Asia Insurance Review Reports

The Hindu Business line reports

Simple health insurance procedures soon: IRDA

Hyderabad , Aug.9

Managing your health insurance policy is set to become easier.

Right from filling up of claim form, attachment of bills to claim settlement procedures, there would be uniformity and simplicity soon, according to Mr J. Hari Narayan, Chairman, Insurance Regulatory and Development Authority (IRDA).

“We will be announcing the guidelines on administration of health insurance shortly. Many aspects, such as nature of a claim form, may look simple, but they could be made uniform and simple for the convenience of a policy holder,'' Mr Hari Narayan told newspersons after inaugurating an NSE.IT centre for online testing and certification for agents here on Monday.

On the present stand-off between the insurers and major hospitals on provision of cashless treatment, he indicated that IRDA would not be intervening in the matter.

“Our view is that the issue is fundamentally a commercial one between the insurers and hospitals,” he said, while hoping that the issue would be resolved soon.

No deadline extension

The IRDA was not going to extend the September 1 deadline for insurers to comply with newly-announced norms for Unit Linked Insurance Plans (ULIPs), he said.

The new guidelines were aimed at reducing the costs of the insurers. “We want the insurers to reduce cost. They need to redesign the products keeping in view the interests of policy-holders,” he said.

On the alleged adverse impact of new ULIP norms on the business of insurance companies, he said: “Yes. We want some impact.”

PENSION FUNDS

On the likely jurisdiction conflict between the Pension Fund Regulatory and Development Authority (PFRDA) and IRDA on pension products, he said clarity would emerge only after the enactment of PFRDA Bill.

In case of regulatory overlap/dispute, the matter would be referred to the High Level Committee constituted recently by the Government.

AGENTS

The IRDA would announce comprehensive changes in the recruitment of agents in the next two/three months. “The set-up will be re-modelled. We are examining the feedback on the exposure draft on the issue,” he said.

Mr Ramesh Padmanabham, MD and CEO of NSE.IT, said by April 2011, NSE.IT would have 250 centres across the country. It now has 106 centres.

New Delhi :   Indian government on Tuesday introduced a Bill in Parliament to allow insurers to sell unit-linked insurance plans (ULIPs), without seeking the capital markets regulator's approval.

Thereby the government is indicating that it is serious about letting insurance watchdog IRDA and the insurers a free playing field when it comes to the lucrative Ulips, even if it is at the cost of market regulator Sebi and may well not be in the interest of hundreds of thousands of investors.

The Securities and Exchange Board of India (SEBI) and the insurance regulator had locked horns on who should regulate ULIPs, virtually mutual fund instruments (that invest in stock markets) with an minuscule life cover added, given the products combined insurance and investments.

The Bill will seek to formalise an earlier presidential decree which permitted such sales.

RBI Guv to be vice-chief of jt mkt regulator

The government today introduced a bill in the Lok Sabha that provides for a joint mechanism headed by the Finance Minister to resolve differences among the financial regulators - SEBI, IRDA, RBI and PFRDA.

The Bill - the Securities and Insurance Laws (Amendment) and Validation, Bill 2010 - addresses concerns by Reserve Bank of India (RBI) over its autonomy, by including its Governor as Vice-Chairman of the joint commission instead of making him just a member.

The bill replaces the ordinance of June 18 which had brought within jurisdiction of IRDA the power to regulate "life insurance business" that may include hybrid insurance products like Unit Linked Insurance Policy (ULIPs).

The ordinance had treated RBI at par with other regulators leading its Governor D Subbarao to express reservation saying this would dilute the authority of the central bank.

Stock Market and Insurance regulators SEBI and IRDA were at loggerheads over the jurisdiction of hybrid insurance products like ULIPs with both claiming their authority over these popular schemes.

Since ULIPs comprise insurance policy as also the mutual fund, SEBI had issued an order in April this year asserting its authority over the scheme. However, this was not acceptable to insurance regulator IRDA.

In the midst of deadlock, the government came out with an ordinance giving the jurisdiction to IRDA.

It had also proposed a joint commission comprising the Finance Minister as Chairperson and RBI Governor as Vice Chairman, Secretary in the Department of Economic Affairs, Secretary (Financial Services) and the heads of stock market, insurance, banking and pension fund regulators - SEBI, IRDA, RBI and PFRDA - as members.

Smaller insurance companies in Taiwan can now gain fast-track entry to the mainland Chinese market if they form alliances, even though they might not individually meet China 's 5-30-2 entry rules, reports the Taiwan Economic News.

Japanese women are expected to live for almost 86.5 years, topping the world longevity ratings for the 25th straight year, reports the Associated Press citing data for 2009 published by the Japanese Ministry of Health, Labour and Welfare. Average life spans rose by almost five months for w omen and nearly four months for men compared to the previous year.

The Financial Express Reports

Cashless plans only at our rates: Insurers

New Delhi :   Locked in a battle with big healthcare firms over censoring cashless health insurance claims, state-run insurers today asserted that the facility would be extended only to those hospitals that agree to their rates for medical expenses.

"The purpose of working out such package rates and stablising the hospitalisation costs, will benefit the insured in many ways," the four state-run general insurance companies -- National Insurance Co, New India Assurance Co, Oriental Insurance Co and United India Insurance Co -- said in a joint public notice.

Presumably hurt on their balance sheets by the allegedly inflated bills for medical costs of people covered by cashless mediclaim facilities, these insurers have pruned the list of hospitals in four large cities for providing this facility with effect from this month.

The selected list of hospitals in Delhi and National Capital Region, Mumbai, Chennai and Bangalore , does not include big chains like Fortis and Max Healthcare and was prepared on the basis of those accepting rate packages prepared by the insurance firms for medical procedures and hospitalisation costs.

While the insurers' move has been vehemently opposed by large hospitals, the general public has also been caused inconvenience as settlement claims for many of them were refused at the hospitals not on the preferred list for such a facility.

A conciliatory meeting was arranged between the insurers and the hospitals in Mumbai on July 13, after which the insurance firms agreed to work upon expanding the list of approved hospitals for cashless facility.

In today's statement, the four public sector insurers that together command nearly 65-70 per cent health insurance market share, however, made it clear that only those hospitals would be included in the list that adhere to its conditions on medical costs.

"We along with some TPAs (Third Party Administrators), worked out package rates for some of the procedures/hospitalisation expenses, which are commonly claimed under our health insurance policies," the statement said.

Having offered these rate packages to various hospitals over a period of several months, those agreeing to the offer were included in a "Preferred Provider Network", or a network of hospitals where cashless mediclaim facilities would be available, the insurers said.

For treatment at non-PPN hospitals, the policy holders would need to seek reimbursement of expenses later.

The Asia Insurance review Reports

Some domestic enterprises in Vietnam are planning to enter the life insurance market because they are attracted by the huge potential of the sector, but they have been warned that it will be very challenging, according to a report on the Vietfinancenews website.

The Financial Express reports

IRDA ignores people's mediclaim pain

New Delhi :   Insurance watchdog IRDA washed its hands of the controversy surrounding the PSU insurers withdrawing the cashless hospitalisation facility, even as industry bodies stepped up efforts to find an amicable solution to the row while medical insurance policy-holders are left writhing in pain during emergencies.

"It is a matter between the insurance companies and the hospitals, there is no regulatory issue... IRDA is not looking into it," Insurance Regulatory and Development Authority of India (IRDA) Chairman J Hari Narayan said over the phone.

Concerned over the plight of patients holding mediclaim policies, industry body CII held a series of meeting with different stakeholders to resolve the controversy. It also plans to hold more consultations in Mumbai.

Another chamber Ficci described the decision of the PSU insurance companies as "retrograde".

The controversy is over four state-owned general insurance companies taking about 150 hospitals off the list of Preferred Provider Network (PPN) that offer cashless hospitalisation services to policy holders under the mediclaim scheme.

Alleging over-billing by hospitals, New India Assurance, United India Insurance, National Insurance and Oriental Insurance withdrew the facility of cashless treatment from certain big private hospitals from July 1.

When contacted, the Chairman and Managing Director of Mumbai-based New India Assurance, M Ramadoss, said, "In some hospitals, we have withdrawn (the facility) and not from all."

"Patients are suffering because of the problem... We are holding meetings with different stakeholders to resolve the issue," said noted heart specialist Naresh Trehan, who is also the chairman of the CII Healthcare Council.

"We would be meeting them again to resolve the issue," he added.

Narottam Puri, a noted ENT specialist and a member of Ficci's committee on health services, described the steps taken by the PSU insurance companies as "retrograde".

He questioned how the best private hospitals in the country could suddenly become bad and taken out of the network of entities providing cashless treatment facility to insured persons.

On the allegations of over-billing, Puri said: "These issues can be sorted out across the table."

Fortis Healthcare Head-Sales Sunil Kapur, too, said, "Tariff is agreed upon in advance for each medical procedure and generally TPAs (Third Party Administrators) have adequate time to respond if they have any disagreement with the prices proposed."

Max Healthcare CEO Pervez Ahmed said, "We urge insurers and the TPAs to come forward and share their concerns so that individual mediclaim holders are not denied their privileges and can continue to rightfully avail of cashless services."

There would be stricter and stringent distribution norms, leading to lowering of commissions on the sale of such products, sources said.

Currently, commission charges are as high as 50 per cent of the first-year premium.

According to IRDA Chairman J Hari Narayan, it will frame new guidelines for these products to make them more attractive for policy holders.

At the same time, the regulator plans to come out with directives to improve the transparency element of such hybrid products, which involve both investment and insurance.

The regulator will also try and address the issue of increasing the lock-in-period and raising life cover.

These products need to be more transparent and whatever commission and expenses are built into the product should be disclosed explicitly in a simplified format, sources said.

Indicating that IRDA would continue with its reforms of ULIPs, Finance Minister Pranab Mukherjee had said, "I understand that Insurance Regulatory and Development Authority has taken some very positive steps in respect of regulations of ULIPs, which are in the interest of both the insurance industry as also the policyholders."

"I am sure that the insurance industry and IRDA would continue to bring in these reforms so that the interest of all the stakeholders are secured," he said earlier this month.

IRDA has already taken some measures like imposing a cap on ULIP charges, extending the minimum term of the policy to five years, introducing the concept of compulsory annuitisation in pension policies and fixing the maximum limit of surrender charges.

In order to put more money in the hands of investors, IRDA recently said that insurers cannot charge a fee for surrendering a unit-linked insurance policy after five years.

Insurance companies used to charge a nominal fee for customers to withdraw their unit-linked policies even after expiry of the lock-in period.

However, policies withdrawn during the lock-in compulsorily attract a high surrender charge

Asia Insurance Review reports

ULIP row ends; but will the investor be the final winner?

Asia Insurance Review Reports

Nine Asian countries have been rated as the nations most at risk from extreme weather and geophysical events, according to a new study ranking 229 countries on their vulnerability to natural disasters. Bangladesh and Indonesia top th e Natural Disasters Risk Index, released by the London-based global risk advisory firm Maplecroft, to help businesses and insurance companies to identify risks to international assets.

High Court says LIC can't charge fee for transfer of policy

Mumbai:   Life Insurance Corporation of India , the market leader in insurance sector, cannot charge any fee for transfer or assignment of its policies, the Bombay High Court has held.

The court conceded that transfer of policy (such as its sale, or assignment as a security for a loan) is a cumbersome process and puts burden on LIC's resources and manpower, as it has to be registered.

However, the division bench of Justices F I Rebello and J H Bhatia held that under the LIC Act, or even the Insurance Act, the company has no power to charge such fees.

Earlier, LIC had banned the transfer of insurance policies, but it was challenged, and High Court had in its 2007 decision held that sale of policies was permissible.

Present controversy arose after LIC issued a circular (which came into effect in May 2007) whereby it began to charge a fee of Rs 250 on every transfer of policy.

It was challenged by city-based Dravya Finance Pvt Ltd, a 'non-Banking Finance company' engaged in the business of advancing loans against the assignment of life insurance policies. It contended that the imposition of the fee was illegal.

The division bench upheld its contention, after observing that only the central government had the power to impose such a fee with respect to a policy, and not the LIC.

New system soon to resolve insurance complaints

Hyderabad , May 9

If you are having any issues with your insurer on policy/claim-related issues, then you can expect a speedy and transparent solution soon.

Insurance Regulatory and Development Authority (IRDA) is set to introduce a hi-tech, integrated grievance management system for speedy and effective redressal of grievances.

“This will be an integrated, robust system which can capture everything happening in insurance companies on policy-holder grievance management,” Mr J. Hari Narayan, Chairman, IRDA, told Business Line. The proposed consumer grievance management system – to be introduced from July 2010 — will track the complaints being received by the individual insurers through a real-time connectivity with their portals. “That way we can check the nature of complaints, their status in all 43 insurers at any time,” he said.

According to Mr A. Giridhar, Executive Director, IRDA, the idea behind the new system is to expand the scope of complaint redressal mechanism. Currently, the grievance management is done at two levels – the company level and at the Ombudsmen appointed by IRDA in different regions.

“With this new system, in addition to building an extensive data pool, we will also be able to track both policy as well as claim related grievances,” Mr Giridhar said.

IRDA had successfully conducted a pilot involving four major insurers. “We are satisfied with the pilot and new system will be in place by roping in 46 insurers in the country,” he added.

EDUCATION

The regulator is also increasing its efforts in creating awareness about various intricacies of insurance policies including the unit-linked insurance plans (ULIPs).

“We have been focussing a lot on educating people on ULIPs through various means. When we recently advertised about making wise decisions about ULIPs, some people made it controversial without any basis,” he said.

The continuous efforts of the regulator had brought down the number of complaints of mis-selling of ULIPs, he added.

A 20-member team is involved in conducing inspections on the insurers on various regulatory aspects including the consumer welfare.

The companies to be inspected would be decided either on a random basis or by the number of complaints.

Asia Insurance review reports

The Hindu Businessline Reports

Risk cover must for top-up premium in ULIPs

All top-up premiums made during the period of contract in unit-linked insurance plans (ULIPs) should include compulsory insurance cover treating it as a single premium, according to Insurance Regulatory and Development Authority (IRDA).

In a circular to the life insurers, the Authority said partial withdrawal is allowed only after fifth policy anniversary for all unit linked products except pension/annuity products. In the case of unit-linked pension/annuity products, no partial withdrawal shall be allowed and the insurer shall convert the accumulated fund value into an annuity at maturity.

However, the insured will have the option to commute up to a maximum of one-third of the accumulated value as lumpsum at the time of maturity.

In the case of surrender, only up to a maximum of one-third of the surrender value could be availed in lump sum and the remaining amount must be used to purchase an annuity.

The insurers should ensure conformity to these guidelines for products to be sold from July 1, 2010, IRDA said.

The authority had also reiterated that the provision of death benefits was mandatory except in cases of ULIPs linked to health insurance.

The minimum policy term for individual products should be five years while group products could be renewed annually, it added.

A final government decision on the takeover of Nan Shan Life Insurance, the Taiwan unit of AIG, has been postponed until July at the earliest, according to the Taiwa n News Online website.

State-owned Japan Post Insurance, the country's biggest life insurer, will invest around 300 billion yen (US$3.15 billion) more in regional and corporate bonds in the financial year which began on 1 April, and plans to pick up domestic stocks, to win higher returns, reports Reuters. The insurer's investment plans overall will rise to 7.1 trillion yen during the current fiscal year, says Mr Mitsuya Watanabe, General Manager at J apan Post Insurance's investment planning section.

New Delhi :   Contrary to their earlier stand to move court jointly for settling the issue of control over Ulips, difference have surfaced between insurance regulator IRDA and market watchdog SEBI on the legal recourse.

Insurance regulatory development authority (IRDA) said that it wanted to seek a legal mandate jointly with SEBI, but the market regulator had reservations.

"SEBI has written a letter to us, that according to their legal counsel, the joint application is not valid in this (Ulip) case under section 90 of Civil Procedure Court ," IRDA Chairman J Harinarayan said from Hyderabad .

According to sources, a renowned lawyer had suggested the regulators filed a case under section 90, as they were not adversaries fighting each other but only required a legal clarification over jurisdiction.

Under section 90 "if any person agrees in writing to state a case for the opinion of the court, then the court shall try and determine the same in the manner prescribed."

When asked whether IRDA would again approach the government, he said it could be one of the options.

However, SEBI Chairman C B Bhave refused to comment on the issue, when contacted.

The high voltage dispute between SEBI and IRDA arose when the market regulator banned 14 life insurers, including those belonging to SBI and Reliance Anil Ambani Group, from raising any further money from Ulips unless they are registered with the market watchdog.

However, IRDA asked insurers to ignore the order and continue doing business as usual.

After the two conflicting orders, the matter reached the Finance Ministry, where the two watchdogs agreed to jointly seek a legally binding mandate from an "appropriate" court.

Till then, status quo ante was restored.

Following government directive, SEBI allowed insurers to raise money from existing Ulips, but banned new launches under the scheme.

SEBI has been contending that Ulips, which have an investment content, should fall under its purview, while IRDA says as Ulips are an insurance product they are the subject matter of the insurance regulator.

The Hindu Business Line Reports

SEBI seeks to move all ULIP cases to Supreme Court

SEBI has approached the Supreme Court seeking transfer of all public interest litigations filed against its order on ULIPs in different courts to the Apex Court .

A SEBI source said the regulator has filed a transfer petition for clubbing the two PILs filed in Mumbai and Lucknow .

With the capital market regulator making this unilateral move despite the Finance Minister's advice to seek a joint verdict, the regulatory conflict over ULIPs appears to have further intensified.

IRDA wanted to file a joint application under Section 90 of the Civil Procedure Code, but SEBI did not agree to it.

Mr J. Hari Narayan, Chairman, IRDA said, "SEBI's legal counsel is of the opinion that there is no maintainability of a joint application under Section 90 of the CPC on this issue. However, our lawyers say we can find a legally binding solution under this Section."

SEBI had instead suggested that the PILs filed in Lucknow and Mumbai should be clubbed and shifted to the Supreme Court.

IRDA is opposed to the idea of solving jurisdiction issues through the hearing of PILs as it is of the opinion that they address consumer interest issues rather than conflicts regarding jurisdiction.

"The issues raised in the PILs have nothing to do with jurisdiction. The issue here is of deciding SEBI's jurisdiction. PILs do not have a direct bearing on deciding the jurisdiction," said Mr Hari Narayan.

The IRDA Chairman said the onus is on SEBI to establish their legal right to extend their jurisdiction to ULIPs.

"We are confident of our legal stand. They are shying away from jointly seeking a legally binding decision. The ball is in SEBI's court as they are the ones who are exerting their right to regulate ULIPs," he said.

Despite SEBI asking insurance companies not to launch new unit linked products without its permission, insurers said they are going ahead with their plans. However, as of now, no insurance company has launched any unit linked product.

The Economic Times Reports

Irda forces Maruti Suzuki to rejig insurance business

IRDA imposes penalties on 10 insurance cos: Pranab

New Delhi :   The government on Tuesday said insurance regulator IRDA has imposed penalties on 10 insurance companies, including Life Insurance Corporation, in the previous two financial years 2008-09 and 2009-10 for violation of regulations.

Besides LIC, the IRDA imposed penalties on Max New York Life, ICICI Lombard, National Insurance Company, United India Insurance, New India Assurance, Apollo Munich Health Insurance, HDFC Standard Life, Reliance General Insurance and General Insurance Corporation, Finance Minister Pranab Mukherjee informed the Rajya Sabha.

Insurance Regulatory and Development Authority (IRDA) imposed penalty on LIC, HDFC Standard Life and Apollo Munich Health for non-achievement of social and rural targets while GIC was short of investment in central government securities, he said.

"The Authority carries out regular inspections of insurers to monitor compliance of the guidelines of IRDA," Mukherjee said.

Penalty was imposed on New India Assurance for not filing the quarterly financial and solvency statement in time while Max New York Life was charged penalty for violating directions issued by IRDA in respect of unit linked insurance policy.

The Hindu Business line Reports

SEBI ORDER MAY NOT AFFECT LIFE INSURERS IN NEAR TERM

"Ban on sale of ULIPS happens to be in a comparatively lean period "
The ongoing SEBI-IRDA turf war is unlikely to impact life insurance companies business, at least for the time being. This is because April is a lean period for the companies after the busy January- March quarter. Almost 40-45 percent of sales of insurance policies happen in the Jan-March quarter due to the tax-saving season. In contrast, the April-June quarter is comparatively lean, with around 10 percent of the industry sales coming from quarter.

Korea Life, South Korea's second largest life insurer, aims to expand in Asian markets as it says that the domestic insurance sector is becoming saturated, reports the Korea Times citing the company's CEO and Vice Chairman, Mr Shin Eun-chul.

Two trade associations representing spas and wellness centres in Singapore are negotiating with insurance companies to obtain cover to guarantee refunds to customers of unused portions of wellness packages the customers had paid for - in the event of the closure of any of their members.

SEBI, IRDA to jointly approach court on ULIP jurisdiction

The tussle between the Securities and Exchange Board of India and the Insurance Regulatory and Development Authority on regulating Unit- Linked Insurance Policies took a new twist, with the Finance Minister, Mr Pranab Mukherjee, on Monday stepping in to remove market uncertainties over the fate of the products.

After day-long discussions held separately between the chiefs of the two regulatory bodies and Finance Ministry officials, Mr Mukherjee announced that the regulators had "agreed to jointly seek a binding legal mandate from an appropriate court. Meanwhile, status-quo ante is being restored."

Market observers saw the Finance Minister's announcement as a move that would put in abeyance last Friday's SEBI order against 14 private life insurance companies. The position as existed before the SEBI order was being restored until the two regulators obtained a ruling or direction on the legal mandate from a court, they said.

However, doubts still remain on whether IRDA can approach a High Court for a binding legal mandate, when the insurance regulator is not a party to the capital market regulator's order.

Asked what could be an "appropriate court" to provide a binding legal mandate to both the regulators over ULIP jurisdiction, the Finance Secretary, Mr Ashok Chawla, said, "in my view it could be a High Court."

Now, with the action on the ULIP standoff set to move to court, life insurance industry observers noted that there was going to be some uncertainty in the minds of investors even as the life insurance companies were permitted to continue selling ULIPs.

Earlier in the day, the IRDA Chairman, Mr J. Hari Narayan, told reporters that he had come to the Finance Ministry not to get a decision, but to apprise the Government of the situation and why it was necessary for IRDA to step in. He said he wanted to ensure there was no unseemly concern or negative expression in the market.

"I don't have the powers to quash SEBI's order. But I certainly have the power to direct insurance companies to do or not to act. We had two rounds of discussions with the SEBI Chairman and his officials, but they did not change their stand", Mr Hari Narayan said.

The SEBI Chairman, Mr C.B. Bhave, declined to comment on the ULIPs controversy. "I am not going to comment on this. I will comment at an appropriate time," he said.

Meanwhile, at a separate event to mark the SEBI Foundation Day, the Finance Minister initiated the process of disbursal of disgorgement proceeds to investors who were deprived from share allotments because of the IPO scam. Mr Mukherjee urged all financial regulators to work towards "no load plus fee model" for the entire financial sector, to ensure a fair deal for all market participants.

Financial Express reports

IRDA asks cos to ignore SEBI order

Insurance regulator IRDA has taken SEBI head on by setting aside a ban on ULIPs by the market watchdog and asking 14 life insurance companies to continue their business as usual.

The finance ministry has opted to keep a safe distance from the ongoing controversy.

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 a bone of contention between the two regulators.

Moving swiftly within 24 hours of SEBI order, IRDA Chairman J Hari Narayan in a signed order has asserted that it is IRDA which will control the ULIPs, which are issued by the insurance companies.

Earlier on Friday, SEBI had banned 14 life insurance companies, including those belonging to the Tatas, Reliance Anil Ambani Group, SBI, ICICI Bank and HDFC, from issuing Ulip products.

SEBI Chairman C B Bhave while speaking to reporters in Kolkata on Saturday declined to speak on the ban on 14 insurance companies from selling Ulip without its approval.

"I am not going to comment on the order," he had said.

The Securities and Exchange Board of India (SEBI) in its Friday evening order had also said that entities registered with SEBI could operate such schemes as they are in the nature of mutual funds.

Even as the two regulators continue the turf war, Finance Secretary Ashok Chawla distanced himself from the controversy saying it was a matter between the two regulators.

"It's a matter between regulators, so they have to decide."

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, the total funds under the management of life insurance sector stood at over Rs 9 lakh crore of, accroding 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.

IRDA's order, however, will provide some relief to these life insurance companies.

The order issued by SEBI banned 14 insurance companies from issuing "any offer document, advertisement, brochure soliciting money from investors or raise money from investors by way of new and/or additional subscription for any product (including...

IRDA re-assures worried investors

"I think we will have to have greater clarity on respective jurisdiction. Investors are safe," IRDA Chairman J Harinarayan told reporters outside the Finance Ministry's office at the North Block.

Harinaryan came today to give his side of the picture to the Finance Ministry officials.

"I don't think I have come here for a decision. I am here to give a perspective on the issue. SEBI does not have jurisdiction on ULIP products. Sebi believes otherwise," he said.

SEBI Chairman C B Bhave, who is in Delhi to attend a function, may also meet the ministry official on the issue.

On late Friday night, SEBI banned 14 life insurance companies, including Reliance Life, SBI Life, ICICI Prudential, Tata AIG and HDFC Standard Life , from raising fresh money in ULIP schemes that invests a major chunk of funds in stock markets.

A day after, IRDA asked these companies to continue their business as usual, questioning the SEBI's authority to issue such an order.

"The decision which they (SEBI) have taken have a negative implication on the financials of policy holders and insurance companies," Harinarayan said.

Economic Times Reports

Ulips back on shelves as Sebi, Irda call cease-fire

NEW DELHI/MUMBAI: THE government has brokered a truce between the two warring financial sector regulators-the Securities and Exchange Board of India (Sebi) and Insurance Regulatory and Development Authority of India (Irda)-over the supervision of unit-linked insurance plans (Ulips), signalling a return to normal business for the insurance industry.  

On Monday, after several rounds of talks, the government managed to persuade both the regulators to seek a legal mandate from a court on oversight of this product. Finance secretary Ashok Chawla said the appropriate authority in this case would be the high court.  

This may provide comfort to the insurance industry, which prefers to approach a high court rather than the Securities Appellate Tribunal that hears appeals against orders issued by Sebi. Their reasoning is that moving SAT would be a tacit admission that Sebi's writ runs large over Ulips, which are investment products with an element of insurance. There are indications that the insurance industry may consider the option of appealing to the Delhi High Court.  

Following the meeting between the chiefs of Sebi and Irda and senior finance ministry officials, both the regulators have decided to restore status quo and keep in abeyance the orders issued by both during the weekend.  

Later, finance minister Pranab Mukherjee told reporters that Sebi chairman CB Bhave and Irda chief J Hari Narayan had held talks on the issue of regulatory jurisdiction over Ulips. "To resolve any ambiguity and to ensure smooth functioning in the markets, the regulators have agreed to jointly seek a binding legal mandate from an appropriate court. Meanwhile, status-quo ante is being restored," Mr Mukherjee said.  

What this means is that the insurance industry will not be hobbled for now from selling Ulips. But the move on Monday will provide only a limited solace for insurance firms as they say the prevailing uncertainty will put off new investors. Insurance industry officials said they have told their staffers to continue to sell Ulips. Insurers did route money into equities on Monday, but it was unclear whether it was money raised through Ulips or from traditional insurance products such as term cover.  

On Friday, Sebi had barred 14 insurance firms from selling Ulips without its approval, to which Irda reacted the next day by directing insurers to ignore the order.  

An agreement was hammered out after talks between Mr Bhave, Mr Hari Narayan, Mr Chawla and R Gopalan, secretary in the department of financial services.  

According to a person privy to the talks, initially an agreement was almost worked out whereby insurance firms were to be allowed to sell units of existing Ulips while new products would be launched later after gaining more clarity on regulatory oversight. But this was changed subsequently with the final draft stating that the regulators had agreed to seek a legally-binding mandate.  

Earlier in the day, Mr Harinarayan had said: "Sebi does not have a jurisdiction on this product... I think we need to have greater clarity on respective jurisdiction... I have powers to instruct insurance companies to act or not to act." Mr Bhave, who appeared confident while doing the rounds of North Block, chose not to comment. In between the meeting, Mr Hari Narayan took a break to smoke.

Asia Insurance review reports

Global reinsurance giant, Munich Re, aims to achieve double-digit annual growth in life insurance premiums in China in five years, riding on the country's rising economy, reports the Shanghai Daily newspaper.

Australia 's financial watchdog, the Australian Prudential Regulation Authority (Apra), has told general and life insurers that they are likely to be subject to the same tough global regulations as banks. The move could force some insurers to boost the level of capital reserves on their balance sheet, according to a report in the Sydney Morning Herald

Sompo Japan Insurance, part of Japan's second largest casualty insurer, will focus its investments on Asian emerging markets in the new fiscal year which began on 1 April, reducing holdings of Japanese stocks, reports Bloomberg.

A massive fire which broke out last Saturday at Asia's biggest inland port, the Inland Container Depot at Tughlakabad in south Delhi, is estimated to have cost losses of around INR1 billion (US$22.6 million), reports the Times of India . Another estimate says that the losses could total INR2 billion at the depot which is run by the state-owned Container Corp of India (Concor).

NTUC Income, a leading insurer in Singapore , has launched a free insurance scheme for low-income households. Called the Income Family Micro-Insurance Scheme (Ifmis), it will pay out S$5,000 (US$3,600) in the event the main caregiver passes away or becomes totally and permanently disabled.

Economic Times Reports

Life insurers see 18% growth in total premium income in '09-10

KOLKATA: The Council has projected 18% growth in total premium income for the life insurance industry in the financial year 2009-10.  

Although final figures, released by the Insurance Regulatory Development Authority (Irda), are being compiled, Life Insurance Council secretary general SB Mathur told ET: "During 2008-09, the life insurance segment had mopped up a first premium income of Rs 88,000 crore while in 2009-10, there was an approximately 10-12% growth, which means that first premium income in the year just gone by is expected to be around Rs 1 lakh crore."  

Mr Mathur also said the industry is estimated to have garnered a total premium income of Rs 2.6 lakh crore at the end of 2009-10, against Rs 2.2 lakh crore in the previous fiscal, which means an 18% growth. Life Insurance Corporation (LIC) is expected to have earned total premium income of Rs 1.76 lakh crore in the year under review, against Rs 1.53 lakh crore in the previous financial year.  

On the entire sector turning profitable, Mr Mathur said it is expected to take another 2-3 years before almost all companies turn profitable. As of now, almost all private sector companies, barring a few, showed loss on their profit and loss account.  

According to data released by the Insurance Regulatory Development Authority (Irda) for 2008-09, total accumulated losses stood at Rs 14,421 crore while the total equity infused by all companies put together was Rs 18,253 till March 2009.

GIC Re wants insurers to underwrite risk more prudently

General insurance companies, resorting to underpricing their policies to capture a larger pie of the business, may now find the going tough. The reinsurance agency, GIC Re has decided to follow a sliding rate of commission from the April renewals. This means that the ceding commissions paid to the general insurers by GIC Re will be linked to the claims experience of these companies. So, insurers having a higher claims ratio will get a lower commission from GIC Re. This is being done to encourage insurers to underwrite risk more prudently, said Mr Yogesh Lohiya, Chairman and Managing Director, GIC Re.

"Based on the companies' past claims experience in the treaties, we have modified our conditions and finalised the reinsurance programme. The ceding commission will be linked to the claims ratio of the companies. This will incentivise companies who are performing well and have lower claims ratios," said Mr Lohiya.

Reinsurance agreements

Ceding commission is paid by the reinsurer to the primary insurer on reinsurance agreements as compensation to place the business with the reinsurer. The commission covers the insurers' costs of underwriting and administering the business. It includes costs incurred on acquiring the business such as agents' commissions, policy formulation and paperwork.

Indian insurance companies have to compulsorily cede 10 per cent of their business to GIC Re. But all the players reinsure much more with GIC Re. While public sector players reinsure around 20-30 per cent of their portfolio with GIC Re, private insurers reinsure more than 60 per cent of their portfolio.

Commissions to come down

The ceding commissions will come down by 5-12 per cent varying from company to company, Mr Lohiya said.

Most of the insurance companies have a combined ratio of around 110-130 per cent.

A combined ratio of above 100 per cent means that the company is paying out more money in claims than what it is receiving from premiums.

Bringing discipline

GIC Re is hopeful that with these measures general insurers will tighten their belts and bring some discipline in their pricing.

GIC Re has also asked companies providing insurance support to foreign companies to keep this business out of the treaties.

"Companies are accepting a lot of business from abroad to boost their topline growth even though they do not understand the country specific risks. We have asked the companies not to include this in the treaties so that we don't have to bear the losses", said Mr Lohiya.

Ensuring awareness

In today's world of uncertainties, life insurance policies act as a safety net to guarantee adequate financial security for many families. A priority for most working members of the family, insurance penetration levels in India are, however, low at around four per cent. While many in urban areas are unprotected for the future, the bulk of the rural population also remains unaware. Thus, the spread of awareness about insurance becomes a major task for the industry.

For a while now, the Government has been promoting a culture of insurance with incentives such as tax rebates for those who buy such cover, but for their part, companies too have been investing in innovative marketing strategies.

ICICI Prudential, one of the first private sector insurance companies to start operations in 2000, has been running campaigns since 2002-03 designed to both push its policies and educate the masses about the benefits of insurance.

Sujit Ganguli, the marketing head, has been at the helm for almost half the period of the company's existence. In this time, he has concentrated on various campaigns focused on retirement solutions and child insurance besides the more recent initiatives in the rural market.

"We have a marketing spend of around 0.5 to 1 per cent of revenue. Marketing is critical for an insurance company as it has to build familiarity and trust with people. Since most people don't understand the product really well, the right amount of faith is very important for consumers," he says.

One of the most important focus areas in its marketing has been retirement solutions. In a country which is traditionally used to the protection of joint families, retirement planning is not taken too seriously. Such policies are even more relevant in the absence of any overarching Government social security scheme.

"One of the biggest barriers is that people traditionally don't plan for retirement. Very few people, like employees of the Government and large corporates, have access to pensions." With longer lifespans and higher inflation and healthcare costs, one has to have access to retirement planning, he says.

He added that ICICI Prudential was the first to start communicating about such policies back in 2002, with the message 'you do not need to compromise on the quality of life after you retire'. More recently in 2009, it launched a major initiative designed as a contest to show that with a proper retirement plan one can do whatever one desires. The contest received one lakh entries online, from which the winners got to choose between 40 dream vocations one could pursue after retirement.

Among other focus areas, child insurance has also been high on the company's agenda. In 2006-07, the insurer had launched a brand awareness programme in schools called 'Nat Geo Smart Kid Hunt'. In this, five national winners were chosen based on certain parameters such as IQ.

In 2009, the private insurer combined its focus on child insurance with a push towards the rural areas and smaller cities. Says Ganguli, "In rural and Tier III and IV cities, the focus of parents is more on their children. They want them to study, do well and move on to the urban areas - but due to a lack of exposure, they do not know how to do this. We had an initiative across four States including Punjab and Gujarat , where we took teachers from the cities for teaching modules. We also invited parents for counselling sessions. Moreover, we were conscious to not link it to policy purchase at all."

The company, which claims to have retained its premier position for the last nine years in new business premiums, plans to stay with its current marketing approach of spreading awareness towards planning for one's future.

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Reports by Business Line

After a blip in January, the life insurance industry rebound to register a 28 per cent growth in fresh business premium in February, data complies by the insurance Regulatory and Development Authority showed. While life Insurance Corporation of India managed to grow its fresh premiums by 32 percent, the new business of private companies grew by 22 percent-

Fresh Business premium in February                                               (Rs.cr)

The General Industry posted a 22 percent growth in February on the back of robust growth in the motor and health segments. While the public sector players' premium collections increased by 25% percent

Gross written premiums for the month of February

The Indian governme nt has said that it has no plans to divest its stake in the country's sole domestic reinsurer, General Insurance Corporation (GIC).