Got a soliciting call from IRDA? Beware!

New Delhi: The Insurance Regulatory and Development Authority (IRDA) has warned the public to watch out for unscrupulous persons selling insurance policies by claiming to be the regulator's representatives.

IRDA has asserted that it is a regulatory body not involved directly or indirectly in the sale of insurance and financial products. As such, it said complaints should be lodged against persons claiming to be its representative for the purpose of selling insurance policies.

"Any person making any kind of transaction with such individuals or agents will be doing the same at their own risk. If any member of the public notices such instances, he or she may lodge a police complaint in the local police station," IRDA said in a public notice.

It said it has observed that the general public are receiving calls from individuals claiming to be IRDA's representatives, who offer insurance policies of different insurance companies with various benefits.

Meanwhile, in view of...the large quantum of unclaimed insurance settlement amounts lying with the insurers, the IRDA has asked all insurers to reflect such sums in its balance

sheet under the head, 'current liabilities'.

At present, such unclaimed amounts are not disclosed separately.

These unclaimed amounts include claims settled but not paid to the policyholders or insured persons and excess premium or tax or any other charges that are refundable to the policyholders, among other things.

PNB buys out insurance JV, sells MF biz

PNB buys out insurance JV, sells MF बिज़

* PNB buys partners' stakes in life insurance joint venture

* PNB sells entire stake in MF venture to Principal

* Scouting for strategic partners for life, non-life ventures

India's state-run lender Punjab National Bank restructured its insurance and mutual fund joint ventures by buying out its partners' stake from the insurance venture and selling its entire stake in the mutual fund joint venture, the bank said in a release on Thursday.

PNB bought its partners'--Principal Financial Group Mauritius (PFG) and U K Paints--stake of 26 percent and 32 percent, respectively, from the insurance joint venutre, Principal PNB Life Insurance Company.

After taking over the stake from PFG and others, PNB's holding in Insurance Broking Company is now 81 percent and in Principal PNB Life Insurance Company Ltd is 88 percent, PNB release stated.

The bank is now looking at strategic partnerships in life and non-life insurance business and has also invited expressions.

Understand the insurance policy fully before signing up

The insurance industry has long been accused of making promises that it does not keep at the time of a claim. Customers are often under the part of the insuring public and ensure that they get their just dues when claiming under the policy. For ease of understanding, this is classified according to the aspects that need to be taken care of during various stages of the contractual relationship.

At the time of purchasing / proposing for insurance

Complete disclosure of information pertinent to the subject matter of insurance (the thing insured).

Example – existing insurance policies in case of Health / Personal Accident, nature of construction of building, existence / absence of fire-fighting equipment, pre-existing health conditions in the case of health policy etc.

Previous Insurance History – Claims made, No Claim Discount in Motor policy, special discounts / conditions on previous policy etc.

Always purchase insurance for the realistic value of the asset – there is hardly any savings to be had through under declaration, but the consequences of such undervaluation can be quite significant at the time...of claim.

Always ensure that your policy is in force and is renewed well in time without waiting for expiry in order to avail of continued benefits of uninterrupted coverage. For example health policies typically cover pre-existing conditions after a specified period of uninterrupted coverage which benefit will be lost if there is a lapse in cover in the intervening period.

Please make it a point to acquaint yourself thoroughly with the coverage and exclusions of your policy and any special conditions / limitations mentioned therein.

During the duration of the policy

Inform the insurer of any material alteration to the subject matter – modification of vehicle or asset, any improvement effected to the asset, any property / building that is going to be unoccupied for a length of time etc.

impression that all eventualities are covered under their insurance only to discover at the time of claim that either the loss is not covered under the policy or that the cover is limited and does not recompense them to the full extent of the loss. With some understanding of the essential elements that go into the insurance contract, customers can avoid the commonly encountered pitfalls in dealing with insurers. Most issues arise due to inadequate understanding of the importance of information provided to the insurer at the time of proposing for insurance or a failure to comply with duties expected of the insured person following a loss. We hope that the following few pointers would help in enhancing the understanding on the.

Online Insurance: Cleaning the web

: With a spate of insurance companies launching online products to reduce cost and insurance web aggregators (IWAs) offering information to customers, the Insurance Regulatory and Development Authority (Irda), has come come out with new draft guidelines to regulate the aggregators.

The new guidelines are aimed to bring in uniformity in display of prices and key features of the insurance products by the websites, to protect the interests of the customers and also to rationalise the approach adopted by insurers and brokers in dealing with various websites that offer price comparisons and display the key features of products.

IWAs like click2insure.com, insurancemall.in and policybazaar.com compile information on the various features and pricing of the products. A customer can compare the premiums and policy features to get the best deal. However, the urgency to bring in regulations for IWAs comes from the fact that many websites were not giving latest and correct...information to users and are instead collecting personal information of potential customers and were sharing the data with the insurance companies. It is estimated that at present, the IWAs do a business of R150 crore every year.

The panel headed by A Giridhar, executive director, Irda, is also examining a wide range of issues such as a mechanism of electronic issue of policies, the legal implications, cost-benefit analysis and operational procedures, among others. It has invited comments from various stakeholders on the draft guidelines and will come out with the final version soon.

Deepak Sood, managing director and chief executive officer of Future Generali India Life Insurance, says online marketing is rapidly evolving new distribution channels that show greater promise as it will help insurers reach customers in a cost-effective manner. “Initially, at least, the online market market will be characterised by simple products. Complicated products which will need professional advice in...choosing various features and options of the product may not be suitable for online sale unless the customer is highly informed,” he says.

The insurance regulator has proposed that IWAs be registered under the Companies Act and must have a minimum net worth of R50 lakh at any time during the previous three consecutive years. It has also proposed that they should not have any referral arrangement with an insurer and most importantly, that they will not be an insurance agent, corporate agent, micro-insurance agent or an insurance broker. Further, they should only display information pertaining to insurance products and price comparisons of different insurers approved by Irda. The draft guidelines also underline that IWAs will have to ensure that if a customer evinces interest in buying an insurance product but does nor prefer any insurer, the IWA will not transmit the customer’s details to the insurer.

Insurance experts say...

US upset with India's insurance laws

WASHINGTON: Foreign partners in the Indian insurance companies operate in an "extremely uncertain" environment due to snake and ladder like laws governing the sector, the US Trade office said.

While an Insurance Laws (Amendment) Bill is pending with the Standing Committee of Parliament for increasing the foreign investment in insurance joint ventures to 49 per cent, an existing regulation requires that after completing 10 years of operation, overseas investment in such companies would have to be brought back to 26 per cent.

Several of the insurance joint ventures, including Reliance Life are about to complete 10 years of operations in India. Whereas HDFC Standard Life has already completed a decade of business here.

So, unless this provision is amended, passage of the Insurance Laws (Amendment) Bill allowing foreign equity to 49 per cent would be meaningless.

The US Trade Office in its 2011 National Trade Estimate Report on Foreign Trade Barriers talks about this paradox in the Indian insurance laws.

"While the Insurance Regulatory and Development Authority (IRDA) said it plans to publish a clarification of these regulations, foreign investors continue to operate in an extremely uncertain environment," the US said.

India first opened its insurance sector for foreign participation of up to 26 per cent in both life and non-life segment in 1999. A bill pertaining to raising FDI ceiling to 49 per cent in the sector is pending before Parliament.

The Bill, when enacted, would allow raising the FDI cap for the industry to 49 per cent. However, it has been awaiting approval since 2008, as it was delayed by strong opposition from the Left parties during UPA-I government.

"As with other sectors being considered by the government for greater FDI liberalisation, opposition party lawmakers are concerned that passing the Insurance Bill will result in foreign companies' holdings increasing significantly," the report said.

Keen to enter the Indian insurance market, legendary investor Warren Buffett had also said during his recent visit to New Delhi that a foreign investment cap of 26 per cent in insurance sector here was a deterrent.

Buffett's Berkshire Hathaway had recently forayed into the Indian non-life insurance sector as a corporate agent of Bajaj Allianz General.

In India, besides, state-owned LIC, 22 private companies offer life insurance policies. While the general insurance sector has 21 players, which include four PSUs.

Health insurance policy portability from July 1

Health insurance policy portability from July १

NEW DELHI: In a big relief to dissatisfied health insurance policyholders, sectoral regulator Irda on Thursday allowed them portability - shifting policies from one insurer to another on same terms - from July 1.

"The regulator has examined various issues involved in the portability of health insurance plan and has issued necessary orders for effecting portability which will be implemented from July 1, 2011," Insurance Regulatory and Development Authority (Irda) said in a statement.

The portability facility will allow policy holders to switch over to another insurance company with the same conditions.

"The accepting insurer shall provide cover, at least up to the sum assured in the previous insurance policy," the regulator said.

The new facility will also help those policyholders who stick to one insurer throughout life for fear of losing the cover for pre-existing diseases (PED).

"It is essential to protect the policyholders against discontinuity and consequential loss of PED cover by making the health insurance plans portable across the insurance companies," Irda said.

In general, health insurance policies have specific exclusions for PED for a specified period of cover during the initial year, and policyholders do not get this cover in the event of changing insurance firm. It was considered "detrimental to competition".

Irda decision comes after it received several representations from consumer associations and policyholders for enabling portability of health insurance policies.

Currently, the regulator allows portability of motor insurance polices.

IRDA okays health cover portability

MUMBAI: Holders of health insurance policies can now switch companies without fear of losing benefits of a 'no claim' track record or out of concerns that they may have to wait a while before certain health conditions are covered.

The insurance regulator has said on Thursday that insurers must allow policyholders to transfer the credit in terms of waiting period for pre-existing illness and bonus sum insured from one insurer to another. The Insurance Regulatory and Development Authority on Thursday issued guidelines on portability of health insurance which will be effective from July 1, 2011 and apply to life and general insurance companies.

The insurance regulator's move to allow portability will hugely benefit disgruntled policyholders who have to put up with poor service from their insurance companies for fear of losing the track record they have built up over the years. For example, if under a previous policy, a medical condition is excluded from coverage for two years and at the end of the second year the policyholder decides to switch, he will not have to go through the same waiting period again.

If under the new plan the waiting period for the same condition is three years, the new health insurance policy can only exclude the condition from coverage for one extra year. The final guidelines are a departure from earlier proposals where a standard policy, similar to the standard motor insurance cover, was mooted which could have been renewed with any insurers . However, given the difference in terms of coverage , the regulator has stuck to the nub of the issue-policyholders losing the track record they have built.

According to insurers, policyholders who shift will have to find a cover similar to their existing policy or accept the new plans. "In a way, it will be similar to mobile portability. Just as a customer opting for a new provider will have to accept the terms of the new plan, the policyholder too will have to accept the terms and conditions of the new insurer," said Sanjay Datta, head of health at ICICI Lombard General Insurance .

Claims such as those for bypass surgeries are invariably rejected if they occur in the first year of cover on the grounds that such medical conditions do not develop overnight. Insurers agree to pay these claims only if the insured has been continuously covered for a couple of years at least.

IRDA has said that the credit (in terms of waiting period ) would be limited to the sum assured (including bonus ) under the previous policy . The regulator has put the onus on the new insurer for continuing the cover. If the policy results lapses into discontinuance because of any delay by the insurer in accepting the proposal, the insurer shall be bound to continue coverage.

All insurers have been asked to inform policyholders that all health insurance policies are portable and that the policyholder who wants to shift should take action well before the renewal date. According to Datta, the industry will move to a shared database by which an insurance company can immediately figure out the track record of any person who approaches them for health insurance. IRDA has asked companies to share the claim details of the policies, where the policyholder has opted for portability, within seven working days of a request from the renewing insurer.

Easy Switch

IRDA's move to allow portability will benefit disgruntled policyholders who have to put up with poor service from their insurance companies for fear of losing the track record they have built up over the years

Insurers say policyholders who shift will have to find a cover similar to their existing policy or accept the new plans. The industry will gradually have to move to a shared database.

Insurance cover for army personnel increased

NEW DELHI: Extending a better life insurance cover for its personnel, Indian Army has increased the Army Group Insurance Fund (AGIF) by Rs 10 lakh and Rs 5 lakh for its 35,000 officers and over one million jawans respectively.

"The government has taken a decision to increase the AGIF coverage for soldiers in the Army. Under the new scheme, the officers would avail coverage of Rs 40 lakh, while the same has been increased to Rs 20 lakh for jawans," Defence Ministry officials told PTI.

The premium amount payable by the soldiers has also been increased accordingly.

Now jawans would have to pay a minimum of Rs 2000 annually while earlier they were paying between Rs 600 to Rs 1000.

For officers, the same amount has been increased from Rs 2000 to Rs 4000.

"It is the minimum deduction from the salary of soldiers and after the sixth pay commission soldiers are contributing even more voluntarily," the officials said.

The decision, which would come into effect from April 1, was pending with the Ministry for quite some time.

Earlier, the officers were provided an insurance package of Rs 30 lakh and for the Personnel Below Officer Ranks (PBORs), it was Rs 15 lakh.

"The policy was pending with the ministry and its concerned department for review and the Army had mentioned few important points to raise the insurance limits," officials said.

While counter-insurgency operations in Jammu and Kashmir and North-East region have always been a major task for the Army, its role during disasters and natural calamities across the country, has further increased the stress on its men.

"The soldiers posted in difficult terrain and elsewhere must believe that the organisation is taking care of the basic needs of his family.

"Besides, there are issues of rising prices and meeting the requirements of good education and health for the old parents. It takes out a lot of stress and even motivates him to perform better," officials said.

Over the years, a number of new monetary measures have been initiated by the Indian army to ensure better life and facilities for the family members of its soldiers.

The focus has been mainly on ensuring good education for the children and re-employment of the soldier in case of disability during action.

Various options have been made available for the children from military background.

Along with education loans, soldiers get due assistance from Army Welfare Corpus in form of scholarship, tuition fee and higher technical education through educational institutions run by the army.

"There are provisions for covering the tuition fee and the cost of books for children pursuing professional courses.

"A significant amount is spent by the army in ensuring these measures. It is very important for the organisation to take care of the family members specially parents and children so that he can perform his tasks well," officials said.

Premium on mega risk policies falls by up to 20%

MUMBAI: Oil rigs and aviation companies' insurance cost may fall by a fifth, following the softening of rates at reinsurers due to easing risk perception in the absence of major natural calamities or terrorist strikes.

These policies, known as mega policies, are the ones with a sum assured of more than 2,500 crore.

"Mega-risk policies are mainly reinsurance-driven. Premium rates move with global claim experiences. Not many claims have come last year," said KG Krishnamoorthy Rao, MD and CEO of Future Generali . Around 80-90% of the risk in such policies is reinsured.

Reinsurance rates across most lines of natural catastrophe have declined around the world on excess capacity and strong balance sheets of reinsurers.

Reinsurance rates depend upon two factors - claim experiences over the last one year and capacity in the market.

"Reinsurance rate depends upon demand supply. At present, there is enough capacity in the market, therefore, rates are softening," said G Srinivasan, chairman and managing director of United India Insurance .

Aviation reinsurance rates have fallen by 15% in 2010 while terrorism has seen a drop of 20%. The rates in aviation insurance segments would decrease by another 10%, said executives. General Insurance Corporation , Munich Re, Swiss Re are some of the reinsurers active in India. At present, the insurance regulator has stipulated that at least 10% of the risk has to be placed with national reinsurer GIC.

Mega risks constitute 10% of the industry's total income. This year non-life insurance companies have collected total premium of 34,507 crore during the first 10 months of the financial year.

Also, around 80% of the insurance contracts come up for renewal in April.

On the retail insurance front, policyholders are most likely to see an increase of 20-25% on motor insurance in the next six months. During the last year, insurers have lowered the discounts. Similarly, retail health insurance is likely to witness an increase in rates on medical inflation.

Buffett's Berkshire to enter India; ties up with Bajaj Allianz

NEW DELHI: Berkshire Hathaway, the conglomerate led by billionaire Warren Buffett , today said it plans to enter the Indian non-life insurance sector as a corporate agent of leading player Bajaj Allianz General.

The move would mark the foray of Berkshire Hathaway's direct entry into the Indian market, where the billionaire investor Buffett is yet to make substantial investments.

As part of its planned India entry, the US conglomerate has incorporated Berkshire India to sell and distribute general insurance products in India.

Berkshire India would directly sell insurance to consumers through the portal 'berkshireinsurance.com' and by way of telemarketing, it said in a statement.

Initially, the focus would be on motor insurance but the company would continuously update its business model.

"If the market proves receptive, the Company will seek to expand its products to include health insurance, life and travel insurance and other personal lines, as well," it noted.

Berkshire Hathaway is a sprawling US conglomerate Berkshire Hathaway that is into various businesses, including property and casualty insurance and reinsurance, finance, manufacturing, and retailing.

It has significant stakes in global majors, including Coca-Cola and Kraft, that also has a good presence in India.

Berkshire India CEO Arun Balakrishnan said that his company and Bajaj Allianz share a common goal of providing exemplary customer service.

"We have been watching the Indian insurance industry for a long time and are very excited about the immense opportunity in the emerging retail insurance sector," Berkshire India's Director Kara Raiguel said.

Berkshire Hathaway has been very successful in the online and direct distribution model in the US and we would like to replicate that success in India as well, he added.

According to him, buying financial products directly over the Internet is a relatively new and growing opportunity in India.

Known for his business acumen and investment style, Buffett is Chairman of Berkshire Hathaway.

Going by reports, Buffett would be visiting India this month as part of his philanthropic initiatives.

Cost of group health cover to soar

MUMBAI: The cost of providing group health insurance is set to go up by 25% to 50% for majority of the corporates that provide this benefit as insurance companies prepare to hike rates in April when most policies come up for renewal.

More than half of the companies that buy group health insurance for their employees have ended up claiming more for employee treatments than what they had paid as premium.

This has resulted in what insures describe as an "underwriting loss in their group health insurance business" . Many multinationals buy group health policies which coincide with the calendar year and premium under these policies have gone up by 5% to 10%.

However, the larger policies which are purchased by big employers like IT companies will come up for renewal in April and insurers say that prices will rise for those companies with an adverse claims ratio.

Under claims data for the last 3 years, 50% companies are observed to be experiencing a high claims ratio of 100-150 %, says a report on healthcare trends by Towers Watson, a global consultancy. The report says that all respondent companies with claim costs between 125% to 150% faced premium increase to the extent of 25% to 50% this year as against only 9% last year.

"The insurance industry has realized that it is not worth carrying with losses and every insurer has made correction in their group insurance premium ," said Antony Jacob, CEO, Apollo Munich Health Insurance. "I believe that in the next 12 to 24 months group health insurance will stop being a loss making business."

One reason for the increase in health insurance was the advancement in medical technology which resulted in medical inflation growing at a faster rate than general inflation. Claims are higher for companies that provide insurance coverage to employees' parents . The insurers face a higher level of losses with total parental claims forming 60% of the claims for the companies that cover employee families.

"Companies are also trying to deal with this by putting some restrictions on the cover provided to parents. Some companies have even started excluding parental cover from group benefits ," said Sanjay Dutta, head of health at ICICI Lombard General Insurance. "However, the increase is not across the board it is largely on a case-to-case basis ," he added.

Premium on mega risk policies falls by up to 20%

MUMBAI: Oil rigs and aviation companies' insurance cost may fall by a fifth, following the softening of rates at reinsurers due to easing risk perception in the absence of major natural calamities or terrorist strikes.

These policies, known as mega policies, are the ones with a sum assured of more than 2,500 crore.

"Mega-risk policies are mainly reinsurance-driven. Premium rates move with global claim experiences. Not many claims have come last year," said KG Krishnamoorthy Rao, MD and CEO of Future Generali . Around 80-90% of the risk in such policies is reinsured.

Reinsurance rates across most lines of natural catastrophe have declined around the world on excess capacity and strong balance sheets of reinsurers.

Reinsurance rates depend upon two factors - claim experiences over the last one year and capacity in the market.

"Reinsurance rate depends upon demand supply. At present, there is enough capacity in the market, therefore, rates are softening," said G Srinivasan, chairman and managing director of United India Insurance .

Aviation reinsurance rates have fallen by 15% in 2010 while terrorism has seen a drop of 20%. The rates in aviation insurance segments would decrease by another 10%, said executives. General Insurance Corporation , Munich Re, Swiss Re are some of the reinsurers active in India. At present, the insurance regulator has stipulated that at least 10% of the risk has to be placed with national reinsurer GIC.

Mega risks constitute 10% of the industry's total income. This year non-life insurance companies have collected total premium of 34,507 crore during the first 10 months of the financial year.

Also, around 80% of the insurance contracts come up for renewal in April.

On the retail insurance front, policyholders are most likely to see an increase of 20-25% on motor insurance in the next six months. During the last year, insurers have lowered the discounts. Similarly, retail health insurance is likely to witness an increase in rates on medical inflation.

Health insurancescheme for government employees

New Delhi: Health Minister Ghulam Nabi Azad Friday said a health insurance scheme will be introduced for the central government employees.

"The central government is contemplating introduction of a health insurance scheme for the central government employees and pensioners in consultation with other concerned ministries and departments," Azad told the Lok Sabha during question hour.

"The proposal is to make this scheme on voluntary cum contributory basis for serving employees and pensioners except for new joinees in respect of whom it is proposed to be on mandatory cum contributory basis," the minister said.

He, however, said that no time frame can be given for the introduction of the programme.

Calamity insurance costs to go up after Japan disaster: Insurers

NEW DELHI: As Japan suffers the jolt of a severe earthquake and tsunami, insurance companies feel the cost of catastrophic insurance for next year will move skywards.

"Since most of the re-insurance treaties in India are due for renewal in April, there may be some impact on the premium rates, especially for the catastrophic cover," Future Generali India Insurance MD & CEO K G Krishnamoorthy Rao told PTI.

A 33-foot tsunami, triggered by a powerful 8.9-magnitude quake, struck Japan today, leaving huge damage to properties and reportedly killing 26 people.

Although the extent of the damage is yet to be quantified, the re-insurers would have to take a hit while compensating for the loss.

"The Japanese earthquake or tsunami will have an effect on the re-insurance market but only next year from a rate perspective," Bharti AXA General Insurance CEO & MD Amarnath Ananthanarayanan said.

The reinsurance companies, which act as insurers of last resort for general insurers, would be making up for majority of the losses. These companies usually take up the cost associated to an event when the claim to be settled is too high.

"The estimation of losses will take time. However this can affect a few insurers and reinsurance firms operating in the region," Rao said.

The first three months of the current year saw insurance companies bearing the brunt of rising claims on account of events like floods in Australia, storms in the US and a severe earthquake in New Zealand.

Expert also said the global re-insurance companies, like Munich Re or Swiss Re , might have to enhance their natural catastrophe budget for 2011.

"In terms of the Indian reinsurance market, given that there have been fortunately no major catastrophes, the reinsurers will want to take a greater share of the Indian pie and therefore the rates will be very reasonable despite this earthquake or tsunami," Ananthanarayanan said.

Bharti AXA Life launches 2 products

NEW DELHI: Private sector Bharti AXA Life Insurance today announced the launch of two products - a retirement plan and a child protection plan.

While the retirement plan - Bharti AXA Life Wonder Years Retirement Plan - will be a traditional product and offer combined benefits of guaranteed returns and life insurance cover.

The child plan - Bharti AXA Life Bright Stars Power Plus - would have the features that protects and build savings for the child's key lifestages.

"Both the products are based on extensive consumer research and hence address the needs highlighted by customers. They have been specifically designed to provide returns at the key life stages," Bharti AXA Life Chief Marketing & Operations Officer Mark Meehan said.

Bharti AXA Life Insurance is a joint venture between Bharti Enterprises and AXA. While Bharti Enterprises hold 74 per cent stake in JV, the remaining 26 per cent is held by AXA Asia Pacific Holdings Ltd (APH).

Indian insurers taking stock of risk exposure to Tsunami

CHENNAI: Indian insurers - New India Assurance Company Ltd and General Insurance Corporation of India (GIC Re) - are taking stock of their risk exposure in Japan following Friday's tsunami that hit the country severely.

"All our branch staff in Tokyo are safe and are not affected by the tsunami. It is too early to estimate the probable loss though the branch has confirmed losses likely to be reported," Chairman-cum-Managing Director of New India Assurance A. Ramadoss told IANS.

The company has around 40 employees in Japan. According to him, the company's Japanese branch underwrites a premium of around Rs.150 crore.

India's national reinsurer General Insurance Corporation of India (GIC Re) is taking stock of its exposure in reinsuring risks underwritten in Japan following the earthquake and tsunami that Friday hit that country severely.

"We are in the process of collating information. Now we are not in a position to make any statement," an official of GIC Re told media.

The company's Chairman and Managing Director Yogesh Lohiya was not available to comment on the likely scenario that would emerge.

Industry officials do not expect any major hardening of reinsurance rates for catastrophic risks because of Japanese tsunami though they agree that the property losses is going to be high as Japan is highly insured nation.

"Such hardening of reinsurance would happen only in the case of aviation or marine/transit losses. Losses to property/life is country specific and there may not be any global hardening of reinsurance rates," an official of a private non-life insurer told IANS preferring anonymity.

Ramadoss said: "In Japan insurers may increase the premium rates or increase the deductibles - the amount of loss that the insurers would not pay."

According to him, general insurers in Asia including the Indian companies are in the process of renewing their annual reinsurance contracts.

"Normally, the Asian reinsurance contracts come up for renewal in April. However today (Friday) we are getting e-mails from reinsurers stating they would like to have some more time to quote following the Japanese tsunami," an official of a government owned insurer told IANS.

According to an industry official, the Indian Ocean tsunami did not affect the general or even the life insurers much as the properties and lives were not insured.

"But in Japan going by the television visuals lots of automobiles, refinery and other property have been damaged. This is bound to affect the primary insurers," he said.

IRDA may let insurers invest in gold and ETFs

MUMBAI: The Insurance Regulatory and Development Authority (Irda) is vetting a proposal to allow life insurance companies to invest in gold and exchange-traded funds, or ETFs. The move will provide greater flexibility to local insurers to invest in various asset classes.

A senior Irda official said the regulator is weighing the two options. "We may allow insurance companies to invest in gold and equity ETFs with a cap of 5-10%. There are proposals from various companies to let them invest in ETFs of commodities and equities," said the official.

An exchange-traded fund is an investment fund traded on stock exchanges just like stocks. Gold ETFs invest directly in gold and hence track its prices closely, eliminating the hassles of stocking up on physical gold. Equity ETF mirrors a basket of stocks such as S&P CNX Nifty or BSE Sensex, which reflects the composition of an index.

The Irda official said the regulator would, however, like to restrict the exposure of insurers to any single commodity.

After the regulatory changes in the Ulip space, insurance companies are not able to innovate products. "The charges are capped. There is not much innovation that we can bring. One product is replicating another," said a senior executive of a large insurance company.

Insurance companies are looking forward to new options for investment flexibility. "This will improve our investment choice. Whenever there is an inflow in Ulips, we can quickly allocate funds in ETFs and then take a call on where to invest," said Abhijit Gulanikar, chief investment officer of SBI Life .

There are 16 ETFs in India, including gold and equity. According to the current regulations, insurance companies cannot invest in commodities. These changes will, however, require amendments in regulations. After the Insurance Act is amended, Irda will have the power to introduce changes in the investment norms.

Nippon Life to acquire 26% stake in Reliance Life for $680 mn

NEW DELHI: Japanese insurance firm Nippon Life Insurance Company will acquire a 26 per cent stake in Reliance Life Insurance for $680 million.

"Nippon Life Insurance will invest an aggregate value of Rs 3,062 crore ($680 million) to acquire a 26 per cent strategic stake in Reliance Life Insurance," the Anil Ambani Group firm said in a statement today.

The transaction pegs the total valuation of Reliance Life Insurance at approximately Rs 11,500 crore ($2.6 billion), the statement said, adding that the transaction is subject to necessary regulatory approvals.

Nippon is the 6th largest life insurer in the world and the No. 1 private life insurer in Asia and Japan.

Commenting on the development, Chairman Anil Ambani said, "At this time, our thoughts are with the people of Japan, bravely facing an unprecedented natural catastrophe. We pray for strength to the country, its people and our new partners in the entire Nippon Life family, to overcome the trauma of the tragic loss of life and devastation caused by this calamity."

Reliance Capital currently holds a 100 per cent stake in Reliance Life.

"We both share the same passion and philosophy and, together, we believe we can develop a strategic partnership to help Reliance Life Insurance become a world-class insurance company in India," said Nippon Life Insurance President Kunie Okamoto.

Shares of Reliance Capital were up 5.46 per cent at Rs 538.75 on the BSE at 1116 hours.

Nippon Life buys 26% in Reliance life

MUMBAI: Nippon Life, Japan's biggest life insurance company, on Monday acquired a 26% stake in Reliance Life for a sum of Rs 3,062 crore, surprising analysts with a valuation that was higher than expected. The deal, that values Reliance Life at Rs 11,500 crore, or around $2.6 billion, is the largest foreign direct investment in the financial services industry. Shares of Reliance Capital, the financial services arm of the Anil Dhirubhai Ambani Group , or ADAG, and the owner of Reliance Life, went up by 10% to Rs 562 on the Bombay Stock Exchange as it will receive most of the money.

"Some part of the money will be raised by way of primary issuance, but a large part will be through a secondary sale," said Reliance Capital MD and CEO Sam Ghosh . The company will infuse another Rs 30-40 crore into the business. Through this secondary sale, which will be combined with a small issue of new shares, Reliance Capital's stake will come down to 74% from 100%. Reliance Life, a subsidiary of Reliance Capital, is the only life insurance company 100% owned by an Indian promoter.

Analysts said the valuation is significantly higher than expectations. "We estimated the valuation to be $1.6-1.7 billion against $2.6 billion. But since the Japanese company wanted to enter the market, they were ready to pay a premium. India is a growing market and this gives them a presence here," said Suresh Ganapathy, an analyst with Macquarie . Manish Karwa of Kotak Securities said the valuation is 40% higher than expectations. "Inorganic way is the easiest entry for Nippon Life," said an analyst with KPMG .

Of the 22 companies that have entered the insurance market since the industry was thrown open, foreign and private investment in 2000, twenty have foreign partners, according to data on the website of insurance regulator Irda. The stake sale in Reliance Life is the first instance of induction of FDI by way of a secondary sale. The company did not require any capital during the third quarter, Mr Ghosh said, adding that it plans to break-even this quarter. The nature of the business is such that it requires regular capital infusion, said analysts.

For every policy sold, the company has to put aside extra capital as solvency margin, which is the excess of reserve over liability. One of the key yardsticks to measure the performance of a life insurance company is capital efficiency. This is assessed as the ratio of the gross written premium (GWP) with the capital deployed. GWP is the total premium income including renewal and new business. Reliance Life's GWP stood at Rs 1,447 crore at the end of December 2010 while its total capital stood at Rs 3,094 crore.

According to a report by JP Morgan , the deal valuations would impact Kotak and SBI positively as both banks have insurance joint ventures. "Aditya Birla Nuvo and Max India would also be big beneficiaries as insurance is the largest contributor to their valuation," the report said. Reliance Life has been searching for a partner for a couple of years. The deal with Nippon Life has taken place at a time when the insurance regulator is working on IPO guidelines by private insurance companies. An amendment to the Insurance Act that, if approved by Parliament, would raise the FDI limit to 49% from 26%, is also pending.

Mr Ghosh said the company would wait for this to happen before listing. On Monday, the company said its renewal premium grew by 25% to Rs 857 crore at the end of December 2010 against Rs 686 crore for the corresponding period last year. Due to the change in policy regulations, its new business premium declined by 35.6% to Rs 593.7 crore. The number of agents stood at 215,952 at the end of December 2010, a rise of 33% compared with 162,370 a year ago. Its assets under management stood at Rs 11,700 crore at the end of December 2010. The increase in distribution force helped Reliance Life clock the highest number of polices in the private sector life insurance industry to 308,923.

Primer on Personal Accident Insurance

Personal accident insurance policies can be a good tool to manage the risk associated with accidents . Non-life insurance companies offer these products for both individuals and groups. If you are a person exposed to the risk of an accident, you should ideally buy one. For ex-ample , a cab driver , who spends most of his time driving a cab on the road where most of the accidents take place should have a personal accident cover.

Personal accident insurance policies not only insure an individual in case of a death due to accident , but they also assure monetary payouts in case of disability - both temporary and permanent nature. The buyers should run through the schedule of benefits where the insurer enlists the 'condition insured' and the 'amount payable' before he signs above the dotted line. For example, if an insured individual loses sight in one eye, he is entitled for 50% of the sum assured.

The schedule comprises a host of such conditions to the extent of 'loss of toe' . The policy also pays for medical expenses arising out of accident subject to sub limits. An insured individual is also entitled for hospital confinement allowance if he is hospitalised due to an accident . The insurance companies have also realised the need of 'family assistance' . In case of the unfortunate death of the insured in an accident, the children are also entitled for 'education assistance payouts' if the buyer has bought this optional benefit at the time of purchase of the policy.

If you are willing to pay a bit more, the insurers also offer you additional benefits such as 'house modification allowance' and 'loss of employment allowance' for the assured who have met with an accident. There is no need to go for a medical test to buy personal accident insurance policies and generally the tenure of the policies is one year.

Of course, there are options available where one can pay for longer tenures and enjoy a discount on the premium payable. The cover can be extended to your family if you are willing to pay a bit more to include them. The sum assured may vary from Rs 1 lakh to Rs 1 crore. The insurance company offers a no-claim bonus of 5% for each claim-free year.