Sunday, May 13, 2012

Brand, not price, drives insurance:

Mumbai: Consumers prefer the brand of the service provider, customer service and convenience over price while buying general insurance products, an Ernst & Young (E&Y) survey has found.

"Pricing is not the most important criterion for consumers when purchasing an insurance product. Brand of the provider, customer service and convenience hold greater importance compared to price," the survey said here today.
The E&Y survey, which covered over 24,000 life and non-life insurance customers across 23 countries about their buying practices with over 1,000 consumers in the country, however, said price sensitivity varies by segments and type of product.
The report also pointed out that consumers are increasingly using online mode for research and buying a product.
"Consumers are increasingly moving online, (with) 31 percent of respondents use a range of online channels for research," it said, adding, however, sales activity lags research with only 11 percent customers actually making the purchase.
It also said despite higher use of the online channel, personal contact still remains important in purchase of insurance products.
"Customers are willing to purchase additional products from the same insurer as 69 percent of the respondents saying they will do so, with convenience and better service being the primary drivers," the report said.

It, however, noted that with portability provisions, more number of customers are likely to switch providers in the near future. E&Y

United India Insurance's PAT jumps nearly 200%

Chennai : State-run United India Insurance today announced nearly 200 per cent jump in its profit after tax for the year ending March 31, 2012.

The Chennai-based insurance provider clocked a PAT of Rs 387 crore for the period ending March 31, 2012 up by 196.4 per cent from Rs 130.54 crore registered during the previous year, United India Insurance CMD G Srinivasan said.
During the year, the company's total business grew by 28.2 per cent to Rs 8,179 crore as against Rs 6,377 crore in the previous year, he said announcing the results.
"The industry is on a growth path. last year, the industry grew by 23 per cent so we expect there will be 20 per cent plus growth in current year also. There is a lot of awarness also. The industry has taken off well. We are very optimistic..", he told reporters.
He said the company declared a dividend of 52 per cent for the year and added they would surpass Rs 10,000 crore premium this fiscal.
"In terms of premium income we will cross Rs 10,000 crore. Our focus will be on motor, personal lines..", he said, adding they would soon come out with a insurance product targeting the small and medium enterprise sector.
"There are about four crore SMEs in the country. We need to create more awareness on SMEs. We will be coming out with a product (for SME sector)", he said.

Friday, May 11, 2012

Moody's reviewing LIC rating; downgrade likely  

New Delhi: Global agency Moody's today said it is reviewing rating of state-owned LIC for a possible downgrade over its huge exposure to government bonds.

"Moody's has placed the insurance financial strength rating of Life Insurance Corporation of India (LIC) (Baa2/ stable) under review for possible downgrade," Moody's Investors Service said in a statement.
It said that the credit quality of financial institutions, with high levels of domestic sovereign debt holdings, and low geographically diversified revenue and earnings sources, is closely linked to the sovereign's credit strength.
"Issuers with these characteristics are unlikely to have standalone credit assessments above the sovereign," Moody's Investors Service added.
LIC enjoys Moody's Baa2 rating with a stable outlook, which is higher than the agency's Baa3 sovereign rating for India. Baa3 represents the lowest investment grade rating.
The review of LIC, the statement said, reflects Moody's revised assessment of the linkage between the credit profiles of sovereigns and financial institutions globally.
"Moody's says that the review for downgrade reflects LIC's direct exposure to the Indian sovereign risk in terms of its investment portfolio and business profile," it added.
As of 31 December 2011, government securities and government guaranteed bonds represented 54 per cent (Rs 6 lakh crore, or about USD 111 billion) of the insurer's total cash and invested assets.
"Almost 100 per cent of its net premiums earned are from India. Furthermore, LIC has been increasing its exposure to public sector banks through equity investment, in addition to the purchase of shares in Oil and Natural Gas Corporation Ltd which is 69.14 per cent owned by the Indian government in March 2012," the statement added.
A parliamentary panel last week asked the insurance regulator IRDA to inquire whether LIC has breached the investment norms while buying ONGC shares during the stake auction.
It is mandatory for insurance companies in India to invest a large percentage of income in government papers. Fully owned by government, LIC is the country's largest life insurance company.
The Moody's announcement come close on the heels of lowering of rating outlook of 11 Indian financial institutions by Standard and Poor's.

'Strong case for insurance FDI cap hike'

New Delhi: The Reserve Bank of India (RBI) has said there is a case for hiking FDI cap in insurance and some other sectors in view of India's growing integration with the global economy, if local economic and political scenario permits.

"... as the economy integrates further with the global economy and domestic economic and political conditions permit, there may be a need to relook at the sectoral caps (especially in insurance) and restrictions on FDI flows (especially in multi-brand retail)," RBI has said in a study, released earlier this month, on FDI flows to India.
The study said there are certain sectors, including agriculture, where FDI (Foreign Direct Investment) is not allowed, while sectoral caps in some sectors such as insurance and media are relatively low compared to the global patterns.
"In this context, it may be noted that the caps and restrictions are based on domestic considerations and there is no uniform standards that fits all countries," it added.
RBI said the demands for raising the present FDI limits of 26 per cent in the insurance sector may be reviewed taking into account the changing demographic patterns as well as the role of insurance companies in supplying the required long term finance in the economy.
Commenting on the need for a higher FDI limit in the insurance sector, Monish Shah, Senior Director of consultancy giant Deloitte in India, said that insurance is a high gestation, capital intensive business and the sector needs fresh capital to fund its existing businesses and expansion.
"Increased capital will benefit the industry as a whole by increasing the insurance access and penetration in the country.
"Increase in FDI in insurance from a strategic minority to a dominant minority is one of the reforms which is being eagerly awaited by several industry players; as despite the slowdown, Indian insurance sector remains attractive in the long term," he added.
Noting that life insurance industry is long-term in nature and requires years of capital infusion, MetLife India's Managing Director and Country Manager Rajesh Relan said: "Capital infusion through FDI will help grow the industry by increasing customer coverage with a range of innovate products that are clearly focused on today's uninsured.
He further said that growth of insurance sector would also help in developing other sectors and providing capital to the government for long-term infrastructure projects.
The RBI study found that sectoral cap was higher than India even in China for insurance and a few other sectors, while countries like Brazil and Russia have higher sectoral caps than India across most of the sectors.
About the retail sector, it said that "given the international experience, it is argued that FDI in retail would help in reaping the benefits of organised supply chains and reduction in wastage in terms of better prices to both farmers and consumers.
"The main apprehensions in India, however, are that FDI in retail would expose the domestic retailers - especially the small family managed outlets - to unfair competition and thereby eventually leading to large-scale exit of domestic retailers and hence significant job losses.
"A balanced and objective view needs to be taken in this regard."
The RBI further said that another important sector was the generation, transmission and distribution of electricity produced in atomic power, where FDI is not permitted at present, may merit a revisit.
"In this context, it may be noted that electricity distribution services is a preferred sector for FDI. According to UNCTAD four out of top ten cross-border deals during 2009 were in this segment, which led to increase in FDI in this sector even in the face of decline in overall FDI," it noted.
Akash Gupt, Executive Director PWC India, said that FDI in multi-brand retail is going to improve the back end infrastructure and the efficiency and therefore will have a positive impact on the goods.
"Insurance sector today needs substantial amount of money, its bleeding heavily. And since Indian entrepreneurs don't have that amount of money and the only way is to let foreign players enter the segment and hike the investment limit to 49 per cent from 26 per cent," he added.
Gupt said that foreign investors were expected to invest money immediately after the FDI cap was raised in insurance, as they understand that there is substantial growth in this country.
"Globally capital is scarce. An appropriate due diligence is going to be made by the foreign investor before he makes the investment but I don't see any foreign investor ignoring India," he noted.
Ritesh Chandra, Executive Director and Head Consumer Practice at Avendus capital, said that the RBI's objective is to attract a large quantum of FDI through opening up of multi-brand retail business for foreign investors.
"FDI in retail has long term benefits for the economy which outweigh any potential threats to domestic retailers... The so called threat to "mom and pop" stores is completely unfounded, as the structure of the distribution and retail network in India is completely different from the developed markets," he added.

Decision on Insurance Amendment Bill postponed  

New Delhi: The government on Thursday postponed a decision on retaining the Foreign Direct Investment (FDI) ceiling in insurance at 26 per cent as suggested by the Standing Committee on Finance."The consideration of the item has been postponed because 26 per cent foreign investment is already permitted," Finance Minister Pranab Mukherjee told reporters after the meeting of the Union Cabinet.The Union Cabinet was expected to take a decision to retain the FDI limit at 26 per cent The committee in its report on the Insurance Laws (Amendment) Bill, 2008, had suggested that FDI should not be increased to 49 per cent as was provided in the Bill which was tabled in the Rajya Sabha.Foreign insurers and their domestic partners have been demanding an increase in the FDI cap to 49 per cent to fund business expansion.As per the current regulation, a foreign player cannot have more than 26 per cent stake in private insurance companies in the country.The Standing Committee had rejected the government's proposal to raise foreign direct investment ceiling to 49 per cent in December last year saying the proposal to increase the FDI cap in insurance companies seems to have been decided upon "without any sound and objective analysis of the status of the insurance sector following liberalisation".It had said that the policy stance of enabling a greater role for foreign capital in the insurance sector would not necessarily have the desired impact."Increased role of foreign capital may lead to the possibility of exposing the economy to the vulnerabilities of the global market,...flight of capital outside the country and also endangering the interest of the policy holders," it had said.

However, the panel, headed by senior BJP leader Yashwant Sinha, had agreed on the need to bring in comprehensive changes in the archaic laws governing the insurance sector.The government had introduced the Insurance Bill in the Rajya Sabha in December 2008 with an aim to bring improvement and revision of laws relating to insurance business in the changed scenario of private participation.

Wednesday, May 2, 2012

            Reliance Insurance to pay Rs 88K                         

New Delhi: The Reliance General Insurance Company Ltd has been ordered by a consumer forum to pay over Rs 88,000 to a mediclaim policy holders for its failure to facilitate cashless service to him for his daughter's surgery.

The New Delhi District Consumer Disputes Redressal Forum ordered payment of compensation saying the man was denied the service "when it was needed the most" and the firm treated his request for assurance for cashless facility as a claim for the same.
"In our view, Reliance General Insurance Company Ltd have clearly misdirected themselves in treating the request of complainant father, as request to allow claim. At that stage before admitting his daughter in the hospital, he only needed assurance that the cashless service can be availed. The firm failed to comfort him," said the forum's President C K Chaturvedi.
The consumer court's order came on a Dwarka resident, H K Choudhary's plea, which said his daughter was to be operated upon in Max Hospital on July 4, 2008 and he had requested the insurance firm to ensure cashless facilities.
He alleged despite informing the firm a month in advance, it kept making repeated enquiries and sought copies of various documents and even after providing all documents, it failed to facilitate cashless service and he had to pay Rs 38,800.
Choudhary had also alleged that during the pendency of the case he had submitted the claim of Rs 38,868 to the firm by e-mail, but it was yet to be settled.
The insurance firm had contended that it had made the repeated enquiries as it thought it was a request for allowing claim.
Rejecting the firm's contention, the forum directed it to "settle the claim within a month" and also awarded a "total compensation of Rs 50,000 to complainant for deficiency of service, when it was needed most."

'ProbeLIC's purchase of ONGC shares'            

New Delhi: A parliamentary panel has asked insurance regulator IRDA to enquire whether country's largest insurer LIC has breached the investment norms while buying ONGC shares during the government stake auction.

        The Standing Committee on Finance, headed by Former Finance Minister and senior BJP leader Yashwant Sinha, also regretted that the government is using public sector undertakings (PSUs) as "milching cows" to bridge the deficit.
"The Committee recommends that the Insurance Regulatory and Development Authority (IRDA) should enquire into this issue and investigate as to whether the LIC has violated any prudent investment norms and exceeded the limit stipulated by them," it said in a report tabled in Parliament today.
Last month, the government raised Rs 12,767 crore through auctioning of shares in oil major ONGC and state-run LIC had subscribed to a huge chunk of the issue.
While the ONGC share sale was subscribed 98.3 per cent, LIC had picked up over 84 per cent of the shares on offer. The remaining was bought by institutional and retail investors.
Following this, LIC's stake in ONGC has gone up to 9.48 per cent. As per the IRDA norms, insurers cannot hold more than 10 per cent stake in any company.
"Owing to risk factors associated with the recent acquisition of shares of ONGC by Life Insurance Corporation (LIC), 29 crore policyholders of LIC are likely to be adversely affected," said the Committee.
The Committee has also expressed its disapproval of the manner of ONGC disinvestment and said, "it was nothing but mere financial engineering to shift money from one pocket of the exchequer to the other".
The government could raise about Rs 14,000 crore through disinvestment in public sector undertakings (PSUs) in 2011-12 fiscal, much less than the budgeted Rs 40,000 crore.
For the current fiscal, the government targets to raise Rs 30,000 crore through stake sale in PSUs.
"The government should formulate a coherent and effective disinvestment policy without diluting the objectives for which the CPSEs have been set up," the Committee said.
It said that the government seems to be "unduly confident" of achieving the disinvestment target for the current fiscal and said disinvestment has turned out to be merely a deficit-bridging exercise.
The Committee has also expressed doubts over the government's ability to achieve the fiscal deficit target of 5.1 per cent of GDP in 2012-13 fiscal.
"...The possibility of occurrence of fiscal slippages again in the year 2012-13 is distinct," it said, adding that the government should chalk out a roadmap to achieve the budgeted target.

"Doubts over achieving the fiscal deficit target also emerge owing to factors like the government's huge borrowing programme, widening current account deficit.... shortfall in tax collection and failure in achieving disinvestment target," the Committee said.