The government-owned Life Insurance Corporation of India (LIC) has registered a six per cent increase in market share to 78 per cent of all new life insurance policies bought by customers since April 1 during the current financial year. LIC’s market share at the end of March 31, 2011, had stood at 72 per cent of all new policies sold during the last financial year (2010-11) with the 23 rival life insurance companies, most of which are tied up with international giants, holding 28 per cent share. The combined market share of these companies has now fallen to 22 per cent during the current fiscal, according to the latest figures.
LIC‘s north zone chief Nilesh Sathe said the share of the private sector companies has come down as customers are turning away from the unit-linked life insurance products (ULIPs) offered mainly by the private sector companies as these have become risky because of the volatility in the stock market. Investments in LIC‘s conventional life insurance products that are not linked to the stock market are considered much safer.
However, though in terms of the number of policies LIC has a 78 per cent share, in terms of the percentage of first time premium income the company’s share is at 72.43 per cent. This is because the private sector companies focus more on big ticket premiums, which has given them a larger average income per policy.
The average ticket size of the first premium income of private sector companies works out to Rs 23,293 while the corresponding figure for LIC is Rs 12,806. The average ticket size for the insurance industry as a whole is Rs 15,070. Sathe explained that LIC offers a much wider range of policies, starting at a minimum premium of Rs 250 with life insurance value of Rs 30,000. This enables the public sector company to achieve the social objective of taking its insurance cover to a wider range of the country’s population.
LIC also has the lowest outstanding claims ratio of a mere 0.37 per cent. The figures also show that during 2009-10 while LIC had settled 99.8 per cent of death claims, the private sector companies had settled 96.8 per cent of such claims. There were also variations among the private sector companies with some doing better than others.
Sathe said the LIC claims that have not been settled were mainly due to family disputes with one member moving court against another. “There have been instances where the mother was named the beneficiary of the policy in the case of death but the wife has moved court to assert her claim,” he said. Some claims have also come in the doubtful category as the insured person has died shortly after buying the policy. In such cases, it often turns out that the person had some illness that he had concealed from the company at the time of insurance.
currently charges higher premium for its term plans than private competitors. For example, a 30-year-old non-smoker has to pay an annual premium of 7,300 for a 25-lakh policy under LIC’s term plan Amulya Jeevan, while she can buy online policies such as ICICI Prudential’s iProtect for 3,350 and Kotak Life’s e-term plan for 2,750.LIC plans to reduce this gap with the launch of its online term policy, where it can save on agent commission. Its move is expected to make private insurers reduce their rates further. The state-owned insurer is also betting big on Bancassurance, or selling policies through bank branches.
LIC’s ED Vipin Anand said the insurer has set a target to double its income from Bancassurance this financial year to 5% of its total new business income. The insurer is targeting new business income of 54,000 crore this year. At present, 20 banks, including United Bank,
UCO Bank, Central Bank, Corporation Bank, BoM and PNB, sell LIC policies.LIC has announced a bonus of 21,580 crore for its policyholders for 2010-11, which is 95% of its net surplus of 22,716 crore. The rest 5% has gone to the government.
It has announced a higher bonus rate under seven with-profit plans, namely Jeevan Anand, Jeevan Tarang, Jeevan Madhur, Child Future Plan, Jeevan Shree I, Jeevan Bharti I and Jeevan Pramukh. It also announced loyalty additions for the first time in other seven plans.
After a gap of two years, Life Insurance Corporation of India (LIC) has raised bonus by up to 15 per cent for 2010-11.
The country’s largest life insurer, which reported a 10.3 per cent rise in net actuarial surplus at Rs 22,716 crore for 2010-11, compared to Rs 20,586 crore in the previous year, allocated Rs 21,580 crore for paying annual bonus to policyholders.
“The bonus rates have gone up after a gap of two years. We will be providing higher bonus rates under seven plans like Jeevan Anand, Jeevan Tarang, Jeevan Madhur, Child Future Plan, Jeevan Shree I, Jeevan Bharti I and Jeevan Pramukh. This apart, we have also brought in seven other plans under loyalty additions,” a LIC spokesperson told reporters.
In the traditional plans category, which accounts for more than 60 per cent of its incremental sales, the insurer will launch cheaper products, in line with the rates offered by private insurance companies. “Currently, our traditional plans are costlier than offered by the competition. So, we will come out with plans with competitive rates,” he said.
In 2010-11, LIC collected Rs 86,444.7 crore by selling new policies, 22 per cent more than Rs 70,891.5 crore garnered in the previous corresponding period. Total investment in debt and equities stood at Rs 2,00,000 crore and the solvency margins improved to 154.07 per cent from 153.96 per cent.
Jeevan Arogya is the first defined health insurance product to be introduced by India’s largest life insurance company, LIC of India. It will pay the customer a fixed daily cash amount as well as cover specific surgeries.
The product is a Hospital Cash Benefit Plan (HCB) that offers daily hospital cash benefit for a fixed number of days that one is hospitalised. Besides that, it will cover 140 surgeries with the maximum amount one can avail for surgeries being 100 times the daily limit.
The product also offers a lump sum amount that is twice the daily cash limit per hospitalisation day, even for surgeries not listed. This feature is similar to the HCB plan offered by Aegon Religare Life Insurance. Life insurer Tata AIG’s Wellsurance Family Classic offers a standard daily cash plan without any surgery benefits.
Jeevan Arogya has a number of features that should take care of rising health care costs.
For instance, it increases the limits on the initial daily benefits every year. So, one’s daily cash limits will rise to a maximum of five per cent or up to 1.5 times of the initial amount each year. This would be in addition to the five per cent added to one’s daily cash limit as part of one’s cumulative or no-claim bonus. Together, this could lead to a 10 per cent rise in one’s daily cash benefit.
No doubt, even other health insurers (both life and general) offer a nearly five per cent rise in the sum assured as part of one’s cumulative bonus. However, Jeevan Arogya customers are assured of getting a five per cent rise, even if they are not eligible for no-claim benefits.
Besides, since all other benefits are linked to the person’s daily limits, a rise in the daily limit translates into higher day care and major surgery benefits.
Another feature allows automatic waiver of the subsequent year’s annual premium for customers who make a claim for major surgical benefits.
However, Jeevan Arogya is a complicated product with both yearly and lifetime limits on how many times a claim can be made. So, one is allowed only three day care claims and only one major surgery claim in a year.
In terms of costs, it is much cheaper than the Aegon Religare product. If you opt for a daily cash limit of Rs 2,000, you would be paying an annual premium of Rs 4,000 for Jeevan Arogya. For the same limit, Aegon Religare’s premium would be Rs 13,800.
However, health products from life insurers are more restrictive in nature. While HCBs pay a lump sum, the hospital cash offered by general insurers covers the actual expenses falling within the amount sum insured.
Also, HCBs only cover illnesses mentioned in their policy document. They also permanently exclude pre-existing ailments. In comparison, four years of continuous cover with a general insurer will get you a cover for a pre-existing disease. Except hospitalisation due to accidents, life insurers’ policies usually have longer cooling periods of 90 days from the effective date of the policy.
Insurance experts caution consumers against opting for such HCBs as a standalone health insurance product. Instead, they advise customers to buy health products from a life insurer as an add-on to a basic health policy that will cover actual expenses.
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But Shah did not want to let go of the policy because he had completed three years, the period after which specific diseases, such as hernia, cataract, dysfunctional uterine bleeding, are covered. He was also just one year short of getting a cover for other pre-existing conditions. What was Shah to do?
He needn’t have worried. With health insurance portability likely to come into effect from 1 July this year, there may be respite for people like Shah. Portability allows you to carry over the pre-existing disease (PED) benefits in your previous policy to the new service provider.
This was one of the biggest deterrents for switching because the customer had to serve the waiting period all over again and PED claims were covered only after a waiting period of 2-4 years. However, Irda has waived this condition, making for a smooth shift to a new insurer provided the previous policy has been maintained without a break.
When to move
You can look for a new insurer not only because of a sudden jump in premium but because a job shift has landed you in a place where the coverage of the existing insurer is inadequate. “People shifting from one place to another face problems due to lack of policy servicing at the new location,” states Irda. Service standards, network of hospitals, lack of coverage in areas such as dental treatment, maternity benefits, etc, could also prompt you to shift.
Portability can be carried out only at the time of renewing a policy, not at any time during the year. However, it is advisable to approach the new insurer at least 45-60 days before the renewal date in order to ensure a smooth transition. Says Sanjay Datta, head of customer service, ICICI Lombard General Insurance Company: “A smooth sharing of data between insurance companies is a must to facilitate portability. For this, the industry wants to move to an IT-based platform for exchange of information regarding waiting period, existing claims, etc. The glitch is that all insurance companies don’t have data that is online and in a standardised format.”
If you don’t start the procedure well in advance, there is a chance that you could go coverless for a certain period. “To avoid such a situation, one can look at a short-term extension of the policy. Besides, a 60-day period is given before a break in cover is considered,” says Arun Mehrotra, head, retail underwriting & product development, Iffco Tokio General Insurance .
Insurance companies have been advised by Irda to acknowledge all applications for portability within three working days. Also, the previous insurer has been advised to share the policyholder’s claim history with their counterparts within seven working days
BS Reporter / Mumbai June 11, 2011, 0:50 IST
Mukesh forays into insurance. Reliance Industries on Friday took yet another step of building a financial services empire by agreeing to buy out the Bharti Group from its insurance joint ventures with French insurer Axa.
Sunil Mittals’ Bharti held 74 per cent stake in the insurance ventures, with AXA the balance 26 per cent – the maximum permissible foreign direct investment (FDI) in the Indian insurance space. The acquisition price was not disclosed by both the companies.
According to the proposed deal, which will need clearances from insurance regulator Irda and Competition Commission of India, RIL and its associate Reliance Industrial Infrastructure (RIIL) will have 57 per cent and 17 per cent, respectively, while AXA will continue to have 26 per cent.
Once the FDI limit is raised, AXA will have the option of picking up another 24 per cent from Reliance. “The proposed agreement contemplates an option by which AXA would acquire from RIL and RIIL up to 24 per cent shareholding in both the insurance companies. Upon exercise of such option, RIL will effectively own 45 per cent, RIIL will have 5 per cent and AXA the balance 50 per cent in both the insurance companies,” a communication from RIL said.
The Insurance Amendment Bill, which is awaiting Parliament’s nod for a long time, has proposed a maximum of 49 per cent stake, but RIL sources said the 50 per cent stakeholding proposed for Axa is only an enabling provision and will obviously be bound by the rules of the day.
Bharti on the other hand said the financial services businesses did not fit into the company’s long-term growth plans. “Bharti intends to use the proceeds from selling off its interests in these joint ventures towards other group businesses in India and abroad,” Bharti said in a statement.
Insurance will be the second major sector in which RIL Chairman Mukesh Ambani will directly compete with his younger brother Anil Ambani who owns Reliance Life and Reliance General. RIL’s entry into the insurance sector became possible after the termination of a non-compete clause which was signed during the demerger of Reliance Group in 2005. Reliance Life had recently roped in Japanese insurer Nippon Life by selling 26 per cent stake for Rs 3,062 crore.
Although the companies did not share the deal value, insurance experts said the valuation of the life insurance deal would be much lower than the Reliance-Nippon deal due to Bharti-AXA’s lackluster performance. “It will be surprising if RIL paid a premium to acquire the stake,” said an insurance analyst.
The first year premium of Bharti AXA Life Insurance has dropped 17 per cent to Rs 362 crore in 2010-11. However, gross premium of the general insurance company increased 77 per cent to Rs 550 crore in 2010-11.
Punjab National Bank, the country’s second largest bank, was also in talks with Bharti Axa for its insurance foray. Sources said the bank is now negotiating with two other insurance companies for a paoosible partnership or acquisition.
In March, RIL debuted in the financial services sector by entering into a joint venture with the D.E. Shaw Group, a global investment and technology development firm. The partnership with DE Shaw led to RIL directly competing with Anil Ambani’s Reliance Capital in the financial services space.
When contacted, J Hari Narayan, chairman, Insurance Regulatory and Development Authority, said “We are yet to get any formal application from the company. Getting a nod from the regulator will depend on if the acquirer company is found fit to operate in the sector,” he said.
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