IRDA wants insurers to take active interest in firms they invest in

The insurance regulator wants insurers to become more active on issues related to corporate governance in listed companies.

The move assumes significance as insurance companies hold significant stakes in listed Indian entities. Life insurance companies manage assets of over Rs. 19-lakh crore, with Life Insurance Corporation of India (LIC) being the largest domestic institutional investor managing assets of over Rs. 13-lakh crore.

TS Vijayan, Chairman of the Insurance Regulatory and Development Authority (IRDA), at a recent seminar in Mumbai said: “It is time insurance companies looked at the corporate governance practices of companies in which they are investing.

“I believe these practices will come so that investment managers of insurance companies can get the best returns while ensuring safety of the investments for policyholders.”

According to reports, the capital market regulator Securities and Exchange Board of India (SEBI) has been in discussion with IRDA urging it to ask insurers to be more vigilant with regard to corporate governance of companies.

Currently, while SEBI has issued norms for mutual funds governing their voting record, there are no norms for insurers on improving corporate governance in listed companies.

In 2013, the Finance Ministry had asked LIC, which is seen as a passive investor in many companies despite holding significant stakes, to place nominees on boards of all companies in which it has significant investments to help protect shareholder interest.

The Chief Investment Officer of a large private life insurance company said that over the last year, insurance companies have been more active investors and have started exercising their voting rights in a bid to protect the interests of policyholders.

In July, in a rare case of investor activism, shareholders rejected the compensation payment in excess of prescribed limits to three directors of Tata Motors.

Risk-based solvency

Vijayan also said that a committee formed by IRDA has submitted a report on risk-based solvency norms.

“The solvency regime at present does not give any appropriate credit for appropriate risk strategy in arriving at solvency. In contrast, the risk-based solvency margin regime will explicitly incentivise insurers to adopt a comprehensive risk-management framework for capital requirement,” said Vijayan.
Source: http://www.thehindubusinessline.com/

IRDA may allow 5-year insurance policies to ease renewal hassles

You may soon have a way out of the annual car insurance renewal hassle, replete with the pesky calls and haggling over the amount.

The insurance regulator is considering a proposal to allow insurers to offer policies with a one-time, five-year cover and is expected to issue fresh guidelines on such long-term products. These policies could come cheaper, too. "Some insurers have submitted proposals in this regard and we are evaluating them. We can start with such policies in the two-wheeler segment first," said an official with the Insurance Regulatory and Development Authority (IRDA), adding that based on the experience, similar products for commercial vehicles can be launched.

The regulator also aims to use this long-term policy cover to promote insurance, especially in rural areas. "Several companies have pointed out that insurance renewals are not happening, so if we have a long-term product right at the inception, it may also promote the insurance culture," the IRDA official said. As per the latest data, insurance penetration in the country declined to 3.96% in 2012-13 from 5.2% in 2009-10. General insurance penetration in the country stands at 0.78%. The premium underwritten for the motor segment in 2012-13 was Rs 29,777 crore.

The move comes when the government is looking to open the insurance sector and allow 49% foreign direct investment. There are 17 private sector and four PSU general insurers in the country. According to a report by KPMG, the under-penetration is driven by lack of overall financial awareness, lack of understanding of general insurance products, low perceived benefits and propensity to purchase insurance based on reactive drivers such as insistence by financers and statutory requirements.

General insurers also feel that such a product will boost the renewal business, which is quite low in rural areas. "The regulator should look at allowing a longterm cover for commercial vehicles such as tractors and mini utility vehicles. These can be further linked to the registration and fitness certificate," said a CEO of a private general insurer, requesting anonymity.

A senior official with a PSU general insurer said some issues need to be sorted out before such a product is rolled out. "For example, you need a mechanism to factor in the 'no-claim bonus' and subsequently the pricing of such a policy," he said. There are also concerns about the possible liability on such insurance products exceeding the premium received.

At present, there are 10 lakh outstanding motor third-party claims involving an amount of about Rs 22,000 crore. Customers, though, may not complain, given the hassles of renewal every year, when they are bombarded months before the policy is to expire.

Source : http://articles.economictimes.indiatimes.com/

Irda issues draft guidelines for insurance marketing firms

Paving the way for a new distribution channel, the Insurance Regulatory and Development Authority (Irda) issued draft guidelines for insurance marketing firms on Wednesday.

An insurance marketing firm is an entity that will be allowed to market insurance policies along with other financial products such as mutual funds that are approved by financial sector regulators, Irda said.

To sell these products there will be two kinds of licensed individuals: an insurance salesperson, who will be responsible for soliciting and marketing insurance products alone, and a financial service executive, who will handle other financial services, such as offering financial advice, sale of mutual funds and the national pension system, or NPS.

These licensed individuals will have to obtain the necessary qualifications and licences from the respective regulators. To become an insurance salesperson the individual needs to have passed Class 10 and needs to clear the insurance brokers examination. Insurance agents are not eligible to become insurance salespersons, and the latter can’t cross over to become agents unless their licences as salespersons are active

.

Financial service executives will need certification from regulatory bodies. For instance, to sell mutual funds, they will need to be certified by the Association of Mutual Funds in India (AMFI). For distributing NPS, they will need to be certified by the Pension Fund Regulatory and Development Authority (PFRDA), and for sale of financial products regulated by the Securities and Exchange Board of India (Sebi), they will need to obtain registration as investment advisers under the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013.

In case of insurance, salespersons will be involved in soliciting insurance policies, but their remuneration will not be commission-based. According to the draft rules, they would be paid a fixed amount and a performance incentive that may be over and above this. The role of the salespersons will lean more towards being a broker in the sense that they will need to keep the interest of their customers paramount.

“Insurance marketing firms will have a fiduciary responsibility towards customers. These are neither insurance brokers nor insurance agents, but a new channel of distribution,” said P. Nandagopal, chief executive officer and managing director of IndiaFirst Life Insurance Co. Ltd. “Insurance brokers in retail currently operate like multiple corporate agents, and having one more distribution channel that is allowed to sell multiple insurance policies may improve this practice. A new distribution channel is a welcome move,” he said.

To be an insurance marketing firm, a company will need to have at least Rs10 lakh of net worth at all times and will have to buy a professional indemnity insurance policy that is equal to four times the business turnover of the marketing firm. The licence will be given for three years.

According to the draft, insurance marketing firms will be allowed to charge commissions as per the Insurance Act. In addition to this, these will also be able to charge a fee on account of marketing expenses, expenses towards infrastructure and performance-based incentives.

Irda will take feedback till 15 April.

Read the entire draft here:

http://www.irda.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?page=PageNo2249

Source : www.livemint.com

Insurers to offer online products with more options than plain vanilla covers in 2014

 

Online insurance policies are likely to get more customer-friendly in the New Year.

With life insurers focusing specifically on online channel to sell term insurance, customers can look forward to more products, and extra features to the existing plain vanilla covers, apart from discounts on premiums.

Some changes are likely on the health insurance front, too.

Employers' group covers are likely to either trim benefits or withdraw some altogether.

Individual health covers may also become costlier.

"Online products will see even more traction in 2014, with the online platform driving the growth for the industry," says Rishi Piparaiya, director, marketing and bancassurance, Aviva India.

Online products with cheaper premium lured many individuals who earlier had reservations on buying pure protection policies that do not pay anything back. "Online platform will become one of the emerging distributional channels, due to growing internet-savvy population.

Customers can also expect more discounts as insurers will pass on the savings on acquisition costs — like commissions — to them," says Anuj Agarwal, MD and CEO, Bajaj Allianz Life.

In 2013, Aviva and Max Life launched variants of deferred term plans, which aim to help nominees avoid inefficient utilisation of lump-sum death benefit.

The trend is likely to continue in the New Year. According to online aggregator policybazaar.com's CEO Yashish Dahiya, such term plans already account for 25% of the portal's online term business. "Next year, more companies could queue up to launch such income replacement plans and we expect this segment to corner 60% of our online term business," he adds.

However, many industry participants believe the claim settlement record of online term plans is a cause for concern, and it may come under regulator's lens soon. "There has been some talk around claim settlement record of online term policies not being good. The claim has to be paid only in case of the policyholder's death and if there is no one to fight for nominees at that point in time, some insurance companies take advantage of the situation to reject claim. In 2014, we could see Irda framing some regulations to rein in such practices," says Sanjiv Bajaj, managing director, Bajaj Capital.

Health Insurance

Employees relying solely on their employer's group cover for their health insurance requirements will have to scout for independent covers, especially for their parents. "In the group health insurance space, we see some hardening of prices next year on account of increased loss experience by the industry," says Neelesh Garg, executive director, ICICI Lombard. Higher premiums would mean corporates taking steps to curtail the benefits offered.

"Group health premium is sensitive to a rise in medical inflation rate, which is ordinarily rising by 10% year-on-year. If a corporate pays for medical inflation, the employees should not expect any change. But, if a corporate does not propose to pay to cover for medical inflation, there could be a corresponding moderation in policy benefit through reduced sum insured/sub limit/co-pay etc to balance the risk premium," says Rakesh Jain, CEO, Reliance General.

Parental coverage is usually the first casualty of such premium hikes. In any case, advisors and insurers recommend employees to buy standalone policies to cover themselves and families.

"Employees should take a parallel individual health policy to cover shortfall from group health policy. It would also safeguard them in an eventuality arising from change in job," says Jain.

Also, even individual health insurance premiums are also likely to go up this year. "Irda's working group on retail health insurance has looked at pricing methods and proposed certain changes so as to avoid heavy losses to the health insurance industry," informs Sanjay Kedia, CEO of broking firm Marsh India. However, you could draw some consolation from expected improvement in claim settlement procedures, with thirdparty administrators' role being severely curtailed.

Source : articles.economictimes.indiatimes.com

Hike in third-party's insurance premium not reason enough to change course

 

Your car insurance premium for third-party liability coverage is set to rise 20% from April 1. The Insurance Regulatory and Development Authority ( Irda) issued a circular last week spelling out the quantum of hike applicable to private cars, two-wheelers and commercial vehicles for the financial year 2014-15. The premium for your third-party liability cover, which is mandated by law for all vehicles, will go up when you renew your policy this financial year. The thirdparty insurance premium tariff is fixed by the insurance regulator every year. The hike for private cars was in the region of 20% last year as well.

Insurers and industry watchers feel the impact of increase in premium will be nominal for car owners. "For private cars, the share of third-party component in the overall premium is quite small at 15%. So, the overall increase in premium will be just 1-2%," says Sanjay Datta, chief of underwriting and claims, ICICI Lombard General Insurance. If you own a car with engine capacity of less than 1000cc, your third-party premium will amount to Rs 1,129, up by Rs 188 compared to last year. Similarly, for cars with an engine capacity between 1000cc and 1500cc, the premium increase will be Rs 222. For cars with engine capacity exceeding 1500cc, the third-party premium will go up by Rs685 to Rs4,109 this year. "The maximum increase for private car owners will be close to Rs700. An increase of a few hundred rupees, in absolute terms, should not worry policyholders," says Deepak Yohannan, CEO of insurance aggregator portal myinsuranceclub.com.

Source : economictimes.indiatimes.com

Irda set to revamp packaging of life insurance products

The Insurance Regulatory and Development Authority (Irda) is set to revamp product designing practices in the life insurance industry to protect consumer interest.The insurance regulator has proposed wholesome changes in various aspects — participating and non-participating products, group long-term covers, products offering ‘low’ insurance covers, single premiums or products with limited premium payment terms, net asset value (NAV)-guaranteed products and benefit illustration procedures.

Source: Business Standard

Provide cover for HIV patients

A public interest litigation has prompted the Insurance Regulatory and Development Authority to issue a draft guideline mandating insurance cover for HIV patients. The regulator came up with the directions today, after a PIL challenged the practice of insurance companies rejecting benefits to HIV-positive patients. The Delhi High Court, calling it “unreasonable and unconstitutional”, had last May issued a showcause notice to the the regulator to explain its stand. The guideline will be implemented from October this year. In fact, the draft of the document had been in the works for the last five years after then finance minister P Chidambaram first mooted the idea in response to a proposal from his Cabinet colleague Oscar Fernandes, who was then the labour minister.

Source: Business Standard

Irda sets benchmark for IPOs by insurance companies

The Insurance Regulatory and Development Authority (Irda) issued the initial public offering (IPO) regulation for life insurance companies on December 1, 2011, based on the Gazette notification of November 14, 2011. The regulation enables those life insurance companies that have completed 10 years of operation to increase equity capital under ICDR (Issue of Capital and Disclosure requirements) Regulation, 2009, of the Securities and Exchange Board of India (Sebi), either through fresh issue of equity capital or divestment of equity by one or more of the promoters through a public offer for sale. The insurance company has to get the approval of Irda before applying to Sebi.

Source: Financial Express