IRDA bans advance premium payments beyond 30 days
To prevent money laundering, Insurance Regulatory and Development Authority (IRDA) has barred insurance companies from accepting premium in advance beyond 30 days.
In a circular to chief executives of life insurers, the regulator said this move would also ensure regular payment of premium by policyholders. “Collection of advance premium under both, linked and non-linked products, shall not be allowed except in the case mentioned,” the circular said.
In case you have opted for monthly premium payment mode, now you will be allowed to pay only three months premium in advance on the date of commencement of the policy. For example, if your policy commenced on 1st April, you will be allowed to pay three months advance premium on 1 April only.
At present, a policyholder can make a lump sum payment of premium before the due date and get a nominal interest or some discount on it. According to insurers, it is sometimes convenient for policyholders to pay in advance… More
IRDA: Insurers need to redesign product for rural customers
The IRDA (Insurance Regulatory and Development Authority) chairman J Hari Narayan released a white paper on financial inclusion prepared by Ernst & Young at the national conference on “Financial inclusion: Integrating insurance into total package”, organised by the Associated Chambers of Commerce and Industry of India (Assocham) in Hyderabad on 15th May. Mr Hari Narayan said that the insurance companies need to improve their products and post-sale services to ensure that they are demand-driven.
Elaborating on the role of micro-insurance as a part of financial inclusion, he said that the difference between micro- and macro-insurance was the premium and coverage amount. Companies need to design a product that will meet the needs of rural customers. They must also create confidence among customers by promptly responding to their claims… More
IRDA asks Life Insurance Council to design single insurance product
The IRDA (Insurance Regulatory and Development Authority) has asked the Life Insurance Council to design a single insurance product that will cover life as well as general insurance.
“It will be a single product that would protect life and also against personal accidents,” IRDA chairman J Hari Narayan said on the sidelines of a national conference by Assocham on ‘Financial Inclusion: Integrating Insurance into Total Package’ in Hyderabad.
“The idea was referred to the Life Council. Supposing we have only one type of product, will that reduce cost and make it more efficiently distributed. That is something these people will have to study and come out with,” he added. The IRDA chairman said, “It has come to their notice that microfinance institutions were asking for a high service charge on the sale of micro-insurance products.”… More
In Focus Stories
IRDA bans highest NAV guaranteed products
The Insurance Regulatory and Development Authority (IRDA) has asked life insurers to stop selling highest net asset value (NAV) guaranteed products.
According to the regulator, the marketing of highest NAV guaranteed products shall not be allowed. These products contribute almost 20% to the total premium collection of life insurers. Highest NAV products promise to pay the highest value the fund achieves during a certain period—for example: five or seven years. However, to maintain that NAV consistently, insurers take risk of investing in stocks aggressively. This may lead to unwanted risks.
The regulator has also mandated a minimum death benefit of at least 10 times of the annualised premiums in case of traditional products, as there were some products offering a limited death benefit… More
IRDA to change minimum sum assured for life insurance plans
The Insurance Regulatory and Development Authority (IRDA) has decided to provide a minimum sum assured for all life insurance products in the event of death. The move is to ensure that policyholders are adequately covered. The change also means death benefits will be linked to premium payment unlike the case now.
The regulator said that life cover should be either 10 times annualised premium or105% of the total premium paid till the date of death… More
Chit fund companies to sell insurance and mutual funds
According to media reports, chit funds companies in Tamil Nadu, Kerala, Andhra Pradesh, Karnataka and New Delhi are diversifying into financial product distribution like mutual funds and insurance to increase revenues.
Some of the major chit fund companies like The Balussery Benefit Chit Fund, Shriram Group and Margadarsi Group, along with many small companies have entered into financial product distribution.
According to the Chit Fund Act of 1982, all these companies have created a separate business vertical to launch their distribution venture. These companies have requested for an amendment to the Chit Fund Act, which will allow them to run the distribution business within their core chit funds business. However, chit funds have to impart training on financial products to their agents.
Amit Sethi, owner, Amvi Financials, says, “Chit fund companies need to include this business under the Chit Fund Act. It’s a good idea to sell financial products through chit fund companies because they have deep penetration in rural areas which are yet to be explored by investment institutions.”… More
Life insurers not to pay minimum alternative tax
The important amendments made by finance minister Pranab Mukherjee to the Finance Bill 2012 have now been approved by the Lok Sabha. Mr Mukherjee presented the Budget for 2012-13 before the Parliament on 16th March. On 8thMay, the Lok Sabha, after a brief discussion, has approved the amended the Bill. Now, the same is pending for the approval of the Rajya Sabha.
The Bill is expected to get approved and will then be sent to president Pratibha Patil for her consent. Thereafter, the Bill will become an Act. One of the important amendments made by the finance minister to the Bill is the withdrawal of proposal to bring life insurers under the minimum alternative tax (MAT) regime.
If this provision would have been approved by the Lok Sabha, life insurers would have to pay MAT at the rate of 18.5%. While the current provision prescribes income-tax to be payable at the rate of 12.5% and that too after accumulated loss is cleared… More
“The beginning of this new era in the development of insurance industry saw proliferation of new products and distribution channels which promoted rapid growth of the industry,” says Rajesh Sud MD & CEO, Max New York Life Insurance… More
Sticking to traditions
“There are many types of insurance plans in market today. Traditional plans are those plans where in the investment management is done by the insurance company and the customer does not take an active part in investment,” says V Viswanand, director & head-products and persistency, Max New York Life… More
“A lot of the mis-selling happens because the customer is in a hurry. At some point during the conversation with the agent, he has heard what he wanted to hear and is ready to buy”
Amitabh Chaudhry, MD & CEO, HDFC Life, in The Economic Times
“Try and understand what you are buying. Spending 2-3 hours to understand an insurance policy that will cover you for 25-30 years is not too much to ask”
Swapan Khanna, Co-founder, I-Save in The Economic Times
Higher provisioning in third party motor insurance increases insurers’ losses
Despite a positive growth in revenues, many general insurers had to make do with single-digit growth in profit or net loss during FY11-12. The reason for this is high provisioning for third-party motor pool and higher claims ratios in the group health insurance portfolio.
The Insurance Regulatory and Development Authority (IRDA) has increased the provisioning requirements in the third party motor pool recently. A CRISIL report published on 2nd May said that higher provisioning requirement in third party motor insurance segment by the insurance regulator is likely to increase losses incurred by general insurers by around Rs. 65 billion in the near future. It, however, noted the latest regulatory developments are structurally positive steps for the industry in the long-run. The report also said that the additional provisioning in the motor third party pool coupled with high claims in the motor third party and health insurance would impact the underwriting performance in the interim… More
Royal Sundaram Alliance reports 29% growth in GWP for FY11-12
Chennai-based Royal Sundaram Alliance Insurance has reported 29% growth in GWP (gross written premium) for the financial year ended March 2012. The company’s GWP increased to Rs. 14.79 billion in FY11-12 from Rs. 11.44 billion in FY10-11.
Private general insurer’s has recorded a profit after tax (after pool loss) of Rs. 2.2million compared to a loss of Rs. 201 million in the previous year. The company’s minimum required claims provision for FY11-12 was Rs. 1.18 billion. However, the company has provided for a higher amount of Rs. 2.22 billion towards the motor pool losses so that the quantum of losses to be absorbed in the next two years stands reduced… More
IFFCO Tokio appoints Yogesh Lohiya as new MD and CEO
IFFCO-Tokio General Insurance Company announced the appointment of Yogesh Lohiya as the new Managing Director and Chief Executive Officer (CEO). He will take over the office effective 16th May, 2012, succeeding S. Narayanan.
Prior to joining IFFCO-TOKIO, Yogesh Lohiya was Chairman and Managing Director of “GIC Re” and retired on attaining the age of superannuation… More
Future Generali India Insurance grows 53% in GWP
Future Generali India Insurance Company Ltd, the general insurance joint venture between Future Group of India and Generali of Italy, has registered a 53% growth of its gross written premium–significantly higher than the industry average, in the company’s fourth full year of operations ending 31st March 2012.
Motor insurance business contributed 57% to the company’s overall premium for the FY 2011-12 and registered a growth of 67% over FY 2010-11.
The total gross premium underwritten by the non-life insurance sector for FY 2011-12* stood at Rs. 58,344 crore, which is 23% over FY 2010-11, (private non life up by 25% and the public non life insurance sector up by 22%)… More
Bharti AXA Life launches traditional insurance plan
Bharti AXA Life Insurance, the private life insurance joint venture between Bharti Enterprises and AXA, has launched its new traditional life insurance plan–Bharti AXA Life Young India Plan. This plan is part of the company’s “Strategy of Proof” framework that is predicated on redefining the life insurance category through a set of tangible product propositions aimed at meeting the customer’s lifestage needs… More
How to reinstate a lapsed policy
An insurance policy may cease to exist due to various reasons. It could be because of carelessness, you don’t see any value in continuing with the policy or because of a financial crisis. Swapan Khanna, co-founder, i-save, says, “Letting a policy lapse and not reviving it not only leaves one without a risk cover but also does not make financial sense.”… More
How to file a complaint against insurer
Filing a complaint helps you, to make sure that next time you won’t have any bad experience with them… More
Moody’s downgrades LIC to Baa3 from Baa2, outlook stable
Moody's Investors Service has downgraded to Baa3 from Baa2 the foreign currency insurance financial strength rating of LIC. The rating outlook is now stable… More
Life insurance complaints declines 4.3% in 2011-12
The number of customer complaints reaching the IRDA has declined sharply 9.5% in 2011-12. While the number of life insurance complaints decreased 4.3% to 0.39 million in 2011-12 from 0.41 million in 2010-11. In the same period, the number of non-life complaints dipped around26.5% to 93,155 from 0.13 million… More
Consumers conduct detail research before buying insurance policies
According a global insurance survey conducted by Ernst & Young (E&Y), consumers prefer the brand of the service provider, customer service and convenience over price while buying general insurance products.
The E&Y survey, which covered over 24,000 life and general insurance customers across 23 countries about their buying practices with over 1,000 consumers in the country, however, said price sensitivity varies by segments and type of product.
It also pointed out that consumers are increasingly using online mode for research and buying a product. About 74% of respondents indicated that they conduct detailed research before buying life and pensions policies, far more than in the UK (37%), the US (31%) or China (44%). The survey also said that despite higher use of the online channel, personal contact still remains important in purchase of insurance products… More