IndusInd Bank to pick up 3-5% stake in Aviva Life

Private sector lender IndusInd Bank is set to pick up three-five per cent stake in private sector life insurer Aviva Life Insurance. According to sources privy to the development, as part of the deal, apart from offering shares, Aviva Life would also pay an advance commission, taking the total valuation of the deal to around Rs 1,000 crore.

“The final modalities are being worked out. IndusInd Bank would have a board meeting later this week, after which the deal would be announced,” a source said.

The private sector lender is already a corporate agent for Aviva Life, a joint venture between fast-moving consumer goods major Dabur Group and UK’s Aviva, with the latter holding 26 per cent stake.

Earlier this year, Axis Bank had picked up a stake of four per cent in Max New York Life, in a deal valued at around Rs 75 crore. According to recent reports, Syndicate Bank is expected to pick up six per cent stake in Birla Sun Life Insurance Company. As a part of the deal, Birla Sun Life has offered to pay Rs 600 crore as advance commission to the public sector lender.

The Dabur Group has been looking to dilute a part of its holding in Aviva Life Insurance. The insurer was also among the three companies short-listed by Punjab National Bank for its insurance joint venture. However, in July, the Delhi-based bank entered into an agreement with Metlife to buy 30 per cent stake in Metlife India.

Aviva Life was also in talks with public sector lender Syndicate Bank, which had floated a request for proposal for a joint venture in the life insurance segment in April.

Aviva Life started its operations in 2002 and promoters of the company had infused Rs 2,004 crore till March 2011. The company had declared a profit of Rs 29 crore in 2010-11. During the April-December period of the current financial year, Aviva Life collected premiums worth Rs 466.14 crore through new policies, a marginal fall compared with Rs 469.30 crore collected in the corresponding period a year ago.

Under the bancassurance model, banks offer their branch networks as low-cost distribution channels to insurance companies. Last month, the Insurance Regulatory and Development Authority (Irda) brought out draft guidelines on bancassurance. These advocated opening up of the bancassurance channel and accordingly, Irda had divided the country into three zones

Source: Business Standard

Paperless insurance likely in a year: IRDA chief

You can expect your insurance transactions to be paperless in the next one year, thanks to an initiative by the Insurance Regulatory and Development Authority.

“We are working on making insurance paperless and have short-listed about four data repositories, including National Securities Depository Ltd, for the purpose,” Mr J. Hari Narayan, Chairman, IRDA, told newspersons on the sidelines of a roundtable on distribution in insurance organised by the Confederation of Indian Industry here on Friday.

Data repositories and data warehouses are vital for making insurance online or paperless, he added.

The first priority for the regulator with regard to distribution channels is bancassurance, which means distribution of insurance by banks.

BANCASSURANCE

“By the beginning of the next financial year, we will have a new regulatory regime for bancassurance,” the IRDA chief said.

In the draft guidelines issued earlier, IRDA favoured limited opening up of bancassurance.

Referring to decline in the life insurance industry in the first nine months of the current fiscal ended December 31, 2011, he said that the industry would close the year with about 13 per cent de-growth.

Earlier, while addressing the delegates, he said the IRDA was also taking a re-look at the nature of regulation, especially in the distribution segment.

The widening of the broking channel was needed as the existing regulation for opening branches was causing financial strain on the small brokers,” he said.

PENETRATION

Referring to insurance penetration of about 4.2 per cent, he said it was not low as a percentage of the Gross Domestic Product.

Asking insurers to build trust, he said: “Insurance depends on trust. This is a bigger issue than distribution.”

He also released a CII report on addressing distribution challenges in insurance.

nagsridhu@thehindu.co.in

IRDA forms Health Insurance Forum for consultation

The Insurance Regulatory and Development Authority has formed a Health Insurance Forum to act as a consultative body for all stakeholders.

“In view of the growth in the health insurance industry, it is necessary to create a forum for an effective dialogue between hospitals, insurance companies, third-party administrators and consumer,” Mr J. Hari Narayan, Chairman, IRDA, said in an order issued here.

Role of forum

The functions of the forum will be to advice and assist the regulator in evolving health insurance regulations and facilitate the creation and adoption of standard processes and definitions in health insurance.

The members of the forum would include six chief executive officers of insurance companies, and representative of the Ministry of Health and Family Welfare.

Each nominated member will have a term of two years, and the forum is expected to meet at least twice a year, Mr Hari Narayan said.

nagsridhu@thehindu.co.in

IRDA to make health cover for HIV patients mandatory

HIV/AIDS patients, doctors and nurses who are vulnerable to the infection can look forward to health insurance cover soon.

At present, health insurance cover is not being provided to these categories of customers.

In an exposure draft released on Friday, the Insurance Regulatory and Development Authority has asked all life and general insurers to put in place an underwriting policy on health insurance coverage for persons suffering from HIV.

“The Authority has received representations from various stakeholders, including public bodies and the Government, to provide insurance cover to people living with HIV and to those who are vulnerable to it in health insurance policies,'' Mr J. Hari Narayan, Chairman, IRDA, said.

The insurers should indicate the general eligibility criteria for extending health cover under this category by specifying the stages of infection and compliance with treatment protocols.

They should also identify all possible risks and those risks which would be denied.

All the product designs would be examined and approved by the regulator in accordance with file and use procedures.

IRDA proposes to implement this order from October 1, 2012.

nagsridhu@thehindu.co.in

Life insurance sale must be need based, says IRDA

The sale of life insurance policies are set to become more scientific soon.

The life insurers should ensure a need-based sale of life insurance products by their direct sales personnel, the Insurance Regulatory and Development Authority said in the draft guidelines on product matrix released on Tuesday.

“It is important and necessary for insurers to have in place a suitability index (or a prospect product matrix) that can serve as a self governing tool to assess the quality of sale,” Mr J. Hari Narayan, Chairman, IRDA said.

As per the draft guidelines, an insurer or a distributor must make reasonable efforts to obtain a consumer's suitability information prior to making a recommendation to the consumer on a product.

Suitability information means information should include factors such as age, annual income and financial resources used for funding the purchase of the life insurance product besides risk tolerance.

The regulator is planning to bring the product matrix (or need-based sale) from April 1, 2012.

PNB waiting for IRDA nod on Metlife stake

Awaiting regulatory approval for its proposed acquisition of a 30 per cent stake in insurance company Metlife, Punjab National Bank (PNB) has said it will not disclose the rationale behind the move or the financial details until IRDA gives its nod.

“We are waiting regulatory approval from the Insurance Regulatory and Development Authority (IRDA) for the deal and unless that comes through, we will not disclose the details and strategy,” said Mr K R Kamath, Chairman and Managing Director, PNB on the sidelines of the 100-year celebrations of the bank’s operations in the eastern region.

Mr Kamath said PNB does not foresee any hurdles in the way of the deal, which was announced five months ago, and would unveil the transaction details after approvals were in place.

If the proposed deal goes through, PNB would become the largest shareholder in the insurance company.

Speaking about overseas expansion, Mr Kamath said the bank is awaiting approval from the Canadian authorities for setting up a subsidiary in that country, besides the regulator’s nod in Oslo, Norway.

“We have applied with Reserve Bank of India for Maldives and after receiving positive feedback from a survey, we will soon move to our regulator to foray into Bangladesh,” he said.

IRDA asks agent training institutes to register as cos

To eliminate non-serious players, the insurance regulator IRDA has asked all existing agent training institutes (ATIs) to get themselves registered either as a company or trust by June.

“Existing accredited entities (ATIs), other than the companies/ societies, trusts, have to convert themselves into companies, societies or trusts within 6 months...,” the IRDA said in a circular.

The Insurance Regulatory and Development Authority (IRDA) has said that only those entities with more than three years of experience in training for financial or insurance products will be eligible for accreditation as institutes for training insurance agents.

The initial approval will be for a period of three years and consideration of further renewal for next three years.

Further, ATIs are required to maintain the attendance record by way of biometric system and put in place an effective mechanism for the same by April 1, 2012.

These entities play an important role in training agents for selling insurance products as the sector is battling the curb the menace of mis-selling. Mis-selling refers to sale of a financial instrument without fully disclosing the pros and cons of it to an investor.

IRDA slaps Rs 2 lakh penalty on MetLife India

The Insurance Regulatory and Development Authority (IRDA) has imposed a penalty of Rs 2 lakh on MetLife India Insurance Co Ltd for not providing the policy to a customer even after 11 months.

The decision to impose the penalty was taken by the regulator after completion of investigation into a complaint lodged by a customer who applied for a life insurance policy by duly paying the premium, but received no response from MetLife.

“Having regard to the facts of the case, the IRDA is satisfied that there has been negligence on the part of the insurer and consequently imposes a penalty of Rs 2 lakh,” Mr J. Hari Narayan, Chairman, IRDA, said in an order issued on Monday.

IRDA issues uniform ALM norms for insurers

Insurance regulator IRDA has issued uniform asset-liability management norms for insurers to manage their solvency, and asked insurance companies to undertake stress tests to ascertain their ability to meet financial obligations in the event of a crisis.

On examination of the extant norms being followed by insurance companies, IRDA found they were “incomplete and inconsistent. As the mandate by the authority was very broad, each insurer had adopted their own measures in reporting such details”.

“The Asset-Liability Management (ALM) is relevant to and critical for the sound management of the finances of the insurers that invest to meet their future cash flow needs and capital requirements,” IRDA said in a circular.

The guidelines, which would come into effect from April 1, make it mandatory for insurance companies to prepare an ALM policy and have it approved by the Insurance Regulatory and Development Authority (IRDA) by March-end.

“Stress testing being critical in the management of risks and the financial soundness of the insurers… the authority has mandated all insurers to conduct scenario and sensitivity testing,” IRDA said.

Effective procedures

IRDA has asked the insurance companies to determine their ability to meet financial liabilities after taking into account factors like a 30 per cent fall in equity values and a one percentage point decline in yields on fixed investments, among others.

IRDA has issued these guidelines to bring about uniformity in the ALM norms being followed by both life and non-life insurance companies.

IRDA has said that insurers would have to put in place effective procedures for monitoring and managing their asset-liability positions to ensure that their investment activities and asset positions are appropriate to their liability, risk profiles and solvency positions and it should be used to measure the interest rate risk faced by insurers.

The ALM policy should enable the insurers to understand the risks they are exposed to and develop ALM policies to manage them effectively.

deepa.n@thehindu.co.in

General insurers' rejected more claims in 2010-11

The number of claims rejected by the general insurance industry has been increasing in 2010-11, according to the Insurance Regulatory Development Authority's (IRDA) annual report.

“The rise is due to the fact that the sector is expanding rapidly and business volumes are increasing. The number of policies issued by non-life insurance companies is increasing year on year. It stood at 7.93 crore in the year 2010-11 (4.67 crore in the year 2006-07, at the time of de-tariffing). Accordingly, the number of claim intimations is also higher and, therefore, an increase in claim repudiations in numerical terms,” IRDA said in the report. The net incurred claims of the 24 non-life insurers stood at 29,536 crore in 2010-1, against 22,274 crore in 2009-10. The incurred claims showed an increase of 32.60 per cent during 2010-11. While the public sector insurers reported growth at 30.95 per cent in the incurred claims, the same was higher for private insurers at 35.99 per cent However, overall the growth in incurred claims during 2010-11 at 32.60 per cent was significantly higher than 12.97 per cent recorded during the previous year.

Among the various segments, motor insurance and health insurance had high claims ratios, at 102.69 per cent and 100.08 per cent respectively. Compared with the previous year, the incurred claims ratio in all segments except in health insurance, has increased. There was a substantial reduction in the incurred claims ratio in the health segment from 111.13 per cent in 2009-10 to 100.08 per cent in 2010-11.

Overall, the percentage of claims rejected at the non-life industry level is only 2.6 per cent, from the total number of claims processed during 2010-11.The industry settled 85.3 per cent claims of the total claims lodged.

IRDA has constituted an elaborate grievance redressal mechanism, Integrated Grievance Management System (http://www.igms.irda.gov.in), which enables access to grievances lodged with insurers on the website of IRDA.

deepa.n@thehindu.co.in

Insurance made child's play, with comic books

The country's insurance regulator will use the power of comic books to drive home the basic concepts, needs and importance of insurance in one's life, starting right from the school level.

The Insurance Regulatory and Development Authority has readied comic books and hand-books for high school students. They will be distributed in select schools and later scaled up.

The books will contain attractive stories which will try to weave the basic concepts of insurance, products, both traditional and unit-linked, the need for insurance and how to address problems and what mechanisms to choose.

“I believe that children should be made aware of the basics of insurance so that they can be financially-informed adults later,” Mr J. Hari Narayan, Chairman, IRDA told Business Line.

In a new approach, the IRDA plans to catch them young to promote insurance. In the last few years it has been making efforts to simplify procedures, policy documents, and so on to help customers. There is more. “We have asked the Central Board of Secondary Education and State boards of intermediate education to introduce insurance in curriculum,” Mr Hari Narayan said.

Efforts are also on to launch an educational course in insurance, he added. This can also help youth from the rural areas to take up insurance agencies.

The objectives of the initiative are simple. As insurance is a complex subject with much scope for mis-selling, catching educating the young in insurance concepts augurs well.

Further, given the huge potential for growth of the insurance sector in India, a proper awareness would also help the industry.

The other financial regulators such as the Securities and Exchange Board of India and Reserve Bank of India have also been treading a similar path.

While SEBI has been in discussion with Central Board of Secondary Education, the RBI had released simple information booklets.

Claims settlement: LIC fares better than private insurers

Life Insurance Corporation of India has performed better in terms of claims settlement ratios as compared to private life insurance companies, according to the IRDA annual report.

“The claims settlement ratio of LIC was better than that of the private life insurers. Settlement ratio of LIC increased to 97.03 per cent during the year 2010-11 when compared to 96.54 per cent during the previous year,” the IRDA said in the report.

The percentage of claims rejected by LIC stood at 0.01. The ratio of claim rejections to total reported claims declined from 1.21 per cent in the previous year to 1 per cent in 2010-11.

Compared to LIC, private insurers rejected a large number of claims.

The per cent of claims rejections increased to 8.90 per cent in 2010-11 from 7.61 per cent in 2009-10.

Overall, the life insurance industry's settlement ratio has improved slightly to 95.58 per cent in 2010-11 from 95.24 per cent in 2009-10, and the claims rejection ratio has also gone up to 2.04 per cent in 2010-11 from 1.93 per cent in 2009-10.

Life insurers settled over 50 lakh maturity claims in 2010-11, paying a total of Rs 32,345 crore and the number of survival benefits paid in the year was over 1.35 crore for an amount of Rs 19,816 crore.

deepa.n@thehindu.co.in

Irda to develop electronic re-insurance platform

The Insurance Regulatory Development Authority (Irda) said it would take steps to introduce an electronic re-insurance platform for insurers and both Indian and foreign re-insurers.

"The proposed electronic re-insurance platform will have to be mandatorily used by insurers and Indian reinsurers as well as foreign reinsurers operating in India," Irda Chairman J Harinarayan said.

He said Irda had taken up an ambitious programme of designing an exchange or an inter-faceted, interlinked, electronic platform, on which reinsurance broking transactions would be executed.

"The entire operation on the reinsurance side will be done through this particular platform once it is in place," Harinarayan said on the sidelines of the Eighth Insurance Brokers' Summit here.

Harinarayan said that it would be an ambitious task.

"There are entities working on it for some time. GIC has taken good steps in this regard but the kind of platform we are thinking would be a national and a much larger platform for placing all re-insurance contracts," he said.

Source: Business Standard