.SEBI's order does not mention insurance companies such as LIC, IDBI Fortis and a few other bank-sponsored life insurance companies.Based on data from the IRDA's 2008-09 annual report, ULIPs managed total funds of Rs.1.72 lakh crore as of March 2009. Insurers such as ICICI Pru Life, Bajaj Allianz, SBI Life and Birla Sun Life were the ones with the biggest ULIP assets.A rough calculation suggests that ULIPs could be managing close to Rs 2.3 lakh crore now, after accounting for the market appreciation and new premium collected, inclusive of LIC (about Rs.1.2 lakh crore).Ever since the launch of ULIPs by private insurers in 2003-04, there has been friction between mutual funds and life insurance companies.With SEBI banning entry loads on mutual fund schemes, which in turn led to MF agents upfront commissions going down to 0.5 per cent from the earlier 2 per cent, inflows into mutual funds declined sharply.In an interaction with Business Line, commenting on the ban, Life Insurance Council Secretary-General, Mr S. B. Mathur, said that it was unfortunate that SEBI had imposed this ban, but felt that the insurance companies would explore various possibilities to find an acceptable solution. IRDA is expected to issue a circular this regard and also may take up the matter with SEBI.We spoke to several insurance companies to have their view on this order and the majority of them felt that IRDA was more competent to comment on this. But a top insurance official on the condition of anonymity, raised the question of how claims of existing ULIP holders will be dealt with now. “If I am not allowed to accept his premium, if the death occurs, who will be responsible for (fulfilling) the insurance contract? Under Type I ULIPs, the fund value or the sum insured will be paid as death benefit.The ULIP is a unified contract, investment contract cannot be taken out separately and be subject to a certain regulator.”An insurance agent said : “SEBI's recent crackdown on upfront commission being paid to agents, being charged as expenses for arriving at the net asset value means that we are not going to get any (upfront) fee for marketing mutual fund products. With the ban on ULIPs, we will be completely thrown out of the financial intermediary business. This may impact our life very seriously.”

ADAG eyes foreign partners for life, general insurance biz

The Anil Ambani Group-promoted Reliance General Insurance is looking to buy a majority stake in its rival Royal Sundaram, while talks are in advanced stages to bring in Swiss Re as foreign partner in its life insurance venture. While talks have reached advanced stages for sale of 10-15 per cent stake in Reliance Life to Swiss Re for an estimated Rs 1,500 crore, a possible buyout of the Sundaram Group's 74 per cent stake in Royal Sundaram Alliance Insurance could take some time due to regulatory issues, sources in the know of the developments said. Royal Sundaram Alliance Insurance Company is a joint venture between the Sundaram Group and the England-based RSA, which owns 26 per cent stake in the alliance. Though the deal size could not be ascertained, it can be noted that Royal Sundaram has mopped up Rs 820 crore premium in the first 11 months of this fiscal, compared to Rs 1,847 crore premium collected by Reliance General. If successful, it would be the first time that a general insurance firm acquires a rival and therefore the relevant guidelines need to be sought from the sectoral regulator Irda. In the life insurance space such a deal has happened in the past when Reliance Life acquired AMP Sanmar in 2005. Both Reliance Life and Reliance General are part of Reliance Capital, the Anil Dhirubhai Ambani Group's financial services arm. With these two separate deals, Reliance Capital is seeking foreign alliances to run both its life as well as general insurance businesses, sources said. When contacted, ADAG spokesperson declined to comment, while Royal Sundaram did not respond to an e-mail. RSA's external communications director Louise Shield said, "we don't comment on rumours and speculation so have no response to make." When contacted, Swiss Re's director for communications (Asia division) Kwokchoi Wong said the company "does not comment on market rumours". As per the existing rules, a foreign entity can hold only up to 26 per cent stake in an insurance firm in the country. Besides plans to offload 10-15 per cent stake to a foreign partner, Reliance Life could sell additional 10-15 per cent shares through an initial public offer, for which it is awaiting final IPO guidelines from Irda, expected by the end of the next month. For nearly a year, Reliance Capital has been planning either an IPO or strategic sale of its life insurance business to unlock value for shareholders. After the strategic stake sale to foreign firms, as and when it happens, Reliance Life could also come out with an IPO, according to sources. "Depending on the interest from foreign firms (for buying a maximum of 26 percent stake), the company (Reliance Life) could come out with an IPO," a source said.

Insurance cos join hands with Visa cards for premium payments

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

Birla Sun Life targets retirement, health areas

Birla Sun Life Insurance Company is planning to expand its product portfolio in retirement and health insurance segments in 2010-11, according to its Chief Financial Officer, Mr Mayank Bathwal.
“In the health segment, we will look at launching policies aimed at the unorganised sector and self employed persons, a segment vastly underserved as of now,” Mr Bathwal told media persons at a meeting here.
The health segment, currently contributing less than five per cent of the company's business, would be one of the fastest growing segment for the company in the future, he said.
In the retirement segment, he said, the company could look at launching products in tune with consumer demand in both the accumulation phase of the fund and its annuity component.
The company currently holds 3.6 per cent market share of the total life insurance industry.
Its loss account as on December 2009, had reduced by nearly 26 per cent over the same period last year to Rs 381 crore, he said.

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

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

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

Bharti AXA offers 10% discount on health plans for women

On the eve of International Women’s day, non-life insurer - Bharti AXA General Insurance offered 10 per cent discount on all its health Insurance products for women. The discount will be available till March 31, 2010.

The insurer said that the primary objective of the promotion is to increase awareness amongst women of the need for financial protection against health risks and other stress-related diseases that women today are prone to.
“With today’s fast paced lifestyles and nuclear families, women today are more prone to health related problems than they ever were before. High stress levels at the workplace and other lifestyle related health risks; all point towards the need for better health care & health insurance to provide much needed help is case of an unwelcome eventuality,” said Amarnath Ananthanarayan CEO, Bharti AXA General Insurance.

Life insurance employee strength down 34,000

18% reduction in workforce aimed at lowering expenses.
Companies may be back to hiring, but private life insurers saw their employee strength fell nearly 34,000, or 18 per cent, during April-December 2009. The cut was aimed at lowering expenses.
According to data collated by the Life Insurance Council, the number of employees declined to 152,874 at the end of December 2009 from 188,645 a year ago.
However, the number of agents increased by 7.59 per cent to 2.98 million during the period as against 2.77 million at the end of December 2008.
The staff strength fell despite an improvement in sales during the nine months ended December 2009. Income from new policies rose 25 per cent during the period.
Individual companies refused to disclose the number of employees on their payrolls.
"Due to attrition, we saw some reduction in our workforce. The numbers should be marginal since hiring also took place during the period," said Abhijit Gulanikar, chief financial officer, SBI Life.
"Insurers are focusing on profitability and cutting the non-functional workforce. Productivity also went up as the number of employees decreased," said GV Nageswara Rao, managing director and chief executive officer, IDBI Fortis.
"When people do not meet their sales target, they are forced to leave. Last year was a tough one as companies increased their sales target, focusing more on efficiency," added a senior executive of a life insurance company.
Cost reduction, driven by companies such as ICICI Prudential and HDFC Standard Life, was aimed at a quicker break-even. In a recent interview, ICICI Prudential Life Managing Director V Vaidyanathan told Business Standard the company would break-even earlier than the 2012 deadline it had set for itself.
Belt-tightening — which includes relocating offices, renegotiating rentals and even lowering expenses on stationary and electricity — is already showing results in the form of a lower rise in expenses. Operating expenses of 23 life insurers dropped to 10.14 per cent at the end of December 2009 compared to 12.24 per cent for 21 insurers a year ago.
"The drop in expenses was possible due to effective cost-cutting measures adopted by the industry. Companies curtailed operating expenses and rationalised their distribution channels, while managing an increase in total premium," said Life Insurance Council Secretary General SB Mathur.

SBI Life posts net profit of Rs 199 cr in first 9 months

SBI Life Insurance, has clocked a profit of Rs 82 crore in Q3 FY10 while for the first nine-months of this fiscal (FY10), the life insurer posted a net profit of Rs 199 crore.
Its total premium collection in the first nine-months stood at Rs 6,087 crore, up 32 per cent, a press release issued stated.
New Business Premium grew by 19 per cent to Rs 4,392 crore during the period.
"Reflecting its superior efficiency in its business operations, the company maintains the lowest "expense to GWP (Gross Written Premium)" ratio in industry of 7.99," the release said.
"We remain committed to reaching life insurance solutions to customers, across socio-economic and geographical segments, enabling them for a better tomorrow," SBI Life Insurance's Managing Director and CEO, M N Rao said.
The New Business Annualised Premium Equivalent (APE), a standard measure in the industry to measure performance, has grown by 24.75 per cent to Rs 3,953 crore.
Assets Under Management (AUM) grew by 111.5 per cent, over the corresponding period last year, to Rs 24,589 crore.

Intimation to company in writing necessary for insurance claim

An insurance company is not liable for any deficiency of service if a policy holder fails to submit the information about the accident,
damage and claim in writing, a consumer court has held. "The oral approach to the insurance company for appointment of the surveyor and to determine the damages to reimburse has no meaning unless the required information of the accident, damage and claim are submitted in writing," the District Consumer Disputes Redressal Forum (Central) has said. The policy holder, Charanjeet Singh, approached the Forum, seeking insurance claim from New India Assurance Company Limited for his vehicle which suffered damage in an accident. The Forum dismissed the complaint on the ground that no surveyor could be appointed by the company to assess the insurance claim in the absence of claim form and without having any information of the accident. "Without the information of the accident and damage to the vehicle and in the absence of claim form, the company could not have appointed any surveyor to assess the damages," the Forum, comprising President B B Chaudhary, Members M Siddiqui and S R Agrawal, said. The Forum noted that the complainant failed to produce any medical evidence relating to the accident. "Singh's contention is not supported by any medical documentary evidence, which prevented him to approach the insurance company after he met with an accident. The vague plea has got no merit," the Forum said. Singh met with an accident in 2004. He claimed to have received treatment in GTB hospital. His insurance claim for damaged vehicle was repudiated by the company on the ground that they were not informed about it.

Insurance regulator may focus on small policyholder this year

2010 will see India's insurance regulator coming of age and focusing on how to provide maximum benefits to the average policyholder, industry watchers expect.

The Insurance Regulatory and Development Authority (IRDA) had a big year in 2009, coming out with several regulations including:
* the cap on charges levied by firms on their unit-linked insurance policies (ULIP),
* the solvency margin they have to keep,
* payment made to intermediaries,
* corporate governance,
* public disclosure, and
* allowing health plus life insurance policies.
In 2010 the primary action expected is to refine the game changing regulation that capped the charges levied by the insurers on their ULIPs to make it relevant for a majority of the policyholders.
'In addition, guidelines for aligning financial reporting with IFRS (International Financial Reporting Standards), risk based capital, calculation embedded value (current value of the future profits) and corporate governance are expected this year,' G.N. Agarwal, appointed actuary of Future Generali India Life, told IANS.
'This year IRDA is expected to drive the focus on customer value tweaking the cap on charges regulation,' a high-ranking official of a private life insurer told IANS on condition of anonymity. IRDA will also take a strong stand against the swelling of the insurers' kitty when a policyholder is forced to surrender his policy, he said.
R. Krishnamurthy, managing director of global consultancy firm Towers Watson's insurance and financial services division, said: 'We can expect IRDA to play an activist role in 2010. The IRDA and SEBI (Securities and Exchange Board of India) are likely to work out joint initiatives to control the mindless growth of ULIPs and demand more accountability from the players.'
Last July the IRDA was forced to come out with a regulation for capping the charges on ULIPs on the back of SEBI abolishing the entry load on mutual funds. The pension regulator unveiled the new pension scheme with very low fund management charges.
'However, life insurers have come around the regulation by offering the benefit only to policies that are held to maturity. Considering the fact that majority of the ULIPs are unlikely to be held till maturity, policyholders will not see any improvement in their value proposition,' an industry official told IANS.

Religare opts for solo entry into health insurance business

Insurers are venturing alone into the general insurance arena, following tie-ups with global players not working out.
Religare Enterprises is likely to foray alone in the health insurance space, though sources close to the development said that it had not ruled out the possibility of roping in a partner later.
In June, Religare had signed a non-binding term sheet with Swiss Re to set up a health insurance joint venture. But three months later, the two parted ways.
"We are evaluating the option of going alone and may soon apply for R1,R2 and R3 license," said Anuj Gulati, Chief Executive Officer Religare Health Insurance. R1, R2 and R3 are different stages of approval granted by the Insurance Regulatory and Development Authority, with R3 being the final go-ahead.
So far, Reliance General is the only non-life insurer to not have any foreign joint venture partner.
On the life side, Reliance Life and Sahara Life do not have partners, though the former is now in the hunt for an investor to raise funds to finance its expansion.
Insurers said foreign partners bring in expertise to run the business, which is required more than the capital. The minimum capital required for setting up both life and non-life insurance is Rs 100 crore. More capital is required as the business grows but the need for funds on the general insurance side was smaller.
Last year, when L&T parted ways with Travelers, it went ahead to seek regulatory approval for venturing into the non-life insurance space.
The company expects to start operation in another two months. Another tie-up that broke last year was Hero-Ergo and Indiabulls-Societe Generale while Edelweiss is setting up a life insurance joint venture with Tokyo Marine.
Insurance industry executives said that with the private sector present in the Indian market for nearly 10 years, local talent had been created and that will help Indian companies go solo.
Apart from the fact that general insurance required lower capital, a group like Religare could easily put in the required funds till the company achieved break-even, the sources said.

PVT INSURANCE COMPANY NEWS

Life insurance companies see expenses dip to 10.14%

Expenses of life insurance companies have dropped significantly to 10.14% for the period ending 31st December 2009, compared with 12.24% for the corresponding period last year, according to the data released by the Life Insurance Council (LIC). According to SB Mathur, secretary general, LIC, "The drop in expenses was possible due to effective cost-cutting measures adopted by the life insurance industry, by curtailing operating expenses and rationalising their distribution channels coupled with an increase in the total premium to Rs 164, 353 crore from Rs 131, 382 crore, an increase of 25%".
The renewal premium of the industry increased from Rs 79,168 crore to Rs 96,917 crore, an increase of 22% on a y-o-y basis. In case of ULIPs, the renewal premium increased by 41% to Rs 37, 543 crore from Rs 26, 638 crore. New business premium increased by 29% to Rs 67, 438 crore from Rs 52,215 crore, with private companies also showing a positive growth. Share of linked business in new business has decreased from 61% (Dec 08) to 53% (Dec 09) indicating customers' discomfort towards market volatility and opting hence opting for conventional products. The total infrastructure investment made by life companies stood at Rs 1, 30,009 crore. Equity investment of life companies was in tune of Rs 44, 358 crore for the period Apr-Dec 09.