Term assurance policies may cost less

IRDA has recently reduced solvency margins on term assurance plans to the insurers. Solvency Margin is a statutory sum of money that should be kept aside to meet claims.  Term assurance policies are pure risk contracts wherein the sum assured is payable in the event of death of the insured during he period of validity of the cover. However on survival of the insured at the end of the term of the policy only sum assured without additional benefits would be paid. The proposed reduction in solvency margin on these policies would enable the investor to utilize such funds in a profitable manner. The resultant gain may be passed on to the insured in terms of reduction in premium for such policies. According to Mr. Sharma chief actuary of Bharti AXA Life this welcome move may result in 25% reduction in the premium of term covers, theoretically. Additionally this move will enable penetration of term insurance policies to rural areas due to the reduced premium. LIC of India has already preparing to apply to IRDA to approve the revised pricing, as informed by their chief actuary Mr. Agarwal. For LIC and also for the industry, term plans may be 4% of their total policies in terms of value.

Insurance Diploma for CEOs

IRDA has extended the time limit for insurance companies’ CEOs to acquire a diploma or fellowship from the Indian Institute of Insurance till April 2009 as persons with Fellow or Associate qualification in insurance are no readily available and the present executives are in the process of acquiring the qualification.

Wanted Sales Managers

Private life insurers are facing a piquant situation, as they are not getting capable sales managers. In private life insurance companies sales managers select and hire insurance agents and handle them. This is similar to the development officers of LIC. Absence of capable sales managers results in absence of quality agents, which in turn tells on growth of business. To offset this situation Insurance companies now employ people on regular role of the company and depute them for canvassing business. This has a flip side in that the employees are not going to claim commission as they are paid salary and their attrition rate is also lower than agents. Insurance analysts say that sale of insurance covers through employees is cost effective and remunerative as well. Many Life Insurers are in the process of recruiting employees in thousands as reported.

No Insurance for Indusind

Indusind Bank, which was reported to be looking at entering the insurance business under the previous management namely Hinduja, has decided now under the new management of Mr. Romesh Sethi not to enter the insurance business. So Aviva Life whose products the bank was distributing so far can have a sigh of relief. However the Hindujas are following their programme to start an insurance joint venture with Mass Mutual of US.

LIC promotes Talent shows

LIC has promoted recently a talent show for children in which the winner was presented with Rs.5 lakhs as music scholarship. Earlier LIC has sponsored sports events and award functions and also other shows.

Reliance Life business report for 2007-08

Reliance Life Insurance Company has reported a growth of about 200% in the FY 08.Their new business premium during the FY was Rs.2754 crores. The company has increased its branch strength during the year by 600 new branches and its agents by nearly 80000 more taking the total number of branches to 744 and agents to 1.75 lakhs. Mr. Nandagopal CEO of Reliance Life told that the promoters have earmarked Rs.2000 crore for life insurance business. He further said that the company expects to break even by 2010. He further explained that nearly 80 to 90 percent of their new business was from individuals for regular premium policies. It may be relevant to mention that recently Mr. Sam Ghosh who was heading Bajaj Allianz has joined Reliance Life.

Bajaj Allianz “s micro insurance entry

Bajaj Allianz has launched a new group insurance product for SKS clients. The product called Swayam Shakthi Suraksha comes with provision for payment of very low premiums that is at Rs.45 per month. The distribution will be handled by SKS and the company targets 20 lakh members in six months.

Indiabulls and Sogecap

Sogecap, the insurance arm of the French bank Societe Generale and Indiabulls financial services have finalized their arrangements for entering life insurance sector in India. The new company expected to be named Indiabulls Societe Generale Life Insurance Company Limited with an initial capital of Rs.300 crores to be borne equally by both the partners for their 74% and 26% equity. The two partners are expected to leverage their strength in distribution and insurance.

Insurance Brokers

IRDA has recently permitted insurance companies to establish their own brooking companies. Due to frequent changing in pricing of products and expected changes in the wording of the policy documents brokers would become necessary to educate the customers on risks that should be and can be insured. However it is to be watched whether the brokers are honest to customers or their principals. It is no doubt that brokers of corporate descent with powerful brand image would score over others.

Bajaj Allianz CEO on brand and branches

Mr.Kamesh Goyal CEO of Bajaj Allianz in an interview to ET has said that just expansion of or opening of many branches need not necessarily result in enhanced business. A strong and good brand image is the main scoring point for increase in business. He further opined that the growth in life insurance business would not be more than 20-25% during the next 5/10 years. However they and many private players should aim and achieve 50-70% growth during the period with innovative products and marketing to remain stable, which he was confident of fulfilling.

SBI posts high profit

SBI Life Insurance recorded a net profit of Rs.34 crores for the FY 07-08, which is an increase of 800%. Total premium income was RS.5622 crores. Out of this new business premium was Rs.4792 crores which indicated an 87% growth on year on year. Mr. US Roy MD and CEO of SBI Life said that they had a satisfactory year with not only the net profit rising, but also wiping out their accumulated losses. Major portion of the business was from ULIPs.  Mr. Roy further said that they are planning to open 250 new offices and expand the reach of their bancassurance model. Number of their advisors is to be increased to 80000 from the present strength of 40000. He further informed that their solvency margin stood at 3.6% as against the norm of 1.5% prescribed by IRDA. This excellent performance may prompt SBI Life to think of going for the first ever IPO by Indian private insurer.

IRDA seeks deferring Service Tax on ULIPs

The IRDA is reported to have requested the Government to consider levying of Service Tax on ULIPs of Life Insurance companies by five years. The grounds on which the request is made are 1) the industry needs more time to grow; 2) tax at this stage could impact Ulip investments in the volatile stock market. The 12% tax proposed in the Union budget may result in drop in earning of Ulip investors by 60 basis points, as insurance companies would pass on the burden to them. The Life Insurance Council also have explained the charges levied on Ulips by Insurance companies to impress why Ulips are not to be treated on par with mutual funds.

Death claims settlement PSU vs. Private Insurers

Data released by IRDA on death claims settlement for the FY 2006/07 shows that the Life Insurance Corporation tops in settlement of death claims. Private Insurers have settled 72.7% of death claims whereas LIC has settled 96.94%. This is against total number of claims received by private insurers at 13139 and by LIC at 6.02 lakhs. Percentage of claims rejected by private insurers was 13.98 against 1.43 rejected by LIC. Claims pending are 13.32% for private insurers and 1.63% for LIC. In terms of value, the settlement by LIC was Rs.4289.28 crores and for private insurers it was Rs.155.46 crores. However the claims servicing cannot be compared because of the vast difference in the number of years the LIC and the private insurers are in business

The government of India has decided to provide 5 crore workers in the unorganized sector insurance benefits and pension under the central government’s social security scheme in the next five years. 1.2 crore workers would be covered during this year and the rest in the second phase. Under the scheme 75% of the grant would be borne by the center and respective state governments would provide the balance 25%.

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