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No. 14 – February 2012
COVER NOTES
IN THIS ISSUE
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Insurance companies offer cover for second medical opinion
Life Insurance Corporation loses market share in first half
Govt seeks to push insurance bill in winter session
IRDA flags wage issue to stem talent exodus
IRDA to come up with final norms on digitising insurance policies
by December
Mis-selling may impact insurance valuation: Sanket Kawatkar,
Milliman
No. 47 - November 2014
November 2014
Domestic News


Insurance companies
offer cover for
second medical
opinion
Life Insurance
Corporation loses
market share in first
half

Govt seeks to push
insurance bill in
winter session

IRDA flags wage issue
to stem talent exodus

IRDA to come up with
final norms on
digitising insurance
policies by December

Mis-selling may
impact insurance
valuation: Sanket
Kawatkar, Milliman
Insurance companies offer cover for second medical
opinion
TNN/Nov 4, 2014
CHENNAI: If someone you knew was recently admitted to hospital and the cardiac surgeon advised an
open heart surgery, but thanks to remote medical assistance, the person was able to get a second
opinion from a renowned surgeon who said there is no need to immediately rush into one, not only
have you benefited from it, so has your insurer.
Insurers are seeing more value of providing coverage for second opinion service as part of their health
insurance offering.
United India Insurance has revised its family floater offering to include insurance coverage for second
opinion. "Today, there are many specialists available worldwide and if the second specialist says that a
surgery is unwarranted, not only does it help the customer, but it also leads to better claims
experience and management from the insurance standpoint," Milind Kharat, CMD, United India
Insurance said.
Similarly, Apollo Munich is also providing for second opinion coverage under some of its plans.
Insurers' state that a second medical opinion is most sought after in case of major ailments such as
kidney failure, heart attacks or in case of a major organ transplant. "Our research shows that for major
illnesses, when customers are recommended a line of treatment by a specialist, they often feel the
necessity to consult another expert. Second opinion coverage addresses this need," Antony Jacob, CEO,
Apollo Munich Health Insurance said.
Though it's early days yet but the rapid corporatization and subsequent commercialization of the
healthcare sector in India has resulted in some erosion of trust of the primary healthcare provider.
"Sometimes, the treating physician may not be aware of the latest advances in medicine. Or,
sometimes suggest surgery where none may be required," Dr Debraj Shome, co-founder and director
of second opinion consultancy, Medi Angels said. Shome goes on to illustrate his point by an article
published by Lancet in 2009. "This article demonstrated that 85 per cent patients who underwent an
invasive procedure, would want to take a second opinion if they could," Shome said.
More importantly, the market for second opinion is also slowly getting organized with companies like
Medi Angels bringing in 350 specialists and super specialists from 15 countries under one platform to
deliver second opinion service. "Our pool of doctors is 'by invitation' only to ensure top quality
consultation," Shome said.
The company recently tied up with a public sector insurer and a private insurer to offer second opinion
services to their customer base totaling 50 lakh. Previously, one had to use the family/friend network
to get access and avail of a second opinion. Some insurers are providing second opinion as part of their
value added services to customers.
Bajaj Allianz General Insurance has tied up with three second opinion service providers under which its
customers would only have to quote their health card number to avail the service free of cost. The
company launched a second opinion cover almost seven years back but later withdrew it due to lack of
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demand. State owned New India Insurance provides for second opinion coverage, but on a case by
case basis. "We still don't see second opinion as a major push factor in healthcare. But if a treatment
warrants second opinion, we would cover it," G Srinivasan, CMD, New India Assurance said.
Life Insurance Corporation loses market share in first
half
ET Bureau/Nov 6, 2014
MUMBAI: The absence of products and a scarce presence in unit-linked insurance plans (ULIPs) have
cut into the market share of industry leader Life Insurance Corporation (LIC) of India. Its share of
policies sold in the first half of this fiscal year dropped to 72 per cent from 75 per cent in the
corresponding year-ago period.
The insurance industry saw a 1.7 per cent dip in first-year premium collections due to the lower growth
registered by LIC. Data released by regulator Insurance Regulatory and Development Authority (IRDA)
showed that first-year premium collection stood at INR 491.78 billion in September against INR 500.56
billion a year ago. LIC saw a 5 per cent dip in new business in the first half to INR 358.33 billion.
Among private insurers, DLF Pramerica saw 386 per cent growth, mainly because of a low base. Private
sector leaders ICICI Prudential and HDFC Standard Life logged 37 per cent and 31 per cent growth,
respectively, in the same period. "As of now, we do not have ULIP products, but we expect it to be on
the shelf by March this year," LIC chairman SK Roy told reporters on the sidelines of a recent event
organized by ET Edge. Data released by rating company ICRA showed that the share of ULIPs in new
business generated in 2012-13 in LIC's portfolio was less than 1 per cent against 35 per cent for private
insurers. A report by Espirito Santo Securities attributes lower premium collection by LIC to low
availability of products, and a base effect as the company aggressively pushed life insurance products
last year, highlighting service tax issues.
It further said LIC has just 22 products in the market versus 60 or so products earlier. ULIPs have gained
some gloss with the rally in equities. Such instruments allow the policyholder to choose the asset in
which savings are invested and returns are linked to the performance of this asset. While traditional
products require that the bulk of the investment is in government bonds, ULIP holders can choose to
invest their entire contribution in equities.
Deepak Mittal, MD and CEO of Edelweiss Tokio, which saw a healthy growth of 63 per cent, said the
industry is adjusting to product regime changes that took place in January. Giving the outlook for the
second half, Vibha Padalkar, executive director and CFO of HDFC Standard Life, said she expects overall
individual premiums to be flat with private industry likely to grow at about 10 per cent.
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November 2014
Govt seeks to push insurance bill in winter session
The Times of India/Nov 19, 2014
NEW DELHI: With two members of the Rajya Sabha select committee on Insurance Laws (Amendment)
Bill - J P Nadda and Mukhtar Abbas Naqvi -- becoming ministers, the government, keen to push its
reform agenda, will move a resolution to get approval of the upper House for their replacement on the
first day of the winter session of Parliament on November 24.
The Bhartiya Janta Party (BJP) is learnt to have sent the names of Rajya Sabha members V P Singh
Badnore (Rajasthan) and R Ramakrishna (Karnataka) to chairman Hamid Ansari to fill the vacancies in
the select committee.
As the 15-member panel, headed by BJP MP Chandan Mitra, is supposed to submit its report on the
last day of the first week of the winter session, the government does not want to waste a single day in
getting the vacancies filled. It intends to get approval on November 24, paving the way for the panel to
submit its report on time.
The government is treating the issue on priority, keeping in mind the crucial reform bill that proposes
increasing FDI limit in the insurance sector from the existing 26% to 49%.
The panel will have to finalize its report quickly amid indications that Congress members do not seem
to be keen to hold its meeting on one or the other pretext.
The Congress, which scripted the legislation when in power, had in August forced the government to
send the bill to a select committee for further examination without extending any solid reason to do
so. It is to be seen whether the Congress, which has three members on the committee, will cooperate
or not.
If there is no consensus on the bill, the government - which doesn't have numbers in the upper House - will be left with no option but to call a joint session.
But even the joint session option will depend on how the BJP reaches an agreement with Shiv Sena in
Maharashtra. In case Shiv Sena decides to opt out of the ruling coalition, it will be difficult for the
government to get bills passed in a joint sitting.
At present, the collective strength of National Democratic Alliance (NDA) in both Houses of Parliament
is 396 which are 4 more than the number needed to cross the halfway mark in case all members of Lok
Sabha and Rajya Sabha attend the joint session and vote. But if Shiv Sena leaves the ruling coalition,
the NDA's strength will be reduced to 375 which will be 17 short of the halfway mark.
In that case, the government will find it difficult to reach the magic number unless it garners support
from other parties like Biju Janta Dal (BJD), All India Anna Dravida Munnetra Kazhagam (AIADMK) and
others or could impress upon parties like the Nationalist Congress Party (NCP) to either abstain from
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voting or support the proposed legislations.
Consensus in the select committee on the insurance bill will also depend on how other parties react. So
far, seven members, including BJD's Kalpataru Das and independent member Rajeev Chandrasekhar,
have supported the bill.
Samajwadi Party, BSP, CPM, Trinamool Congress and AIADMK have one member each. They, along
with Congress, are opposed to certain clauses in the bill.
IRDA flags wage issue to stem talent exodus
economictimes.indiatimes.com/Nov 25, 2014
MUMBAI: The insurance regulator wants to incentivize the agency by fixing a minimum wage to retain
talent in the industry. The number of agents has been coming down sharply in the life and nonlife
insurance sectors in the past financial year.
While the private sector insurers appointed 283,000 agents, they terminated the services of 414,000
lakh in the same period. In the case of LIC, 387,000 agents were asked to go while 281,000 were
recruited. "There should be some minimum protection wage for insurance agents also. Companies
should pay a minimum wage of INR 10,000 per month," said TS Vijayan, chairman of Insurance
Regulatory & Development Authority (IRDA).
On an average, an agent earns INR 4,000 a month at present. Vijayan called for protection of agents,
saying that if companies comply with the Minimum Salary Act, they will naturally contribute to the
employment market of the country. Agents can earn up to 40 per cent of the first year's premium on
traditional or conventional policies.
The recent rally in the stock market has led to a rise in the sale of unit-linked insurance plans while
traditional plans have declined. Also, companies have changed focus since the revamp of product
norms last year when the regulator introduced a cap on surrender charges. Vijayan argued that there
are countries which pay as high as 160 per cent of the first-year's premium as commission to agents,
adding that fixing of commission should be left to individual companies.
According to the Insurance Act, commission on traditional insurance plans is capped at 40 per cent of
the first year's premium. However, commission on unit-linked insurance plans is capped since 2010,
when the regulator capped the overall charges, including policy administration and premium allocation
charges. As on March 31, 2013, there were 2,120,000 agents, according to the latest IRDA data.
On higher FDI in the insurance sector, Vijayan said 26 per cent private participation showed an increase
in market penetration, entry of new companies and the number of agents. "This could be termed a
success, but it has to be seen in the context of the benefits it brings to the country and the customer. If
one looked at the number of people in the 0-18 age group and considered 18 as the earning age, then
nearly 25 million individuals would enter the job market each year for 20 years in Mumbai alone. Add
to this, the increase in the number of vehicles, houses and other assets, the number of policies that will
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be sold is phenomenal," he said.
Vijayan stressed that there must be a concerted effort between the industry, the regulator and the
government in creating public awareness about the benefits of insurance.
IRDA to come up with final norms on digitizing
insurance policies by December
Business Today/Nov 27, 2014
Following a pilot project, the Insurance Regulatory and Development Authority (IRDA) plans to come
out with final guidelines on digitizing insurance policies by December.
Under the pilot, IRDA had asked insurers to tie-up with all repositories so that policyholders can keep
their policies in digital form. The project was implemented for two months from July 1. At the pilot
stage, each life insurer had to convert at least 1,000 or 5 per cent of existing individual policies,
whichever is less, into electronic form. For new polices also, each life insurer had to issue at least 1,000
or 5 per cent policies issued during the launch, whichever is less, in electronic form.
SV Ramanan, chief executive officer, CAMS Repository Services, says, "We have digitized one lakh
policies so far but around 75 per cent converted policies are existing ones. We have observed that
agents are not very keen on issuing new policies in digital form as they do not get to see the policy
documents. The digital copy goes directly to the policyholder. We have asked the regulator to look into
the matter."
"Only a few companies have achieved the target of 2,000 policies, and it was mostly from existing
policies. Many companies have even failed to comply with the project guidelines," he says.
IRDA Chairman T S Vijayan says, "Initially the response was not very strong. That's why we asked
insurance companies to do pilots. We wanted insurers to know the bottlenecks. Final guidelines are
about to come but we may not make it mandatory for policyholders."
IRDA has licensed five companies to act as repositories-NSDL Database Management, Central Insurance
Repository, SHCIL Projects, Karvy Insurance Repository and CAMS Repository Services.
Experts say they have been talking with the regulator to make the whole process online so that
policyholders do not have to go to the branch office for converting their policies. At present, one can
convert by submitting the form directly to an insurance repository or by sending it through the
insurance company. A unique number is assigned to every policyholder and details such as claim
history and nominees are stored under that number.
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Mis-selling may impact insurance valuation: Sanket
Kawatkar, Milliman
economictimes.indiatimes.com/Nov 27, 2014
MUMBAI: Mis-selling of insurance products and frequent changes in regulations may impact the
valuation of insurance companies in India, according to Sanket Kawatkar, principal and consulting
actuary of Milliman, a global actuarial firm. The valuation of insurance companies will become a focus
as soon as Parliament allows foreign insurers to raise their stake in Indian ones to 49 per cent from the
current cap of 26 per cent.
A report by Milliman noted that the joint venture structure is a stumbling block for partners to arrive at
a consensus on valuation. Kawatkar pointed out that partners are likely to differ on valuations once the
FDI limit is raised. "Some JV (joint venture) agreements are problematic and can create hurdles in
attracting potential investors," the Milliman report stated.
Currently, there are 24 life private insurance companies operating in India with most having a foreign
partner. "There are challenges in fair valuation... Some who have pre-agreed formula on valuation may
also want to re-negotiate," said Kawatkar.
Curbing mis-selling is critical as it can hurt not only the reputation of the life insurance industry, but
also valuations of insurance companies. "While it is difficult to quantify the impact of mis-selling on a
life insurance company's valuation, it does get affected adversely. High lapsation rate, which could
stem partly from mis-selling, can be a drag on insurers' valuations," he said.
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Disclaimer
This newsletter from Prudent Insurance Brokers Pvt. Ltd. carries edited extracts from
news stories. PIBPL has not verified these stories and does not vouch for their
authenticity.
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