Insurance: 03/01/2012

Thursday, March 22, 2012

Irda raises red flag on rising risks, multiple schemes

Mumbai: Insurance regulator of India is comfortable with the way the industry of the country life insurance is running. In a recent letter to life insurers, insurance regulators and Development (Irda) has raised several concerns about products sold by insurers, without taking into account the interests of customers and increasing exposure to risk.

Irda is wary of products that provide unlimited amounts that risks are ultimately borne by foreign reinsurers to which the regulator has no control. He also criticized the life insurance industry to offer multiple policies under the aegis of a single product without any additional benefits to investors-an observation that the regulator of India's capital market had been on the mutual fund (MF) industry back.There times are 24 life insurers in India with close to Rs 15 trillion in assets. During the December quarter, the industry collected about Rs 1080000000000 premiums, according to the Life Insurance Council, the body representing the industry.
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"Irda may refrain compensation policies that have no limit on the sum insured," said a person with direct knowledge of the development.

Legally, Irda can not dictate the number of firm policies or some offers put a cap on the maximum sum insured as long as the insurer is capable of underwriting risks in the product, either directly or through a reinsurer. However, the regulator may ask the insurer about the rationale for launching a product before approving it.

The letter Irda, reviewed by Mint, designs questions of certain products, how they are sold, and how agents are encouraged to the cost of the insured and, finally, how insurers undermine their solvency.

He even said that the industry is moving toward giving foreign reinsurers. Fronting in insurance parlance, is an arrangement in which a primary insurer acts as the insurer of record by issuing a policy and passes the entire risk to a reinsurer in exchange for a commission.

Generally, the insurer is giving authorized to do business in a country where the risk is situated, but the reinsurer is not. In such cases, the reinsurer is appointed as a captive or an independent insurance company that can not sell insurance directly in a particular country.

"Generally, each insurance product must have a maximum sum insured to the insurer must accept the risk. Specifying" no limit ", and therefore have low retentions, it is of a question whether the life insurance industry is moving towards the front. This must be considered, "Irda said.

Each life insurance policy has certain amount estimated insured (or the maximum performance that the policyholder can expect at maturity) and two risk coverage of the pure components and savings. The component of the hedging policy is represented as underwriting capacity of the insurer.

Risks on the books of the insurer are required to be in line with its solvency margin. If some of the risk is passed to a reinsurer, the insurer must pay a certain premium to the reinsurer. Normally, the solvency margin is sufficient to bear the risks built into the books of the insurer as part of it is supported by the reinsurer. However, if the reinsurer defaults due to credit risk, the impact is reflected in the books of the insurer and it hits its solvency margin.

In India, Swiss Re and Munich Re are the two main foreign reinsurers. GIC Re is the only national reinsurer.

According G.V. Nageswara Rao, managing director and CEO of IDBI Fortis Life Insurance Co. Ltd., each insurance company must try to keep their own risk.

"Passing on the risks to a reinsurer is a cost premium to the insurer. Apart from the concerns raised by Irda, roping in a reinsurer, it is also guaranteed. But rates reinsurance premiums are more competitive than those of GIC Re to dissociate the risk of possible defaults of foreign reinsurers, we need another local reinsurer with competitive rates, "Rao said.

According to Irda, if an insurer has a limited ability to take risks and take the help of foreign reinsurers to provide insurance products, such a company is only as a provider of insurance and not an insurer. "These provisions mean heavy reliance on reinsurers for each product," he said. As they are subject to credit risk heavy, any failure of a reinsurer could undermine the solvency of the insurer.

SB Mathur, secretary of the Board of Insurance, said: "We are looking into the matter and (will) certainly address the issue."

Several strategies

Irda is also concerned about the multiple policies under the aegis of a single product.

Moreover, after questioning the MF industry to launch a series of similar products, without a significant body, the regulator of capital market in 2010 had suggested the merging of smaller systems with the biggest, but to avoid similar confusion for investors and save costs. The Securities and Exchange Commission of India has criticized the way the industry was the launch plan after another to help retailers gain more commissions regardless of the benefits of investors.

Irda said: "At the time of release, a set of funds under the product are usually indicated. However, funds very quickly under a given product proliferation. This proliferation has nothing to do with the size of the fund. This resulted in a situation where companies have a wide portfolio of funds, but the size of each fund could be very small. "It confuses consumers and may contribute to lower gains for them, he added.

Mathur said the industry is aware of this fact. "In addition to issues raised by other Irda, all funds will also need a regular audit," he said.

The regulator is also concerned about the insurance unit-linked products (ULIPs) which guarantee the highest value of net assets, and so-called guarantee fund returns. Over time, these products "tend to fixed instruments," he said, and added: "While this may be inevitable given the design of the product and its insurance carrier, it is surprising that several products to invest heavily in fixed instruments almost since their inception. "

He recommended a minimum equity component for a specified period of time for these products.

Irda has sought suggestions from industry on how issues relating to the reservation and pricing of guarantees could be evaluated. "Recognizing the significant burden of communication and the likelihood of communication problems in these products, would it not desirable to restrict the sale of these products on one platform, multi-pay?" He asked.

The regulator is also concerned about the failure of certain ULIPs with the rules of income tax in terms of insurance coverage and examines whether insurers could be the maximum possible loss that may incur ULIP buyer. Currently, insurance companies only talk about the possible returns from ULIPs.

Rao of IDBI Fortis said that until the insurer is able to manage costs and respect of a fund or product, the regulator should not be worried.

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Wednesday, March 21, 2012

Satyam-TechM merger: Why its a win-win for all

Tuesday, March 20, 2012

Kudankulam protests: I am not afraid of arrest, says Udhayakumar

Wednesday, March 14, 2012

I will not be a cause of crisis: Rawat on Uttarakhand Congress tussle

Sunday, March 11, 2012

Am not begging for chief minister post: Yeddyurappa

Hubli: In Hubli on a mission demonstration of power, today the former Karnataka chief minister BS Yeddyurappa made it clear he would not ask the BJP high command of the chief minister ship, and that he would not campaign for the March 18 Udupi-Chikmagalur Lok Sabha bypoll in the wake the attack on him by the chief minister DV Sadananda Gowda.

"Even though I had decided to campaign for the party candidate, I have decided against it in the wake of Gowda say that I have eight cases pending against me. Under these circumstances my presence would adversely affect the outcome of the poll results," he told reporters sarcastically, referring to Mr Gowda and state BJP president KS Eshwarappa who have been attacked him.

Mr. Yeddyurappa has Hubli in connection with his 69th birthday is being organized by his supporters, said that his demands for his reinstatement as chief minister was a "closed chapter", and he did not want the state president ship.

He also said: "I have no plans to leave the BJP from now and float a new outfit."

"It is true that I had prayed for reinstatement as Chief Minister because I wanted to present Rs. One lakh crore budget. Now I do not have anything. It is a closed chapter," said Mr Yeddyurappa, who had previously expressed the hope that the party central leadership will do justice to him after the high court order striking down a chapter of Lokayukta report on illegal mining, which indicted him led to his exit as chief minister last year.

In response to the high court order, Mr Gowda said eight other cases were pending against Mr. Yeddyurappa, indicating that he would not make way for the restoration of his predecessor.

Mr Yeddyurappa also said tersely that Mr. Gowda and Mr. Eshwarappa were capable leaders who could help the party win the byelection.

"I do not want to be an obstacle in Gowda and Eshwarappa efforts to help the party candidate win bypoll," he said.

Mr. Yeddyurappa said he would not demand anything from the central leadership. "Eshwarappa has already declared that the central management will not meet my requirements, even though my followers fly to Delhi," he said.

Mr. Yeddyurappa has Hubli bash is attended by about 12 loyalist ministers from North Karnataka, which is dependent on its grip on the electorate for their re-election, though most still swear by the party.

Yeddyurappa loyalists as ministers Basavaraja Bommai, Murugesh Nirani, V Somanna and CM Udasi, all of which are from the politically powerful Lingayat community, as the former Chief Minister belongs, had invited the BJP national president Nitin Gadkari to participate in the Hubli convention, which he declined.

Both Mr Gadkari and Mr Gowda, and their loyalist ministers had been to Goa on 9 March to participate in the swearing in ceremony of newly elected BJP Chief Minister Manohar Parikkar.

Mr. Yeddyurappa told reporters he has no plans to quit BJP "as from now" and float a new outfit and stated that none of his Protestant ministers and lawmakers had assumed a signature campaign for his reinstatement as Chief Minister.

"I have no plans to stop BJP from now and float a new outfit. None of my supporters, including legislators and ministers have kicked off a signature campaign to reinstate me as Chief Minister," he said.

He denied reports that he was 'remote' Chief Minister Gowda and Yeddyurappa loyalists do not cooperate with Mr. Gowda in governance.

"But there is confusion among MLAs and party workers over some issues," he said.

Deny that Hubli rally is a demonstration of power, Mr Yeddyurappa urged his followers not to push the party central leadership for his reinstatement as chief minister.

He also said that he does not require prior authorization to sign the entire state trips. "My tours will only strengthen the party.

This is not about hurting anyone's feelings in order to hold a meeting, "he said.

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Thursday, March 22, 2012

Irda raises red flag on rising risks, multiple schemes

Wednesday, March 21, 2012

Satyam-TechM merger: Why its a win-win for all

Tuesday, March 20, 2012

Kudankulam protests: I am not afraid of arrest, says Udhayakumar

Wednesday, March 14, 2012

I will not be a cause of crisis: Rawat on Uttarakhand Congress tussle

Sunday, March 11, 2012

Am not begging for chief minister post: Yeddyurappa

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