HDFC Standard Life is the first Company in private sector to get a licence to enter into the Life insurance segment. The Company plans to issue its first policy by December.Besides HDF ICICI Prudential,Max NEwYork Life and IFFCO Tokio general have also received in-priciple approval,. Also Reliance General indurance Company Limited and Royal Sundaram Alliance Company Limited have received approval for its insurance businesses.

THE INSURANCE Development and Regulatory Authority has cleared yet another batch of insurance venture proposals in its meeting on Thursday. Sources said that the Insurance Development and Regulatory Authority has cleared the proposals of Tata AIG General Insurance and Reliance Life Insurance. Both companies have received in-principle clearance from the regulator and are expected to receive final clearance after they capitalise their insurance companies. The other proposals which were taken up include the joint venture proposals from Tata AIG Life and ING Vysya Life Insurance. Insurance Development and Regulatory Authority has already cleared the proposals of seven companies. ICICI Prudential Life Insurance, HDFC Standard Life Insurance, Royal Sundaram Life Insurance, Reliance General Insurance, Max New York Life Insurance, Birla Sun Life Insurance and OM Kotak Mahindra Life Insurance. The joint ventures yet to submit applications include SBI’s joint venture with Cardif, Dabur’s life insurance proposal with CGNU, ICICI’s non-life venture with Lombard Insurance of Canada. So far HDFC Standard Life, ICICI Prudential Life Insurance and Royal Sundaram Alliance have already gone for a soft launch of their products. According to the new insurance companies, the main factor hindering their product distribution is the shortage of accredited training and examining institutions across the country. As per Insurance Development and Regulatory Authority guidelines agents have to compulsorily undergo 100 hours of training and undergo an examination before they can obtain a licence. Another inhibiting factor are the present guidelines on corporate agents which the Insurance Development and Regulatory Authority has promised to review. Under the present guidelines for corporate agents, all the directors of the corporate agency firm have to undergo the same qualifying requirement as individual agents. The Insurance Development and Regulatory Authority is also yet to come out with guidelines for brokerage firms. However, this will be taken up only after the government introduces the necessary amendments in the insurance legislations. Source: The Economic Times Dated: 12 January, 2001

Rush for Unit-Linked Schemes 

14^th November 2003: Leveraging the current bull run, cash-rich policy holders are investing more than their annual premiums in unit linked insurance plans, there by topping up the investment portion of the policy. High net worth individuals would like to protect themselves from the market volatility and unit-linked plans offer a safety net unlike other investment products.

 Unit-linked plans are similar to mutual fund schemes, where the premium is invested in various funds in keeping with policy holder’s risk appetite. Some players allow for topping up the premium without affecting the sum assured (value of the base policy), allowing policyholders to purchase more units. Unlike traditional insurance products, unit-lined plans offer transparency in returns in terms of net asset value (NAV) and flexibility in investment options in debt, equity and a mix of both.

 Various Insurance funds are seeing an upward movement in their unit plans. Funds like Om Kotak Mahindra Life Insurance have grossed Rs25-50 lakh from its high net worth individuals for its unit-linked offering- Kotak Safe Investment Plan. ICICI Prudential Life has seen an 88 percent surge in the top- ups to its unit-linked policies in the second quarter. Birla Sun Life Insurance has also seen a 157 percent growth in its unit-linked plans wherein its unit-linked products have doubled to Rs 47 crore, or 93 percent of sales. The stock market has seen a surge in NAVs of various unit-linked schemes.

24th May 2004: The Insurance and Regulatory Development Authority (IRDA) has made an announcement with respect to exposure of equities in unit-linked retirement plans. Earlier insurance companies were allowed to sell unit-linked retirement or pension policies that offered a 100% equity option (i.e.) the policyholder had an option to invest his premiums in a fund that had a 100% equity exposure. But on January 1 2004, the IRDA disallowed a 100% equity option in unit-linked retirement funds. The fear was that on the back of a strong past performance, insurance companies might miss-sell unit-linked equity funds at a time when the equity market was booming. This measure was meant to ensure consumer security. As a result companies like HDFC Std Life and Birla Sun Life were not allowed to float the 100% equity option. Further the IRDA asked these companies to withdraw the earlier floated group gratuity products with 100% equity fund option. But for investors this is an opportunity where they have all the range of choices present for them and can hence select what they feel is required to suit their particular needs. The caution that one must exercise is that only those who can take the risk of managing an equity fund option in a pension policy should make use of this gap. Others can use as much of equity that they are comfortable with by selecting the appropriate scheme as virtually the entire range is covered by the plans on offer. Experts say that equity provides the best returns in the long run but there is a very high amount of risk in the Indian markets. So if an investor starts planning for retirement at an early age, the strategy that he can adopt is to initially opt for a retirement plan with an equity option and switch at a later stage. Suppose his policy is for a 30-year period, then he may utilise the equity option for the first ten or fifteen years. By then, going by the rule that equities do better over longer periods, his corpus should have built to a fairly large sum. That done, he can then move to a capital preservation mode where he can switch from an equity fund to a debt fund or balanced fund. The good part about switching funds is that it is free. Most insurance companies don’t charge to switch between funds (up to a certain number of switches in the year). Further, like in mutual funds where capital gains tax is attracted, in case of insurance policies, no question of tax arises.

10th August 2004: The Budget proposal to levy service tax on the risk cover for life insurance may come under review, with the insurance regulator highlighting issues on implementation. SB Mathur the chairman of LIC and CS Rao the chairman of IRDA have understood to raise the issue at meetings with the Finance Minister P Chidambaram and the revenue secretary Vineeta Raj at this time on Saturday.

Due to its systems legacy and size, LIC would be the worst affected by the proposed tax. In any case the financial burden would be passed on the policyholder, which would not be very high. On the other hand, calculating the risk premium on every premium instalment would create operational problems. Officials say that although premium is collected in equated instalments, the risk premium varies from year to year rising progressively with the age of the insured.

The IRDA being the regulator has the responsibility of vetting the figures of the insurance companies. Besides, the insurance industry has also problems with the government’s move to levy service tax even on future premium instalments of existing life insurance policies. The impact of the proposed 10.2% service tax on the risk premium on life insurance will be felt by holders of over 14 crore policies issued by LIC. The policyholders will have to Budget for a higher premium on their existing cover. The increase could range from 10.2% on term insurance plans to a 0.7% - 2% increase on policies with savings.

10th September 2004: The insurance licence gets expired after every 3 years; hence every agent has to renew his agency licence. As per IRDA regulations, it is made mandatory to undergo training for the renewal of agency licence. If an agent has an agency of both Life & Non-Life companies, then he has to undergo the training programme. The total trainings hours are 50, which are divided in 25 hours each for each agency. If the agent has only 1 agency then he has to only undergo the training programme of 25 hours, which is conducted by that institute. While filling up the renewal form he has to attach the training certificates has given by the training institute. The nominal fee of for renewal of licence is Rs 250/-.

13th September 2004: Insurance products are often bought on the advice of the lakhs of agents that market policies to a frequently ill-informed public. Interestingly, these advisors may be as ignorant as the rest of us. The Insurance Institute of India (III), which conducts the IRDA-required exams that all insurance agents must take, has found a startling fall — by nearly half — in the pass rates of over 30,000 agents that take the exam every month. In the past, the agent’s exam had a pass rate of over 90%. But since July this year, when the IRDA and Insurance Institute of India began a crackdown on the manner in which the exams were conducted, pass rates immediately plunged to 50-55%. In fact, in some centers, they are as low as 4-5%. SJ Gidwani the secretary general of Insurance Institute of India says, “We have no problems with the professional qualification exams that we conduct.”

            He explained that since III’s other exams like the licentiateship (a certificate level exam) and fellowship are taken for career advancement, they have found no misconduct. ”The agents exam, however, is a certificate that allows you to sell something,” he adds. Currently, there are over 12 lakh agents that work for various life and non-life insurance companies in the country.
Since its introduction in 2000, 1.5m agent exams have been carried out at the rate of 30,000-40,000 a month. The drastic fall in pass rates has been achieved by changing the syllabus and question bank for the exam. The process of conducting the exam has also been changed.

17th September 2004: India has become one of the most well-liked targets for offshoring insurance processes. Top insurance companies in the US and Europe like Cox Insurance Holdings, Aviva Life Insurance, AXA Sun Life have moved their processes to India-based captive or third-party outsourcing firms. Fueled by the success of the US-based health care firm Aetna moving its claims adjudication process to India, many other organisations want to tread the same path. ValueNotes Outsourcing Practice has released Global Insurance Outsourcing report and according to which it looks at outsourcing, currently around 63% of India’s insurance outsourcing revenue comes from the US. Some of the top players in the insurance vertical are WNS, HTMT, EXL, ICICI OneSource and GTL.

            The report emphasis’s the potential for insurance outsourcing with over 1,500 property and casualty insurance companies and 1,300 health insurance companies in the US alone. Globally, the banking, financial services and insurance (BFSI) vertical are the fastest growing segment in outsourcing. ValueNotes stated that India’s BFSI outsourcing revenues in 2003 stood at $1.1 billion, constituting 2.5% of the global BFSI outsourcing. It has estimated that the Indian insurance outsourcing revenues are likely to grow to $790 million by 2007, from an estimated $367 million in 2003, reflecting a compounded average growth rate of 21%. Several large Indian service providers have, through organic growth or acquisitions, set up centers in the US, Canada and other places that qualify as “near-shore” outsourcing destinations and are therefore more acceptable to first time outsourcers. Nilesh Paranjape the senior research analyst of ValueNotes said “India has thus much to offer as an offshoring destination.” Insurance companies are forced to look at outsourcing/offshoring to improve efficiencies and to channalise resources towards the core functions of product development and innovation.

17th September 2004: Fail your exams and force the school to lower the bar. This is exactly what the country’s insurance agents have done to the sector’s supervisory body. The Insurance Regulatory and Development Authority (IRDA) has given a comprehensive helping hand by lowering the passing percentage from 50 to 35. More on this help it has been done with retrospective effect. The reason: agents failing en masse on account of stricter observation in examinations and a change in the question paper.

Following a meeting of insurance training heads on August 2, the IRDA along with the Insurance Institute of India (III), which conducts the exams has lowered the passing marks to 35% with effect from July 1. In simple words, the agents who had got 35% in the exam have now crossed the hurdle. Online examinations are held five days a week while a sit-in exam facility is extended every alternate Sunday. The HR head of a private insurance company said, “The percentage of agents passing the exam fell drastically from 80-90% to as low as 25-30% since late June. In the case of exams conducted online, the percentage of agents who passed fell to a low of 10%.” Now with the lower bar, 80% of the agents taking the examination have passed.

            Senior officials said that lowering of the passing percentage is an temporary measure undertaken by the regulator, which will be rectified once the insurance companies submit a question bank. He added that the IRDA decided to crack the whip when it came across irregularities in conducting agents’ exams. Cheating and copying were rampant in many training institutes, and there was evidence of people sitting on behalf of candidates, who worried the regulator. The chief executive of a leading European insurance outfit, which trains and recruits around 3,000 agents a month said that the dramatic reduction in the number of agents undergoing the 100-hour training and passing the exam has affected the recruitment process. This has led to insurance companies failing to meet internal performance targets. However, on account of the revised syllabus and examination paper, “the percentage of our agents passing the exam has fallen to 60%”, he added.

            On an average, about 25,000-30,000 agents are recruited every month. Even if one were to take an average sale of one or two policies per agent in the initial months, this translates into about 60,000 policies sold for the industry as a whole. Shivaji Dam the chief executive of Kotak Mahindra Old Mutual Life Insurance said “There has been a slowdown in the number of agents recruited, but I think we will be able to meet our target.”

18th September 2004: This financial, Life Insurance Corporation of India (LIC) may level down its bonus to policyholders. This is due to a decline in yields on government securities and high provisions towards solvency margins. The reduction is likely in most of the ‘with profit’ policies. Bonus is declared by LIC every September for those policyholders who have opted for policies ‘with profits’. Every year LIC evaluates its life fund and total liability towards policyholders. About 95% of the surplus is credited to the accounts of ‘with profit’ policyholders and 5% is paid to the government. However, the reduction will not affect those who have opted for policies with assured returns. Last year, the Corporation has reduced bonus by almost 10% due to falling interest rates.

Officials, however, say that returns on ‘with profits’ policies are still in line with other financial instruments. Besides falling interest rates, LIC’s bonus payment has been constrained by the IRDA requirement that the Corporation should maintain solvency margins that are prescribed for private insurers. While the burden is not much for private companies LIC has to set aside capital for all policies that have been sold over the last three decades and are still in force. This year LIC has set aside over Rs 2,000 crore towards solvency margin requirements. With this the total amount set aside for solvency margin requirement has touched Rs 16,807 crore which is 110% of the legal requirement. IRDA has asked insurers to maintain reserves at 150% of the legally required limit. Officials say that solvency margin requirements will be a drain on next year’s funds as well following, which the bonus announcements would stabilise.

20th September 2004: According to the top company official, the United India Insurance (UII), a major participant in health care insurance, is planning to enter the personal life insurance segment by floating a subsidiary. The move was aimed at taking part in the present expansion of the sector and in tune with the entry of more and more operators, UII chairman-cum-managing director V Jaganathan told reporters. The Chennai-based UII would soon chalk out the modalities for setting up of the subsidiary.

On the company's new products in the pipeline, he said UII would launch an eye care policy in collaboration with the Sankara Nethralaya, a premier eye institute at Chennai, covering all ailments pertaining to ophthalmology. This policy would also meet all requirements of an individual on eye care, was in the final stages of framing and could be launched before December next, he said. He added that the premium had been tentatively fixed at Rs 140 per annum per individual.

During this fiscal year, UII was also in the process of establishing 400 'micro offices' in rural areas across the country. He said that there would be round-the-clock one-man offices to cater to the needs of customers. The 'unique' micro offices would be located in rural areas, small towns and cluster of villages where the total population was over 50,000, he said adding a few such offices opened in Tamil Nadu already had turned out to be a success. UII planned to add 200 more micro offices during 2005-06.

23rd September 2004: Organizing and supervising exams has hardly ever been so intimidating and that too an exam for about 3.5 lakh prospective insurance agents and financial advisers who will sell you insurance policies once they clear the question papers. Completely confused and stressed to find a way out, the Insurance Institute of India (III), the body holding the exams for the would-be insurance agents, is seriously thinking of employing ex-military personnel of Kendriya Sainik Board to take care of supervision across 125 examination centers.

The Insurance Regulatory and Development Authority (IRDA), on the other hand, feels that the formation of a full-fledged Life Insurance Council, much in the lines of an ‘association of insurers’, that exists globally, will be able to restrain the confusion that now goes for exams. Incidents of students running out of exam centres with answer sheets, threat calls to school principals, insurance executives barging in to help their candidates, have been on the constant rise. A string of incidents are reported from states like Bihar, Madhya Pradesh and Uttar Pradesh.

Mr. S J Gidwani, secretary general of III, seemed really disturbed. “We are into the business of education, development of course content and improving the efficiency of insurance business, rather than into policing and warding off cheating practices”. “Insurance is a business of trust and it is distressing having to devote so much time these days to such malpractices. We have had preliminary talks with the Kendriya Sainik Board and will pursue the issue with them and the government. This may be slightly long drawn by the time talks fructify. If this materialises, then the ex-military officers have to be state publicly at various examination centres.” Mr. Gidwani said.

Being an absolutely independent authority, these officials will report any annoying incident and malpractice to the III immediately. At present, school and college authorities have been conducting exams; unlike by insurance company representatives a couple of months back. Incidentally apart from facing threats, school authorities are at times fooled by some insurance executives who pose as regulatory authorities and walk into the hall. Sometimes with a majority of female staff managing primary school children, controlling dishonest candidates for them becomes a difficult task. On the regulatory front, the IRDA feels proper formation of Life Insurance Council should be put in place at the earliest.

18th October 2004: Pulling up some corporate agents for unfair practices, insurance regulator IRDA on Monday said it will come up with stringent guidelines for agents to safeguard the interest of consumers and insurers. At the Ficci seminar, the IRDA chairman, CS Rao said "We would issue some guidelines on the manner of selection of corporate agents, the manner in which their activities should be monitored, and precautions to be taken so that there is complete disclosure of the policy implications for the clients." Admitting that IRDA has "no experience" on the working of corporate agents, he said, "While this model has the potential to reach a large section of population in a short time, there are concerns about the mode of sale of policies." He pointed to some advertisements by corporate agents, which gave an impression that they themselves are insurers, and said, "It can become a big problem”. “We would like to prevent it before it becomes big." Rao said IRDA would like to ensure that both the corporate agent (the company) and their employees selling the insurance product have obtained a licence. IRDA also plans to come up with a guideline that would ensure that corporate agents provide full disclosures to insurers on the policies sold by them, the number of individuals covered and for how many years. "Insurers have to be extremely careful in dealing with corporate agents and keep a vigilant eye on the way the sales are affected," Rao said.

18th October 2004: Stating anxiety over slow growth in health insurance cover, IRDA today mooted ways to allow consumers to switch over from one company to another for mediclaim policies and prevent rejection of claim by insurers. CS Rao the IRDA chairman said, "We are exploring various options available to overcome the problem of repudiation of claims on grounds of pre-existing conditions."

There have been several instances when insurers rejected the claims of policyholders mentioning certain preconditions embedded in the policies. The problem comes up when consumers intentionally or unintentionally do not disclose details on some of their illnesses or health problems, when they buy a mediclaim policy. Another aspect being considered is devising a mechanism to enable "portability of insurance" so that policyholders have the freedom to switch their policies from one insurer to another. This would ensure that the consumer get the best policy at the lowest premium rate. Mr. Rao said, "We hope to resolve these issues to the satisfaction of all concerned during the course of this year."

However the number of medical insurance policies sold increased from 7.53 million in 2001-02, to 10.28 million in 2003-04, Rao said, "There are still concerns on adequacy of coverage, the type of covers and the manner in which the claims are processed." Attributing inadequate data to slow growth, Rao said IRDA is firming up a methodology on collection of health data on a uniform basis and implement it after consulting insurers and third party administrators.

19th October 2004: LIC policyholders may not have to pay the Service Tax at least this year, as the public-sector insurance company could absorb the additional tax burden. According to S B Mathur the chairman of LIC, "It looks pretty difficult to pass on the Service Tax burden to consumers this fiscal.” LIC is working out the net burden of the 10% Service Tax and 2% Education Cess on the risk premium and the impact on the price of its products. He added, "If there is a significant net burden, it may be transferred to policyholders. If it is not substantial, it may be absorbed by LIC."

The Finance Minister P Chidambaram had turned down the request of the insurance industry seeking exemption of insurance premium from the service tax. However, he has given an option for insurance consumers - either to pay 10.2% on the risk cover or pay 1% of the gross premium. The service tax proposed in the budget would not only increase the insurance premium for consumers, it would also create difficulties for insurers in calculating the tax on different consumers having varied risk profile. Most of the private players have decided to hike the premium on account of the service tax.

9th November 2004: The government expects the pension sector to overtake insurance segment once it is opened up to private players. UK Sinha, the joint secretary of Capital Markets and Pension said, Pension sector has immense potential and within five years, it will emerge as the second largest within the financial sector after banking. In order to exploit the potential within the sector, the government favours multiple pension fund managers (PFMs) for the segment with investors having the flexibility in switching from one PFM to another, he added. Conversely, Sinha added the proposed regulator Pension Fund Regulatory Development Authority (PFRDA) would take a final call on the number of pension fund managers to be allowed and also the investment guidelines and the minimum capital to be maintained by the fund managers.

Pointing out that majority of the pension schemes are still from the government sector, Sinha said at least one fund manager will be from the public sector and the PFMs would offer broadly three schemes - equity, balanced and debt plans - depending on the age and risk appetite of the investors. However, before allowing PFMs, a central record keeping and accounting agency (CRA) would be set up and it would serve as the nerve centre for the proposed Defined Contribution scheme, where both employers and employees would equally contribute 10% of basic pay and dearness allowance.

18th November 2004: The MF sector uncorked the bubbly when the FM announced the withdrawal of long-term capital gains tax on equity-linked schemes in Budget 2004. But the equity-linked single-premium insurance products being offered by life insurance companies don’t enjoy this break, and the insurance sector is lobbying hard for it. Equity-linked insurance policies are caught in the twilight zone when it comes to tax breaks. Budget 2003 withdrew tax benefits (offered to incentivise insurance) under section 88 and section 10(10D) of the I-T Act on those policies where the sum assured was less than five times the annual premium. The contention was that these products were modelled more on the lines of investment products (like MFs), with very little element of insurance. Therefore, they deserved no tax concession under the above-mentioned sections. The maturity benefits of these policies were taxable, as income from other sources, in the hands of the individual. Then came Budget 2004, and long-term capital gains were exempted from tax for all equity-linked MFs. But equity-linked insurance policies seem to have been ignored, and individuals holding these policies could be taxed on maturity.

Companies like ICICI Prudential Life Insurance, Bajaj Allianz Life Insurance offer unit-linked policies that are similar to schemes offered by MFs. There’s only one difference — a nominal life cover. A policyholder can pay a single premium and choose for the money to be invested in an equity-linked fund for a certain period. This fund will invest 90-100% in equities. For instance, in the case of ICICI Prudential’s LifeLink 2 policy, a sum assured of 105% of the premium can be selected. Obviously, as the sum assured is not five times the premium, no tax benefits would be available on maturity. The entire maturity amount would be taxable as income from other sources at the tax rate applicable to the income level of the policyholder. But, at the same time, if the person were to invest in an equity-linked MF, any withdrawals made after one year would be tax-free. This seems to have put single-premium policyholders at a disadvantage compared to their MF counterparts.

24th November 2004: Life Insurance Corporation launched two schemes -- a money-back children's plan 'Jeevan Anurag' and pension with endowment plan 'Jeevan Nidhi'. Jeevan Anurag offers money back facility of 20% of the sum assured in the last three years of the policy and the balance 40% is paid during maturity, LIC officials said. Jeevan Nidhi offers life cover along with guaranteed additions of Rs 50 per thousand for five years and bonuses thereafter. On survival, the policyholder would get a pension from the accumulated sum. Both the policies offer riders of accidental and disability benefits, term assurance and critical illness benefits. They can be paid in the single premium mode or periodically.

22nd December 2004: The Insurance Regulatory Authority of India has reconstituted the Tariff Advisory Committee effective from January 1, 2005. IRDA chairman CS Rao will head the panel, which would also have IRDA member (non-life) Mathew Varghese as vice-chairman. The other members of TAC are GIC chairman PC Ghosh, New India Assurance CMD R Beri, Oriental Insurance CMD SL Mohan, National Insurance CMD HS Wadhwa, Iffco-Tokio CEO Ajit Narain, Royal Sundaram Alliance Insurance CEO Antony Jacob, HDFC-Chubb CEO Shrirang V Samant and Maharashtra Government Insurance Fund CEO AK Abhang. KK Srinivasan was elected as the secretary of the Committee, IRDA said in a circular. "Members mentioned above have been declared elected, pursuant to the election procedure as laid down in the regulations, to represent insurers in the respective constituencies as enshrined in the rules," IRDA said. The next election of representatives of insurers on the TAC will be held and results thereof will be declared on or before December 31, 2007.

1st February 2005: Raising concerns over the underwriting skills of insurance companies to properly price products, the Insurance Regulatory and Development Authority (Irda) has said that it would consider all factors before taking a final decision on de-tariffication of the insurance sector. “The Irda is concerned over the underwriting skills of insurance companies to properly price the product as the companies don’t seem to be in possession of adequate data,” said Irda chairman CS Rao. “The Indian insurance market has some irregularities and therefore regulations are necessary. However, these regulations are not meant to be static and these can be relaxed when there is enhanced mutual trust between insurance companies and Irda,” Rao added. The Irda chairman called upon insurance companies to tap the ‘potential’ of the rural market and help in raising awareness about the concept of insurance, which would help in facilitating the growth of the Indian economy. Speaking about the growth of the insurance sector in India, Rao said the Irda had still not received an application for stand-alone health insurance. Irda has also set a cap of Rs 10,000 to Rs 50,000 on sum assured for micro insurance on life and non life sectors which can be provided by NGOs.

15th February 2005: Today Life Insurance Corporation said that it would come up with three new products including a single premium scheme and a pension plan. "Our individual assurance segment has grown by 35% in premium income at about Rs 11,000 crore so far. Our group insurance schemes have grown by 67-127 percent in the past few years," said LIC chairman R N Bhardwaj. According to data compiled by IRDA, the state-owned insurer had mopped up Rs 10,316 crore in premium selling over 1.26 crore policies during April-December this fiscal. "We still have two months to go," Bhardwaj said indicating that premium income could cross Rs 13,000-14,000 crore in this fiscal. LIC plans to come up with three new products -- a modified version of its single premium policy Bima Nivesh offering 5.9% return, a unit-linked pension plan and another flexi-life endowment product. LIC has filed the products with IRDA and hopes to launch them in the coming months.

15th February 2005: Insurance Regulatory and Development Authority (IRDA) today confessed that the present administered tariff regime for motor insurance business is likely to continue in the next fiscal. "We are likely to miss the April deadline (for detariffing motor insurance business)," IRDA chairman C S Rao said today. He said that detariffing of motor insurance has to be done for both owners' damage and third party liability. "It cannot be done in isolation," he added.

The general insurance industry, particularly after the advent of private players, has been demanding detariffing of motor insurance because, according to them, the products were under priced. They said that with detariffing, there could be reduction in cost of insurance and would be better for both the industry and consumers.

Industry sources said insurers would be in a better position to price the odd portion of motor insurance by taking into account 30 rating factors including make and model, engine power, age of vehicle, licensed carrying capacity, safety features and repair and replacement costs. The road transport industry, however, fears that detariffing could lead to an increase in premiums and thus increase working costs.

16th February 2005: LIC and other insurers are likely to absorb the 10% service tax and 2% education cess at least in the current fiscal. Insurers are, however, waiting for the finance ministry to clarify certain points on the tax. "We will not charge service tax from policy holders this fiscal," LIC chairman R N Bhardwaj said, adding it would be adjusted in the commission paid to agents. He declined to give any figure of the total outgo that LIC was expecting from the service tax and education cess as it could be assessed only after the end of the fiscal year on March 31.

Service tax, which was extended to the risk component of the insurance policies in the last budget, will have to be paid by consumers from next fiscal, industry sources said. There has been some ambiguity after the finance minister proposed service tax on risk premium in the budget for 2004-05. Later, the Central Board of Excise and Customs came up with a notification that gives an option of 10% service tax on the annual premium or 1% of total premium. Insurance industry sources said the cost of buying an insurance product would go up next fiscal, as all insurers would incorporate the service tax into the premium charged from consumers.

24th February 2005: Insurance regulator IRDA has barred companies from seeking special discount of 5% in exchange of agency commission for mega risk covers above Rs 1,500 crore from the next fiscal. IRDA also raised the eligibility criteria from Rs 3 crore to Rs 15 crore for companies to get the special discount. Big companies will have the option of seeking risk cover for fire, petrochemical, engineering or other businesses covered under the tariff regime directly with the insurer and get a 5% discount. "If they seek the service of brokers and agents, the companies will not get the discount," the regulator said. IRDA chairman C S Rao said: "The cover under mega risk policies and project finance above Rs 1,500 crore sum insured will be eligible for brokerage commission irrespective of capital structure, and the insured will not be eligible for the 5% special discount." Regarding government departments where paid-up capital cannot be determined, IRDA said the special discount would continue as before.

4th March 2005: Life Insurance Corporation (LIC) of India launched a unit linked pension plan 'Future Plus' today. "The plan comes with a host of features like accident benefit, critical illness rider which can be opted for at the time of taking policy and is available with or without life cover," T Chattopadhyay, zonal manager, south central zone said today. He said the policy can be surrendered at no loss on the bid value of the units after two years of policy existence and a small charge of upto a maximum of 4% is levied if surrendered within two years. He also highlighted performance of the zone till February 15 and said that the zone stood at number one on four counts on all India map including number of policies and the sum assured.

10th March 2005: State-owned Life Insurance Corporation’s (LIC) claim repudiation ratio — the claims, which are rejected, is lower than 1%. Sources at Insurance Regulatory and Development Authority (Irda) have found out that private sector life insurers, on the other hand, have a repudiation ratio of over 13%. LIC’s death claims were being settled within 21 days and the outstanding claims as on March 2004 were at their lowest ever at 0.13%, said an LIC official. A low repudiation ratio indicates that the insurer is paying all claims which are payable under the policy’s terms. However, the settlement of any insurance claim also involves interpretation of a lot of technical conditions, which are generally used by the insurers to reject the claims. “At LIC, we normally do not get into too much technicalities considering the fact that most policyholders are not so rich,” conceded a senior official of the Corporation.

A high repudiation ratio may also explain the fact that private life insurers have low claim records in the post-liberalisation period. “Our claim ratio has remained low and in line with our projection for the Indian market,” said a Delhi-based life insurance company. The private life insurers have maintained that the Indian life insurance market is a profitable one and two of the life insurance companies — Bajaj Allianz Life Insurance and Max New York Life Insurance — have already announced profits within the first three years of their operation. Globally, life insurance companies take six to seven years to break-even. LIC has centralised its claim processing system to manage over Rs 20,000 crore worth of claims out of the one crore policies annually. It is making efforts to bring its outstanding claims ratio to below 0.02% in survival benefits (SB) and maturity and 1.5% in death claims. No claim will remain outstanding for more than 30 days and beyond this limit, such cases will be reported to the marketing manager. Investigations will be completed within seven days,” said the LIC official.

15th March 2005: In a major de-tariffing move that will benefit the shipping industry, the Insurance Regulatory & Development Authority (Irda) has removed the price control on insuring marine hulls from April 1. Irda said all classes of marine hull insurance stand de-tariffed in respect of new businesses and renewals effective April 1, 2005. As a consequence, these classes of insurance will come within the purview of the “File and Use” regulations, as applicable to non-tariff products of Irda, said Irda in intimation to the domestic general insurers. The Tariff Advisory Committee (TAC), a constitutional body supervised by Irda, regulates the pricing of 70% of the products of the general insurance industry. Some of the major portfolios that are so far regulated by TAC are motor, fire, engineering, marine hull business.

Industry observes say that the marine hull portfolio is currently a Rs 300 crore business for the domestic insurance industry and with the pricing of the portfolio being detariffed, there will be competition among the general insurers to offer cheaper pricing for the product. Since this is for the first time that such a major tariff portfolio has been decontrolled, it would be interesting to see the price war, the de-tariffing move would trigger. Observers point out that the price will plummet and will be used by the general insurers to acquire other tariff businesses from the shipping houses.

23rd March 2005: SBI Life Insurance, a joint venture between State Bank of India and Cardif SA of France, doubled its capital base to Rs. 350 crores. The joint venture partners have contributed the additional amount in proportion to their stake of 74:26. This is the second capital infusion by the promoters since its inception in 2001. The authorized capital of the company also stands increased to Rs. 500 crores. Commenting on the capital infusion, Mr. S. Krishnamurthy, MD and CEO, SBI Life Insurance, said, “Since inception the company has been registering a triple digit percentage of growth. So far, the company has covered more than 3 million lives.... The infused capital will be optimally utilized to support the expansion of our business.” The company has 34 branches across metros, mini-metros and towns across the country with a market share of 12.75%.

28th March 2005: With marine hull insurance going out of the administered regime from next month, Insurance Regulatory and Development Authority (Irda) has issued new norms for marine and war risk covers. The new norms come after a communication from the finance ministry and the decision of the Tariff Advisory Committee.

Irda has directed all general insurers to indicate the net minimum premium rate for each class of business they would offer with all possible built-in features while filing the products. "Under no circumstances can insures write business below such rate," Irda said in the directive.

"Insurance companies wanting to write marine hull class of business and the war risk insurance for marine hulls are required to file separately with Irda the re-insurance arrangement for protecting the net account exposures," it said, adding they should ensure that the proposed arrangements terminate on March 31, 2006.

21st April 2005: This is part of a fresh set of regulations for micro insurance that have been finalised and would be notified in two to three months, T K Banerjee, Irda member, said today. Irda had earlier barred joint selling of life and non-life insurance products, but has now decided to permit partnerships for providing affordable insurance cover for the poor. The new regulations are aimed at providing an infrastructure over which micro insurance can be developed in a proper manner to make available insurance to the poor at affordable premium.

Irda has also decided to have a shorter training period for micro insurance agents, who would not be entitled to sell other insurance products. The minimum number of hours of training required for micro insurance agents will be reduced to 25 hours against 100 hours for normal insurance agents, Banerjee said. The insurance regulator also threatened to insist on a quota on rural branches. “The new insurance companies are busy tapping the potential in urban and metro areas and very few branches have been opened to cater to the needs of rural population. If the matter continues in the same manner, Irda has to rethink and introduce a system for opening of branches in rural areas,” he said.

Irda also plans to come out with guidelines on unit-linked insurance plans (ULIPs) stipulating a life cover of three to five times the annual premium. This will result in most ULIP products of life insurers getting debarred. “Life insurers will have to either phase out or stop selling their ULIPs which do not meet the new guidelines,” Banerjee, said on the sidelines of a seminar on information technology in insurance. The insurance sector has grown rapidly after opening up the sector to the private players. The per capita insurance premium has gone up to Rs 750 from Rs 300 since 2000.

21st April 2005: Insurance Regulatory and Development Authority (Irda) is unlikely to renew the unused licence of Reliance Life Insurance after three years of its issuance. Sources at Irda pointed out that the insurance regulator was reviewing its earlier decision and was most likely to cancel the licence soon as it had not been made functional. “If they want to be in life insurance, they can apply for a fresh licence. We would not like to renew it anymore,” an Irda source said, adding that the necessary files for this had already been moved.

3rd May 2005: Insurance Regulatory Authority of India has elected three new members for its Tariff Advisory Committee, which sets the premium rates for various general insurance products. The members are GIC chairman R K Joshi, National Insurance chairman B Chakraborti and Oriental Insurance chief M Ramadoss, IRDA said in a circular. The appointment comes after the retirement of heads of three general insurers -- P C Ghosh (GIC), H S Wadhwa (NIC) and S L Mohan (OIC).

IRDA chairman C S Rao heads the TAC, which also has IRDA member (non-life) Mathew Varghese as vice chairman. Other members of TAC are Ajit Narain of Iffco Tokio, Antony Jacobs of Royal Sundaram Alliance Insurance, Shrirang V Samant of HDFC-Chubb and Maharashtra Government Insurance Fund CEO A K Abhang. K K Srinivasan is the secretary of the Committee.

5th May 2005: The RBI has said that it will provide general permission to foreign insurance companies that plan to set liaison offices (LO) in India once they obtain a clearance from the Insurance Regulatory and Development Authority (Irda).

But these LOs of foreign insurance companies cannot engage in any trading, commercial or industrial activity. Moreover, these offices cannot offer any consultancy or any other services either directly or indirectly.

Prior to the establishment of the insurance regulator, the RBI had been granting approval for setting up LOs. Foreign insurers set up such offices in India to examine the prospects of doing business through joint ventures. Several companies have a LO through which they conduct a search for a partner and hold negotiations.

Among other conditions set by RBI, the LO will not have signing/commitment powers and will have to meet its expenses exclusively through funds received from their head office. It cannot borrow or lend money from/to any person in India, nor can it acquire immovable property in the country.

10th May 2005: AllBank Finance has decided to foray into the insurance sector and would appoint a consultant for the purpose. AllBank Finance is a wholly owned subsidiary of Allahabad Bank. ''We are exploring the possibility of entering the insurance and real estate finance segments. We will soon appoint a consultant to prepare a detailed roadmap for the insurance venture,'' Allbank CMD ON Singh said. The bank has already approached the IRDA and would decide by three months on whether to go for life or non-life segment. Singh said AllBank, if it decided to go for life insurance, would tie up with three-four other banks in view of the higher corpus requirement, but would go on its own in the non-life segment.

12th May 2005: Life is uncertain and one should always be prepared to face the future. Life insurance is one instrument which can protect you and your family from a future financial crisis. It is often misunderstood as a means of saving and compared with other general saving instruments. But one should be careful enough while choosing an insurance policy. The policy should be chosen according to one's own requirement. Here is a rough guide to the various insurance schemes available for consumers to help them tide over unexpected events.

Today, private insurance companies are trying to grab the pie from Life Insurance Corporation (LIC). This has given ample opportunity to investors to choose the required products from an array of insurance policies. While there are lots of life insurance policies that are available in the market, these are mainly divided into six categories. These are term policy, endowment, moneyback, pension, wholelife and Ulip.

Term insurance

It covers a person against death for a limited term. You pay for the policy period and at the end of the term, the contract or policy expires. If no claims are made against the policy during the term, you don't receive any benefits after the policy expires, just like an auto or general insurance.

But the biggest benefit of this is you have to pay a marginal premium as compared to other policies. Young people with large financial obligations are usually better off with term insurance policies. The substantially lower premiums enable them to purchase sufficient coverage to protect against loss of income.

Whole life insurance

This is also called as permanent insurance. It does not expire if you continue to pay the premiums regularly. It provides coverage similar to term life insurance, but it also provides an investment vehicle. A portion of the premium goes for life insurance, while the rest goes into an investment account.

This account can be either an interest bearing account or a variable (stocks and bonds) investment account. You pay the same premium till the termination payment period.

Whole life insurance policies are valuable because they provide permanent protection and accumulate cash values that can be used for emergencies or to meet specific objectives. Another important aspect of this policy is that it also protects you after the period of policy termination.

Endowment insurance policy

This plan is appropriate for people of all ages and social groups who wish to protect their families from a financial setback that may occur owing to their demise. It covers risk for a specified period, at the end of which the assured sum is paid back to the policyholder, along with the bonus accumulated during the term of the policy.

Many investors use endowment policy to fund anticipated financial needs, such as college education for their children or retirement. Premium for an endowment life policy is much higher than that of a whole life policy.

Moneyback scheme

Unlike other policies, this policy gives you a return after a certain period of time. It provides periodic payments of partial survival benefits during the term of the policy. The rest of the amount is paid at the end the term with a bonus. The risk cover on the life continues for the full sum assured even after payment of survival benefits and the bonus is also calculated on the full sum assured. This is suitable to the Indian psyche of the life insurance policyholder who wants returns at frequent intervals.

Pension plans

This is suitable for those who want a regular income after their retirement. In this scheme policyholders contribute regularly over a period of time or in a lumpsum amount to form a corpus. This corpus is used to yield a regular income that is paid to policyholders until death starting from his desired retirement age. This is also known as annuity schemes. Typically, annuities are bought to provide a solution to one of the biggest financial insecurities of old age.

Unit linked insurance plans (Ulip)

Unit linked insurance plans (Ulip) are the flavor of the season. These plans are now contributing over 50% of the private life insurance companies since their inception in 2004. In an era of booming stock market, these schemes are giving investors a higher return as well as life protection. Encouraged by the response, many players are launching different savings and endowment plans in the unit-linked format.

According to the IRDA, a company offering unit linked plans must give the investor an option to choose among debt, balanced and equity funds. This policy is suitable for young people who can take risk. These give flexibility of insurance and mutual funds.

Insurance coverage is essential for every individual. In a country of over one billion population, almost 70% people are still uninsured. So they should be aware of all the available insurance policies. How much and what type of insurance one needs differs from person to person. So it is better to fix your targets and consult an insurance agent to avail the best policy.

14th May 2005: Irda has identified one segment of the fire portfolio for the next phase of de-tariffing. The Authority, which had recently deregulated marine hull tariffs, is almost on the verge of taking a decision to free the pricing of the shopkeeper segment of the fire policy.

The fire policy, which earns the second largest premium — next to the motor portfolio — has two segments. One is for corporates and another is the shopkeeper segment, where the materials in a shop are also covered. Irda is considering removing the pricing controls on the shopkeeper segment of the fire policy as it would be easy for the insurers to fix a cost to the policy. “It is easy to manage and insurers with limited expertise on pricing can always assess the risks involved,” said sources at Irda. Irda may then move to decontrol the entire fire portfolio which is a profitable one for the insurers.

By removing price control, Irda believes there will be a greater degree of competition among the domestic general insurers, leading to cheaper prices. This will help shopkeepers to avail of the policies. Generally, shopkeepers shy away from taking any insurance policy. Earlier, in a last-minute decision, Irda had to defer its plan to de-tariff the own segment motor portfolio from April 1 as the regulator thought the industry was not prepared for such a significant change.

Advocating a gradual strategy for de-tariffing, it decided to remove price control on insuring marine hulls from April 1. The Tariff Advisory Committee (TAC), a constitutional body supervised by Irda, regulates the pricing of 70% of the products of the general insurance industry. Some of the major portfolios which are so far regulated by TAC are motor, fire and engineering.

17th May 2005: The government is preparing to walk the talk on raising the equity limit for foreign direct investment (FDI) from 26% to 49% in the insurance sector. A draft Cabinet note on raising foreign equity in insurance companies has been prepared by the insurance division of the finance ministry. The proposal has been circulated for approval of the concerned ministries, before piloting it to the Cabinet for approval.

However, a hike in the FDI limit for the insurance sector will need an amendment to the Insurance Act, 1938. This means Parliament will have to ratify the measure. Of the three budget promises on FDI by FM P Chidambaram in ’04-05, those for telecom and civil aviation have been implemented.

Local companies are wooing the government to allow more foreign equity in their companies. The current paid-up requirements of Rs 100 crore for general and Rs 200 crore for life insurance have become difficult benchmarks, given the pace of growth of the market. Companies feel injection of additional foreign equity will reduce costs. Insurance penetration has been low at around 2%. The sector was liberalised for the private players during end 1999.

20th May 2005: The claim ratio for motor insurance in 2004-05 was estimated at 180% as compared to 150% in the previous year. This means that for every Rs 100 paid as premium, a claim of Rs 180 has been made. According to industry statistics, each claim has been in the range of Rs 1-1.5 lakh and one out of every four policy holders has met with an accident. The overall claims are estimated to be in the range of Rs 6,000 crore.

Credit rating agency Icra estimates that about 3.5 lakh accidents are reported annually in India, claiming 85,000 lives. The largest number of third party claims comes from commercial vehicles.

“Traditionally, claim ratios are the highest for motor insurance and that is normal as every one out of four policies is claimed,” an official source said. And, public sector general insurers take the maximum hit on motor portfolio. “Most private sector general insurers abstain from entering into motor insurance in a big way as it is a bleeding portfolio,” the source added.

To reduce the burden, the government was earlier planning to float a separate company for motor insurance to provide relief to the state-owned general insurance companies.

25th May 2005: IRDA today issued a 26-point guideline for on-line agents training institutes which stipulates at least 100 hours of training in life or non-life insurance. IRDA has said the institutes must strictly adhere to the guidelines, which come into effect from today, or face punitive action like fine, suspension or cancellation of licence.

The applicants shall have to undergo at least 100 hours' training in life or general insurance business and the time allotted for composite training is 150 hours', where an applicant is seeking licence for the first time to act as an insurance agent, IRDA said.

The training duration should be for minimum 18 days for 100 hours' and 27 days for 150 hours training with maximum six hours per day. Similarly, the duration should be minimum 9 days for 50 hours training and five days for 25 hours at the time of renewal with maximum six hours per day, it said.

The guidelines said no product training or market survey should be included in this 150 or 100 or 50 hours' training, but revision examination might form part of it. Every institute should have at least one qualified faculty who is an Associate or Fellow from the Insurance Institute of India for each stream to solve the online queries of students. The initial approval will be for one year and consideration of further renewal will depend on compliance level of rules and regulations during the period of approval.

28th May 2005: HSBC is keen on setting up an insurance subsidiary in India. About 10% of the British banking group’s revenue comes from the insurance business. “We would like to set up a subsidiary to enter both the life and the non-life insurance businesses. We are constantly talking to the regulators,” said Stephen K Green, group chief executive of the firm’s holding company, HSBC Holdings Plc. He was recently in Hong Kong to attend the group’s customary informal annual general meeting of shareholders in its previous headquarters.

HSBC made headway into the Chinese insurance market in 2002 when it picked up 10% stake in China’s second largest life insurance company, Ping An Insurance. Recently, HSBC entered into agreements to increase its stake in Ping An from 10% to 19.9% with an investment of $1.03 billion. HSBC wants to enter the insurance business across the Asia Pacific region, said Michael R P Smith, president and chief executive officer of the HongKong and Shanghai Banking Corporation Ltd, the Asia Pacific wing of the banking company.

Asked if HSBC's entry into insurance is conditional on the Indian government lifting the FDI cap in the sector from 26% to 49%, said Smith, "We are not too worried about the FDI cap. It would be better if the cap is lifted but even otherwise we would like to enter into the manufacturing of insurance products. We are evaluating it at the moment." HSBC plans to be different from the existing 14 private insurance players in India by adopting the bancassurance model.

"Bancassurance will be the differentiating factor for us. We are a great believer in bancassurance. When you get it right, it can be a great driver," said Smith. HSBC has 40 branches across India through which it plans to sell insurance products. HSBC customers hold more than 7 million insurance policies in over 40 countries.

7th June 2005: India's insurance sector - both life and non-life segments - was opened up to private players in December 1999, ending the decades-long monopoly of public sector companies, including Life Insurance Corporation (LIC) in life insurance sector and General Insurance Corporation (GIC), New India Assurance, Oriental India Insurance and United India Insurance in the non-life sector.

Over six years after the insurance sector was opened up to private players in India, AMP-Sanmar Life Ltd, one of the first private entrants in life insurance sector, today said it was exploring all options, including exiting the business. AMP-Sanmar Life, a joint venture between Australia's AMP Life and Chennai-based Sanmar Group, was exploring options for restructuring ownership of their venture, including "outright sale to an existing or new player or bringing in a new partner," a statement here said. The move has been initiated, as the Australian partner AMP Life has decided to exit the life insurance venture in India, it said.

AMP Life holds 26% while Sanmar Group owns the remaining 74% in the life insurance joint venture. "The restructuring of ownership will have no impact on the policy holders. The business will continue and the policies will continue to be valid and will be honored as per terms and conditions," said Graham Meyer, managing director, AMP-Sanmar. He said the move was necessitated after AMP's decision to stay focused on its core wealth management business in Australia and New Zealand and keep its Asian focus centered in asset management through AMP Capital Investors. "Sanmar has decided to take advantage of this opportunity to review its stake in the business, as well," the statement said. Meyer said AMP Sanmar remained a successful business and that this process would help ensure that it can now embark on its next phase of development.

"We want to assure our policy holders that they can rest assured that any restructuring will only precede if it is in the clear interests of AMP Sanmar's policyholders, employees and shareholders," he said. As for the staff, Meyer said, "During this time, they will be encouraged to remain committed to the business and convey the same sentiments to our customers. We will also continue to update our policy holders and staff on all developments".

16th June 2005: Kotak Mahindra Old Mutual Life Insurance on Wednesday said it expects to achieve break-even by 2007-08. The company sees 100% growth in premium income during the current fiscal.

The company plans to ramp up its infrastructure in a big way and will open 10 new branches during the fiscal. It will also hike its life advisor base from existing 7,000 to 12,000 and increase the number of sales managers from 450 to 850 during 2005-06. Managing director Gaurang Shah said that the company posted a 198% jump in first year premium income to Rs 374 crore in 2004-05 from Rs 126 crore in 2003-04. "The company's loss has been reduced from Rs 49 crore in 2003-04 to Rs 45.6 crore in 2004-05", said Shah.

The company plans to launch new products this fiscal. It currently has 17 life insurance products. Shah said: “We believe the two most important areas today which will determine the growth of life insurance products are mortality and retirement products. We have planned a 100% growth for the current fiscal with focus on these products and continuous expansion in infrastructure and manpower”.

The company intends to achieve future growth through a stronger leverage on group synergies, greater focus on quality execution and innovative product offerings. “Our belief on segmented approach towards selecting target markets and segments shall continue and I believe that with higher penetration in states like Tamil Nadu and Punjab, we will be able to exploit the opportunity that the vibrant economy is offering in even smaller towns and rural markets, Shah added.

24th June 2005: The Irda, the regulatory body for insurers, is learnt to be working on a set of norms for policyholders getting insured overseas. According to senior official with an insurance company, there will be a set of criteria for policyholders to ensure a due diligence of the company before they buy a policy. Also it will be made clear that if at all any dispute arises in any such policy, it will be resolved outside India under the host country’s jurisdiction and not under the jurisdiction of Irda.

The due diligence may include first-hand knowledge of the credential of the company, supervisory authority under which the insurer is being monitored and supervised, and the terms and conditions of the policy. Officials said with the Reserve Bank of India permitting Indian residents to remit $25,000 annually, many Indian residents are buying insurance policies offered by foreign companies. While the purchase of insurance policies is not a problem, it is important for the regulator to know the origin of the insurer and the policy so that the policyholder should not get harassed later, a source said.

The RBI had earlier issued a set of norms for resident Indians who were offered deposit taking products from mutual funds and banks operating overseas under the $ 25,000 liberalised fund transfer norm. The basic norms set out by RBI was that only deposits products offered by credible organisation only will be acceptable to Indian residents.

As a mark of the credibility, these organisations should be rated by international credit rating organisations. Moreover, these entities should clearly specify the regulatory authority under which they are being regulated. After the RBI relaxed remittance norms, mutual funds based abroad offered schemes to retail investors and even launched India-dedicated funds to attract investments.

12th July 2005: IDBI has decided to launch a life insurance venture in collaboration with a foreign player. The model and the partners are likely to be finalised in the next couple of months. IDBI has also decided to raise Rs 10,000 crore by way of bonds either from the domestic market or overseas this year. IDBI has engaged insurance consultancy firm Watson and Wyatt, headed by former SBI Life chairman and managing director S Krishnamurthy, for readying the model and the selecting partner for the venture. After finalising the model and the partners, IDBI would approach the central bank, Irda, and the government for approvals.

“S Krishnamurthy had earlier successfully set up SBI Life Insurance and, hence, we have provided him the mandate of developing the model for our insurance venture,” said V P Shetty, chairman. “Models such as induction of another domestic entity along with a foreign partner were models being looked into. IDBI would begin with a life insurance company which would be followed by our entry into general insurance,” Shetty said.

Talking about funds requirement, Shetty said IDBI would have to shell out around Rs 8,500 crore on account of bonds that mature in the next seven to eight months. “A portion of this fund requirement would be met through internal accruals and fresh borrowing of Rs 10,000 crore. The instrument, either ECB or domestic, would depend on the rate of interest prevailing at the time we decide to raise the fund,” he said.

Shetty said, “The bank expects to grow at 25% CAGR, while growth in the retail segment was pegged at 45%. Rate of growth of corporate and wholesale lending, on the other hand, was expected to grow at 25% each.” IDBI was also heavily concentrating on financing overseas corporate acquisitions. About the bank’s asset base, Shetty said, “We at IDBI intend to enhance the asset base to Rs 90,000 crore from Rs 81,365 crore as of March 2005. Total business, on the other hand, was expected to touch Rs 1.5 lakh crore by March 2006 against Rs 1.35 lakh crore.”

15th July 2005: Irda has come out with guidelines with regard to group insurance policies. These guidelines, according to C S Rao, chairman of Irda, aim at streamlining the group insurance sector. “There have been issues with regard to disjointed groups calling themselves as groups to avail insurance. We have, therefore, defined what a group means to bring clarity in this sphere.” The guidelines also define the remuneration that an agent or a broker needs to be paid for selling group insurance.

According to these guidelines, a group shall comprise persons who assemble together with a commonality of purpose or for engaging in a common economic activity like employees of a company. Non-employer-employee groups may also be treated as groups provided the group organiser has the authority from majority of the group members to arrange insurance on their behalf or is doing so as part of a necessary security.

Insurers using the services of corporate agents have been asked to require the latter to file certificates at least once a year from an independent auditor confirming compliance relating to collection and credit of premium as per Irda regulations. According to Rao, it was because there have been some cases wherein “some corporate agents should not have been selected to sell the insurance products.” The premium charged and benefits admissible to members shall have to be clearly mentioned in the policy.

The guidelines also say that group discounts on premium should not be appropriated as additional remuneration to the agent, corporate agent, broker or group organiser and should be passed on to the members. Besides, the commission being paid to the agent or corporate agent in respect to group insurance shall not exceed the percentage approved by the Irda or Insurance Act, 1938 and they shall not get any other payment whether as management expenses, documentation expenses or otherwise.

The insurer shall also be responsible for the certificate of insurance issued by the group organiser or administrator and he/she will also remain responsible to ensure that all sales material and prospectus of the insurance plans are drawn in compliance with insurance regulations.

They will also have to conduct surprise inspection of books and records of the group organiser and manager at least once in a year. They will be held responsible to the persons insured in case of failure of the organiser or manager to account for the business to the insurer, if the insured can prove that premium has been paid. These guidelines, according to Rao, have been introduced because “individuals within groups are not being served well in many cases.”

19th July 2005: The Insurance Regulatory and Development Authority (Irda) has put detariffing of motor insurance on the backburner. At a time when the insurance regulator is preparing a time-table for detariffing the non-life insurance industry, motor is likely to be the last risk product to be detariffed, contrary to what was expected earlier. “Motor insurance business will not see detariffing coming quickly,” C S Rao, chairman, Irda, said, even as he is keen to free the pricing of most non-life insurance products.

More likely than not, the most profitable portfolio of fire will be detariffed next. Bulk of the insurance business comes from fire and motor insurance, with the latter accounting for as much as 40%. Today as much as 70% of non-life premium income falls under a tariff regime. Taking cognition of the recent dilemma facing insurance companies post the detariffing of the marine hull business, Rao said the regulator needs to be careful as to which segment is to be detariffed.

“Insurers need to prepare themselves. I want to come out with a time-table for detariffing the industry which will give time to players to prepare and come out with minimum underwriting guidelines,” said Rao. He further elaborated that considering “marine hull is a reinsurance-driven business, this should not have happened.” When the Irda detariffed marine hull this April, insurance premium rates in this segment fell by as much as 50-60%.

While this augured well for the Indian shipping conglomerates, the insurance players found it difficult to place the risk even with the national reinsurer, the General Insurance Corporation of India (GIC). This followed many players quoting less than international reinsurance rates, said industry sources.

Meanwhile, detariffing auto insurance has hit a roadblock three times in a row as the insurance industry is insistent that detariffing of the market should also include freeing the price on third-party liability cover.

Today this cover is priced very low, making the business unviable. At the same time, the insurance regulator fears that detariffing of the motor insurance market could result in some individuals not being able to afford the cover.

19th July 2005: The Insurance Regulatory and Development Authority (Irda) will come out with guidelines on unit-linked insurance plans (ULIPs) after holding consultations with the industry.

C S Rao, chairman, Irda, wishes to bring about some semblance of assurance to policyholders.

“There is a safety feature built into traditional plans under Section 27 (of the Insurance Act) to protect returns for policyholders,” he added.

Guidelines on unit-linked insurance plans (ULIPs) will try to ensure safety of insurance returns as has been in-built in the case of traditional insurance policies.

This was stated by Rao here today on the sidelines of Munich Re’s seminar on risk management.

Under ULIPs, the investment risk is passed onto policyholders, though a few insurance companies do offer some level of guaranteed returns.

“My concern is on proper disclosure to policyholders since the investment risk has been transferred to the individual. Further, the issue is also related to the actual relationship between the premium collected and the amount of insurance cover granted,” said Rao.

Today ULIPs, a risk-cum-investment product, are selling like hot cakes, as the capital markets are booming, and net asset value of most ULIPs is on the rise.

19th July 2005: Shriram Life Insurance Company, the recently-formed joint venture between the city-based Shriram group and the South Africa-based Sanlam group, has obtained the licence to operate in the life insurance market in the country.

The company, which received the r1 licence from Insurance Regulatory and Development Authority (Irda), is set to commence operations from September 1, according to a press release issued by the Shriram group today.

Shriram group manages funds of over Rs 6,700 crore in its truck financing business, and has a significant presence in consumer durables financing, insurance and stock broking.

Sanlam Life Insurance, a part of Sanlam group, is one of the biggest life insurance providers in South Africa.

21st July 2005: The Narasimhan committee, in its draft report on the proposed amendments in the Insurance Act, may stress the need to bring down the minimum required capital base from Rs 100 crore to Rs 45 crore for insurance companies.

The 11-member committee is preparing a draft on the proposed amendments in the Insurance Act. It is learnt that the report is almost ready and the committee would meet on July 22 to finalise the fine prints.

It may be noted that the government had earlier indicated it was not ready to change the capitalisation norms. However, a member of the committee said lowering the minimum capital base would encourage more companies to enter the insurance market.

“We want the government to reduce the threshold to encourage competition,” sources said, adding that the draft being prepared by them contained mere recommendations. The government would take a final call on the recommendations, they said.

13th August 2005: KVB and BAGIC today launched their co-branded new Insurance product 'KVB Suraksha'. The comprehensive insurance cover would give protection to individuals and their personal assets from the financial trauma of accidents, P T Kuppuswamy, KVB Chairman and Athanusingh Mukherjee, Head Bancassurance, Bagic, said.

KVB Suraksha provides insurance cover to household articles of individuals against all possible risks including fire, strike, malicious damage, burglary and natural disasters like lightning, storm, tempest, earthquake and flood, Kuppuswamy said.

Of the three plans, the first plan was for a total sum assured of Rs 3.75 lakh (covering property all risk, baggage, personal accident, medical expenses due to accident and breakdown of home appliances), with a premium payable of Rs 420 per annum, he said.

Under plan two, the total sum assured was Rs 7.05 lakh with an annual premium of Rs 705, while total sum assured under plan three was Rs 11.40 lakh with a premium of Rs 1,115 per annum, Mukherjee said, adding in case of personal accident a part of the medical expenses was also covered under the policy.

Claiming that the bank expected to sell one lakh policies under all plans during this fiscal, Kuppuswamy said it expected a good interest for KVB Suraksha from Bank's large customer base among the middle income group, which was looking for a comprehensive cover at an affordable cost.

BAGIC would design more tailor-made products exclusively for KVB customers, Mukherjee said.

23rd August 2005: Life Insurance Corporation will flag off its 50th year celebrations next month, with the launch of an affordable 'Golden Jubilee policy' for the masses. "We will enter the 50th year of existence in September. Apart from a series of programmes, we will launch a unique Gold Jubilee policy," LIC chairman A K Shukla said, adding the policy would be for all - the rich and the poor. LIC has filed the product with regulator IRDA for its approval; he said but declined to give details. However, LIC sources said the policy would offer life cover at an affordable rate and have different riders.

20th October 2005: LIC on Tuesday launched a new policy ‘Jeevan Plus’. The unit linked whole life policy offers investment-cum-insurance throughout the lifetime of the policyholder.

LIC senior divisional manager C Narasavadhani said the policyholder could choose the level of cover within the limits, which will depend on the mode and level of premium he agrees to pay. The allocated premium would be applied to buy units as per the chosen fund type.

He said the policyholder’s Unit account would be subject to deduction of charges like life cover, critical illness benefit, accident benefit charges, administrative charges, policy charges and fund management charges.

Units would be allotted based on the Net Asset Value of the respective fund as on the date of allotment. There would be no Bid Offer spread. (Both the Bid price and Offer price would be equal to the NAV).

4th November 2005: IRDA’S proposed new guidelines are set to bring unit-linked policies (Ulips) in line with traditional endowment products. IRDA is expected to issue final guidelines by next month after receiving comments on the draft guidelines that will be circulated in the industry soon.

Sources said that tightening the norms for Ulips will make it easier for IRDA to recommend tax breaks for life insurance products on the grounds that these are long-term retirement plans.

The regulator has already asked Bajaj Allianz Life Insurance to withdraw its single premium policy, Unit Gain SP, because of its short-term features. The company has agreed to withdraw the plan after a new policy to replace it is in place. Unit Gain had brought in for Bajaj Allianz close to a third of its single premium income.

IRDA’s tough stand on Ulips has been a bone of contention between the regulator and private insurance players for almost a year. While insurance companies feel that the regulator will end up stifling product innovation, IRDA is keen that insurance companies sell long-term retirement plans.

2nd December 2005: The Insurance Regulatory and Development Authority (Irda) is slated to make its final recommendations to the finance ministry on the proposed amendment to the Insurance Act by the year-end.

The KP Narasimhan Committee had submitted its report to Irda on the amendment to the Act a few months back. The regulator would now hold talks with the various stakeholders before finalising the report.

“The report would be finalised only after we have held talks with the stakeholders, primarily the insurers, so as to be as industry-friendly as possible,” an Irda official said.

The issue however is unlikely to be taken up in Parliament during the current session. According to the regulator, there should be different norms of capital base for different segments of insurance. It has proposed a capital base of Rs 50 crore for health insurance companies.

For life and general insurance companies, the minimum capital base is likely to be kept at Rs 100 crore. It is also of the view that stand-alone health insurance companies should be allowed to operate in the country.

“Though there has been huge pressure from the insurers to reduce the minimum capital base norm, the regulator feels that there is no immediate need to do so. The capital base has not proved to be a hindrance as there are a number of players in the field already,” sources said.

The regulator is also of the view that for health insurance, the foreign direct investment (FDI) level should be fixed at 51%. The FDI level is now fixed at 26% though the government had proposed to increase it to 49%. The issue continues to be the bone of contention between the UPA government and its Left allies. The Left has said that it would not allow FDI in insurance to be hiked.