NON-LIFE INSURANCE MAY 2019
IRDAI panel for simplifying fire cover norms :
Risk level knob positioned on medium position, white background and orange light. 3D illustration concept for business security management.
A working group of insurance regulator IRDA, that revisited the structure of products providing cover to homes, offices, commercial establishments and MSMEs, has recommended many changes, from simplification of the policy wordings and provision of adequate cover to insuring homes in multi-storeyed apartments for total saleable price.
Seeking comments on the group’s report, the Insurance Regulatory and Development Authority of India (IRDA) said wordings and terms and conditions of the basic policy for fire and allied perils for all categories of risks are driven by the erstwhile All India Fire Tariff, 2001. Insurers, however, have been permitted to sell add-ons to the basic cover. IRDA had set up the group in view of the huge gap between economic losses and insured losses, post catastrophic events, for homes, offices, commercial establishments and MSMEs. The group submitted its second and last part of the report in November.
Structure remains same
Noting that the protection needs of the insuring public for their assets against fire and allied risks are met by Standard Fire and Special Perils Policy (SFSP), the group said the product structure remained, more or less, the same since the All India Fire Tariff revision in 1988. “Though the tariff has undergone several changes since then, the last in 2001, these changes were more in the rules of underwriting and premium rates rather than in the basic structure, coverage and terms of insurance or the claims settlement processes.”
Noting the product, created years ago, does not seem to be meeting the true protection needs of the insuring public, the group recommended introduction of three different versions of the product as a measure to address the present practice of same product being sold to large commercial customers as well as homes and small shops.
The first, and the simplest of the three with most relaxed terms, would be for homeowners while a slightly more refined version would be for micro commercial establishments having value at risk of up to crore.
GIC Re exposure in Ethiopian Airlines crash only 3% :
GIC Re had a 3% exposure in Ethiopian Airlines insurance cover and would be settling the claims proportionately soon for the crashed aircraft, said a source. An Ethiopian Airlines passenger jet bound for Nairobi had crashed minutes after take-off, killing all 157 people on board, raising questions about the safety of the Boeing 737 MAX 8, a new model that also crashed in Indonesia in October.
Insurers typically form a consortium to share the risks of large claims, with the lead insurer taking larger proportion of the risk. The insured value of the plane itself was likely around $50 million (Euro 38 million), according to industry sources Britain’s Global Aerospace was the lead insurer for Boeing and also for Lion Air, which operated the plane that crashed in October.
Sponsor protection cover :
Sponsor protection is a cover offered in almost all student travel policies by insurance companies. It is available for students going outside India for studies. Sponsor here would mean an individual, usually parents of the student, responsible for paying tuition fees of the insured persons (student) for his or her fulltime studies in an educational institution outside India.
One can claim on the sponsor protection cover when the sponsor meets with an accident which results in his or her death or permanent disability due to which he or she is unable to pay the tuition fees of the insured. In such a situation the insurance company would reimburse that proportion of the tuition fees (to the extent of sum insured) for the remaining period of the student’s education. This feature is there in policies of Bajaj Allianz General, TATA AIG and Apollo Munich Health Insurance, among other.
Note that, a student cannot claim both under sponsor protection and study interruption (where a student is unable to continue his/ her studies) for the same reasons.
Public sector insurers to lose market share :
The public sector general insurance companies are slowly losing market share in premium collection to private players. Date released by the General Insurance Council shows that the four main public sector insurers — New India Assurance, United India Insurance, National Insurance and Oriental Insurance Company which have recorded a premium collection of Rs. 68,719 crore, up 1.37 per cent, have ceded five per cent of their market share to the private sector insurers (excluding standalone health insurers) which have mobilized a total premium of Rs. 81 ,600 crore, up almost per cent, during 2018-19.
The merger proposal of three public sector insurers by the government, solvency issues and unfair practices by private players in the motor business are being cited by experts for the erosion in market share by public sector players. The four public sector companies, led by New India Assurance, have a market share of 42.50 per cent at the end of FY 2018-19 as compared to almost 48 percent in 2017-18.
The total private sector market share, including health insurers, has gone up to around 56.34 per cent from 53 per cent last year. The private sector insurers (excluding the stand along health insurers) led by ICICI Lombard General Insurance, have increased their market share to 50.47 per cent in 2018-19.
A moderated version of the existing product is recommended for commercial risks having value at risk from crore to crore.
The group also recommended coverage of all perils in the base product itself to “avoid mis-selling and inadequate coverage for unsuspecting public. Now, many perils do not form part of the base product and are sold as add-on/riders on customer demand or sales push. “For example, earthquake, which has caused large scale economic losses in different parts of the country in recent past, is not a default cover in fire insurance but has to be opted by express demand,” the report said.
The group said there has to be a system of default sum insured for all the dwellings such that the insured value is a reasonable estimation of the correct value of construction cost of the building. Towards this, it wanted the General Insurance Council or the 11B (Insurance Information Bureau) to create a database of cost of construction for each square feet of carpet area for different geographies and construction types. The insured would declare only the carpet area and the sum insured of the dwelling shall be autocalculated at the given rate. Likewise, insurance of apartments in multistoryed building should be for total saleable price of the unit based on rates published by the State government concerned. Policyholder will have the option to increase this rate if the actual rate is higher than ready reckoner, but not reduce below it. “In case of a total loss, per square foot rate specified in the policy shall be sacrosanct and claim shall be paid after multiplying it with the actual area of the apartment,” the report said.
Reliance General Insurance launches tap and buy :
Reliance General Insurance has launched a new feature in travel insurance, “Tap and Buy”, which enables users to get insurance instantly by activating the NFC (near field communication) in their smart phones. Once a customer pairs up his / her device with an NFC enabled device that is installed in airports, the latter prompts to open the user’s WhatsApp from which payment can be made. It works for smart phones including iphone X and above, and Android phones using version 4.0 or above. Currently, the firm has installed 46 NFC enabled display screens at the Indira Gandhi International Airport in Delhi on a pilot basis. The facility will be extended to other airports in the future.
Air India insurance renewal cost doubles to $28 million on growing risk factors :
Air India’s insurance renewal cost has almost doubled to around $ 28 million for the year 2018-19 as a result of host of adverse factors including the recent crash of an Ethiopian Airlines.
The insurance renewal deal for the national carrier’s fleet of 180 aircraft, with a sum assured of $ 12 billion, the largest Indian Aviation insurance account, is currently getting concluded in the London market
and would be effective from April 1. Air India’s insurance renewal also includes $30 million passenger liability cover. Considering the hardening of the market, Air India which normally renews its insurance account in October of every year, had sought six month extension for its existing cover in October.
New India Assurance, India’s largest general insurance player, is the lead insurer of the Air India deal while reinsurance deal is led by the US major AIG.
The aviation insurance market has been hardening for the last one year with Ethiopian crash and the Pulwama terrorist action putting extra pressures on the markets at the time of the Air India’s premium pricing, said sources in the London market, adding that there were some claims of over $ 40 million from the Air India side.
India has many large aviation insurance accounts including Jet Airways, Indigo and Jet and GoAir which have to face a hard market when they come for renewal in the next few months, aviation insurance analysts said. Jet Airways is insured with Oriental insurance while Spicejet and IndiGo are insured with NIA.
Insurers to provide claim tracking mechanism from July 1 :
IRDA has asked all insurers to provide customers clear updates including a tracking mechanism on policies.
The new directive from IRDA will come into effect from July 1. “Clear and transparent communications play a vital role in servicing of insurance policies and in ensuring that the benefits of insurance policies flow to the beneficiaries in a timely manner, the authority has said, adding that all insurers should send communication relating to issuance and servicing of insurance policies through letter, e-mail, SMS or any other electronic form.
Title insurance for realty sector fails to pick up :
The concept of “Title insurance” aimed at protecting the promoters and customer of the real estate project against many risks, has filed to take off due to high pricing and lack of clarity on a host of technical issues despite being made mandatory for real estate projects.
The real Estate Regulation and Development Act 2016 (RERA) mandates the purchase of Title insurance for all new and ongoing property developments registered with the regulatory body. Though IRDA has already approved seven products of the seven general insurers including, New India Assurance, National Insurance Company, ICICI Lombard General Insurance, Bajaj Allianz General Insurance, HDFC Ergo General Insurance, TATA AIG General Insurance and Liberty General Insurance, there are hardly any transactions for the Title Insurance products with many of them seeing only two or three deals, said an industry official.
We are keen that market for the title insurance picks up as the government want to promote housing for all in the country. How much premium the insurance companies can charge is left to them, said an IRDA Official.