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Pass on discount on health insurance claim to policyholders-IRDAI
[Posted by: InsuringIndia News on Friday, June 26, 2015 1:20 PM]
Asking insurers to get the best and cost-effective services for health insurance claimants, regulator IRDAI has directed them to pass on discounts, if any given by hospitals, to policyholders.

In a circular to insurers and Third Party Administrators (TPAs), IRDAI said they may be obtaining discounts from various network providers and other hospitals outside the network during settlement of claims under health insurance policies.

"While every insurer and TPA shall endeavour to get the best and cost effective services to the policyholders or the claimants of health insurance policies, it shall be ensured that the discounts obtained from the hospitals, if any, are passed on to the policyholders or the claimants of the underlying health insurance policy," it said.

Insurance Regulatory and Development Authority of India (IRDAI) said that insurers and TPAs should pass on the benefit of the discount to the concerned policyholder or the claimant.

It also asked them to put in place procedures including mandating the hospitals to reflect such agreed discounts in the final hospitalisation bill of each claim, whereby the policyholder or the claimant can also be aware of the actual bill raised by the hospital.

Also, in cases where the admissible claim amount comes more than the sum insured, the agreed discount shall be on the gross amount raised in bill, before letting the policyholder or claimant bear the costs over and above the eligible claim amounts.

Further, it said if health insurance policies have co-payment or deductible conditions, co-payment or deductible should be effected only after netting of the discounts offered by hospital, if any.

IRDAI said the discount should be in absolute monetary terms and every insurer shall make these procedures as part of their detailed guidelines on claim settlement.

The regulator said the guidelines would come to force with immediate effect for both cashless services and reimbursements of all claims on health insurance policies.

Here's how fixed deposits can be useful for medical needs
[Posted by: InsuringIndia News on Thursday, June 25, 2015 10:43 AM]
Investing in company fixed deposits is no more boring and rigid where you just get a cheque at the specified time, or just lose money if the company defaults.

For the first time, Indian savers in company deposits can use their investment to meet emergency health expenditure without breaking deposits. Triple-A rated Dewan Housing Finance, or DHFL has introduced a scheme christened as "Wealth2Health", which allows up to 75% withdrawal during healthcare emergencies with an option to reinvest the same money.

"We are trying to tap higher share of retail money from the borrowing side," said Harshil Mehta, CEO, DHFL. "So far retail corporate fixed deposits form 8%, which has doubled past four years. We will be promoting this through our 400 branches and distributors."

"A retail presence both in lending and borrowing sides should help us venturing out new areas in future," he said.

The minimum deposit amount is Rs 25,000.It offers interest rate in the range of 9-9.50% with 12-60 month maturities.

Unlike bank deposits, if you investment in corporate deposits, you cannot break it easily as penalties are much higher. In some cases, you will not receive any interest income if schemes are redeemed well before the scheduled maturity.

The Wealth2Health deposit scheme comes with a deposit card, which is linked to the underlying fixed deposits. A customer can use the same for cashless access to a set of hospital networks. The card would also fetch some discounts be it hospitalisation or medical tests. An accidental death insurance of Rs 1 lakh is also attached to the first deposit holder.

For example, if you have deposited Rs 1 lakh, you can pay hospitalisation fees up to Rs 75,000. You can bring back the money after a sometime and run the deposit scheme as usual. The only cost: you will not earn interest on the specific withdrawal till you bring back the money.

But, the scheme is likely to gain popularity more in smaller towns and cities, said some distributors. This may not be popular in mega cities where people have higher cash balances in savings accounts.

"The medical contingence requirement, if any, can be set up now using this DHFL deposit scheme," said Suresh Sadagopan, the founder of Ladder 7 Financial Advisories. "It serves both the purpose of contingency fund while earning a good interest rate if that does not arise."

It functions like a normal deposit when the customer is well when the customer is ill, it works like a health fund and pays for expenses, said a company official.

The company's retail fixed deposits were at Rs 3,728 crore as of March 31. DHFL's total loans including securitised assets expanded 27% year-on-year to Rs 57,000 crore in 2014-15. Its average loan ticket size is at Rs 11.6 lakhs among over four lakh customers.

ULIP premiums of private insurers surge even as mutual funds attract inflows
[Posted by: InsuringIndia News on Tuesday, June 16, 2015 11:21 AM]
Even as mutual funds attract inflows, many investors are accessing equity through Unit Linked Insurance Plan (ULIP) policies. A large part of premiums of most private insurance companies in the past one year has come from ULIP policies.

ICICI Prudential Life Insurance, the largest private life insurance company, has had 85% of its new premiums coming from ULIP schemes in FY15 — up from 66% in FY14. Similarly, HDFC Life's premium share from ULIP policies touched 62% in FY15 against 49% in FY14 while ULIP contributed 45% of SBI Life's premium in FY15 against 34% in FY14.

Higher inflows into ULIPs can be attributed to three factors. "Regulatory changes have made life insurance products more customerfriendly both in terms of product features and charges," said Arijit Basu, CEO & MD of SBI Life which manages equity portfolio of Rs 23,000 crore, of which 90% comes from ULIPs. Irda has now capped the percentage limit an insurance company can charge on a ULIP policy. For a 20-year policy, the maximum charge an insurance company can levy is 2.25% on the notional return of 10% — better known as reduction in yield (RIY), which is a measure of the gap between what the customer's funds earn and what the customer gets after deduction of charges. Similarly, for a threeyear and four-year policy, the maximum charge can be 3% and 5%, respectively. Thanks to fierce competition, insurance companies are charging as low as 1-1.5%.

Secondly, the lock-in period of ULIP has increased to five years from three. Lastly, surrender charges have also been capped. For the first year, the surrender charge is Rs 6,000 and it is nil from the fourth year.

Besides, the average ticket size of ULIP is usually 3-4 times the conventional policy. This means that the premium collected by private insurance companies on ULIP is also higher than conventional policies. This is why the weighted received premium (WRP) growth of private life companies in 2014-15 has been more than that of Life Insurance Corporation.

"ULIPs have regained their popularity and this can be attributed to the government pushing a growth agenda. Customers are allocating more funds towards financial assets and instruments, including life insurance," said Sandeep Batra, ED at ICICI Prudential Life insurance, which manages Rs 1 lakh crore of funds of which 50% is invested in equities. ULIP, being an urban market product, has benefited insurers using Bancassurnace channel — selling insurance through parent or other banks.

The top three private insurance companies derive nearly half of their new premiums from their Bancassurance channel support.

LIC upgrading technology to compete with private sector
[Posted by: InsuringIndia News on Friday, June 12, 2015 10:32 AM]
State-run Life Insurance Corporation of India is upgrading its technology to compete better with the private sector. The country's largest insurer has issued tenders for upgrade of its system to handle documents and speed up policy writing, creation of acall centre than can handle queries in multiple languages, and purchase of iPads for mobility solutions.

"The idea is to improve services. Our technology needed to scale up at the same level as our growth and we needed a faster turnaround time," said an executive with LIC's information technology department. "This is not just a consumer-facing revamp but even internal IT is being upgraded."

The executive, who did not wish to be named, said that LIC is working with consultancy firm EY to spearhead its technology change, and that all upgrades and the cost of buying new technology and running the systems would be a few hundred crore rupees. Telephone calls to LIC seeking comment went unanswered. EY declined to comment.

But the plan for the insurance gi ant's technology transformation is clearly charted in the tenders that it has been issuing. In August, LIC put out a tender to buy 590 iPads. In December, it came out with another to create a new email archival system that could support 200,000 email accounts and another tender to virtualise about 125,000 desktops and laptops.

In February this year, LIC put out a tender for two-factor authentication on desktops, including fingerprint scanners. The insurer said it planned to buy about 100,000 fingerprint scanners in a phased manner. Other tenders issued this year include one to modernise enterprise document management system— used to process policies — and creation of a call centre.

LIC's tender documents show a whole range of companies in the technology sector— from Tech Mahindra and TCS to Microsoft and Oracle—have taken part in the pre-bid discussion meetings. The investments will help the domestic technology market, which suffered in the last few years as companies held back on investment. "LIC's scope of technology upgrade is huge. They started with infrastructure - with desktop virtualization— and are now moving to applications. The idea is that they also have to be attractive to the high-net worth individuals who are more profitable customers," Sanchit Vir Gogia, chief executive and analyst at Greyhound Research, said. He added that private insurers already use tabletbased software to improve.

LIC is not the only state-owned enterprise loosening its pursestrings. Air India is also beginning to make investments in IT and is exploring tablet-based software offering for its pilots and crew, ET had reported earlier this week. "I would expect more such contracts being issued by public sector companies," said Gogia.

Maggi row--Food companies show interest in product recall insurance
[Posted by: InsuringIndia News on Wednesday, June 10, 2015 10:48 AM]
Insurance companies are getting higher number of inquiries for product recall insurance sold to corporates following the Maggi noodles controversy.

The 'product recall' cover is an add-on to product liability. Insurance companies recommend this cover to manufacturers because, besides covering the cost of recall, it is seen as a feature that limits product liability. Until now, food companies in India were not so much bothered about product liability because of the low value of items.

"Product recall insurance was initially popular among the automobile industry. Then there was demand from the pharmaceutical industry. We are now seeing interest from the food industry," said Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance. "Indian companies are now being conscious about product liability," said Singhel.

Praveen Vashishta, chairman, Howden Insurance Brokers, a UK based insurance company, said, "I am sure that there will be more enquiries in coming days but not sure how much of them will actually translate into purchases."

According to Vashishta, it is rare for a food & beverages company that is catering 100% to the Indian market to take out a product recall cover. "Those who export to the US or to Europe invariably take this cover as the regulators are very strict. Besides, the insurance company also provides crisis management advisory services, including appointment of a public relations agency," he said.

According to Ketan Kale of JKT Independent Insurance Brokers, high-profile events usually increase awareness. "We have seen it during the Satyam case. The incident increased awareness of the directors and officers policy and today the cover is a commodity with almost every company going for it," said Kale.

This specialized cover being sold to corporates is designed by international broking firms based on such covers sold internationally. In India, the most significant instance of product liability in the food industry took place in 2003 when chocolate-maker Cadbury faced charges that it was distributing chocolates with infestation. The FDA had ordered seizure of all Cadbury's Dairy Milk chocolates. The incident caused huge losses to Cadbury and compelled the company to redesign its packaging. However, even after the incident, sales of product liability cover did not pick up significantly.

It is not just the presence of toxic substances which trigger a recall. In the US, one of the top causes of recall are undeclared allergens in the food with milk being one of the largest unreported allergen. The other causes of recall are the presence of salmonella and other bacterial infections.

Health, motor e-insurance to be available by year-end
[Posted by: InsuringIndia News on Thursday, June 04, 2015 11:13 AM]
Insurance repositories are ready to offer general insurance policies in electronic form. By the end of 2015, health and motor insurance policies will be available in electronic.

"The data exchange policy has been agreed upon between the General Insurance Counsel and insurance repositories. And the data structure for health and motor insurance has been defined. So we are ready to launch e-insurance in these two segments," said SV Ramanan, CEO of CAMS Insurance Repository.

Last week, the insurance regulator came out with revised guidelines for insurance repositories and electronic insurance policies, which said that all insurance policies --- life, general or health --- can be held in the digital format. "This means, general insurance companies can now tie-up with repositories. Launching health, motor policies in demat format by this year-end is achievable now," said Ramanan.

Home insurance will take some more time to be available in the electronic. This segment is also comparatively small.

"The immediate priority will be converting health and motor policies with annual premiums of Rs 10,000 or more," he added. In case of life insurance, at present, policies with annual premium of Rs 50,000 or more is to be issued in electronic form.

Ramnan said around 11-12 crore new general insurance policies are issued every year. So, that is the number of electronic policies the repository is targeting.

Insurance Repository System was formally launched in September 2013. And till date, CAMS Repository has a total of 150,000 accounts of which 60,000 hold demat policies.

Health savings schemes could soon become a reality
[Posted by: InsuringIndia News on Tuesday, June 02, 2015 10:16 AM]
You might soon be able to buy long-term health savings schemes from health insurance companies.

Similarly, you could also get access to comprehensive health policies with in-built outpatient department covers.

These recommendations are part of the report submitted by the committee set up by the insurance regulator under M Ramprasad, member, non-life, IRDAI, to review the existing health insurance framework. The report suggests sweeping changes in offerings, product approval process and definitions of various terms and services.

"It is recommended that the regulations enable all health insurers to offer health savings products which allow customers to build up a fund to pay for long term health expenses. Tax incentives should be extended to encourage insured to buy such savings linked health products to provide for health care costs for long term," the report said. However, the committee has strongly cautioned against permitting unit-linked health savings products to ensure that policyholders are "not exposed to market volatilities."

The committee has recommended a structure to increase premium in line with medical inflation every year. "The pricing aspects in the regulations may be revisited to include an inflation benchmark (CPI+3%) that allows an automatic increase in premium to take care of medical inflation year on year," the report stated. While the insurers can hike the premium to this extent, they would require IRDAI's approval for any hike beyond this point.

Other suggestions include allowing insurers to offer discounts on premiums to encourage customers to opt for wellness and preventive care programmes. "...not only does it lead to people being healthy but also reduces the claim cost in the long run for health insurers," the committee noted.


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*This is based on the difference between the highest and lowest premium's for a single person, age 25, looking for an individual health policy with the sum insured of Rs. 5 lakhs.
**This is based on the difference between the highest and lowest premium's for a single person, age 25, looking for a term plan, with the sum insured of Rs. 30 lakhs, and the premium paying term of 30 years.
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