TW NL23 Nonlife Newsletter

8/12/2019 TW NL23 Nonlife Newsletter

1/7

Copyr ight 2012 Tow ers Watson. A ll rights reserved. tow erswatson.com 1

IntroductionWe are pleased to c irculate our latest newsletter covering some keydevelopments in the general (non- life and hea lth) insurance industry in Indiaduring the period June to Sep tember 2012.

In an attempt to reduce losses and restore profitability of the four public sector

general insurers, the Finance Ministry has instructed them to suitably raisepremiums wherever necessary, particularly for the Property and Group Healthclasses of business.

The Insurance Regulatory and De velopment Authority (IRDA) has draftedhealth insurance guidelines that are expected to bring about much neededclarity on various contentious issues and pro vide an extent of standardizationbetween offerings from different insurers.

Several recent s teps have been taken by the Finance Ministry to initiate farreaching changes impacting the Indian insurance market. This includesInsurance Laws (Amendment) Bill that, inter alia, proposes raising FDI cap inthe sector from the current ceiling of 26 per cent to 49 per cent and permittingforeign reinsurers to transact business in India. The Motor Vehic les Act 1988

was a lso sought to be revised in order to cap for limiting third party liability.

As reported earlier, the Government has decided to partially dilute its existing100 per cent stake in the PSU general insurers. Keeping the IPO plan in mind,the Finance Ministry has taken the first steps by asking General InsuranceCorporation of India Re (GIC Re) and New India Assurance (NIA) to appointmerchant bankers and finalise their valuations by December 2012.

In the face of ongoing sanctions imposed on Iran by the European Union andUSA, most foreign insurers declined to offer insurance to shipments of c rudeoil from Iran. India, which buys significant share of its global oil imports fromIran, has not joined hands for such sanctions. The Government directed thePSU insurers and GIC Re to provide coverage to Indian ships carrying Iraniancrude oil.

These and other market developments are briefly covered in this issue.

We hope you find the newsletter informative and look forward to your valuablecomments and feedback.

Towers Watson , India

In this issue

Industry statistics April- August 2012

Market update Insurers Other market developments Appointments

Regulatory update

Government update

Distribution

Products

Contact details

In a Mar et

General Insurance Update

India | Issue 23 | September 2012


2/7

Copyright 2012 Tow ers Watson. All rights reserved. tow erswatson.com 2

Industry statistics April-August 2012

As per latest statistics released by the IRDA, Grosswritten premium (GWP) figures for the period April to

August FY12-13 for the General Insurance (non-life andhealth) industry in India was Rs27,940 Crores, registering ayear on year growth of 17.7 per cent as c ompared to thesame period last year. The corresponding figure for the lastfiscal (FY11-12) was Rs23,740 Crores.

GWP (business figures)

Sourc e: IRDA

PSU general insurers continue to lead, with ICICI Lombardand Bajaj Allianz following close behind.

The business figures for the genera l insurers (apart fromspecialist insurers) comprise of Motor, Property andCasualty in addition to Health. Since the segment wisefigures are not available at this stage, comparison of Healthbusiness for different non-life insurers with standalonehealth insurers is not possible.

Religare is the newest s tandalone Health insurer in amarket lead by Apollo Munich. As reported in our previousissue, Apollo Munich has seen the highest number ofrollover customers i.e. who have por ted from their existinghealth insurer in favor of Apollo Munich. One of the mainreasons for the de-growth in Star Health figures is due tosome State Government sponsored mega group hea lthpolicies not being renewed with them.

Growth rates

The GWP growth rates for general insurers ranked overpremium c ollected is shown above. During the period Aprilto August FY12-13, the non-life industry registered agrowth of 17.7 per cent against a growth of 24.2 per cent inFY11-12 over the same period.

Source: IRDA

Market shares

The market continues to be dominated by PSUs, inc luding AIC and ECGC at 58 per cent, and rest is divided betweenprivate players. Pie chart A shows the split of 4 PSU's, AIC,

ECGC and a ll Private Sector general insurers as a b lock at42 per cent. Pie chart B, further elaborates the respectivemarket shares of p rivate players, notable among which areICICI Lombard, Bajaj Allianz and ITGI with market sharesof 8 per cent, 6 per cent and 4 per cent respectively.Others in the chart include Star Health, SBI General,Universal Sompo, Apollo Munich, L&T General, Max Bupa,Raheja QBE and Religare.

Source: IRDA

0 1,000 2,000 3,000 4,000 5,000

New IndiaUnited India

NationalOriental

ICICI-lombard

Bajaj Allianz AICIFFCO-Tokio

HDFC ERGO GeneralTata-AIG

Reliance GeneralCholamandalamRoyal SundaramShriram General

Bharti AXA GeneralFuture Generali

ECGCStar Health & Allied Insurance

SBI GeneralUniversal Sompo

Apollo MUNICHL&T GeneralMax BUPA

Raheja QBEReligare

in Rs millions

Comparison of GWP by non-life insurers

April 2012 to August 2012 April 2011 to August 2011

New India, 16%

United India, 14%

National , 13%

Oriental,

10%

AIC, 4% ECGC, 2%

ICICI-lombard,8%

Bajaj Allianz,6%

IFFCO-Tokio, 4%

HDFC ERGOGeneral, 3% Tata-AIG, 3 %

RelianceGeneral,

3%Cholamandalam ,

2%

Royal Sundaram,2%

ShriramGeneral ,

2%

Bharti AXA

General ,2%

Future Generali , 2%Others, 4%

Private Sector, 42%

Non-life insurer market share

Pie chart APie chart B


3/7


4/7


The four PSU general insurers and members of GeneralInsurance Public Sector Association (GIPSA), havedecided to revive the plan to jointly co-promote their owncommon Third Party Administrator (TPA) for the healthinsurance business.

Appointments

ITGI has scrapped its recent appointment of Mr YogeshLohiya (ex-Chairman of GIC Re) as their new MD. Theappointment was ob jected to by the Finance Ministry as itsprior approval was not sought. Mr Lohiya has since movedas Advisor on the Board of Iffco. Mr Rakesh Kapur, JMD atIffco, has been appointed as the in terim MD.

SBI General Insurance has recently appointed Mr B JSarma as the new MD and CEO of the company for threeyears with effect from 1 August 2012.

Tata AIG General Insurance (TAGIC) has also made atop level c hange by appointing Mr K. K. Mishra as the new

CEO in place of Mr Gaurav D. Garg.

IRDA has appointed Chief Public Information Officers asrequired under the Right to Information Act. These officershave been appointed for different departments; ac tuarial,brokerage, health, accounts, F&I and non-life. All theseappointments came into effect from 11 June 2012.

Regulatory updateIRDAs recently released exposure draft on proposedHealth Insurance guidelines covers se veral i mportant

aspects that have often led to contentious issues in thepast. Some of the important aspects include

Uniformity of product design in terms of

minimum entry age (no exit age),policy period/ term (up to 3 years for non-life),acc ess tocountrywide provider network

freedom to migrate from one policy type toanother (e.g. indi vidual to f loater) withoutlosing ac cumulated benefits

treatment of cumulative benefits

cost of health chec k prior to proposalacceptance

inclusion of non-allopathic treatment

renewal loading due to poor claimsexperience

free look period

special provisions for senior citizens

standardisation of definitions in po licy forms

standardisation of nomenclature for criticalillnesses and excluded expenses duringhospitalisation

Renewability of insurance

Portability of insurance Policyholders' protection

Servicing of health insurance

TPA

Combi products offered jointly by a life insurer and ahealth insurer combining term life insurance and health/ sickness insurance.

Draft norms for IPOs by Indian insurance companies havebeen issued by IRDA that, inter alia, makes it mandatoryfor insurers to seek approval from IRDA prior toapproaching SEBI. Any insurer planning to tap the capitalmarket must have at least ten years' experience in theindustry. IRDA will consider the insurers financial position,its capital structure and regulatory record before providingits approval.

Draft guidelines to boost micro-insurance have been issuedby IRDA. These include broadening of the existing productportfolio and widening the distribution network. In order tostrengthen distribution, the regulator plans to allow severalentities such as c ooperative banks, regional rural banks,primary agricultural co-operatives and individuals to act asmicro-insurance agents. On the product side, IRDA has

also proposed a standard insurance product that is acomposite package of essential life and non-life insurancecovers aimed at the rural and social sec tor. The s tandardinsurance product would be in addition to governmentschemes, which provide insurance cover at concessionalrates.

To fast track the process for regulatory approval ofproducts filed by Indian insurers, IRDA is planning todevelop 10 standard products that wil l be eligible forapproval under the Use and File sys tem as against 'Fileand Use' process.

The minimum solvency ratio required for dividend

payments by an insurance company was eased by theIRDA from 150 to 130. This move will allow OrientalInsurance and National Insurance to make dividendpayments to the government.

A higher startup capital requirement from Rs100 Crores toRs200-250 Crores for insurance companies is reportedlybeing contemplated by IRDA for future entrants to theindustry.


5/7


The current tied agents model for a llowing agents to sellproducts of more than one insurance company is alsobeing reportedly c onsidered by IRDA.

To educate the public on insurance, IRDA has launched anew portal ( www.policyholder.gov.in ). The portal aims toprovide useful information for po licy holders and prospects.The regulator has also introduced a new feature in itswebsite ( www.Irda.gov.in > Other Links > Compare NonLife products) that compares similar general insuranceproducts offered by different companies in the marketbased on factors like coverage, exclusions, discounts anddeductibles.

MyInsuranceClub has become the first IRDA licensed webaggregator si te that can officially compare premiums andfeatures of insurance policies online for life, health andmotor insurance across multiple insurers. This platformwould enable customers to compare different policies andbuy the product online based on preference of pric e, brandand policy benefits. The site also helps in promoting zero-

commission products.

Government update An amendment to the Motor Vehic les Act 1988 capping themaximum liability of Insurance Companies to Rs1 lakh inthe case of injuries or disability and Rs10 lakhs in the caseof death was tabled in the monsoon session of Parliament.

To cut down underwriting losses of the 4 PSU generalinsurers, the Government of India has increased pressureon them to raise premiums, bringing them to the samelevels as in 2007, prior to detariffication. The Ministry ofFinance is said to be deeply c oncerned over the increasinglosses in their hitherto profitable Fire and Engineeringbusinesses. The PSUs have been asked to desist fromcharging unviable low premiums from commercialorganizations and undercutting each others pric ing.

The process for lis ting of two state owned generalinsurance companies has been initiated. The Governmentof India has asked GIC Re and New India Assurance tostart their valuation process by appointing merchantbankers. Finance Ministry officials want these twocompanies to finalise their valuation by December 2012.Keeping the IPO p lan in mind, the Finance Ministry has

asked PSUs to tone up their performance.

The long pending propos al to raise the FDI cap in theIndian Insurance sector from 26 per cent to 49 per cent hasbeen revived by the Government. As a firs t step, thecabinet's ap proval has been obtaine d. The Insurance Laws(Amendment) Bill, 2008 had earlier been introduced in theParliament in December 2008 for increasing foreignparticipation in the sector. The increase in FDI limit in theinsurance sector may attract Rs30,000 Crores. tha t theindustry requires over the next five y ears. According to

IRDA, the Indian insurance sector constitutes around 4.5per cent to the GDP. With the increase in the FDI limit, thepercentage of c ontribution from the insurance sec tor to theGDP is expected to go up.

The proposal for allowing foreign re-insurers to openbranches in India has also been approved by the Cabinet.Such branches would be prohibited from investingpolicyholders' fund directly or indirectly outside India. Theamendments to the bill would allow UK-based reinsurerLloyd's to do business in India. Further, the amended billsets the capital requirement of s tandalone health insurancecompanies at Rs50 Crores.

Alleged service tax evasion by insurers to the tune of morethan Rs300 Crores. is under probe by the Finance Ministry.It has issued summons to about a dozen insurancecompanies seeking documents pertaining to sale ofinsurance policies and commission paid to theirdistributors. It is suspected that several insurers may ha veindulged in irregularities, including evasion of service tax by

misrepresenting the information on accounts book andfudging records related to commission paid tointermediaries like agents and brokers who were selling theinsurance polic ies.

DistributionSBI General Insurance is currently setting up a uniquemulti-distribution model encompassing Bancassurance,

Agency, Broking & Retail Direct channels. It has alsoentered into a corporate agency agreement with StateBank of Mysore for marketing its general insurance

policies.

United India Insurance (UII) is planning to deploy 50,000agents across the country in the next couple of years tostrengthen its marketing team. The company is targetingCategory 4 locations as defined by Indian CensusOperations.

Revised guidelines for bancassurance business are beingdrafted by IRDA, which would make it possible for banks tooffer more than one insurer's products and services.

Products A pilot weather-based crop insurance scheme (WBCIS)has been launched for both loanee as well as non-loaneefarmers for Mrig Bahar in Kharif 2012 in Maharashtra. TheState Government has approved HDFC Ergo GeneralInsurance to carry this out.

Horticultural crops will henceforth be inc luded under theWeather-Based Crop Insurance Scheme. This was hithertoapplicable only to field crops. This ini tiative has been takenby W est Bengal's Agriculture Department.
http://www.irda.gov.in/http://www.policyholder.gov.in/http://www.irda.gov.in/http://www.policyholder.gov.in/


6/7


Farmers not c overed by crop insurance scheme under theNational Agriculture Insurance Scheme (NAIS) are likely tobe included. This move has been initiated by the StateGovernment of Andhra Pradesh.

Weather based crop insurance for tea is being developedby Agriculture Insurance Company of India Limited (AIC)and the Indian Tea Board (ITB).

A composite micro-insurance for the rural sector has beenlaunched by Future Generali. It has been named FutureSampoorna Suraksha policy and will cover multiple riskssuch as hospital cash, personal accident cover, fire,burglary, cart protection and liability, agricultural pump sets,pedal cycles.

Two marine specialty products, Multi-modal TransportOperators Liability and Port & Terminal Operators Liability,filed by Raheja QBE General Insurance have beenapproved by the IRDA, clearing the insurer's foray into thisniche space.

Unemployment insurance product in view of the ongoingeconomic downturn is being developed by Bharti AXAGeneral Insurance and is like ly to be fina lised in thecurrent fiscal. It would cover the general credit risk of aperson.

A tailor made jewelry block insurance policy has beenprovided by National Insurance to Vibgyor Gold for buyersof its Virtue range of jewelry.

Star Health and Allied Insurance has launched apremium product The S tar Comprehensive, which comeswith no room rent capping, no disease wise limits andincludes hospital c ash benefit and new born baby cover. Inaddition, the policy also covers HIV positive individuals.

Apollo Munich Health Insurance has launched its'Optima Senior' for c itizens above 61 y ears of age toprovide lifelong health coverage with a guarantee of noloading for change of health status. The product is forsenior citizens looking for easy to understand healthinsurance coverage, with minimal restrictions andmaximum benefits and c an choose from any of the threesum-insured levels - Rs2 lakh, Rs3 lakh or even Rs5 lakh.

ICICI Lombard General Insurance has launchedComplete Health Insurance, a product with lifetimerenewal and no res triction on maximum entry age. Theproduct also features a wide range of sum insured fromRs1 lakh to Rs50 lakh, OPD coverage and maternitybenefits.

Companies such as Max Bupa Health Insurance andBajaj Allianz General Insurance are planning to providecover for ou tpatient treatment (OPD) benefits and den talcare. The inclusion of OPD benefits implies that the insuredneed not necessarily be hospitalised to seek insurancebenefits. The cover is likely to be in the market by the year-

end to make the insurance sector more attractive toconsumers.


7/7


Contact details

Towers Watson's Risk Consulting team covers the length and breadth of India with associates based in Gurgaon and Mumbai.

Vikas Newatia Director & Practice Leader, General Insurance Consulting, India

Gautam Mazumdar Senior Consultant, General Insurance Consulting, India

Rajesh Sabhlok Senior Consultant, Risk Consulting, India

Emails:

[email protected]

[email protected]

[email protected]

Gurgaon

Suite 1, Redshift, 802-803, 8 th floor

Tower-B, Unitech Cyber Park, Sector-39

Gurgaon- 122002

Tel: 91 (124) 4101018

Fax: 91 (124) 410 1010

Mumbai

511/512, Solitaire Corporate Park

Andheri-Kurla Road, Andheri East

Mumbai 400 093

Tel: 91 (22) 4232 9900

Fax: 91 (22) 2837 0700

The India General Insurance Update has been prepared by Towers Watson for general informationpurposes only and does not constitute professional advice.

The information, opinions and projections contained in this Newsletter are derived from various sources andhave not been independently verified by Towers Watson. If you require professional advice or require anyfurther information please contact any of the above named individuals.

ABOUT TOWERS WATSON

Towers Watson is a leading global professional services company that helps organisations improveperformance through effec tive people, risk, and financial management. With 14,000 associates around theworld, we offer solutions in the areas of employee benefits, talent management, rewards, and risk and capitalmanagement.

For more information, please visit www.towerswatson.com
http://www.towerswatson.com/mailto:[email protected]:[email protected]:[email protected]

Documents

TW NL23 Nonlife Newsletter