Uninsured vehicles mount up

It is surprising to note that about one out of every three vehicles running on the roads of India are uninsured. As a matter of fact, the third party liability insurance cover is compulsory for the owners of the vehicles but a surprising number of them are uninsured. The third party liability insurance, covers the legal liability of insured towards third party personal injury and property damage arising out of an accident involving the insured vehicle. Despite the coverage being mandatory, a huge number of the vehicles are not insured, the main reason being, the insurance companies do not encourage standalone third party insurance since it is a loss making business for them. Not only this, the old vehicles are also not offered insurance coverage because the premium paid is comparatively lower than the payout by the insurance companies. Hence the vehicle owners are bound to break the law. On the other hand, the private insurance companies have tied up with the vehicle manufacturers by offering them attractive deals. This has worsened the case of loss making business, as the premium for new vehicles is fairly high as against a liability-only cover.

ICICI Lombard tops among private players

Among the twelve private players, it is ICICI Lombard that has been able to cross Rs 1,000 crore in premium collection. The general insurance industry has grown by a remarkable 15% till November in the current financial year. However, the performance of Reliance General Insurance Company has dipped, the reason being the dispute between the Ambani brothers. In all, the private players have accumulated over Rs 13,000 crore in total between the months from April to November. Among the state owned general insurers, New India has grown by an impressive 13% collecting Rs 3,094 crore in premium and garnered a market share of 23.05%. Oriental Insurance captured the second position with a premium collection of over Rs 2,330 crore. National Insurance took the third position followed by United India at the fourth place. All these companies have indulged into a fast paced competition and the customers being at the receiving end has benefited from it. Among the private general insurers, ICICI Lombard has undoubtedly performed well and is justifiably reigning the number one position.

PSBs keen on insurance venture

As per the rules of Insurance Regulatory and Development Authority, a minimum capital of Rs 100 crore is required to initiate an insurance company. Since privatization, insurance sector has attracted a lot of private entrants. Public Sector Banks (PSBs) are the new one to take the plunge in insurance. Since foreign hands cannot have more than 26% stake, PSBs like Punjab National Bank(PNB), Bank of Baroda(BOB), Indian Overseas Bank(IOB), Industrial Development Bank of India(IDBI), etc. have plans to join hands for its insurance foray. This alliance would see another freshman in the insurance domain. The first Indian bank to mark a move in this direction was State Bank of India, which is a JV with French based Cardiff, and it took the shape of SBI Life Insurance. Recently, Allahabad Bank, Indian Overseas Bank and IOB have announced that they are on the lookout for an overseas partner to form a general insurance company. The next to follow this trend is IDBI Bank. The other banks following the same lines are ICICI Bank and HDFC that entered JV with Prudential Life and Standard Life Insurance respectively.

A new kid in insurance arena

JM Financial has its mind set on its insurance venture. The firm holds 51 % stake in the investment-banking arm of JM Morgan Stanley. The foreign partner would be able to hold only 26% stake and a domestic firm that would be roped in will hold the remaining stake of 74%. JM Financial has been in talks with a couple of domestic firms for its venture. It is expected to kick off in a few months. An entry into the insurance business and a strong presence in asset management will help the company’s venture in insurance. JM Financial is one of India's fully integrated investment banks. The company consistently ranks in the top tier of Indian investment banks in terms of capital raising in the domestic markets.

Oriental Insurance to revise mediclaim policies

The state owned Oriental Insurance is all geared up to encourage more youth to buy mediclaim policies. As a move in this direction, it has plans to withdraw its existing mediclaim policies and replace it with new ones that would attract more young buyers. The premium income earned by the company was around 12-15% in ’04-’05 and the claims received were as high as 120%. The figures reveal a great deal of loss to the company, the new policies to be launched will have revised premium rates wherein those above 40 years of age will have to pay higher premium with respect to the tariff structure. Oriental Insurance, currently has two mediclaim policies in its kit, functioning for individual and group separately. These policies will be soon replaced it with new ones in a few weeks time. The policy will clearly spell out the pre-existing and the illnesses that will be covered. This will ensure transparency for a layman before he picks up a mediclaim policy.

Life Insurance Companies witness growth in premium income

According to the data compiled by the Insurance Regulatory and Development Authority (IRDA), the Life Insurance Companies’ premium income from new business increased to 105%. In November, the business income garnered was Rs 2,841 crore whereas in the corresponding year, it stood at Rs 1,386 crore. The major share of the premium income was generated by the state owned Life Insurance Corporation. The premium income of LIC from the new business grew by 111%, earning Rs 2,111 crore in November whereas the private insurance companies’ marked a 90% growth obtaining Rs 730 crore. Among the private insurance companies, Bajaj Allianz replaced ICICI Pru Life, which held the number one position in October. Bajaj Allianz acquired a market share of 7% in new business premium income in November compared with ICICI Prudential, which gained 6.4% market share.

Celebrity hospitals under the scanner

The facility of cash settlement wherein the policyholder could pay the hospital bills and then claim a reimbursement from their respective insurer have been banned for individual claims. However the members covered by corporate health plans will remain out of this net. There has been a ban on cashless settlement by Breach Candy, Harkisondas and Lilavati hospitals. Following several complaints received from individual customers, the state owned general insurance companies, New India Assurance, United India, National Insurance and Oriental Insurance have announced a ban on cashless settlements. This ban will continue till the problems are tracked down. The general insurance companies have been trying to analyse data collected by Third Party Administrators (TPAs) from hospitals located in Mumbai. It was found that the cashless settlement was far more than the treatment cost meted out for the same disease. This has resulted in increased number of inflated claims of medical insurance policies leading to a tremendous loss for the insurance companies. Hence these hospitals have banned the cash settlements for individuals’ atleast till the issues get resolved

Insurance cover for ‘tomb’

Non life insurance cover is on the rise. People are becoming increasingly aware of insurance and they do not want to limit themselves by insuring only lives. Here is an example of a family that has insured a tomb called as ‘Karuvely’, which is situated at the premises of the St Dominic’s Syro Malabar Catholic Church, Kerala. The tomb policy is offered by the stated owned general insurance company, United India. The tomb is insured for Rs 1,00,000 for a premium of Rs 550 a year. The policy offers coverage against vandalism, earthquake and other natural calamities.

Bharti AXA Life Insurance plan SPV

The Indian insurance sector will witness a new entrant, Bharti AXA Life Insurance. The French insurance major, AXA, the world’s largest insurer is all set for its joint venture with Bharti Group. The stake held will be 74:26. It is soon expected to start its operations. It also has plans to invest Rs 500 crore in the coming few years. However, AXA’s venture will be a two tier holding structure with a direct holding of 22.2% equity and the rest through Special Purpose Vehicle (SPV). Both the entities have formed an SPV of Rs 190 crore. The stake held will be 90% and 10% by Bharti and AXA respectively as a part of the plan to form a Special Purpose Vehicle (SPV) of Rs 190 crore. The investments in this joint venture will be shared by AXA India holdings (Mauritius), Bharti Enterprises Private and the Bharti Group Company. The shareholding structure will be 22.22%, 40% and 37.78%, respectively. Bharti SPV will act as an investment holding company of the JV.

MDRT convention to take place in Mumbai

The Million Dollar Round Table convention, one of the most prestigious events for life insurance agents will be conducted at the Renaissance Hotel in Powai, Mumbai, on 26th January ‘06. Stephen Rothschild, the president of MDRT (USA), will inaugurate it. The top-notch dignitaries in insurance sector will grace the event with their presence. The convention is aimed at spreading awareness in India. This MDRT Day celebration is specially being conducted for the members to have an experience of the convention that is held in the US and who are unable to attend it. An Indian agent who earns a commission of over Rs 5 lakh is pre-qualified for MDRT membership. In order to get membership, the agent has to pay Rs 20,000 as the registration fee; besides, it costs a lot to attend the MDRT meetings held in US. Moreover not many stand lucky as far as the visa is concerned. Considering these facts, not many MDRT agents get an opportunity to attend the convention in US. Hence this move is taken especially for those agents who are not able to be a part of the convention.

Liability Cover on the rise

The Clause 49 of the listing agreement mentions that the listed companies should have atleast 50% of the board comprising of independent directors. Complying with this clause, many Companies are expected to buy this cover. The directors and the officers are at a stake of being dragged to the court by authorities for any of their wrong doing. Directors' and Officers' liability insurance (D&O) offers the individual directors and officers the protection they need from personal liability and financial loss arising out of wrongful acts committed or allegedly committed in their capacity as corporate officers and/or directors. Liability cover serves the purpose when the company suffers losses. Following these lines, HDFC Chubb General Insurance will offer liability insurance business with a product for mid-sized companies. The policy will offer cover for six risks within a single limit under its new product called Forefront Portfolio. The risks include directors' and officers' liability, outside (independent) directors, employment practices, trustees, internet and employee theft. Howden of UK, which specializes in liability insurance, has started in India as 'Howden India'. It will be soon introducing its venture capital and Private Equity Fund Manager's Liability Insurance Programme.

Samsung Life to enter Indian insurance sector

Presently, India has 14 private life insurance companies and there is more room for private players. The two new private insurance entrants are Bharti AXA Life insurance and Shriram Group. Apart from these two, the third private insurance company waiting to make its venture in India is Samsung Life, which is Korea's oldest life insurance company. The company will begin its operations when the Insurance Regulatory and Development Authority will give its consent to hybrid life and non life insurance companies. Samsung Life had been in talks with several banks in India like Vijaya Bank, Allahabad Bank and ITC for its joint venture. To begin its operations in India, the company would require separate licence as IRDA does not allow hybrid insurance. But it is expected that it would soon be brought in. Hybrid life insurance combines different types of life insurance. The major type of hybrid life insurance is variable universal life insurance, which combines features of variable life and universal life insurance. With this new change, the common man would be introduced to yet another genre of insurance.