General Insurance Update

Transcription

1 India Market General Insurance Update India Issue 23 September 2012 Introduction We are pleased to circulate our latest newsletter covering some key developments in the general (non-life and health) insuranc e industry in India during the period June to September In an attempt to reduce losses and restore profitability of the four public sector general insurers, the Finance Ministry has instructed them to suitably raise premiums wherever necessary, particularly for the Property and Group Health classes of business. The Insurance Regulatory and Development Authority (IRDA) has drafted health insurance guidelines that are expected to bring about much needed clarity on various conten tious issues and pro vide an extent of standardization between offerings from different insurers. Several recent steps have been taken by the Finance Ministry to initiate far reaching changes impacting the Indian insurance market. This includes Insurance Laws (Amendment) Bill that, inter alia, proposes raising FDI cap in the sector from the current c eiling of 26 per cent to 49 per cent and permitting foreign reinsurers to transact business in India. The Motor Vehicles Act 1988 was a lso sought to be revised in order to cap for limiting third party liability. In this issue Industry statistics April- August 2012 Market update Insurers Other market developments Appointments Regulatory update Government update Distribution Products Contact details As reported earlier, the Government has decided to partially dilute its existing 100 per cent stake in the PSU general insurers. Keeping the IPO plan in mind, the Finance Ministry has taken the first steps by asking General Insurance Corporation of India Re (GIC Re) and New India Assurance (NIA) to appoint merchant bankers and finalise their valuations by December In the face of ongoing sanctions imposed on Iran by the European Union and USA, mos t foreign insurers declined to offer insurance to shipments of crude oil from Iran. India, which buys significant share of its global oil imports from Iran, has not joined hands for such sanctions. The Government directed the PSU insurers and GIC Re to provide coverage to Indian ships carrying Iranian crude oil. These and other market develop ments are briefly covered in this issue. We hope you find the newsletter informative and look forward to your valuable comments and feedback. Towers Watson, India Copyr ight 2012 Tow ers Watson. A ll rights reserved. tow ersw atson.com 1

2 Industry statistics April-August 2012 As per latest statistics released by the IRDA, Gross written premium (GWP) figures for the period April to August FY12-13 for the General Insurance (non-life and health) industry in India was Rs27,940 Crores, registering a year on year growth of 17.7 per cent as compared to the same period last year. The corresponding figure for the last fiscal (FY11-12) was Rs23,740 Crores. Growth rates The GWP growth rates for general insurers ranked o ver premium collected is shown above. During the period April to August FY12-13, the non-life industry registered a growth of 17.7 per cent against a growth of 24.2 per cent in FY11-12 over the sa me period. GWP (business figures) Comparison of GWP by non-life insurers New India United India National Oriental ICICI-lombard Bajaj Allianz AIC IFFCO-Tokio HDFC ERGO General Tata-AIG Reliance General Cholamandalam Royal Sundaram Shriram General Bharti AXA General Future Generali ECGC Star Health & Allied Insurance SBI General Universal Sompo Apollo MUNICH L&T General Max BUPA Raheja QBE Religare Source: IRDA 0 1,000 2,000 3,000 4,000 5,000 in Rs millions April 2012 to August 2012 April 2011 to August 2011 PSU general insurers continue to lead, with ICICI Lombard and Bajaj Allianz following close behind. The business figures for the general insurers (apart from specialist insurers) comprise of Motor, Property and Casualty in addition to Health. Since the segment wise figures are not available at this stage, comparison of Health business for different non-life insurers with standalone health insurers is not possible. Religare is the newest standalone Health insurer in a market lead by Apollo Munich. As reported in our previous issue, Apollo Munich has seen the highest number of rollover customers i.e. who have ported from their existing health insurer in favor of Apollo Munich. One of the main reasons for the de-growth in Star Health figures is due to some State Government sponsored mega group health policies not being renewed with them. Source: IRDA Market shares The market continues to be do minated by PSU s, inc luding AIC and ECGC at 58 per cent, and rest is divided between private players. Pie chart A shows the split of 4 PSU's, AIC, ECGC and all Private Sector general insurers as a block at 42 per cent. Pie chart B, further elaborates the respective marke t shares of priva te p layers, notable a mong which are ICICI Lombard, Bajaj Allianz and ITGI with market shares of 8 per cent, 6 per cent and 4 per cent respectively. Others in the chart include Star Health, SBI General, Universal Sompo, Apo llo Munich, L&T Genera l, Max Bupa, Raheja QBE and Re ligare. Oriental, 10% National, 13% United India, 14% New India, 16% AIC, 4% ECGC, Pie chart A Private Sector, 4 Non-life insurer market share IFFCO-Tokio, 4% HDFC ERGO General, 3% Tata-AIG, 3% Bajaj Allianz, 6% Reliance General, 3% ICICI-lombard, 8% Cholamandalam, Royal Sundaram, Shriram General, Bharti AXA General, Others, 4% Future Generali, Pie chart B Source: IRDA Copyright 2012 Tow ers Watson. All rights reserved. tow ersw atson.com 2

3 Market update Insurers Bharti AXA intends to infuse additional capital of approximately Rs150 to 200 Crores. within the next two years to fund its annual growth plan of per cent in the current fiscal; much above the industry's projections of 20 per cent growth. This is to be achieved with increase in footprint and launching new products. They ha ve identified South and West India as their growth drivers. United India (UII) is set to launch the country's first mobile phone premium payment facility. Standard Chartered Bank will offer c ash management services for UII. GIC Re took a c onscious decision staying away from providing reinsurance support for the recently held London Olympics. This comes after they posted losses for the first time in their history during the last fiscal as their book of international business sank due to natural catastrophe events in Asia like floods in Thailand and the tsunami in Japan. This move is being seen as a sign that state-run reinsurers may stay away from some global risks for a few years. Insurance Australia Group (IAG) will be increasing its presence in Asia including India in a bid to generate 10 per cent of its business from the region within four years. In India, IAG has a joint venture with SBI General Insurance Company Ltd. SBI owns 74 per cent of the total capital and IAG the remaining 26 per cent. New India Assurance (NIA) has once again been chosen by Air India Ltd to insure its fleet of more than 120 planes for a total amount of $10.5 billion (around Rs57,750 Crores). The annual premium works out to $24 million (around Rs132 Crores), making it one of the biggest insurance deals in South and Southeast Asia. The contract comes into force on 1 October Chartis Insurance UK Ltd continues to be the reinsurer for this deal. Iffco Tokio General Insurance (ITGI) and GIC Re are likely to take a Rs200 Crores hit because of a claim filed by Hitachi following a ma jor fire des troy ing its p lant at Kadi in Gujarat. Initial reports suggest that the loss to the property could be in excess of Rs200 Crores. Bajaj Allianz General Insurance plans to launch health insurance products with various value-added services in order to extend additional benefits to customers beyond hospitalisation. They will help customers avail discounts for health checkups, gy m memberships and other wellness components. They also plan to launch a specific women s product that will be priced at least 15 per cent cheaper than the corresponding gender agnostic insuranc e cover. Star Health and Allied Insurance is redrawing its business strategy by aiming for premium of Rs150 Crores from Government led / sponsored group health insurance schemes like Rashtriya Swasthya Bima Yojna (RSBY) and Rs850 Crores from the retail segment in FY The company was earlier known to focus on Government sponsored business. Other Market Developments European Union and USA led sanctions against Iran from July 2012 placed an embargo on insurers and reinsurers from covering tankers c arry ing Iranian c rude anywhere in the world. A six-month waiver allows 20 countries, including India, to continue buying lesser quantities of Iranian oil, with some restrictions, without running afoul of the sanctions. Following this, the Indian Government asked the 4 PSUs and GIC to provide insurance / re-insurance cover to ships flying Indian flags carrying crude oil from Iran to India. However, India's leading ship-owners are not happy with the insurance offered to them, saying the extent of coverage is not quite adequate. It was pointed out that a recent shipment carried by an Indian tanker was insured for only $50 million (around Rs275 Crores.) against liability, compared with the multibillion-dollar policies that European insurers typically provided for spills or accidents. Cholamandalam MS has recently introduced Policy on the Go, a mobile application to generate quotes and issue motor policies online. The mobile application can be used by its insurance agents and direct sales teams to generate instant quotes and issue e-policies to its customers. UII has recently launched touch screen kiosks to enable its customers to obtain a digitally authenticated online policy. UII intends to use this format for its motor, health, personal accident and overseas mediclaim policies. Nearly all insurers in the Health seg ment plan to introduce several no-frill product offerings in smaller Tier-II and Tier- III locations where the cost of treatment is low. These will be identical to the standard Mediclaim products in terms of illness and disease coverage but will have lower limits on hospital room rents and a limited choice of hospitals to avail cashless and reimbursement facilities. A recent government initiative to provide free generic drugs to government hospitals is expected to have a positive impact on the health insurance industry in India, particularly for RSBY type of group health insurance schemes. The overall cost of drugs account for 15 per cent to 20 per cent of healthcare cost. This is much higher in rural areas and for critical illnesses and is expected to lower as generic drugs which are priced 80 to 85 per cent lower than identical branded drugs are to be distributed free and may in turn lower the cost of health insurance. PSU general insurers will soon be ending their six year freeze in the health insurance pricing and raise premium by around 15 per cent. Copyr ight 2012 Tow ers Watson. A ll rights reserved. tow ersw atson.com 3

4 The four PSU general insurers and members of General Insurance Public Sector Association (GIPSA), have decided to revive the plan to jointly co-promote their own common Third Party Administrator (TPA) for the health insurance business. Appointments ITGI has scrapped its recent appointment of Mr Yogesh Lohiya (ex-chairman of GIC Re) as their new MD. The appointment was objected to by the Finance Ministry as its prior approval was not sought. Mr Lohiya has since moved as Advisor on the Board of Iffco. Mr Rakesh Kapur, JMD a t Iffco, has been appointed as the interim MD. SBI General Insurance has recently appointed Mr B J Sarma as the new MD and CEO of the company for three years with effect from 1 August Tata AIG General Insurance (TAGIC) has also made a top leve l c hange by appointing Mr K. K. Mishra as the new CEO in place of Mr Gaura v D. Garg. IRDA has appointed Chief Public Information Officers as required under the Right to Information Act. These officers have been appointed for different departments; actuarial, brokerage, health, accounts, F&I and non-life. All these appointments came into effect from 11 June Regulatory update IRDA s recently released exposure draft on proposed Hea lth Insuranc e guidelines covers se vera l importan t aspects that have often led to contentious issues in the past. Some of the important aspects include Uniformity of product design in terms of minimum entry age (no exit age),policy period / term (up to 3 years for non-life),access to countrywide provider network freedom to migrate from one policy type to another (e.g. individual to floater) without losing accumulated benefits treatment of cumulative benefits cost of health check prior to proposal acceptance inclusion of non-allopathic trea tment renewal loading due to poor claims experience free look period special provisions for senior citizens standardisation of definitions in policy forms standardisation of nomenclature for critical illnesses and excluded expenses during hospitalisation Renewability of insurance Portability of insurance Policyholders' protection Servicing of health insurance TPA Combi products offered jointly by a life insurer and a health insurer combining term life insurance and health / sickness insurance. Draft norms for IPOs by Indian insurance companies have been issued by IRDA that, inter alia, makes it mandatory for insurers to seek approval from IRDA prior to approaching SEBI. Any insurer planning to tap the capital market must have at least ten years' experience in the industry. IRDA will consider the insurer s financial position, its capital structure and regulatory record before providing its approval. Draft guidelines to boost micro-insurance have been issued by IRDA. These include broadening of the existing product portfolio and widening the distribution network. In order to strengthen distribution, the regulator plans to allow several entities such as cooperative banks, regional rural banks, primary agricultural co-operatives and individuals to act as micro-insurance agents. On the product side, IRDA has also proposed a standard insurance product that is a composite package of essential life and non-life insurance covers aimed at the rural and social sector. The standard insurance product would be in addition to government schemes, which provide insurance cover at concessional rates. To fast track the process for regulatory approval of products filed by Indian insurers, IRDA is planning to develop 10 standard products that will be eligible for approval under the Use and File system as against 'File and Use' process. The minimum solvency ratio required for dividend payments by an insurance company was eased by the IRDA from 150 to 130. This move will allow Oriental Insurance and National Insurance to make dividend payments to the government. A higher startup capital requirement from Rs100 Crores to Rs Crores for insurance companies is reportedly being contemplated by IRDA for future entrants to the industry. Copyr ight 2012 Tow ers Watson. A ll rights reserved. tow ersw atson.com 4

5 The current tied agen ts mode l for a llo wing agents to sell products of more than one insurance company is also being reportedly considered by IRDA. To educ ate the public on insurance, IRDA has launched a new porta l ( yholder.gov.in). The portal aims to provide useful information for policy holders and prospects. The regulator has also introduced a new fea ture in its website ( > Other Links > Compare Non Life products) that compares similar general insurance products offered by different companies in the market based on factors like coverage, exclusions, discounts and deductibles. MyInsuranceClub has become the first IRDA licensed web aggregator site that can officially compare premiums and features of insurance policies online for life, health and motor insurance across multip le insurers. This platform wou ld enable customers to compare differen t po lic ies and buy the product online based on preference of price, brand and policy benefits. The site also helps in promoting zerocommission products. Government update An amendment to the Motor Vehicles Act 1988 capping the maximu m liability of Insurance Companies to Rs1 lakh in the case of injuries or disability and Rs10 lakhs in the case of death was tabled in the monsoon session of Parliament. To cut down underwriting losses of the 4 PSU general insurers, the Government of India has increased pressure on them to raise premiums, bringing them to the same levels as in 2007, prior to detariffication. The Ministry of Finance is said to be deeply concerned over the increasing losses in their hitherto profitable Fire and Engineering businesses. The PSUs have been asked to desist from charging unviable low premiums from commercial organizations and undercutting each other s pricing. The process for listing of two sta te o wned general insurance companies has been initiated. The Government of India has asked GIC Re and New India Assurance to start their valuation process by appointing merchant bankers. Finance Ministry officials want these two companies to finalise their valuation by December Keeping the IPO plan in mind, the Finance Ministry has asked PSUs to tone up their performance. The long pending proposa l to raise the FDI cap in the Indian Insurance sector from 26 per cent to 49 per cent has been revived by the Government. As a first step, the cabinet's approval has been obtained. The Insurance Laws (Amendment) Bill, 2008 had earlier been introduced in the Parliament in Dec ember 2008 for increasing foreign participation in the sector. The increase in FDI limit in the insurance sector may attract Rs30,000 Crores. that the industry requires over the next five years. According to IRDA, the Indian insurance sector constitutes around 4.5 per cent to the GDP. With the increase in the FDI limit, the percentage of contribution from the insurance sector to the GDP is expected to go up. The proposal for allowing foreign re-insurers to open branches in India has also been approved by the Cabinet. Such branches would be prohibited from investing policyholders' fund directly or indirectly outside India. The amendments to the bill would allow UK-based reinsurer Lloyd's to do business in India. Further, the amended bill sets the capital requirement of standalone health insurance companies at Rs50 Crores. Alleged service tax evasion by insurers to the tune of more than Rs300 Crores. is under probe by the Finance Ministry. It has issued summons to about a dozen insurance companies seeking documents pertaining to sale of insurance policies and commission paid to their distributors. It is suspected that several insurers may have indulged in irregularities, including evasion of service tax by misrepresenting the information on accounts book and fudging records related to commission paid to intermediaries like agents and brokers who were selling the insurance policies. Distribution SBI General Insurance is currently setting up a unique multi-distribution model encompassing Bancassurance, Agency, Broking & Retail Direct channels. It has also entered into a corporate agency agreement with State Bank of Mysore for marketing its general insurance policies. United India Insurance (UII) is planning to deploy 50,000 agents across the country in the next couple of years to strengthen its marketing team. The company is targeting Category 4 locations as defined by Indian Census Operations. Revised guidelines for bancassurance business are being drafted by IRDA, which wou ld make it possible for banks to offer more than one insurer's products and services. Products A pilot weather-based crop insurance scheme (WBCIS) has been launched for both loanee as well as non-loanee farmers for Mrig Bahar in Kharif 2012 in Maharashtra. The State Government has approved HDFC Ergo General Insurance to carry this out. Horticultural crops will henceforth be included under the Weather-Based Crop Insurance Scheme. This was hitherto applicable on ly to field crops. This initiative has been taken by West Bengal's Agriculture Department. Copyr ight 2012 Tow ers Watson. A ll rights reserved. tow ersw atson.com 5

6 Farmers not covered by crop insurance scheme under the National Agric ulture Insurance Scheme (NAIS) are like ly to be included. This move has been initiated by the State Government of Andhra Pradesh. Companies such as Max Bupa Health Insurance and Bajaj Allianz General Insurance are planning to provide cover for outpatient treatment (OPD) benefits and dental care. The inclusion of OPD benefits implies that the insured need not necessarily be hospitalised to seek insurance benefits. The cover is likely to be in the market by the yearend to make the insurance sector more attractive to consumers. Weather based crop insurance for tea is being developed by Agriculture Insurance Company of India Limited (AIC) and the Indian Tea Board (ITB). A composite micro-insurance for the rural sector has been launched by Future Generali. It has been named Future Sampoorna Suraksha policy and will cover multiple risks such as hospital cash, personal accident cover, fire, burglary, cart protection and liability, agricultural pump sets, pedal cycles. Two marine specialty products, Multi-modal Transport Opera tors Liability and Port & Terminal Opera tors Liability, filed by Raheja QBE General Insurance have been approved by the IRDA, clearing the insurer's foray into this niche space. Unemployment insurance product in view of the ongoing economic downturn is being developed by Bharti AXA General Insurance and is likely to be finalised in the current fiscal. It would cover the general credit risk of a person. A tailor made jewelry block insurance policy has been provided by National Insurance to Vibgyor Gold for buyers of its Virtue range of jewelry. Star Health and Allied Insurance has launched a premium product The S tar Co mprehensive, which comes with no room rent capping, no disease wise limits and includes hospital cash benefit and new born baby cover. In addition, the policy also covers HIV positive individuals. Apo llo Mun ich Hea lth Insurance has launched its 'Optima Senior' for citizens above 61 years of age to provide lifelong health coverage with a guarantee of no loading for change of health status. The product is for senior citizens looking for easy to understand health insurance coverage, with minimal restrictions and maximu m benefits and can choose from any of the three sum-insured levels - Rs2 lakh, Rs3 lakh or even Rs5 lakh. IC ICI Lombard General Insurance has launched Complete Health Insurance, a product with lifetime renewal and no restriction on maximum entry age. The product also features a wide range of sum insured from Rs1 lakh to Rs50 lakh, OPD coverage and maternity benefits. Copyr ight 2012 Tow ers Watson. A ll rights reserved. tow ersw atson.com 6

7 Contact details Towers Watson's Risk Cons ulting team co vers the length and breadth of India with associates based in Gurgaon and Mumbai. Vikas Newatia Director & Practice Leader, General Insurance Consulting, India Gautam Mazumdar Senior Consultant, General Insurance Consulting, India Rajesh Sabhlok Senior Consultant, Risk Consulting, India s: Gurgaon Suite 1, Redshift, , 8 th floor Tower-B, Unitech Cyber Park, Sector-39 Gurgaon Tel: 91 (124) Fax: 91 (124) Mumbai 511/512, Solitaire Corporate Park Andheri-Kurla Road, Andheri East Mumbai Tel: 91 (22) Fax: 91 (22) The India General Insurance Update has been prepared by Towers Watson for general information purposes only and does not constitute professional advice. The informa tion, opinions and projec tions contained in this News le tter are derived fro m various sourc es and have not been independently verified by Towers Watson. If you require professional advice or require any further information please contact any of the above named individuals. ABOUT TOWERS WATSON Towers Watson is a leading global professiona l services company that helps organisations impro ve performance through effective people, risk, and financial management. With 14,000 associates around the world, we offer solutions in the areas of emp loyee benefits, talent management, rewards, and risk and capital manage men t. For more information, please visit Copyr ight 2012 Tow ers Watson. A ll rights reserved. tow ersw atson.com 7