Pay up to 20% more for third party insurance

New Delhi: Premium for third party insurance cover of almost all categories of vehicles will increase by 10-20% from April 1. The Insurance Regulatory and Development Authority (IRDA) has notified the increase, which is substantially lower than the changes indicated in the draft exposure. 

    In an official statement, IRDA said as per the exposure draft, there was wide variation in premium charges among various subclasses. It said the authority decided to moderate the increase considering the "sudden and adverse impact" on policyholders of huge increase in rates. The authority also took the decision based on the observation of stakeholders. 
    It also said considering the wide variation in premium charges among the various subclasses, the subclasses were clubbed together and a flat single revision was considered for the vehicle class. 
    A maximum increase of 20% in third party premium will be in the case of private cars, goods carrying vehicles (public carriers), four-wheelers carrying more than six persons and three-wheelers transporting over 17 passengers. In the draft notification, a 39% hike in premium was proposed for private cars and a 46% increase was proposed for cabs carrying over six persons. Third party insurance for two-wheelers will increase by 18.3%. 
    There are only three categories of vehicles – goods carrying vehicles (private carriers), three-wheelers carrying less than six passengers and vehicles like Vikram carrying less than 17 passengers – which won't be affected by the hike. 
    One of the largest truckers' body in the country – All India Motor Transport Congress (AIMTC) – has opposed the IRDA move.

2012 third most expensive year for insurers

Mumbai: The year 2012 was the third most expensive for insurers in terms of disaster claims. Large-scale weather events in the US pushed the total insured claims for the year to $77 billion. For insurers, this is a big setback considering that it comes on the back of $126 billion of record catastrophic claims in 2011 following the Japan earthquake and floods in Taiwan.      Unlike 2011, when GIC booked record losses of Rs 2,490 crore due to reinsurance cover it had provided to companies with exposure to Thailand, this year's disaster claims won't have a direct bearing on India. However, they will have an indirect bearing on the insurance business worldwide. High claims are a factor in hardening of reinsurance rates. Sinceinsurance companies in India buy backstop protection from international reinsurers they are affected as well.      According to Swiss Re's annual disaster report, natural catastrophes and manmade disasters in 2012 caused economic losses of $186 billion, with approximately 14,000 lives lost. Nine of the 10 most expensive insured loss events happened in the US in 2012 with Hurricane Sandy topping the list followed by drought losses. High insurance penetration in North America meant that $65 billion, over half of the $119 billion in economic losses in the region, were covered by insurance. The drought in US resulted in agricultural losses of $11 billion, the highest ever recorded loss in farm insurance.      In India, Swiss Re has classified the collapse of the northern grid in 2012 as a weather-related disaster. "Weak monsoon rains forced farmers to pump water to their fields causing three of India's interconnected power grids to collapse for several hours one day in summer. As a result, northern India suffered the largest electrical blackout in history, affecting an area encompassing 670 million people," the report said.      "The severe weather-related events in the US provided a reminder of the value of insurance and the vital role it plays in helping individuals, communities and businesses to recover from the devastating effects of catastrophes. However, large parts of the globe that are prone to weather extremes were not able to rely on financial relief due to lowinsurance penetration," said Kurt Karl, Swiss Re's chief economist.

RBI, IRDA probe sting op findings Sale Of Gold, Wealth Management Products By Banks Also Under Scanner

Mumbai: The Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority (IRDA) have begun a probe into allegations of irregularities at branches of ICICI Bank, HDFC Bank and Axis Bank involving violation of antimoney laundering norms. Besides scrutinizing records at the head office and branches, RBI is also studying the process employed by banks in selling gold and wealth management products to see whether there are any systemic risks. 

    "The scrutiny has been initiated after an online media firm… alleged money laundering and violation of several provisions of the Reserve Bank of India Regulations, Foreign Exchange Management Act guidelines, Prevention of Money Laundering Act (PMLA), etc," a statement issued by RBI on Monday said. The statement added final reports on all the three banks will be completed by March 31 and "thereafter further course of action as necessary will be initiated". 
    "The media firm had uploaded some videos on the internet relating to thesebanks as well as ICICI Prudential Life Insurance and HDFC Life Insurance," the RBI statement said. IRDA sources said that besides the names of lifeinsurance companies, the videos also name four insurance plans and includes names of the persons selling the products. "IRDA has already asked the CEOs for their comments. They are also trying to ascertain whether the persons are qualified to sell insurance and whether there is any mis-selling of the product," a source said. 
    Bankers say that officials exposed by the sting showed willingness to become accomplices in money laundering largely because of targets to sell life insurance plans. Banks have been finding it tough to sell lifeinsurance following the loss of customer faith in the industry. Although the commission is paid to the bank and not to the employee, private banks set targets and provide incentives to individuals for selling life insurance plans. 
    "While getting term deposits of Rs 10 lakh is not a big deal for a branch, a prospect willing to invest up to Rs10 lakh in a life insurance plan would have enabled the branch manager his entire target," said a bank official. Bankers feel that RBI may take up this issue in a forthcoming meeting with bank chiefs on risk-based supervision next week. 
    Private life insurance companies have been aggressively selling lifeinsurance plans through branches. Branch managers have willy-nilly encouraged relationship managers to use moral suasion. "There have been instances when a bank official calls up a depositor and warns him that a cheque might be returned because of a small shortfall in his account even though he is not bound to make that call. It is at times like this, when the account-holder feels obliged to the banker that the sales pitch is made and the customer feels obliged to buy a policy," said a former banker. TARGETS, SOPS TO BLAME 

•Banks have been finding it tough to sell life insurance following the loss of customer faith in the industry 

•Bankers blame targets to sell life insurance plans for offi cials' willingness to become accomplices in money laundering 

•Private banks provide incentives to employees for selling life insurance plans

Budgeting lessons from the Budget

The way the government handles or mishandles its Budget has lessons for all of us in managing our budgets     Budget is the current obsession. There was a time in the 1980s when the government used to tweak things sector by sector, leaving everyone glued to stock prices and sector calls. Then we had the reformist budgets of the 1990s, when the government began to focus on the macro aspects. Also, a large number of reforms happened outside the budget speech. In the current decade we seem a bit lost, neither able to do reforms nor tweaking micro aspects.      This seems to have trickled down as many of us do not make household budgets any more. But this does not mean we do not have to take any strategic view of our incomes and expenses. We need at least an intuitive sense and some control, in the interest of our wealth. What are the lessons for the household budget this season?      The government's budget is driven by the expense side. The household budget has to be driven by income, and we can't spend what we have not earned. At all times, we need a strategic focus on our future income and how well we have secured it. The Indian government's budget is weak because it makes too little investments to secure the future for all of us. Without economic growth, there is no job growth. When the government fails to generate future jobs, the onus on us to secure our future income by our own actions is even higher.      The government's expenses are populist in nature, with an eye on the vote bank. How the government spends the money is not driven by the long-term needs of the economy, but by a predominantly socialistic view of how to alleviate poverty and backwardness among a large section of the population. We all know of the leakages in reaching these funds to the really needy. A large portion of the money is also spent in paying for the essentials, including running the government, paying the salaries, interest on borrowings and such mandatory items. Too little is then left for building roads, hospitals, schools and other infrastructure that will help a large number of people to find jobs and a secure future.      A household budget may also become irresponsible if it focuses too much on expenses that do not build assets. It contains mandatory expenses that are inevitable like rent, transport and food. Then there are expenses on education and health, which have long-term benefits. Then come expenses that do not create assets, such as entertainment and luxury. Even if a daily account is not maintained, a household should know what percentage of income goes under these three heads. A poor household has inadequate income that barely covers the essentials. A very rich household has adequate income to indulge in luxuries. A middle class household tries to balance the three ends carefully, moving between stress and comfort from time to time. The strategic view should include insurance that covers the mandatory expenses at least, adequate future income to cover expenses after allowing for inflation, and sensible cut back of wasteful expenses to create a buffer.      A government can afford to run a deficit. It can print money, increase taxes, or borrow internationally, or even be bailed out. When a government spends more than it earns, it is still a bad decision, unless the current expense enables a higher future income. For example, running a deficit to fund infrastructure building is alright, since it will bring future benefits. But running a deficit to pay interest and salaries is bad. A household cannot run a deficit and remain healthy. Unless there is immense confidence about future income, it is a bad idea. Large loans for homes, cars, personal expenses, and unpaid credit card balances are all charges on the income, current and future. Since they have taken a loan, the charge on the future income will include interest as well.      A household's problem simply stated is as follows: Future income is subject to risks in the employment, skills and entrepreneurial markets. Expenses it has to incur are subject to increases from inflation and lifestyle changes. Therefore, the only strategic option when one is looking at a balance sheet with risks is to create a reserve. This is why a household that does not save is simply foolish. It exposes itself to the uncertain future with very little preparedness. Deficit is bad for the government and disastrous for the household.      The government's budget receives wide-ranging criticism and is subject to  analysis about what was allocated where and why. The household budget is not subject to such scrutiny. It is secretive, seldom involves all members of the household, and is mostly not documented. It need not be publicised. But it could do with scrutiny and strategic direction from an external, dispassionate professional. Financial planning is not merely investment advisory that will tell you what is the asset allocation that helps your financial goals. It is about taking charge of your personal finances, in your best interest. It is time personal finance audit is available to households, where professionals study the income and expenses, liabilities and assets, and lay out before the household its strategic options. Instead of worrying about the macro picture of the government budget, perhaps some of us can go micro this season?

Non-life insurers plan disaster fund In Talks With NDMA, Most Affected States To Provide Catastrophe Covers

Mumbai: Non-life insurers are working on a catastrophic fund to provide relief to victims of natural calamities such as cyclone, floods, earthquake and tsunami. Insurers are in talks with the National Disaster Management Authority (NDMA) and state governments to set up a fund that will take care of providing immediate relief to victims.      "At present, authorities clear the relief package after the disaster. A catastrophe insurance will ensure that, rather than wait for relief, the cover will provide predefined compensation to the victims," said G Srinivasan, chairman, New India Assurance. "I have recently met with the chief minister of Orissa state and put forward the proposal of a catastrophe cover."      He added that the cover would have a pool structure in which, besidesinsurance companies, the NDMA could also make its fund available.      "Insurance companies can provide a layer of support and get support fromreinsurers. The government can also chip in," said Srinivasan.      Insurers say that the cover could be either designed separately with state government or there could be a central pool for all states. In India, states like Orissa and Andhra on the East Coast and Gujarat on the West have been regularly affected by disasters. The Himalayan states have also been affected by earthquakes in the past.      According to Swiss Re, economic losses from natural catastrophes and man-made disasters may reach at least $140 billion in 2012. The worlddisaster claims are largely from the United States which dominates every year because of hurricanes on the East coast. Of the economic losses of $140 billion, over $65 billion is likely to be borne by reinsurers. This means that the cost of the claims is spread around companies across the world.      Although natural disasters in India rank among the highest in terms of human casualties, there is hardly any impact on the insurance industry because the worst affected are the poor with little assets and no insurance.      Most of the countries that are frequently subject to natural disasters, such as US on the Gulf coast and Japan, have their own insurance programmes to cover such disasters.  Immediate accident cover for AP highway victims on anvil  Mumbai: State-owned insurance companies, led by the GeneralInsurance Council (GIC), are finalizing an assistance programme to provide immediate relief to victims of highway accidents in Andhra Pradesh. "This is a pilot project and it is in the process of being finalized in AP," said G Srinivasan, chairman, New India Assurance. He added that the aim is to provide relief to accident victims by rushing them to hospitals and it was too early to draw conclusions whether it will be of great assistance to theinsurance industry.      The project is being implemented by GIC, the association of all non-life insurers, under the aegis of the Insurance Regulatory and Development Authority. The council is appointing a service provider which will have a team for highway assistance. According to Srinivasan, such a project could also help insurance companies in managing their third-party liability business which provides compensation to accident victims. "Once we have saved lives, we can collect information about the accident and settle claims immediately," said Srinivasan. TNN

Health cover may become cheaper for women

Mumbai: Health insurance for women could get cheaper considering thatinsurance companies view them healthier than men. Statistics ofinsurance claims show that women are healthier than men but they end up paying the same price for health cover as Indian companies do not practice gender-based pricing. Besides, how much women will pay in future for health cover will depend on whether insurance companies cover maternity under mainstream policies.      "Most men with health insurance policies are professionals and end up with a more sedentary lifestyle and are, therefore, more prone to be afflicted by these kind of (lifestyle) diseases," said Sanjay Datta, head of claims and underwriting at ICICI Lombard General Insurance, the largest private sector health insurer. The company has done an analysis of its claims which shows that men's illnesses are strongly linked to lifestyle issues such as "stress, long work hours, smoking, drinking" and women's diseases are linked to neglect, weight gain and reproductive issues.      "As of now, we have not inculcated this in finer pricing. But it does have an impact in pricing of family policies," said Datta. According to Datta, most of ICICI Lombard's policies have started incorporating maternity benefits, which add to claims. "Although maternity is not an ailment, there is an element of certainty in it. Though it pushes up costs we cover it because customers find benefit in the product," said Datta. He said the decision to incorporate maternity was to encourage people to buy the cover. "Nobody wants to use a mediclaim policy but when someone holds apolicy for 10 years and there is no claim there is a feeling on the back of his mind that it is not utilized," he said.      "In general, women are better risks then men although there are some conditions peculiar to women in the 45-55 age band," said Segar Sampathkumar, general manager, New India Assurance, the largest insurer in India. Sampathkumar said maternity risks are still excluded but they are being increasingly covered under  group policies by employers. "In some group policies, which do not include coverage of employee's parents, maternity claims account for almost 60% of claims costs," he said.      According to Sampathkumar, there are downsides to covering maternity in health insurance policies. "If this cover is included in standard policies, the pricing will go up for all. Also since this is not an unforeseen event, it will be possible for people to plan and buy the cover," he said. Otherinsurance companies also say that their analysis shows that incidence of Caesarean deliveries is higher among the insured than in the general population.      According to ICICI Lombard's data, women accounted for only 44% of total claims. Claims for injuries are more for men at 11.5% in contrast to women at 6.8% of all claims. Similarly, in claims related to the circulatory system (including heart-related claims) the ratio is 9.3% of total claims for men and 5.2% in women. Women are more afflicted by genitourinary ailments with 13.4% claims under this segment as compared to 9.5% for males.      Overall, the highest number of claims for women is on account of treatment for different types of infections.  FEWER CLAIMS  •Women account for only 44% of total insurance claims  •Claims for injuries are higher for men at 11.5% in contrast to 6.8% for women  •Of claims related to the circulatory system, including heart-related diseases, men account for 9.3% and women 5.2%