Insurance

When looking at the insurance sector there is a wide spectrum of

business types which includes life insurers, non-life insurers and
reinsurers. Life insurers are best categorized as asset businesses
usually linked in some way to the provision of savings, pensions or
annuities of some kind. Non-life (or Property & Casualty) insurers are
by contrast predominately liability businesses where premiums are
received now to provide cover for claims (i.e. liabilities) that might
arise at some point in the future.
Life and non-life insurance companies both operate in a highly
regulated environment and the typical balance sheet will have very
substantial cash and investments so liquidity is generally not an issue.
As a consequence, the ability of these entities to meet the liabilities as
they fall due in the short term is invariably not the critical factor but
rather the overall assessment of the balance sheet position which can
include some very material and significant assumptions. As a
consequence restructuring in the insurance arena, common with other
areas of financial services, has different pressure points and therefore
there is a tendency for insurance restructuring assignments to follow a
very different path to other business sectors requiring specialist
industry specific expertise.
The Indian Life Insurance industry is one on the strongest growing
sectors in the country. Currently a US$ 41-billion industry, India is the
fifth largest life insurance market and growing at a rapid pace of 3234% annually. Today there are 22 life insurance companies operating
in India. This section brings to you comprehensive information on the
Insurance industry. Use the links below to navigate this section.
Life Insurance is the key to good financial planning. On one hand, it
safeguards your money and on the other, ensures its growth, thus

providing you with complete financial well being. Life Insurance can
be termed as an agreement between the policy owner and the insurer,
where the insurer for a consideration agrees to pay a sum of money
upon the occurrence of the insured individual's or individuals' death or
other event, such as terminal illness, critical illness or maturity of the
policy.
Life insurance plans, unlike mutual funds, are beneficial when you
look at them as a long term avenue of investment which also offers
protection through life cover. Life insurance policies are broadly
categorized into 2 types; Traditional Plans and Unit Linked Insurance
Plans (ULIPs).

Traditional policies offer in-built guarantees and define maturity benefits through variety of
products such as guaranteed maturity value. The investment risk in traditional life insurance policies
is borne by life insurance companies. Additionally, the investment decisions are regulated to a large
extent by IRDA rules and regulations, ensuring stable returns with minimal risk. Investment income
is distributed amongst the policy holders through annual bonus. These policies are ideal for policy
holders who are not market savvy and do not wish to take investment risks.
ULIPs, on the other hand provide a combination of risk cover and investment. More importantly
they offer a flexibility to decide your risk taking profile

Term Insurance helps the customers in safeguarding their families from financial worries that arise
due to unfortunate circumstances. Term plans are pure risk cover plans with or without maturity
benefits. These pure risk plans cover your life at a nominal cost
Term plans also let you avail the benefit to cover your outstanding debts like mortgage, home loan
etc. In case of something happens to you, the financial burden is borne by the insurance company and
not your loved ones.

Term Plan offers you the following benefits:

High insurance Cover at lower costs

Financial security against loans and mortgages,

Single premium payment option available

Available with host of Additional rider benefits

The purpose of health insurance is to help you overcome unforeseen emergencies without
compromising on any other financial goal. Health insurance helps you pay for all your medical
expenses. A health insurance policy also gives you the benefit of covering your loved ones under one
plan to avoid any financial constraints arising on account of a medical emergency.
The benefits:

Cashless hospitalization in all major hospitals pan India

Coverage of pre and post hospitalization expense

Coverage of all major day care treatments

Endowment Plans are an ideal choice for the risk-averse customer. Endowments are long-term,
regular savings plans with a built-in life cover.
Provided you have paid all your premiums, at the end of the term the policyholder receives the sum
assured plus accrued /guaranteed bonuses that have been declared over the years, as a lump sum. In
case of the unfortunate death during the term of your plan, the sum assured, will be paid out as a lump
sum with the bonuses that the policy is entitled to.
The benefits of Endowment Plans are as follows:

Available as money back plans also

Option to avail a host of additional rider benefits

Cover your life for a longer period of time

Loan facility can be availed against most of the plans.

Whole Life Insurance plans provide cover throughout your lifetime. The premium could be
paid for as long as a lifetime or for a limited period.

Unlike endowment plans they do not carry a maturity value and pay the sum assured to the
family in case of the unfortunate death of the policyholder. A Whole Life Insurance plan
assures that your family is protected against financial loss that could occur your death.

Group insurance covers a group of people, usually members of societies, employees of a

common employer, or professionals. All employees or members are included under one
'master policy' owned by the employer /nodal agency. Group Insurance covers both life and

savings products along with options like Superannuation and Health.

Retirement Plans

Retirement Plans make sure that you have support in the twilight years of your life. The savings you
set aside today become your wealth and support in the years to come.
Retirement plans are of two types:
a. Immediate Annuity Plans
These plans allow you to convert a sum of money into a guaranteed series of payments for a
definite period or for life.
b. Deferred Annuity Plans
This plan allows you to save regular amounts of money for a peaceful retirement. This type of
annuity has two main phases, the accumulation phase which allows you to invest and save

money into your account, and the payout phase in which the plan is converted into regular
annuity installments and payments are received.
Retirement Plans offer you benefits such as:

An alternative to superannuation's and provident fund;

Compulsory Saving

Saving tax

Choice of Open Market Option, i.e., you have the option to purchase an immediate annuity
from your current insurer or from any other life insurer as recognized by IRDA.

Insurance today offers a very simple assurance in terms of monetary support to a child and family
incase of death or disability of parent and helps ensure that the shortage of fund never hampers
dreams or aspirations of your child. In short, Children's Plans ensure a secured financial future for
your child.
As parents, make sure you keep the following factors in mind before choosing a child insurance plan:

Should cover your child throughout even if something happens to the parent

The payout should be at a age when the child requires it the most, i.e., when he wants to enter
his dream college or needs to start his career.

Should provide a regular source of income so that child doesn't have to compromise on his
dreams and aspirations.

Your child should not be forced to pay the premiums of the policy.

Wealth plans invest the premium in to the equity, debt and cash markets by allocating units, which like any
other mutual fund have a NAV. You are free to switch between one fund to another depending on the risk factor
you wishes to bear. They offer better returns than traditional endowment plans and offer a great deal of
flexibility along with great returns making them the finest product offering.
The benefits:

Availability in single premium and regular premiums options

Investment funds ranging from index funds to mid-cap funds and debt market linked funds.

Option to choose from a host of additional rider benefits

Tax Benefits as per existing tax laws

Flexibility to move from one investment fund to other by the way of switching of funds

Option to infuse additional capital by the way of Top Ups to give your investments a boost.

Life Insurance provides the dual benefits of savings and security. The following benefits explain why
this investment tool should be an integral part of your financial plans.

Advantages of Life Insurance

Risk Cover - Life today is full of uncertainties; in this scenario Life Insurance ensures that
your loved ones continue to enjoy a good quality of life against any unforeseen event.

Planning for life stage needs - Life Insurance not only provides for financial support in the
event of untimely death but also acts as a long term investment. You can meet your goals, be it
your children's education, their marriage, building your dream home or planning a relaxed

retired life, according to your life stage and risk appetite. Traditional life insurance policies i.e.
traditional endowment plans, offer in-built guarantees and defined maturity benefits through
variety of product options such as Money Back, Guaranteed Cash Values, Guaranteed
Maturity Values.

Protection against rising health expenses - Life Insurers through riders or stand alone health
insurance plans offer the benefits of protection against critical diseases and hospitalization
expenses. This benefit has assumed critical importance given the increasing incidence of
lifestyle diseases and escalating medical costs.

Builds the habit of thrift - Life Insurance is a long-term contract where as policyholder, you
have to pay a fixed amount at a defined periodicity. This builds the habit of long-term savings.
Regular savings over a long period ensures that a decent corpus is built to meet financial
needs at various life stages.

Safe and profitable long-term investment - Life Insurance is a highly regulated sector.
IRDA, the regulatory body, through various rules and regulations ensures that the safety of the
policyholder's money is the primary responsibility of all stakeholders. Life Insurance being a
long-term savings instrument, also ensures that the life insurers focus on returns over a longterm and do not take risky investment decisions for short term gains.

Assured income through annuities - Life Insurance is one of the best instruments for
retirement planning. The money saved during the earning life span is utilized to provide a
steady source of income during the retired phase of life.

Protection plus savings over a long term - Since traditional policies are viewed both by the
distributors as well as the customers as a long term commitment; these policies help the
policyholders meet the dual need of protection and long term wealth creation efficiently.

Growth through dividends - Traditional policies offer an opportunity to participate in the

economic growth without taking the investment risk. The investment income is distributed
among the policyholders through annual announcement of dividends/bonus.

Facility of loans without affecting the policy benefits - Policyholders have the option of
taking loan against the policy. This helps you meet your unplanned life stage needs without
adversely affecting the benefits of the policy they have bought.

Tax Benefits-Insurance plans provide attractive tax-benefits for both at the time of entry and
exit under most of the plans.

Mortgage Redemption- Insurance acts as an effective tool to cover mortgages and loans
taken by the policyholders so that, in case of any unforeseen event, the burden of repayment
does not fall on the bereaved family.

Here are a few points to ponder about, whilst going about fulfilling your needs.

Don't buy insurance just because your neighbor bought it. Buy insurance because you need it.
Understand your financial goals. Once you know what your aim is, you will be in a better
position to choose the type of insurance you need - protection, savings, investment or

retirement.
Different insurance policies have different covers. Make sure your financial advisor presents
you with a list of recommendations, including the types of policies and benefits. Read them
thoroughly to be aware of what your policy covers.

The amount of insurance coverage you need depends on factors such as the number of
dependants, debts or mortgages, lifestyle and investment needs. Insurance cover should be to
such an extent that in case of one's demise, his / her dependents are able to maintain the same
lifestyle as they used to have before the unfortunate event occurred.

The amount of premium paid depends on the insurance cover you buy. Look at the current
benefits your insurance policy provides and opt for a rider accordingly. With some riders, you
may stop paying premiums for your policy if you become disabled, but will still be able to
enjoy the benefits of life insurance protection.

Frequency of Premium Payment:Choice of Frequency of premium payment period - Single premium, Yearly, Half yearly,
quarterly and monthly should be carefully exercised. However, if your policy does not have

this benefit and you are finding it difficult to continue meeting the premium payments, consult
your financial advisor.

Modes of payment
o Payment ECS
o Credit card
o Internet payment
o Cash
o Cheque

What happens if I fail to make the required premium payments?

Typically there is a grace period (15 to 30 days) during which you can pay the premium with
no interest charged. If you do not pay your premium within this grace period, your policy
lapses as a matter of general rule. However the discontinuation of policy is governed by the
policy conditions which may differ from insurer to insurer and plan to plan.

How to Buy
There's no thumb rule on buying insurance; it depends completely on every individual's financial
goals, income profile and risk appetite. However, here are a
few basic rules you should keep in mind before you buy an
insurance product.

Buy insurance only from a licensed company

Buying life insurance is like buying future financial
security for your family. Hence when buying
insurance, ensure your policy is provided by a

licensed company. The list is available on this website too.

Buy insurance only from a licensed agent/ intermediary

Buy insurance only from a licensed agent/ intermediary who is licensed to sell Life
Insurance Products. You can ask for the license before you actually buy the policy

Shop around
Seek premium quotes and proposals from various insurance companies and do a
comparative study. Different policies offer different benefits, so choose one that suits you the
most. Cheapest is not necessarily the best.

Understand the scope of cover, terms and conditions of the policy

Make sure you have a complete understanding of all necessities such as the terms and
conditions as well as exclusions in the policy. If necessary, do not shy away from asking for
explanations from the insurance company.

Avoid unwanted additional coverage

Do not be pressured into buying 'packaged' products, as they often contain fixed coverage's
you don't need. However, you may opt to add additional coverage or riders of your choice at
an additional premium which offers value for money. Your financial commitment should be
in tune with your financial condition.

Get the right life insurance policy

Carefully, study your agent's recommendation to make sure the policy is what you are
looking for. The benefits should match your needs.

Check the date the insurance becomes effective

The date the insurance goes into effect may be different from the date the company issues
the policy. Ensure you ask your agent when the insurance becomes effective.

Fill in your application carefully

Never sign blank proposals or application forms. Ensure all information filled in your

application is complete and correct to avoid delays or even denial of claims at a later stage.

Health related particulars

Life Insurance is a contract of utmost good faith where the responsibility of disclosure of
material fact vests with the buyer. Please ensure that all questions relating to family history,
personal health are answered with utmost care. Any concealment or non disclosure of
material facts could jeopardize claim to your nominees.

Age and Address Proof

Regulations require proposal forms to be accompanied by authentic age and address proof.
Kindly ensure that acceptable proof of age and address are submitted with proposal form.

Ensure premiums are paid to your insurance company

Make sure your cheque or money order is made payable to the insurance company and not to
your agent and insist for a receipt immediately as proof of payment.

Read your policy when you receive it

Life policies have a 'free look' period of 15 days from the date you receive it. Use this
opportunity to make sure this is the right policy for you. In case the policy document
contains any condition which was not explained to you by the agent or intermediary, you
have the right to return it to the insurance company and ask for refund within this period.

List if the insurance companies:

No.

Name of the Company

AEGON Religare Life Insurance Company Ltd.

Aviva Life Insurance Co. India Pvt. Ltd.

Bajaj Allianz Life Insurance Company Limited

Bharti AXA Life Insurance Pvt. Ltd.

Birla Sun Life Insurance Co. Ltd.

Canara HSBC Oriental Bank of Commerce Life Insurance Company

Limited

DLF Pramerica Life Insurance Company Ltd.

Future Generali India Life Insurance Co. Ltd.

HDFC Life

10

ICICI Prudential Life Insurance Co. Ltd.

11

IDBI Federal Life Insurance Co. Ltd.

12

IndiaFirst Life Insurance Company Limited.

13

ING Vysya Life Insurance Co. Ltd.

14

Kotak Mahindra Old Mutual Life Insurance Limited

15

Life Insurance Corporation of India

16

Max New York Life Insurance Co. Ltd.

17

MetLife India Insurance Co. Ltd

18

Reliance Life Insurance Company Limited

19

Sahara India Life Insurance Co, Ltd.

20

SBI Life Insurance Co. Ltd.

21

Shriram Life Insurance Co. Ltd.

22

Star Union Dai-ichi Life Insurance Company Limited

23

Tata AIA Life Insurance Company Pvt. Ltd.

24

Edelweiss Tokio Life Insurance Co. Ltd.

Without-Profit Policy
An insurance plan in which the policyholder does not get any share of the insurer's profits.
With-Profit Policy

An insurance plan in which the policyholder gets a share of the insurer's profits (in the form of
guaranteed additions/bonus), along with the sum assured.

Performance of Insurance Sector

New Business Figures Quarter Ended Mar 2012 (Provisional)
Individual Single Premium (including Rural & Social)

Sr No.

Particulars

Premium

Policies

Mar-12
1.

(Rs.in Crore)

Sum Assured

Mar-12

Mar-12

Non linked*
Life

2.

with profit

6611.70

992198

8831.00

without profit

2407.91

629008

13803.04

2.22

183

0.00

1156.47

29705

3.12

with profit

55.25

4576

2.43

without profit

65.91

2410

2.13

General Annuity
with profit
without profit

3.

4.

Pension

Health
with profit
without profit

Subtotal

0.00

0.00

0.40

234

14.87

10299.86

1658314

22656.59

1.

Linked*
Life
with profit

0.00

0.00

7922.81

1111955

14648.06

with profit

0.00

0.00

without profit

0.00

0.00

0.00

0.00

170.53

15711

0.30

without profit
2.

3.

General Annuity

Pension
with profit
without profit

4.

Health
with profit
without profit

Subtotal

Total (A+B)

0.00

0.00

2.17

457

8.12

8095.51

1128123

14656.48

18395.37

2786437

37313.07

Growth of the Insurance Sector

India's insurance sector is zooming to show an unprecedented progressive
growth of more than 200% by the period of 2009-09. The Associated Chambers
of Commerce and Industry of India has clocked out the fact that during this
period, private players in the industry will see a growth of about 140 per cent,
owing to the adoption of the aggressive marketing techniques in comparison of
the growth rate of 35 percent-40 percent achieved by the state owned insurance
companies. The chamber is expected to poise the business of insurance to reach
at Rs.2000 billions in coming 2 years from the present level of Rs. 500 billion.
With the result of adoption of the intense marketing strategies by the private
players, the declination has been witnessed in respect of the share of the state
owned insurance companies captured in the market. The market share fallout
has been noticed in context of such companies like GIC, liC, which have come
down to nearly 70 percent in the past 4-5 years from the 97 percent. The experts

have fore casted the more severe competition in the insurance sector likely to be
occurred in the near future. Till recently, insurance sector was majority driven by
the government sector players but now many private sector multinational
players have come into the picture. Like HDFC, ICICI, Kotak, Mahindra and Birla
Sun life. Insurance sector has been characterized as the booming sector of the
Indian arena, which has shown the growth rate of more than 15 percent to 20
percent. Insurance in India is put under the federal subject and is governed by
the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and General
Insurance

Business(Nationalization)

Act,

1972,

Insurance

Regulatory

and

Development Authority(IRDA) Act, 1999 and by various other acts.

The roots of the insurance sector can be tracked down in the year 1818 in the
formation of the life insurance Corporation in Calcutta. The idea was to provide
means to the English widows. During that time different premiums were charged
for the Indian and English people lives. In 1870, the Bombay Mutual Life
Insurance Society started its insurance business and it charged the same
premium from all people irrespective of whether they were Indian or English. In
the year 1912, insurance regulation was started due to the passing of the Life
Insurance Companies Act and the Provident Fund Act. By the year of 1938, in
India there were total 176 insurance companies. In the year of 1938, with the
passing of Insurance Act, 1938 there was the introduction of the first
comprehensive legislation. It was passed with the aim of providing the strict
state control over the insurance business. After the independence, insurance
sector in India grew at a much higher pace. In the year 1956, Indian government
combined together 245 Indian and foreign insurers and the provident societies
under the name of nationalized Monopoly Corporation. It was the same period
when the life insurance corporation (liC) came into the existence by the passing
of the Act of Parliament and through the contribution of capital around Rs. 5
crore. Till 1972, private sector has enjoyed somehow monopoly in the general
insurance sector. There were around 107 private companies in the field. With the
effect of the General Insurance Business (Nationalization) Act, 1972, the general

insurance business got nationalized in the India. Due to the amalgamation of

107 private insurance companies, 4 new companies, as the subsidiaries of the
General Insurance Company, came into effect- National Insurance Company,
New India Assurance Company, Oriental Insurance Company and United India
Insurance Company.
Indian Insurance Industry: New Avenues for Growth 2012
With an annual growth rate of 15-20% and the largest number of life insurance
policies in force, the potential of the Indian insurance industry is huge. Total
value of the Indian insurance market (2004-05) is estimated at Rs. 450 billion
(US$10 billion). According to government sources, the insurance and banking
services contribution to the country's gross domestic product (GDP) is 7% out of
which the gross premium collection forms a significant part. The funds available
with the state-owned Life Insurance Corporation (LIC) for investments are 8% of
GDP.
Till date, only 20% of the total insurable population of India is covered under
various life insurance schemes, the penetration rates of health and other non-life
insurances in India is also well below the international level. These facts indicate
the of immense growth potential of the insurance sector. The year 1999 saw a
revolution in the Indian insurance sector, as major structural changes took place
with the ending of government monopoly and the passage of the Insurance
Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for
private players and allowing foreign players to enter the market with some limits
on direct foreign ownership.
Though, the existing rule says that a foreign partner can hold 26% equity in an
insurance company, a proposal to increase this limit to 49% is pending with the
government. Since opening up of the insurance sector in 1999, foreign
investments of Rs. 8.7 billion have poured into the Indian market and 24 private
companies have been granted licenses.

Innovative products, smart marketing, and aggressive distribution have enabled

fledgling private insurance companies to sign up Indian customers faster than
anyone expected. Indians, who had always seen life insurance as a tax saving
device, are now suddenly turning to the private sector and snapping up the new
innovative products on offer.
The life insurance industry in India grew by an impressive 36%, with premium
income from new business at Rs. 253.43 billion during the fiscal year 2004-2005,
braving stiff competition from private insurers. This report, Indian Insurance
Industry: New Avenues for Growth 2012, finds that the market share of the state
behemoth, LIC, has clocked 21.87% growth in business at Rs.197.86 billion by
selling 2.4 billion new policies in 2004-05. But this was still not enough to arrest
the fall in its market share, as private players grew by 129% to mop up Rs. 55.57
billion in 2004-05 from Rs. 24.29 billion in 2003-04.
Though the total volume of LIC's business increased in the last fiscal year (20042005) compared to the previous one, its market share came down from 87.04 to
78.07%. The 14 private insurers increased their market share from about 13% to
about 22% in a year's time. The figures for the first two months of the fiscal year
2005-06 also speak of the growing share of the private insurers. The share of LIC
for this period has further come down to 75 percent, while the private players
have grabbed over 24 percent.
There are presently 12 general insurance companies with four public sector
companies and eight private insurers. According to estimates, private insurance
companies collectively have a 10% share of the non-life insurance market.
Total premium of life insurers drops by 3% in FY12
MUMBAI: The total premium of life insurers dropped by 3 per cent to Rs 2,83,315 crores for 2011-12

compared to Rs 2,91,605 crores in the year ago period, as per the provisional data released by Life
Insurance Council, the industry body for all life insurance companies.

The total new business premium collected by the industry for FY 2011-12 declined by 9.5 per cent at
Rs 1,13,678 crores from to Rs 1,25,618 crores last year.
Linked new business saw a significant drop of 67 per cent to Rs 17,455 crores against Rs 52,739
crores last year.
However, Non-Linked new business premium showed a growth of more than 32 per cent to Rs
96,224 crores as on March 31, 2012, compared to Rs 72,878 crores in 2010-11.
The total assets under management (AUM) of life insurers also increased by 9 per cent to Rs
16,18,544 crores as on March 31, 2012, compared to Rs 14,82,549 crores in the previous year, despite
the apparent slow-down in the industry.
"This drop in total premium can be attributed to change in regulatory road map, declining number of
products and disappearance of pension business in the individual segment," Life Insurance Council
Secretary General S B Mathur said.
If the individual pension business is considered, which forms a major segment of the new premium
for Life Insurance companies, and on which policy holders have traditionally placed trust during the
accumulation stage, has fallen drastically in FY12 to a meager 1.80 per cent of total new business
premium, he said. New Business Premium garnered from individual pension policies during FY12
shrunk considerably to paltry Rs 1,139 crores compared to Rs 19,257 crores in the previous fiscal and
Rs 26,389 crores in 2009-10.
A drop in total premium collected by life insurers in India notwithstanding, their total assets under
management (AUM) grew by 9% says data released by industry body Life Insurance Council. The
total AUM figure stood at Rs 16,18,544 crores as on March 31, 2012, against Rs 14,82,549 crores last
year. ""The increase in AUM is despite apparent slowdown in the industry, resulting in 3% drop in the
total premium to Rs 2,83,315 crores for financial year 2011-12, compared to Rs 2,91,605 crores last
year,"" an official release said.
The total new business premium collected by all life insurers in 2011-12 was Rs 1,13,678 crore - a
drop of 9.5% on a year-on-year basis compared to Rs1,25, 618 crore last year. "This drop in total

premium can be attributed to the change in regulatory roadmap, declining number of products and
disappearance of pension business in the individual segment," said SB Mathur, secretary-general, Life
Insurance Council. Linked new business dipped by 67% y-o-y to Rs 17, 455 crores from Rs 52, 739
crores last year. However, non-linked new business premium posted a growth of over 32% to touch
Rs 96,224 crores against Rs 72, 878 crores in 2010-11.
According to the report, individual pension business, which forms a large segment of the new
premium for life companies, has fallen drastically in FY 2011-12 to meager 1.80 % of total new
business premium. New Business Premium garnered from individual pension policies during FY
2011-12 shrank to Rs 1,139 crores vis-a-vis Rs 19,257 crores in 2010-11 and Rs 26,389 crores in
2009-10. ""This virtual disappearance of pension premium and declining new business unit linked
premiums had wide repercussions on the overall investment done by life companies in the Indian
equity market. Net investment done by life insurers in equity markets has shown a steep decline,"" the
release said. In FY 2011-12 the net buying by life insurers in equity stood at Rs 26,990 crores as
compared to Rs 30,565 crores last year. ""In 2009-10 the net buying done by life insurers was Rs
65,411 crores and during the 2008-09 financial crisis, when FIIs withdrew more than Rs 46,000
crores from equity markets, Indian life insurers had invested more than Rs 55, 000 crores reducing
volatility in the equity markets,"" it added. The data shows that public sector giant LIC's share of
equity investment in last few years has declined sharply, by over 50%. In 2011-12, the life insurance
behemoth had invested Rs 15,735 crores in equities as compared to Rs 39,215 crores in 2009-10 and
Rs 35,835 crores in 2008-09.

Unit-linked insurance plans take a beating

From more than 70 per cent of sales during 2008-09, the share of Ulips in new business premium
dropped to a mere 15 per cent in the last financial year
The verdict is out: Unit-linked insurance policies, or Ulips, are no more catching customers fancy.
Be it due to regulatory changes or a volatile stock market, over the last two years, Ulip sales have
taken a beating.
From more than 70 per cent of sales during 2008-09, the share of Ulips in new business premium
dropped to a mere 15 per cent in the last financial year.
According to data collected by the Life Insurance Council, during 2011-12, premium collection from
Ulips fell 67 per cent to Rs 17,455 crore compared with Rs 52,739 crore in the corresponding period
a year ago, accounting for only 15.35 per cent of the total new business premium collection.
In the same time, non-linked or traditional business showed a growth of 32 per cent to Rs 96,224
crore, accounting for nearly 85 per cent of the total new business. During 2010-11, Ulips accounted
for nearly 41 per cent of the new business premium.
Ulip sales have sunk since September 2010, when new regulations by the Insurance Regulatory and
Development Authority (Irda) made selling of these hybrid plans less lucrative for both life
companies and agents. Ever since new guidelines came into force, traditional plans, which earn a
relatively higher commission, have gained the sellers attention.
Another reason behind the drop in sales in Ulips is the absence of pension products from the market.
Individual pension plans, which accounted for a little over 50 per cent in the sales of Ulips two years
ago, declined drastically, and accounted for less than two per cent in 2011-12. Premiums collected
from individual pension policies during FY12 shrank to Rs 1,139 crore compared with Rs 19,257
crore in 2010-11 and Rs 26,389 crore in 2009-10, the data showed.

NEW PREMIUM COLLECTION

(Rs crores)

2010-11

Shar
e
(%)

Linked
Non-linked
New business

201112

Share

Change

(%)

(%)

52,739

41.98

17,455

15.35

72,878

58.02

96,244
1,13,69
9
1,69,61
6
2,83,3
15

84.65

1,25,617

Renewal
premium

1,65,988

Total premium

2,91,60
5

100

100

-66.90
32.06
-9.49
2.19
-2.84

Source: Life Insurance Council

This drop in total premium can be attributed to the change in regulatory road map, declining number
of products and disappearance of pension business in the individual segment, according to S B
Mathur, secretary-general of the Life Insurance Council. Lower sales in Ulips have also impacted
equity investment by insurance companies. Insurance officials say equity inflows have fallen, as the
sales mix has shifted in favor of traditional policies. Unlike Ulips, where up to 95 per cent of the
funds can be deployed in equity, traditional plans cap equity exposure at 25 per cent.
Subsequently, during 2011-12, net investment by life insurers in equity stood at Rs 26,990 crore
compared with Rs 30,565 crore in the previous year. In 2009-10, the net buying done by life insurers
was Rs 65,411 crore," Mathur noted.
During the 2008-09 financial crisis, when foreign institutional investors withdrew Rs 46,000 crore
from equity markets, Indian life insurers had invested Rs 55, 000 crore, reducing volatility in the
equity markets."
Though the new business premium collection was down nine per cent during 2011-12, total premium
collection for the industry was down three per cent, courtesy a positive inflow in the renewal
premium collection. This was for the first time since the opening of the life insurance sector that the
premium collection had shrunk. The current financial year has seen a continuation of the downward
trend, with a choppy equity market and high inflation adding to the woes.
Recent trends in Insurance sector

Irda bans products with highest NAV guaranteed

The Insurance Regulatory and Development Authority (Irda) has asked life insurers to stop selling
highest net asset value (NAV)-guaranteed products.
In a recent communication to all life insurers, the regulator has said, The marketing of products
labelled as highest NAV product shall not be allowed". These products contribute almost 20 per cent
to the total premium collection of life insurers.
Irda, in the past eight months, had informally expressed its discomfiture with such products at several
fora. The regulators argument was that such products led to systemic risks associated with the way
funds were managed and posed the risk of a heavy sell-off in equities when stock markets fell.
Highest NAV-guaranteed products are those that promise to pay the highest value the fund achieves
during a certain period, say, five or seven years. However, to maintain that NAV consistently, insurers
have to take risks by investing in stocks aggressively. That could lead to undue risks.
These products had become the largest selling unit-linked life insurance policies (Ulips), after the
new guidelines on Ulips came in September 2010.
In another move, the Irda has 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. The regulator has also discouraged the use of single premium or limited premium
payment term polices as these could impact the cash flow management of companies. Accordingly,
Irda has proposed all polices have a regular payment option equivalent to the term of the policy.
Single-premium polices might be issued only under special categories.
In most of these products, customers are being lured with the promise of a decent maturity benefit,
but in case of claims (in the event of death), the benefits or the amounts are sometimes lower than the
premiums. The basic underlying principle of a life insurance policy is it should have sufficient life
risk cover," said an Irda official.

The regulator has expressed reservations on policies offering low" or insignificant" life risk covers.
Irda has pointed out three types of traditional plans on such grounds -- products where the death
benefit is defined as the return of premiums (with or without interest), products in which the initial
death benefit is significantly high and reduces subsequently during the currency of the contract and
products in which the insurance cover is insufficient/insignificant in relation to the premium i.e.
products which are mostly meant for savings. We would not allow such products. It was clearly a
marketing gimmick from the insurers," said a senior Irda official. In case of unit-linked policies, the
Irda mandates a minimum sum assured guarantee of roughly 10 times of the annual premiums (in
case of death). However, for traditional plans, there was no such mandate. The Irda is likely to come
out with the final guidelines on product design soon, which would include all such details. It is not
approving any products until life insurers design products according to the framework suggested.
"Lately more complex products are being designed and filed for F&U (file and use) clearance with
the Irda. In the process of clearing these products, the Irda has noticed that features of several
products are not in alignment with the best practices and, frequently, lack clarity. The efficiency of
product clearance has been constrained by such features," the Irda said in its communication.
Comparison site gets Irda approval
Mumbai-based insurance portal MyInsuranceClub.com has become the first comparison website to
bag Insurance Regulatory & Development Authority of India's approval. This license allows
MyInsuranceClub to officially compare premiums and features of insurance policies online.
Deepak Yohannan, chief executive officer says, If web aggregators are supported by insurance
companies it would result in drop in premiums, as costs of transacting online are much less compared
to other modes of sale."
The huge success of low-cost online term insurance plans is a good example where web aggregators
displayed the zero-commission products for the benefit of their visitors. Increasing number of online
plans are being launched by insurance companies, which will be priced much lower compared to
offline plans, he says.

Online insurance aggregation is a big hit with consumers in many developed markets. Last
November, Irda had issued guidelines that capped the remuneration that aggregator websites can
receive from insurers and banned them from rating or reviewing policies.
Gross premium income of general insurers rises 38%
The gross premium income of the general insurance industry increased 38.4 per cent in
January as compared to the year before.
According to data collated by insurers, the industry collected Rs 4,149 crore by writing new
policies in January, as against Rs 2,998 crore last year. As compared to December 2010, the
gross premium income increased 17.4 per cent.

The private players outshone their public sector peers, registering growth of 47.58 per cent
to Rs 1,957 crore, whereas the public sector companies collected a premium of Rs 2,192 crore
a growth rate of 31.1 per cent.
For the ten months ended January, the industry recorded growth of 24.1 per cent in gross
premium income to Rs 34,962 crore, as compared with Rs 28,165 crore in the corresponding
period last year.
Compared to the life insurance industry where growth in new premium income declined
after September, growth for the general insurance sector over the last six months has been
steady, with the industry recording average growth of 22-23 per cent every month, said an
official at a state-owned general insurance company.
The new business premium income of the life insurance industry declined 20 per cent in
December to Rs 9,709 crore, as against Rs 12,201 crore in the same period last year.
Growth pangs of insurance downplayed
At a time when the life insurance industry is staring at its worst growth rate, the Insurance Regulatory
and Development Authority is playing down the concerns of the sector. R K Nair, member (finance

and investments), said that after a number of good years, this was the time for consolidation, and
more importantly, orderly growth.
If we analyze the premium collection for the current year, we see that sales of the unit-linked plans
have come down drastically. But sales of pure protection plans or traditional plans have grown
significantly. This shows that investment products have suffered, which should not be a concern
considering the current macroeconomic environment," said Nair.
Several issues such as impending regulations on bancassurance, the general insurance industrys lack
of profitability and life insurers woes were discussed.
Nair cited figures from the April-December 2011 period, whereby the first year premium collection in
the life insurance industry is down 17 per cent, compared to the corresponding period last year.
There has been a significant growth in the last 10 years in the life insurance industry and one should
put the latest slide of premium collection in perspective," he added.
Insurance players were of the opinion that in order to promote long term savings in the economy,
pension products should be encouraged. However, it should not come with the baggage that they need
to invest in annuities only. Instead, buyers of such products should be allowed to use the accumulated
sum as they wished to.
According to P Nandgopal, managing director and chief executive officer of India First Life
Insurance Company, pension plans, which accounted for nearly 30 per cent of sales, played a key role
in promoting long term savings. Regulator must define the role and roadmap for the life insurance
industry," he added.
In a bid to increase the penetration of insurance products, insurers called for simpler regulation for
individual agents.
While bancassurance contributed 25 per cent of the premium, the agency network contributes 75 per
cent of the premium. There is a need to open the agency framework also. Agents should be allowed to
sell insurance products of more than one insurer," said Amitabh Chaudhury, managing director and
chief executive officer of HDFC Life Insurance.

M N Rao, MD & CEO, SBI Life, said, Bank employees should be allowed to sell insurance products
over the counter, and the banking correspondents also should be used to market the insurance
products to increase the penetration of insurance in the remote places."
If growth for the life insurance industry is a concern, it is profitability and low returns which are
hurting the general insurance industry. However, with the motor pool being dismantled and prices
stabilizing, insurers were of the opinion that margins and returns will only improve going forward.
Dismantling the third party motor pool will be a relief for the industry. We are also seeing the prices
stabilizing in other lines of business. So going forward, returns and margins will improve," said
Bhargav Dasgupta, MD & CEO, ICICI Lombard GIC.
Many companies have started reporting positive combined ratios, which is an indication that prices
are moving towards the right direction. Going forward, the returns and profitability will see
considerable improvement," said Gaurav D Garg, MD & CEO, Tata AIG General Insurance
Life insurers to see higher growth in October-March
New premium collection of the life insurance industry may improve in the October-March period,
says the Life Insurance Council, industry body for life insurers in India. However, insurers need to
introduce new products at regular intervals to sustain consumer interest, it adds. According to the
council, during the April-September period, the total premium collected, which includes new
premiums and renewal premiums, decreased two per cent to Rs 1, 22,661 crore from Rs 1, 25,179
crore. The fall can be attributed to a drop in new business premium collection, down 22 per cent in
the same period.
In the same period, the renewal premium collection grew 17 per cent to Rs 73,575 crore, as against
Rs 62,818 crore in the corresponding period last year.
The growth in renewal premiums is indicative of the fact that at a time when there is risk aversion
among savers and the market sentiment is totally negative, policy holders have continued to have
faith in life insurance products," the council said in a release. The council attributed the fall in new
premium collection to the low sales of unit linked products, especially individual pension products.

The individual pension segment, which was a major contributor of new premium for life companies,
and on which policyholders have traditionally placed trust during the accumulation stage, has fallen
drastically to 1.2 per cent this year, compared to an average 26 per cent for the earlier two years. It is
evident from the data that voluntary contribution from retail investors under the individual pension
segment has dried up", said S B Mathur, the councils secretary general. The recent guidelines on
compulsory annuitisation by the Insurance Regulatory Development Authority (Irda) may hamper the
industrys growth, he added.
However, he welcomed Irdas new circular on pensions, and felt that companies needed to widen their
products offerings. He added there was a need to offer non-guaranteed pension products to investors
with a larger risk appetite.
Till September 30, promoters of life insurance companies had infused more than Rs 32,720 crore as
capital and infrastructure investment had also crossed Rs 2 lakh crore, the release said.
Slower waltz, life insurers ask IRDA
Give us time to digest what youre dishing out, the life insurance industry is trying to persuade the
Insurance Regulatory and Development Authority (Irda).
For instance, the regulator is likely to come out with new norms on both pension and traditional plans
over the next two months, say companies. The industry isnt in favour of both these important
guidelines coming back-to-back. Insurers, through the Life Insurance Council, are in talks with Irda
to space these regulatory changes, with a gap of preferably a year between each of the important
guidelines being awaited. They have also requested the regulator to not fix all issues together, but to
take one or two key ones and address these before going on to the next ones. Insurers also complain
the regulator does not take all their views into account. The new norms for pension products were
earlier going to be announced in May, for which the industrys views were hardly considered by
Irda," says a life insurer. A senior Irda official says it is not possible to take each and every view of
the industry into account. The industry, then, wants the regulator to engage in five-six rounds of
discussion before coming to a conclusion on products and services.

Rajesh Sud, managing director and chief executive officer of Max New York Life Insurance, says,
The issuance of guidelines needs to be well spaced. There has to be a decent gap, depending on the
nature of the guideline. There has been a lot of regulatory action and many more are expected in the
coming months. The regulator needs to give us a longer tenure, discuss with insurers before coming
out with changes, so that the regulation has a broader consensus. If followed, this can give us time to
prepare ourselves well for each change."
In situations like these, it becomes difficult for the industry, it says, to cope with the regulators speed
and make appropriate changes in products and services. Till now, the regulator has given very little
time (typically, one to three months) to the industry to understand and implement the guidelines. In
foreign countries, insurers are mostly given a year, it complains.
We need to pick out two or three big issues and address these, one by one. This will give both the
industry and customers enough time to cope," says Sandeep Ghosh, CEO of Bharti AXA Life
Insurance.
Insurers feel the regulator is in a haste because Irda chairman J Hari Narayan is going to retire in
2013.
Therefore, they believe, he wants to finish all that he had planned to do in his tenure. The industry has
had heavy losses due to poor sales of unit-linked plans since the time new guidelines were announced
in September of 2010. And, Irda has since also been trying to revamp one rule after another. As a
result, the industry has not been able to get the kind of sales it saw before September 2010. Apart
from the ones mentioned above, norms are awaited on issues like bancassurance, reinsurance,
mergers and acquisition, super agents and financial need analysis.
IRDA widens health insurance net
In the draft guidelines on health insurance announced by Insurance Regulatory and Development
Authority of India (Irda) in May, the definition of health insurance was widened. According to the
draft norms, travel, personal accident and critical illness covers would fall under the health insurance
segment.

Health insurance business means the effecting of insurance contracts which provide for sickness
benefits or medical, surgical or hospital expense benefits, travel health insurance and personal
accident cover," said the guidelines issued by Irda. Presently, personal accident and critical illness
covers come under miscellaneous business.
This may require the finance ministry to alter the definition of health insurance under the Health
Insurance Act, as it does not include travel, personal accident and critical illness under health
insurance. The hitch: Major health insurance norms like portability and lifetime guaranteed
renewability may be applicable to these covers also, which may be very difficult for travel insurance
as it is a short-term cover with a maximum policy term of six months," says a health insurance head
of a general insurance company.
While personal accident and critical illness covers insure health-related expenditures, an international
travel cover is largely health insurance as it is a mix of medical and travel-related covers. For
example, consider a $5 lakh cover with Tata AIGs Travel Guard that insures you for accident and
sickness medical expense reimbursement. This comprises accidental death and dismemberment
(common carrier) for $5,000, accidental death and dismemberment for $25,000 (24 hours), sickness
dental relief ($500) along with emergency medical evaluation. Here travel or baggage related covers
(baggage, passport, trip delay) are covered for maximum $1,000.
Also, the insurance regulator wants travel medical policies may be offered either as a stand-alone
product or as an add-on cover to existing health policy as and when an existing policyholder travels."
Presently, travel covers are only stand-alone covers. Personal accident and critical illness indemnity
covers are also available only as stand-alone covers, while benefit covers (issued by life insurers) can
be bought as an add-on on term plans.
At the same time, the regulator has disallowed assigning policies to anyone else. No assignment of
health insurance policies shall be allowed irrespective of whether they are indemnity or benefit
based," said the draft guidelines. This means you may not be able link any of the general insurance
policies to loan.

Many general insurers allow linking personal accident or critical illness cover under the credit shield
business that is linking it to home loan. Here, in case of you lose your income (due to accident and
disability or any terminal disease) the policy proceed takes care of the loan repayment.
The regulator is discouraging the credit shield business as these covers are short-term ones and may
lead to huge payouts for insurance companies," said another health insurance head.
IRDA slaps Rs 1.47-cr fine on HDFC Life for norm violation
The Insurance Regulatory and Development Authority (Irda) has slapped a fine of Rs 1.47 crore on
HDFC Life Insurance for violating norms pertaining to the commission paid to corporate agents and
denial of death claims.
The private life insurer was charged for seven violations after Irda, the insurance sector regulator,
made inspections between July 26 and 30 in 2010 on 25 possible violations.
Irda found 21 instances of the insurer denying death claims under home loan protection policies, and
was fined Rs 1.05 crore. Besides, the regulator found seven instances of the insurer paying
commission beyond prescribed limits to its corporate agents, and was fined Rs 35 lakh.
Under the guise of utilising network of marketing and advertising campaigns, sums ranging from Rs
6 lakh to Rs 286.92 crore were paid to HDFC (Housing Develop-ment Finance Corp), HDFC Bank,
HDFC Securities and HDB Financial Services, which are the corporate agents of the insurer," Irda
said, adding it would take further actions against these entities for receiving commission over the
permissible limit. Irda has also fined the life insurer Rs 5 lakh for soliciting insurance business from
unlicensed individuals and entities.
The regulator has directed HDFC Life to pay the penalty within 15 days. Amitabh Chaudhury,
managing director and chief executive officer of HDFC Life, was present during the hearing.
This was the second instance in less than a month where a large private life insurance company has
been fined by Irda. Last month, the regulator had slapped a fine of Rs 1.18 crore on ICICI Prudential
Life, the second largest private life insurer in the country for violating norms pertaining to
commission paid to corporate agents, referral agents and brokers. The insurer was charged for six

violations after Irda made inspections between November and December 2010 on 42 possible
violations.

Insurance FDI reforms may be dropped

New Delhi: A politically vulnerable Congress-led United Progressive Alliance (UPA) is likely to drop
the proposal for easier foreign direct investment (FDI) norms in insurance and pension funds.
- Prime Minister Manmohan Singh.
Accordingly, the proposal to enhance FDI in insurance joint ventures to 49% is likely to be dropped,
and the government, as demanded by the opposition, may cap the FDI ceiling in pension funds to
26% and guarantee assured returns, an official associated with the developments said.
The political opposition to the liberalization sought by the UPA was threatening to derail a key and
long pending insurance and pension fund reform initiative. The parliamentary standing committee,
headed by former finance minister Yashwant Sinha, had recommended that FDI in pension be capped
at 26% in the legislation itself and assured returns be given to those individuals who are willing to
park their entire corpus in government securities. The government is expected to move amendments
to the Insurance Laws (Amendment) Bill, 2008, and the Pension Fund Regulatory and Development
Authority Bill (PFRDA), 2011, to cap FDI at 26% in the current budget session of Parliament. With
FDI being capped at 26% in both these sectors, the government is hopeful that it will be able to push
through these financial sector Bills.
Except the whole issue of FDI, there is no other major problem with the insurance Bill. Given the
political compulsions, FDI will be 26%. There is no other choice. It is a political call, said a top
finance ministry official, who declined to be identified. India has 24 life insurance companies and an
equal number of general insurance companies.
Finance minister Pranab Mukherjee in his budget speech on Friday had said the government will push
the insurance amendment, PFRDA and the Banking Laws Amendment Bill, which will pave the way
for the issue of banking licences by the RBI by the end of the year, in the current parliamentary
session.

Many new foreign companies that want to enter these segments (insurance and pension funds) in the
Indian financial services market may (now) review their decision, said Robin Roy, associate director
at audit and consulting firm Price waterhouse Coopers. The biggest challenge for the insurance
industry is capital. Foreign partners are willing to bring in more funds, but if the ceiling is not raised,
that will not happen. Insurance companies will then have to look to either coughing up more capital
or inducting another domestic partner to meet the evolving capital requirements.

Few insurers ready to cover celeb body parts

While public sector insurers are open to the idea of providing such covers there appears to be
hesitancy among a section of insurers to get involved in such covers. Those unwilling give the reason
that domestic non-life insurance companies do not have the underwriting expertise to design such a
cover and would completely depend on foreign reinsurers to provide it. Government owned insurance
companies such as New India Assurance, United India Insurance and private insurer ICICI Lombard
have

said

that

they

may

consider

providing

such

cover.

However, private insurers such as Bajaj Allianz General, Tata-AIG General, Royal Sundaram said
that they have not sold such covers and would not look at providing celebrity insurance covers. They
would rather provide a personal accident policy that would cover the financial loss due to disability
from an accident.
So what does a celebrity insurance policy cover? The policy would indemnify the business loss to a
celebrity for that part of their body or talent that is important for their business. Foreign reinsurers
would look at the health of celebrity, his popularity, his balance sheet and earnings from the talent or
body part that he wishes to insure, the kind of sport or art he is in and the risks surrounding the
celebrity.
So, many in Western countries have insured their voice, sportspersons their legs and arms while
actors have insured their smile, face or specific body parts. However, unlike in the Western countries,
in India the trend is yet to begin. A key reason is that Indian insurers do not have the expertise to
design a celebrity insurance cover and would have to get it designed from foreign reinsurers, mostly
Lloyds of London.

G Srinivasan, CMD of United India Insurance, said, There have not been any serious proposals from
celebrities asking for body insurance covers. We can consider providing such a cover, but we first
have to check with foreign reinsurers who will look at the risks involved, the contingencies, besides
other

factors

such

as

the

amount

of

cover

being

asked

is

appropriate

or

not.

M Ramadoss, CMD of New India Assurance, said, "If a celebrity wants such insurance, then we will
send his proposal to foreign reinsurers who will evaluate the request and put the terms, conditions and
decide the premium."
However, explaining the reason for hesitance among other segment of insurers, vice-president of
Prudent Insurance Brokers, Pavanjit Singh Dhingra said, "Celebrity insurance is a very niche
segment. There is no reinsurance capacity for such covers in India. Also very few foreign reinsurers
offer such covers."
Director retail at ICICI Lombard General insurance, Neelesh Garg, said, "We sell one or maximum
two such policies in a year on a case-to-case basis. There are specific events under which a celebrity's
talent or specific body parts are covered. These policies are not popular in India. Since we do not
have the underwriting experience, these are underwritten by Lloyds of London. The premium is very
high and varies from 1 per cent to 5 per cent of the sum insured depending on the various risk
factors. Official of Bajaj Allianze said on conditions of anonymity, We would sell our personal
accident cover to the celebrity and are not looking at providing these exitic covers. A Tata AIG
official also that they offer personal accidents covers that will insure the celebrity against any injury
to any of his or her body parts due to accident.
Maharashtra big on health insurance claims
MUMBAI: When it comes to health insurance, the people of Maharashtra always get their due. The
state led the country in the number of medical insurance claims filed in 2009-2010, indicating,
according

to

experts,

higher

levels

of

public

awareness

about

the

issue.

More than 2.96 lakh policyholders in Maharashtra applied for cashless and reimbursement claims
with general insurance companies providing health cover in the financial year 2009-2010, according

to data compiled by the Insurance Information Bureau ( IIB), a government agency. In comparison,
Delhi boasted a figure of just 1.16 lakh claims. Only Gujarat and Tamil Nadu came close to
Maharashtra with 1.62 lakh and 1.51 lakh claims, respectively.
An insurance analyst attributed the noticeable difference in numbers to public awareness levels. "In
Delhi and Maharashtra, particularly in cities like Mumbai and Pune, awareness about insurance
products is comparatively higher than in rest of the country. A large number of people are buying
health insurance policies. Obviously, with a sizeable number of people getting insured, the claims are
also going to be high," he said.
The large number of insurance claims, however, did not mean large amounts of money. Even though
Delhi had fewer claims filed, it had the highest average of reimbursement paid by insurance
companies in the countryRs 31,052. Policyholders in Maharashtra, in comparison, received an
average of Rs 30,885. This, however, was considerably better than Gujarat, where, despite the 1.62
lakh

claims,

the

average

reimbursement

was

just

Rs

19,004.

But the best numbers were scored by Rajasthan, which had only 20,134 insurance claims, but an
average reimbursement of Rs 19,632.
Many attribute the high number of insurance claims in the country to fraudulent practices. Dr
Mohammed Mukhtar, health strategies manager, MD India Health Care Services, said: "Insurance
companies have suffered major losses because of the high number of claims, some of which are
rooted in frauds perpetrated by hospitals. In many cases, policyholders participate in the frauds by
showing excess billing and unnecessary or extended hospitalization."
Farmers unlikely to get insurance for damaged crops
JAIPUR: The farmers in the state, who had lost their crops to the recent rain and hailstorm,
may not get any compensation from the present weather-based insurance scheme in the
state as hailstorm is not covered under the policy.

According to sources, the state has adopted the weather-based insurance in which the
compensation is calculated on the basic parameters of temperature, rainfall and moisture
levels. These parameters could be measured by instruments and compensation is paid if
temperature goes up beyond a point or of flood or in the case of excess moisture incursion
acting as a spoiler for the crops. However, the present calamity in the form of hailstorm does
not come under any of the existing parameters and hence no insurance coverage.
Officials, however, said another insurance scheme, the national agriculture insurance
scheme, takes this factor into account but this insurance policy is not implemented in the
state. Minister of state for agriculture Gurmeet Singh Kunnar said: "The government may
consider an amendment to the existing scheme to cover this risk factor under the existing
insurance scheme to provide relief to the farmers."
Considering the frequent drought and occasional flood in the state, Rajasthan had adopted
the weather-based insurance policy to cover the farmers, said officials. This policy was
implemented in all the districts since March last year. "Ideally, the farmers should be
covered by both the schemes like in many other states. But it then requires infrastructure
and the premium would also go up substantially with the risk factor increasing," said an
official. Officials said even if the hailstorm was not covered under the insurance scheme, the
state government could claim compensation from the calamity found or disaster
management head.
However, farmer Ram Singh in Sikar district says: "There is a grey area between both the
schemes. The national agriculture insurance scheme assesses the damage on the basis of the
quantum of the output. For instance, last year the crops suffered due to unseasonal rains
and the maize developed dark spots and the quality suffered. Even after declaring support
price for maize, there were no takers. The procurement was limited as the farmers could not
sell their products as it could not meet the requisite standard. In such a situation, no existing
scheme comes to the help of the farmers, he said.

Soon, get cashless aid in all Mumbai hospitals

Cashless facilities may now be accepted by every single hospital in the city in a months time.
By the end of this financial year, all the major hospitals in Mumbai will join the fray of
preferred providers network (PPN), said a senior insurance company official. This will
ensure transparency in rates of treatments provided by the hospitals and help patients avail
the cashless facility.
We are in talks with many hospitals now. By the end of this financial year on March 15, we
will bring all the hospitals in the PPN fold, said Dr Mohammed Mukhtar, health strategist
and manager of MD India Health Care Services.
This week itself, Cumballa hill hospital and Heart Institute in Kemps Corner has signed the
agreement with General Insurance Public Sector Association (GIPSA). The Fortis group,
consisting of 53 hospitals all over India, is also in talks of signing the agreement.
They have four hospitals in the MMR region.The Fortis group in Mumbai includes their
hospitals in Mulund, Mahim, Vashi, and Kalyan. GIPSA is a group of four public-sector
insurance companies that decided to restrict the cashless medical facilities to hospitals that
agree to join the PPN. The insurance companys parts of GIPSA are India Assurance
Company Ltd, United India Insurance Company Ltd, Oriental Insurance Company Ltd and
National Insurance Company Ltd. The agreement signed is in respect to 41 surgical services.
Vijay Shetty, the managing director of Cumballa hill hospital said, We were in negotiations
with GIPSA for some time now. We signed the agreement this week. This will ensure that the
patients can avail of the benefits of cashless medical insurance policy. A patient can walk
into our hospital and not worry about payment.
We are in the process of signing it. We would certainly not like to discomfort the patient
any further. We also want to let patients have their cashless facility, said Dr Uma Nambiar,
zonal director-Mumbai, Fortis Healthcare Ltd.
If any health complication occurs, GIPSA is willing to accept about 3-4% of the deviation
with a justification for the same. So far, the count of hospitals on the cashless medi-claim
network in Mumbai is over 170.

Chapter -2
Regulatory framework
IRDA opens the door to getting banks to focus on mis-selling
The increasing confidence of the Insurance Regulatory and Development
Authority (Irda) showed two weeks ago when it slapped a fine of Rs. 1.47 crores
on HDFC Standard Life for some five violations out of a list of 25 charges. Indian
regulators are not known to levy large sums as fines. Probably the highest fine
levied by the regulator till now, the move showcased IRDAs ability to go beyond
the defunct Rs. 5 lakh limit that the Insurance Act insists on. Fines and penalties
are governed by the Insurance Act of 1938 that caps fines at Rs. 5 lakh. Mustve
been a large amount 70 years ago, but now it does not even buy the paper that
an insurance company will write its policies on. Inflation indexed at 6% a year,
that limit shouldve been at Rs. 3.7 crores today and this would have translated
into a Rs. 109 crores fine for HDFC Standard Life or almost 40% of its 2011-12
profits. Right now the fine bites less than half a percent of profits. The world has
moved on from 1938 and now the limit should be reworked to a floor and not a
ceiling. The stalled Insurance Bill has been frustrating not just for companies that
wanted the foreign direct investment (FDI), but also for the regulator, which
wants more teeth. IRDA has been innovating on the fly to bite down harder on
the companies. It is splitting the fine across years, across aggrieved policy
holders; across any category it can find to impose the maximum fine of Rs. 5
lakh in a more meaningful manner. HDFC Standard Life, for example, has been
fined Rs. 1.05 crores for ignoring an IRDA notice to waive the 90-day waiting
period in home loan-linked life insurance policies in 2003. There were 21 policy
holders whose claims were rejected and apportioning Rs. 5 lakh each to them,
IRDA has instructed the insurance company to not only pay the claim but also
pay a fine.

A whole list of insurance companies has been pulled up in the six months gone
by in 2012. But IRDA action in tightening regulation around insurance companies
is bringing it up against entities overseen by other regulators. For example, Irda
found that HDFC Standard Life had paid HDFC Bank and HDFC Securities
marketing expenses that exceeded the actual expenses incurred by the two
entities by 269% and 461%, respectively, in 2010-11. Irda found the marketing
expenses paid by the insurer in violation of rules and it will now pay Rs. 35 lakh
(Rs. 5 lakh for each instance) as a fine. But the thread now goes to the corporate
agents who took the money. And that is leading to banks. On 3 July, IRDA
slapped a Rs. 15 lakh fine on IndusInd bank for receiving payments from
Cholamandalam General (its general insurance partner) in excess of the
permitted levels. IndusInd said that these payments were for database sharing,
incentives to employees and infrastructure setting-up costs. IRDA has concluded
that the payouts made in the form of infrastructure services were linked to the
premium income generated by the corporate agent.
IRDA widens health insurance net
In the draft guidelines on health insurance announced by Insurance Regulatory
and Development Authority of India (Irda) in May, the definition of health
insurance was widened. According to the draft norms, travel, personal accident
and critical illness covers would fall under the health insurance segment.
Health insurance business means the effecting of insurance contracts which
provide for sickness benefits or medical, surgical or hospital expense benefits,
travel health insurance and personal accident cover," said the guidelines issued
by Irda. Presently, personal accident and critical illness covers come under
miscellaneous business.
This may require the finance ministry to alter the definition of health insurance
under the Health Insurance Act, as it does not include travel, personal accident
and critical illness under health insurance. The hitch: Major health insurance

norms like portability and lifetime guaranteed renewability may be applicable to

these covers also, which may be very difficult for travel insurance as it is a shortterm cover with a maximum policy term of six months," says a health insurance
head of a general insurance company.
While personal accident and critical illness covers insure health-related
expenditures, an international travel cover is largely health insurance as it is a
mix of medical and travel-related covers. For example, consider a $5 lakh cover
with Tata AIGs Travel Guard that insures you for accident and sickness medical
expense reimbursement. This comprises accidental death and dismemberment
(common carrier) for $5,000, accidental death and dismemberment for $25,000
(24 hours), sickness dental relief ($500) along with emergency medical
evaluation. Here travel or baggage related covers (baggage, passport, trip delay)
are covered for maximum $1,000.
IRDA slaps Rs 1.47-cr fine on HDFC Life for norm violation
The Insurance Regulatory and Development Authority (Irda) has slapped a fine of
Rs 1.47 crore on HDFC Life Insurance for violating norms pertaining to the
commission paid to corporate agents and denial of death claims.
The private life insurer was charged for seven violations after Irda, the insurance
sector regulator, made inspections between July 26 and 30 in 2010 on 25
possible violations.
Irda found 21 instances of the insurer denying death claims under home loan
protection policies, and was fined Rs 1.05 crore. Besides, the regulator found
seven instances of the insurer paying commission beyond prescribed limits to its
corporate agents, and was fined Rs 35 lakh.
Under the guise of utilising network of marketing and advertising campaigns,
sums ranging from Rs 6 lakh to Rs 286.92 crore were paid to HDFC (Housing
Develop-ment Finance Corp), HDFC Bank, HDFC Securities and HDB Financial

Services, which are the corporate agents of the insurer," Irda said, adding it
would take further actions against these entities for receiving commission over
the permissible limit. Irda has also fined the life insurer Rs 5 lakh for soliciting
insurance business from unlicensed individuals and entities.
The regulator has directed HDFC Life to pay the penalty within 15 days. Amitabh
Chaudhury, managing director and chief executive officer of HDFC Life, was
present during the hearing.
Insurance Regulatory and Development Authority (IRDA) is an autonomous apex statutory body
which regulates and develops the insurance industry in India. It was constituted by a Parliament of
India act called Insurance Regulatory and Development Authority Act, 1999 and duly passed by the
Government of India.
The agency operates its headquarters at Hyderabad, Andhra Pradesh where it shifted from Delhi in
2001.
The IRDA Act, 1999 was passed as per the major recommendation of the Malhotra Committee report
(1994) which recommended establishment of an independent regulatory authority for insurance sector
in India. Later, It was incorporated as a statutory body in April, 2000. The IRDA Act, 1999 also allows
private players to enter the insurance sector in India besides a maximum foreign equity of 26 per cent
in a private insurance company having operations in India. It serves as an Authority to protect the
interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the
insurance industry and for matters connected therewith.

Duties, powers and functions

The duties, powers and functions of IRDA are laid down in section 14 of IRDA Act, 1999 as : [1]
1.

Subject to the provisions of this Act and any other law for the time being in force, the
Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance
business and re-insurance business.

2.

Without prejudice to the generality of the provisions contained in sub-section (1), the powers
and functions of the Authority shall include, -

1.

issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel
such registration;

2.

protection of the interests of the policy holders in matters concerning assigning of policy,
nomination by policy holders, insurable interest, settlement of insurance claim, surrender value
of policy and other terms and conditions of contracts of insurance;

3.

specifying requisite qualifications, code of conduct and practical training for intermediary or
insurance intermediaries and agents

4.

specifying the code of conduct for surveyors and loss assessors;

5.

promoting efficiency in the conduct of insurance business;

6.

promoting and regulating professional organizations connected with the insurance and reinsurance business;

7.

levying fees and other charges for carrying out the purposes of this Act;

8.

calling for information from, undertaking inspection of, conducting enquiries and
investigations including audit of the insurers, intermediaries, insurance intermediaries and other
organizations connected with the insurance business;

9.

control and regulation of the rates, advantages, terms and conditions that may be offered by
insurers in respect of general insurance business not so controlled and regulated by the Tariff
Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938);

10.

specifying the form and manner in which books of account shall be maintained and statement
of accounts shall be rendered by insurers and other insurance intermediaries;

11.

regulating investment of funds by insurance companies;

12.

regulating maintenance of margin of solvency;

13.

adjudication of disputes between insurers and intermediaries or insurance intermediaries;

14.

supervising the functioning of the Tariff Advisory Committee;

15.

specifying the percentage of premium income of the insurer to finance schemes for promoting
and regulating professional organizations referred to in clause (2.6);

16.

specifying the percentage of life insurance business and general insurance business to be
undertaken by the insurer in the rural or social sector; and

17.

exercising such other powers as may be prescribed