US looks forward to further opening of FDI in insurance:Nancy J PowellGurgaon: The US today said it is looking forward to India opening up its insurance sector further to foreign investors just as it has done in case of FDI in the retail sector.

"We are looking at the expansion of FDI, particularly at expansion of FDI in insurance," US Ambassador to India Nancy J Powell said at the World Economic Forum on India here.

She was responding to a query on the US expectations regarding India's economic reforms going forward.

The bill to increase FDI cap in the insurance sector from 26 per cent to 49 per cent has been pending in the Rajya Sabha since 2008. Last month, the Cabinet had decided to move ahead with its proposal to hike foreign investment ceiling in the sector.

In September, India had relaxed foreign direct investment (FDI) norms in retail sector, allowing foreign retailers to have up to 51 per cent stake in the multi-brand segment. Foreign carriers have also been allowed to invest up to 49 per cent in domestic airlines.

Commenting on the development, Powell said: "The implementation of the ones which have been put forward is going to be very, very key, particularly the state government's response to FDI in multi-brand retail."

She however said it would depend on individual companies decisions and how do they respond to that

"Partnership with Indian companies is going to be very very large one," she added.

India tops life insurance rankings: WEFNew Delhi : India may rank low in terms of overall financial development globally, but it is the world's top-ranked country in terms of life insurance density, the World Economic Forum (WEF) has said in its latest report.

Life insurance density is measured in terms of ratio of direct domestic premiums for life insurance to per capita GDP of a country.

As per WEF's Financial Development Report 2012, India has been ranked 40th in terms of overall financial development of a country, but it is placed better than many larger economies like the US, UK, Japan and China for life insurance density.

India is followed by China, Japan, US and UK in the top-five countries for life insurance density, WEF said.

In terms of non-life insurance density, India is ranked third after China and the US at top-two positions, but is ahead of countries like Germany, France, Japan and the UK.

Global consultancy giant McKinsey said in a recent report that Indian insurance sector is expected to see an exponential growth in 2012 amid increasing household incomes and higher premiums (as a percentage of the GDP).

WEF said its report measures the financial development of 62 countries across various segments of their financial systems and capital markets.

The overall rankings are based on more than 120 variables spanning banking financial services, financial stability and non-banking financial services among other factors.

"Recent empirical research has found a strong positive relationship between insurance sector development and economic growth; this relationship holds quite strongly even in developing countries," WEF said in its report.

"Insurance also creates liquidity and facilitates the process of building economies of scale in investment, thereby improving overall financial efficiency," it added.

Reliance Life Insurance President and Executive Director Malay Ghosh said the country's life insurance industry is one of the fastest growing in the world but remains a highly under-penetrated and untapped market.

"The percentage of young people, the number of people likely to be in their work life in the next few years and the spread of literacy are all set to give a significant fillip to the domestic insurance sector," he said.

Another area where India has been ranked on the top is the output loss during a banking crisis, along side 19 other countries. These 20 countries have been found to have suffered the minimum output loss during any banking crisis.

Neeya Naana 11/04/12

Election duty: LIC moves HC, says too busy to spare staff

The Life Insurance Corporation of India (LIC) has moved a petition before the Gujarat High Court challenging the orders of the District Election Officers (DEOs) concerned requisitioning its employees for election duty. A division bench has issued notices to the Election Commission and nine DEOs, and kept further hearing on November 8.

According to LIC counsel Maulik Shelat, as per the provisions of Representation of the People Act, such requisition orders can be passed only by the Chief Electoral Officer and not the DEO. Even the EC rules prescribe that employees of LIC should be taken while making sure that their routine work does not suffer, Shelat added. And since they are too busy at present, LIC employees cannot be requisitioned for election duty, he said.

So far, different DEOs have requisitioned more than 1,000 LIC employees for election duty.

General insurers to seek bailout from Finance MinisterMumbai: After life insurers, it’s general insurers who are knocking at the finance minister’s door, calling him to save the industry from a worsening situation.

Finance minister P Chidambaram will meeting general insurers in New Delhi on Monday to understand the problems of the industry.

The Rs 60,000 crore general insurance industry is in crisis as all its vital financial parameters are shaky despite the sector showing a growth of 20-25 per cent in premium collection. Its massive losses (over Rs 10,000 crore in 2011-12) are a result of cut-throat competition post detariffing period, regulated third party motor premium and losses in health insurance portfolio.

The industry has grown four times over the past 11 years but without much success in terms of penetration which is stagnating at 0.65 per cent. It has also seen multiplying underwriting losses.

As many as 21 general insurance companies were in the red in FY11 and FY12 owing to higher motor third party provisioning.

The insurance regulator, Irda, on the basis of a Supreme Court judgment, had asked general insurers to increase their reserve requirement against third party claims in 2011-12. Consequently, the insurers had to bring in higher capital and showed higher losses which would continue for the next couple of years.

Motor insurance which is a loss-making segment for the industry, contributes to approximately 40 per cent of the non-life insurance industry premium. In FY12, motor third party premium comprised 40 per cent of motor insurance premium.

As present, third party (TP) rates which are regulated by Insurance Regulatory and Development Authority are lower than the levels for the general insurers to break even.

“General insurers will urge the FM to remove the administered pricing for motor TP portfolio. They will also point out that under the proposed amendment in the Motor Vehicle Act, insurers have to deposit 50 per cent of the awarded amount with the court as against a maximum Rs 25,000 now which add to their problems,” said an insurance source.

The amendment also seeks to incorporate interest rate at 2 per cent above the bank rate which would increase the claim outgo, thereby further impacting the revenues of the industry.

Health insurers say that there is a need to index insurance pricing to medical inflation and standardise charges across provider network for major diseases.

However, analysts said that general insurers have to blame themselves for their grim situation as they have created the unhealthy competition in the segment post detariffing period.

HDFC Standard Life Insurance asked to pay Rs five lakhChandigarh: Insurance Ombudsman in Chandigarh has asked private insurer HDFC Standard Life Insurance to pay Rs five lakh with interest to an NRI complainant after holding the company responsible for mis-selling a policy.

"An award is passed with a direction to the insurance company to make payment of Rs five lakh with interest at rate of eight per cent from the date of complaint that is March 2, 2010," said Insurance Ombudsman (Chandigarh), Manik Sonawane in his order.

Mis-selling means deliberate, reckless or negligent sale of products or services in circumstances where the contract is either misrepresented, or the product/service is unsuitable for the customer's needs.

The complainant, Satnam Singh Randhawa, who is working as a driver in USA, had said in his complaint filed in 2010 that he bought life insurance policy from HDFC Standard Life Insurance under single premium mode in 2006 during his visit to India.

He said the agent of the company told him that it was a single premium policy but later on it was found that it was a yearly premium policy with Rs five lakh to be paid annually.

Even the company representative acknowledged during the proceedings that the proposal form was not for single premium policy and Rs five lakh was an annual premium under the said policy.

When Randhawa approached HDFC Standard Life Insurance, he was told that only Rs 2.70 lakh was payable which was not acceptable to him.

Complainant also accused the company of not delivering the policy bond despite several reminders.

The company representative was asked to produce the proof of premium reminder and lapse intimation of the policy sent to complainant that could not be produced, Ombudsman found.

"... during the course of hearing by complainant and representative of company, I am of the opinion that it is a clear case of mis-selling of policy.

"The policyholder is only 8th class pass and is working as a driver in USA and is neither adequately literate to know the intricacies of the policy nor he was explained about factual position. There was inordinate delay in communication with the policy holder.

"No sincere efforts were made by the insurance company in a time-bound manner and the case has been dealt quite casually," Ombudsman wrote in his order.

Notably, mis-selling of insurance policies top the list of complaints lodged by aggrieved customers with the Chandigarh Insurance Ombudsman as it is having over 2,000 complaints pending pertaining to life insurance and non-life insurance products.

Will look at picking up SUTTI stakes if asked, says LICMumbai: LIC today said it has not been approached by the government to pick up the latter's stakes in Axis Bank, L&T and ITC, which are currently held by the Special Undertaking of Unit Trust of India (SUUTI), but added if it is so asked, it will definitely look at it.

"As far as LIC is concerned, we have not been approached (to buy the government's stakes in Axis Bank, L&T and ITC). In case they approach us, we will definitely have a look at it," Corporation Chairman Dinesh Kumar Mehrotra told reporters on the sidelines of a capital markets summit organised by industry body Ficci here.

SUUTI, created in 2002 after the then UTI was wound up,

owns strategic stakes in three listed blue-chip entities: ITC (11.54 per cent), Axis Bank (23.58 per cent) and L&T (8.27 per cent).

Besides, SUUTI also owns significant stakes in unlisted firms such as the Stock Holding Corporation, in which it owns 16.96 per cent valued at about Rs 300 crore.

The government is planning to en-cash these holdings which are worth over Rs 40,000 crore, as part of its efforts at meeting the fiscal deficit target by divestment.

The plan is to sell the SUUTI stakes to an SPV. The SPV holding will not pledge shares but will borrow funds by way of negative liens, under which it cannot sell the shares without the permission of lenders and the government.

When asked about the 10 per cent equity exposure cap, Mehrotra said: "The corporation has been approaching the regulators and the finance ministry on this issue for quite some time. I think, both of them have taken it very positively. Hopefully, something should come and we will get some headroom".

LIC, which had bailed the government last March when the follow-on option of ONGC was bombed by picking up almost the entire stake worth over Rs 12,000 crore, plans to invest Rs 2.4 lakh crore this fiscal.

"We propose to invest Rs 2.4 lakh crore this fiscal and have invested Rs 65-70,000 crore so far," Mehrotra said, adding of the total investment, 10-15 per cent constitute pure equity investments out of which it has invested Rs 7,000-8,000 crore as of now.