Prakash Iyer: Life lessons from a glass of water! - JUST FOR A CHANGE !

Dear Viewers,

Not worrying too much about the problem is the first step to solve it.

A chemistry professor decided to teach his students a different lesson one day. Holding a glass of water in his hand, he asked the students, “How much do you think this glass of water weighs?” “500 grams!” came a voice from the back. “600,” said another student. “I don’t really know!” said the professor, holding the glass up to make sure everyone could see it. “And unless we weigh it, we won’t know.” With the glass still in his outstretched hand, the professor continued, “What will happen if I hold it like this for a few minutes?”

“Nothing!” came the reply. “Right, and if I hold it for an hour like this, what might happen?” “Your hand will begin to hurt,” said a student. “Indeed. And what would happen if I held the glass in my hand like this for 24 hours?”

“You would be in tremendous pain,” said one student. “Your hand will probably go numb,” said another. “Your arm will be paralysed and we’ll need to rush you to the hospital!” said a student on the last bench.

“True,” said the professor. “But notice that through all this, the weight of the glass did not change. What then causes the pain?” The class went quiet. The students seemed puzzled.“What should I do to avoid the pain?” asked the professor. “Put the glass down!” said a student.

“Well said!” exclaimed the professor. “And that’s a lesson I want you to remember. The problems and worries in life are like that glass of water. Think about them for a while and nothing happens. But think about it a bit longer and they begin to hurt. And if you think about them all day long, you will feel paralysed – incapable of doing anything. It’s important to remember to let go of your problems. Remember to put the glass down!”

We may not have been in that classroom that day, but it’s a lesson we would all do well to remember. Put the glass down! Always. It’s not just problems and worries. Sometimes, we feel hurt and betrayed by a friend. And we carry that grudge through our lives. It grows and causes us anguish and pain. Learning to forgive – and forget – is not just good for the other people, it’s great for you. Nelson Mandela spent 27 years in jail and when he was finally freed, you can understand how angry and vengeful he must have felt. But guess what? When he became President, he invited his jailers to be present at the inauguration – in the VIP seats! If he could forgive after 27 years of suffering, surely we can too.

It is the same with our fears too. A failure or an incident in early childhood becomes a deeply entrenched fear over time. Fear of public speaking, fear of Maths, fear of rejection. You name it, and chances are, we have it. Someone gave us that glass to hold when we were little kids – ‘you are clumsy, you are no good, you can’t do it’ - and we have faithfully held on to it all our lives. ‘I can’t’ - becomes a thought that stays in our mind and grows – leading us to complete paralysis. Time to put the glass down!

 

The story goes that there was a hardworking man who lived a contented life with his wife and children. Every evening when he returned from work, he’d follow a ritual. Outside the door to his house were three nails. On the first one, he’d put his hat. On the second he’d hang his coat. And on the third nail, he’d unwrap an imaginary turban from his head and ‘put’ it there. A friend happened to see this and enquired what he was putting on the third nail every day.

“Those are my problems, my worries and my anger,” said the man. “I have lots of that at work, but when I come home, I remember to take it off – and leave them outside. I don’t take them home with me.” Maybe you should learn to do that too. Starting today. Put the glass down. And see the difference!

Prakash Iyer is MD, Kimberly-Clark Lever and Executive Coach. For more inspiring life lessons, read Mr Iyer's new book The Habit of Winning.

.....EDITOR

Insurance companies are liable to pay even if there is a change in vehicle ownership

DEAR VIEWERS,

In what comes as a big relief to many auto insurance policyholders, the apex court passed a ruling that insurers are liable to compensate for the loss during a third party motor insurance claim even if there is a change in the ownership of the vehicle.

This ruling passed by the Supreme Court was directed to National Insurance Company, which is one of the four non-life public sector insurance company in India. On 13th June 1998, a mini bus hired by the UP State Road Transport Corporation engaged in an accident taking the lives of one person and three children. The claim with National Insurance was stuck because the vehicle was owned by a private party and only hired by the UPSRTC. Finally, the Supreme Court directed asking National Insurance to compensate Kulsum, widow of the victim and passed a ruling that made the insurance companies liable to pay the compensation to the claimant even the vehicle ownership was transferred

The Supreme Court bench represented by Justice Dalveer Bhandari and Justice Deepak Verma, expressed that the motor insurance has been mandated by law for a social objective which is to protect the third party victims and the same had to be maintained.

Justice Verma said, “The liability to pay compensation is based on a statutory provision. Compulsory insurance of the vehicle is meant for the benefit of the third parties. The liability of the owner to have compulsory insurance is only in regard to third party and not to the property. Once the vehicle is insured, the owner as well as any other person can use the vehicle with the consent of the owner. Section 146 of the Act does not provide that if any person uses the vehicle independently, a separate insurance policy should be taken. The purpose of compulsory insurance in the Act has been enacted with an object to advance social justice.”

....... EDITOR

National Insurance Company sees a dip in its net profits - 2010-11

DEAR VIEWERS,

Public sector insurer National Insurance Company released its financials for the financial year 2010-2011. Despite a 32% rise in premium earnings, the insurer has witnessed a 67% fall in its net profits and 73% fall in its operating profits in FY 2010-11.

The dip in the insurer’s net profits was mainly attributed to the decline in operating income from health insurance, third party motor cover; own damage motor insurance cover as well as housing insurance cover. The loss registered in the operating income is Rs 445 crore which is six times that in the previous year.

The massive decline in National Insurance Company’s net profits was cushioned to some extent by the 37% increase in its investment income to Rs 378 crores.

National Insurance Company is headquartered in Kolkata, and has a network of about 1000 offices, manned by more than 16,000 skilled personnel, spread over the length and breadth of the country covering remote rural areas, townships and metropolitan cities.

......EDITOR

Court Orders United India Insurance company to compensate minor girl hit by car

DEAR VIEWERS,

A seven year old minor girl was injured in a car accident while she was crossing the road with her parents and brother. The girl became mentally challenged due to the injuries sustained in the accident. The Delhi court directed United India Insurance Company to pay Rs 5,90,750 to the girl.

Manzoor Ahmad Simon, a resident of Greater Kailash was driving his Tata Safari at a reckless speed when his car hit the minor girl. The car was insured by United India Insurance Company Ltd.

Judge Swarana Kanta, Motor Accident Claims Tribunal (MACT) stated that it is a very sad case where the child who was only 7 years of age at the time of the accident suffered mental retardation due to the injuries.

The girl suffered 75% permanent disability which is unlikely to improve. The condition has made her dependent on the entire family. The judge said, “The child has suffered mental retardation which has affected her prospect of marriage. She has also become a case of apathy and has lost interest in most of things.”

According to the girl’s father “No amount of compensation can compensate the loss of childhood and youth that the girl has suffered at this age.”

.....EDITOR

FRIENDS BE ALERT ABOUT CUSTOMER COMPLAINTS - New India Assurance in trouble again for not responding to customer complaint in time

DEAR VIEWERS,

The Insurance Regulatory and Development Authority (IRDA) has always come down heavily on insurance companies that fail to address policyholders complaints in an effective and timely manner.

This time, New India Assurance is on the receiving end, with the regulator slapping a penalty of Rs 1,00,000 for non-compliance of regulations.

Shri Hemendra Mehta filed a complaint against New India Assurance Company in the matter of non-refund of Mediclaim premium for the period the insured was staying abroad, in spite of the insurer’s email communication of 24.11.2009, stating that refund can be considered for the period of stay outside India during the policy period.

The authority sought explanation from New India Assurance for the delay in resolving the policyholder’s complaint. On failure of response from the insurance company, IRDA issued a notice dated 11.5.2010 upon New India Assurance to show cause as to why appropriate action in terms of the provisions of the Insurance Act, 1938 and the IRDA Act, 1999 should not be initiated against them.

In response to this, New India Assurance conceded that they had, inadvertently, not mentioned the requirement of an OMP Policy in their communication. The insurer also said that they have taken a ‘generous view’ on the matter and effected refund on 26.5.2010, thereby requesting the regulator to condone the delay in replying to them.

The authority observed that New India took 7 months to redress the policyholder’s complaint and over 2 months to respond to the letter sent by the Grievance Cell. New India violated Regulations 10 & 5 of IRDA (Protection of Policyholders’ Interests) Regulations 2002, and hence has imposed a fine of Rs 1,00,000 in favour of IRDA, which needs to be paid within 15 days.

The insurance watchdog has once again reinstated the fact that protection of policyholder’s interests is of the highest priority, and that any kind of delay in resolution will not be well accepted.

......EDITOR

NEW INDIA ASSURANCE COMPANY LOSSES OF Rs 421 Cr POSE CONCERN

DEAR VIEWERS,

For the first time in its 90 year history, New India Assurance posted losses of Rs 421 crore in 2010-11. The largest general insurance company has taken a severe blow from of about Rs 300 crore from international operations.

According to New India Assurance Chairman and Managing Director, M Ramadoss, the insurer has taken a big hit in their exposure to Tokyo Electric Power Company (Tepco), Australia, New Zealand and Bahrain.

Tepco runs the Fukushima nuclear power plant, which faced serious damages as a result of the Japanese tsunami on March 13. Along with Swiss RE, Munich Re and certain others, New India Assurance was also a co-insurer for the plant.

Besides these losses, the insurer has been hit by other natural catastrophes like the New Zealand earthquake and floods in Australia.

M Ramadoss, said that the losses were entirely on account of co-insurance arrangements.

The government has expressed concerns over these heavy losses. A senior government official told ET, "It is a matter of concern that a public sector firm is reeling under losses. Naturally, an explanation needs to be provided. We have already made the presentation to the board. We have a senior finance ministry official and head of a public sector bank on our board."

.......EDITOR

July 29, 2011 

For ‘misconduct’ in investing, CBI probes two MDs of LIC

DEAR VIEWERS,

After giving a clean chit to former Life Insurance Corporation (LIC) of India chairman and now managing director T S Vijayan in the bribes-for-home loans scam, the CBI has initiated a fresh probe against him.

This time, on allegations of favouring corporate houses, including Shahid Balwa’s DB Realty, by investing LIC money in their public issues or borrowings. Records show that the Economic Offences Wing of the CBI in Mumbai registered a preliminary enquiry on June 27 against Vijayan and Thomas Mathew, another managing director with LIC, and two other senior executives for “misconduct” in investing LIC money.

“The suspect persons, in connivance with other unknown persons, exposed the funds of LIC of India by investing in IPOs of various companies which were against the investment policy of LIC of India,” says the PE.

The companies mentioned: JP Infratech, JSW Energy, Bajaj Hindusthan, Shree Renuka Sugars, DB Realty, Varun Shipping, Exide, Areva T&D, JSW Steel, Apollo Hospitals and BASF India. The CBI does not spell out what were the alleged deviations from the norms.

When contacted, both Vijayan and Thomas Mathew said they did not discuss the investment policy or deviations.

“I’m not aware of the preliminary enquiry filed by the CBI. I’m on leave now,” said Vijayan. “I have no idea about this case. I have nothing else to say,” said Thomas Mathew.

The other LIC executives named in the PE are Executive Director (Investments) N Mohan Raj and Chief (Investment) B Venugopal. LIC officials said the CBI’s move was a surprise since there were three Finance Ministry nominees on the state-owned insurer’s board.

“Did they not know about these investments and raised objections then?” said a source. They said that investments made are reported to and decided by LIC’s investment committee, which is a subcommittee of the board of LIC and meets almost every month.

“Big investments have to be decided by the sub-committee unanimously. The investment committee consists of members from the finance ministry and heads of banks and other financial institutions and the investment policy is reviewed by the board of LIC every six months,” the source said.

Vijayan was denied an extension when his five-year term as LIC chief came to an end on May 2 because of allegations of involvement in the bribes-for-loans scam involving LIC Housing Finance.

Mid-June, the CBI absolved Vijayan as it did not find any evidence of the complaints leveled against him in the bribes-for- home loans scam, said a CBI official.

Last November, the CBI arrested Ramchandran Nair, who was then chief executive of LIC Housing Finance, and Naresh K Chopra, Secretary (Investment) at LIC, for allegedly accepting bribes to sanction big-ticket loans. Six senior executives at three public sector banks were also arrested

......EDITOR (source I.E.)

IRDA slaps a penalty on six insurance companies

DEAR VIEWERS,

General insurance companies ICICI Lombard, IFFCO Tokio, Royal Sundaram, Bajaj Allianz, New India Assurance and National Insurance failed to comply with the guidelines laid down by the Insurance Regulatory and Development Authority (IRDA).

These six insurance companies had granted licenses to five group entities belonging to the same promoter entity M/s Maruti Suzuki India Ltd group, to act as corporate agents on their behalf.

Corporate agent means a company or firm which holds a license to act as an insurance agent for a life insurer and a general insurer. As per rule, a firm or company can sell the products of only one Life Insurance Company and General Insurance Company at a time.

The insurance regulator received information that Maruti Suzuki India Ltd holds 99.99% stake in five other group entities Maruti Insurance Distribution Services Ltd, Maruti Agency Network Ltd, Maruti Insurance Agency Services, Maruti Insurance Agency Logistics Ltd and Maruti Insurance Agency Solutions Ltd. These five group entities were also acting as corporate agents of other insurance companies.

These six insurance companies failed to verify compliance of these corporate agents while granting as well as renewing license. They failed to exercise due diligence in renewal of the license and did not obtain complete information from the corporate agent about insurance related activities of any of the members of the group they belong to.

Insurance companies are not allowed to violate rules either knowingly or unknowingly. All the six insurance companies have therefore been slapped with a fine of Rs 5 lakh each for flouting the rules laid down by the regulator.

June 13, 2011 - 04:27 PM  by  My Insurance Club  

....EDITOR

New India Assurance pays Rs 141.20 crore to GNFC

Dear Friends/ Viewers,

Gujarat Narmada Valley Fertilizers Company (GNFC) had reported a disastrous explosion followed by fire in the Waste Heat Boiler (E-703), in their Ammonia plant on February 10, 2010. Following this damage, there was a disruption in their plant operations for 4 months.

GNFC is a joint venture between the Gujarat Government and Gujarat State Fertilizer Company Ltd. It was set up in Bharuch in 1976 and is one of the world's largest single-stream ammonia-urea fertilizer complexes. The company reported the loss and material damages to New India Assurance (NIA).

In a filing to Bombay Stock Exchange (BSE), GNFC said, “NIA has paid an amount of Rs 141.20 crore as a full and final settlement on February, 2011.

..... EDITOR

NEW INDIA ASSURANCE - PREMIUM COLLECTION CROSSES Rs. 1000 Cr in April ,2011

Dear Friends/Viewers,

New India Assurance, Oriental Insurance, United India Insurance and National Insurance are the four Public sector non-life insurance companies in India.

These four insurers have collectively amassed Rs 2,957 crores in the month of April this year. This is a 14% jump over their premium collections of Rs 2,583 crores in April last year.

Out of the total business of Rs 2,957 crores in April, New India Assurance has single handedly contributed Rs 1,002.6 crores. The second highest contributor is United India Insurance with premium collections of Rs 719 crores, followed by National Insurance and Oriental Insurance.

Last year, in April, New India Assurance managed to collect premiums of Rs 891 crores. The insurer has increased its collections in April this year by 12.5%. National insurance has increased its collections by 22%.

Oriental Insurance has collected only Rs 581 crores in premiums this year with a growth of only 4%.

New India Assurance has single-handedly contributed 34% of the overall business collections of these public insurance companies.

...... EDITOR

A CASE STUDY :Insurance company asked to compensate robbed Jeweller with interest

Dear Viewers,

The following text reproduced  in the larger interest and attention of U/W and Claims Dept. personnel in Insurance industry.

Friends, in order to avoid bearing such huge liabilities,  be allert and act swiftly and appropriately with all requisite evidenes, whilst defending such cases before Consumer Forums.

Friends, it is everybody's responsibility to make alert all our legal counsel and In-charges, who are at the helm of affairs,whilst handling such cases. Please save our Industry from such unfair liabilities. 

With Regards,  

....EDITOR

******************************************************

Oriental Insurance Company has been asked to compensate Zaveri Bazaar’s jeweler for the burglary which took place in his store Royal Jewellery in 2004.

A few years back Amrit Jawanmal Shah filed a claim with the insurance company stating that his store was burgled of Jewellery worth Rs 27 lakhs. The insurance company refused to provide a compensation stating that the theft did not take place.

On top of this the insurance company filed a fraud case under section 420 and 511 of the Indian Penal Code against the jeweler.

Shocked by this move, the jeweler approached Maharashtra State Consumer Disputes Redressal Commission on October 16, 2006 alleging the insurance company on account of non-settlement of his insurance claim.

The commission ordered the insurance company to compensate the jeweler with Rs 27 lakh with an additional interest of 6% in November 2007. The insurance company moved the National Consumer Disputes Redressal Commission (NCDRC). NCDRC directed the state forum to decide the complaint afresh allowing the company to file its defense and surveyor’s report, if any, to assess the loss.

The insurance company failed to submit a written version despite specific directions of the National Commission. The state commission said that it had no option but to hold the firm guilty of deficiency in service and adoption of unfair trade practice.

Finally the jeweler was acquitted of all charges and the insurance company was ordered to compensate him with a sum of Rs 27 lakhs with 9% interest plus Rs 25,000 as the cost of complaint.

*******************************************************

SOURCE:

June 16, 2011 - 03:30 PM by My Insurance Club Newsdesk

PERFORMANCE OF GIPSA MEMBER COMPANYS -FOR F.Y. 2010-11

DEAR VIEWERS,

The four public sector insurance companies United India, National Insurance, Oriental Insurance and New India Assurance have collectively crossed the Rs 25,000 figure in terms of premium collections for the financial year 2010-2011.

Government owned New India Assurance, which is the largest non-life insurer in India, leads the pack with a premium collection of Rs 7,070.22 crores. This is a 17% growth over its collections of Rs 6,042.51 crores in the previous year.

National Insurance has recorded the highest jump of 32% during FY 2010-11 compared to that in the previous year. The insurer has mobilized insurance premiums to the tune of Rs 6,115 crores over Rs 4,625 crores in the previous year.

United India has surpassed previous year’s collections by 21.71 per cent and has collected Rs 6,376.37 crores in FY 2010-11.

Oriental Insurance is the lowest amongst the four PSU’s in terms of premium collections as well as the growth percentage over previous year. The total premium collection of Oriental in FY 2010-11 is Rs 5,439.60 crores over Rs 4,736 crores in the previous year.

The total premium collection of these four PSU’s is Rs 25,001.60 crores.

..... EDITOR

GIPSA CHIEF IN TROUBLE WITH C.B.I.

Dear viewers,

Central Bureau of Investigation (CBI) conducted raids on the premises of Oriental Insurance Company.

Dharani Mishra, CBI spokesperson said that Oriental Insurance gave credit-based insurance policies to Paramount Airways, without following any procedures.

The CBI suspects that M Ramadoss, former Chairman and Managing Director of Oriental Insurance Company, present Chairman of the The New India Assurance Co Ltd, entered into a conspiracy to favour Paramount Airways which is a low-cost airliner.

M Ramadoss, former Chairman and Manging Director of Oriental Insurance has also been the chairman of the governing body of General Insurers' (Public sector) Association of India (GIPSA). Mr Ramadoss takes over as the chairman with effect from 1 Jan 2007.

The post of CMD of New India Assurance Co Ltd fell vacant after the existing chairman of the association-B Chakrabarti, completed his term on 30.09.2009.

The Mumbai-based New India Assurance was headless for nearly two months, with A.R. Sekar, the company’s general manager, working as its acting chief. from 1.10.2009 to 31.12.2009

The normal practice is to transfer the senior-most among the chairmen-and-managing directors of the three other public sector general insurers — National Insurance, Oriental Insurance and United India Insurance — as the chief of New India Assurance.

Mr Ramadoss took charge in Oriental Insurance Company on January 12, 2005.

He joined Insurance Industry in 1976 as direct recruit Class I officer in New India Assurance Company and worked in various positions. In 2001, he was promoted as General Manager and posted to London Branch for 3 years. He returned to India and joined Head Office in the Middle of November, 2004.

Mr Ramadoss is a first class commerce graduate from Madras University and Chartered Accountant from Institute of Chartered Accountants of India. He is also Fellow of Insurance Institute of India and an Associate of Chartered Insurance Institute of UK.

Mr. Ramadoss has the unique experience of having worked in the Insurance Industry in different parts of the country and different fields like Operations, Investments, Finance and Information Technology.

He is:
President, Insurance Institute of India
Chairman, Office of the Governing Body of Insurance Council
Chairman, Governing Board, National Insurance Academy, Pune
Chairman, The New India Assurance Company (Trinidad & Tobago) Ltd., Port of Spain
Director, Prestige Assurance Plc, Nigeria
Director, India International Insurance Pte. Ltd., Singapore
Chairman, Insurance Committee, Bombay Chamber of Commerce & Industry, Mumbai
Chairman, Insurance Committee, The Associated Chambers of Commerce & Industry of India, Delhi
Member, Reinsurance Advisory Committee, IRDA (Regulator)
Member, Policyholders’ Protection, Intermediaries etc. Regulations Advisory Committee, IRDA

......While Paramount Airways was preparing to re-launch flight services, the low-priced airliner pocketed a blow on July 18 when officers of CBI raided its office and house of its proprietors in Madurai.

The Economic Offences Zone of Delhi, CBI, carried out raids on the premises of two firms including Paramount Airways and Oriental Insurance Company Limited at six places in Mumbai, Chennai and Madurai.

CBI spokesperson Dharani Mishra stated, "Oriental Insurance gave credit-based insurance policies to Paramount without following any procedures. The CBI suspects that the former chairman and managing director of Oriental Insurance, M Ramadoss, entered into a conspiracy to favour Paramount."

Around 10 CBI functionaries took part in the raid. Sources stated that one group of six people reached the Paramount office at the airport at 7 a. m.

The group searched the office for some hours and left it around 1p. m. and joined another group, which was carrying out searches in the house of Paramount chairman M Thyagarajan at Thirunagar, Madurai.

It is discovered that the officers explored another house in Kochadai plus the properties of Thyagarajar Mills in Kappalur on the outskirts of Madurai.

Sources in the Paramount management refused the episode, saying that it was neither a raid, nor the officers were from the CBI.

A Paramount functionary stated, "We had applied for security clearance to relaunch our flight service shortly. The visit by the team was in connection with issuing of security clearance. This is part of the normal procedure."

----- EDITOR

Insurance and Indian Budget 2011-2012

Proposals in Indian Budget 2011-2012

A. Budget proposes to move the following legislations in the financial sector:

(i) The Insurance Laws (Amendment) Bill, 2008;

(ii) The Life Insurance Corporation (Amendment) Bill, 2009;

(iii) The revised Pension Fund Regulatory and Development Authority Bill, first introduced in 2005;

B. Services provided by life insurance companies in the area of investment are also proposed to be brought into tax net on the same lines as ULIPs.

C. Budget also proposes to extend the Rashtriya Swasthya Bima Yojana - a health insurance for the poor - to cover workers of the unorganized sector like hazardous mining and associated industries like slate and slate pencil, dolomite, mica and asbestos.

Analysis

The insurance legislation would increase the FDI limit to 49 percent from the current 26 percent.

The LIC bill would increase the share capital of Life Insurance Corporation (LIC) to Rs.100 crore from its current Rs.5 crore.

The PFRDA Bill would bring in a full-fledged regulator for the pension sector. Now it is regulated by an interim authority.

Insurance bill will empower IRDA (Insurance Regulatory and Development Authority) to introduce forward-looking regulations to promote sustainable growth of the industry. The bill gives a lot of flexibility to the IRDA in framing regulations.

Due to the modification proposed in budget for service tax on fund management charges, some guaranteed unit linked insurance policies (ULIPs) will attract higher charges.

A very senior citizen category has been introduced at the age of 80 years and above with exemption limit of Rs.500,000. Also increase in income tax exemption limit to Rs.250,000.for senior citizens and the reduction in the age limit for senior citizens to 60 years will help seniors to enjoy pension in the retirement years without tax impact.

NOTE:

The bills relating to the insurance sector has been pending for past several years.

The Insurance Laws (Amendment) Bill, 2008 was introduced in the Rajya Sabha in December 2008 and was referred to the Standing Committee on Finance in September 2009. The committee is yet to submit its report.

Life Insurance Corporation (Amendment) Bill, 2009 was introduced in the Lok Sabha in July 2009 and was referred to the Standing Committee on Finance, which submitted its report in March 2010.

Pension Fund Regulatory and Development Authority Bill was first introduced in 2005 It lapsed with the dissolution of the 14th Lok Sabha

Insurance reforms in 2011-12 mainly depend on how soon the government is able to get insurance related bills introduced & passed.

...... EDITOR

Bancassurance: emerging trends, opportunities and challenges

DEAR FRIENDS,
According to a recent sigma study, bancassurance is on the rise, particularly in emerging markets. Worldwide, insurers have been successfully leveraging bancassurance to gain a foothold in markets with low insurance penetration and a limited variety of distribution channels.

Bancassurance, the provision of insurance services by banks, is an established and growing channel for insurance distribution, though its penetration varies across different markets. Europe has the highest bancassurance penetration rate. In contrast, penetration is lower in North America, partly reflecting regulatory restrictions. In Asia, however, bancassurance is gaining in popularity, particularly in China, where restrictions have been eased. The research shows that social and cultural factors, as well as regulatory considerations and product complexity, play a significant role in determining how successful bancassurance is in a particular market.

The outlook for bancassurance remains positive. While development in individual markets will continue to depend heavily on each country’s regulatory and business environment, bancassurers could profit from the tendency of governments to privatise health care and pension liabilities. In emerging markets, new entrants have successfully employed bancassurance to compete with incumbent companies. Given the current relatively low bancassurance penetration in emerging markets, bancassurance will likely see further significant development in the coming years.

Emerging Trends ::

Though bancassurance has traditionally targeted the mass market, bancassurers have begun to finely segment the market, which has resulted in tailor-made products for each segment. The quest for additional growth and the desire to market to specific client segments has in turn led some bancassurers to shift away from using a standardised, single channel sales approach to adopting a multiple channel distribution strategy. Some bancassurers are also beginning to focus exclusively on distribution.

In some markets, face-to-face contact is preferred, which tends to favour bancassurance development. Nevertheless, banks are starting to embrace direct marketing and Internet banking as tools to distribute insurance products. New and emerging channels are becoming increasingly competitive, due to the tangible cost benefits embedded in product pricing or through the appeal of convenience and innovation.

Finally, the marketing of more complex products has also gained ground in some countries, alongside a more dedicated focus on niche client segments and the distribution of non-life products. The drive for product diversification arises as bancassurers realise that over-reliance on certain products may lead to undue volatility in business income. Nevertheless, bancassurers have shown a willingness to expand their product range to include products beyond those related to bank products.

Strategic Challenges ::

These developments are expected to challenge traditional bancassurers in the following ways:

The shift away from manufacturing to pure distribution requires banks to better align the incentives of different suppliers with their own.

Increasing sales of non-life products, to the extent those risks are retained by the banks, require sophisticated products and risk management.

The sale of non-life products should be weighted against the higher cost of servicing those policies.

Banks will have to be prepared for possible disruptions to client relations arising from more frequent non-life insurance claims.

.......EDITOR

India – The Next Insurance Giant in Asia-Pac

DEAR VIEWERS,

Insurance is one major sector which has been on a continuous growth curve since the revival of the Indian economy. Taking into account the huge population and growing per capita income besides several other driving factors, a huge opportunity is in store for the insurance companies in India. According to the latest research findings, nearly 80% of Indian population is without life insurance cover while health insurance and non-life insurance continues to be below international standards. And this part of the population is also subjected to weak social security and pension systems with hardly any old age income security. As per our findings, insurance in India is primarily used as a means to improve personal finances and for income tax planning; Indians have a tendency to invest in properties and gold followed by bank deposits. They selectively invest in shares also but the percentage is very small--4-5%. This in itself is an indicator that growth potential for the insurance sector is immense. It’s a business growing at the rate of 15-20% per annum and presently is of the order of $47.9 billion.

Topics covered in the report:
- Trend analysis of Indian economy and growing macroeconomic factors and
- India’s position in the context of emerging countries
- Historical growth trends & growth drivers of Insurance & its sub-sectors in India and outlook till 2011.
- Market size of insurance sector (total, life & non-life) since 2000 till 2007
- Market forecast of insurance sector (total, life & non-life) between 2007 and 2011
- Key issues & challenges, major trends & opportunities
- Government’s initiatives to promote & regulate the insurance market
- Competitive landscape and market share of top players
- And many more...

Emerging Areas:
- Healthcare Insurance & Pension Plans
- Mutual fund linked insurance products
- Multiple Distribution Networks .i.e. Bancassurance

Major Driving Factors:
- Growing demand from semi-urban population
- Entry of private players following the deregulation
- Rising demand for retirement provision in the ageing population
- The opening of the pension sector and the establishment of the new pension regulator
- Rising per capita incomes among the strong middle class, and spreading affluence
- Growing consumer class and increase in spending & saving capacity
- Public private partnerships infrastructure development
- Dearth of innovative & buyer-friendly insurance products
- Success of Auto insurance sector
- - - - - - - EDITOR

India: Insurance Industry to stick to current solvency standard

DEAR VIEWERS,

The insurance industry in India will continue to observe its current solvency rules even though insurers in other countries are moving over to the new Solvency II regime, according to local media reports.

"Our country does not have the required statistical database to adopt Solvency II norms that have been devised by the European community," says says Mr RK Nair, a member of the IRDA which is not keen on adopting Solvency II rules in India.

Solvency II is a risk-based model for all insurers and reinsurers in the European Union. The rationale is to facilitate the development of a single market in insurance services in Europe, while ensuring adequate consumer protection through a risk-based approach to supervision. Scheduled to be implemented in January 2014, Solvency II comprises a new set of capital requirements, valuation techniques and governance and reporting standards.

"The challenge for India, however, is that evaluation of risk can throw up different figures for regulators, insurers and valuers because there are no proper systems of evaluation or calculation of such risks in India," says Mr Nair. "We have a factor-based process in India to calculate solvency. Our regulator and the industry are comfortable with that."

India's current solvency framework is in line with Solvency I model which itself is based on the EU's insurer solvency regime put in place in the 1970's. This requires insurers to maintain a minimum solvency ratio, which currently is 150% for Indian life insurers and 130% for non-life insurers. The required solvency margin is thus easy to compute and to monitor. However, it does not recognise the size of the insurer's portfolio, type of business, operational risk and risk management practices such as reinsurance and underwriting.

.......EDITOR