News Blog

India: Regulator issues rules on acquiring listed insurers' shares

Mon, Aug 8, 2016General Insurance

IRDAI has released guidelines covering the acquisition of shares in listed insurance companies, ahead of the public listing of the first insurance company in the country. The acquirer will be required to adhere to the fit and proper criteria and seek regulator's approval for a stake of at least 5%, says the IRDAI (Listed Indian Insurance Companies) Guidelines, 2016, published last Friday. The guidelines say: "Every person who intends to make any transfer or any arrangement or agreement to transfer 1% or more but less than 5% of the paid up equity share capital of the concerned insurer, may do so, subject to compliance of Fit and Proper criteria." A self certification for “Fit & Proper” shall be filed with the respective insurance company. The guidelines added: "It will be open to the Authority to seek additional information/documents from the applicant/concerned insurer, including but not limited to shareholders' agreements and make such enquiries with regulator/s, revenue authorities, investigation agencies, credit rating agencies, as may be considered appropriate." Currently, no insurance company in India. is listed on any exchange. Several insurers are making preparations for an initial public listing. They include the private- sector ICICI Prudential Life which plans to float its shares in the current financial year. The guidelines also stipulate that the minimum shareholding by promoters should at all times be maintained at 50% of the paid-up equity capital of the insurer. However, where the present holdings of the promoters are below 50%, they will be the minimum holdings.

Asia Insurance Review

GST to make insurance costlier by 300 bps Read more at:

Wed, Aug 3, 2016General Insurance

MUMBAI: Your insurance policies- life, health and motor will begin to cost more from April 2017 as you would end up paying up to 300 basis points more in taxes. This could pinch the middle class more as they continued to depend more on insurance for savings than other investments like stock markets. Indeed, the pure protection may cost more than the unit-linked insurance plans. There are two parts of insurance and service tax is levied on the protection part and not the investment part. Term plans will be the most hit which will become costlier by 300 basis points. A basis point is one-hundredth of a percentage point. Service tax of 15% is levied on term plans, which are pure protection. This will go up to 18% in the new regime. At present, service tax of 3.5% is levied on protection part of endowment and unit-linked life insurance policy in the first year and 1.75% from second year onwards. This would go up to 4.5% in the first year and 2.25% from second year onwards. "Insurance premium rates will go up by 50-300 basis points when GST is passed," said Naresh Makhijani head of financial services KPMG. "There is greater challenge in complying with the GST laws, deciding on where to pay tax. If the proposal is accepted in one state but the policy is issued from another, where does one pay premium?" The industry believes that higher tax rate will have a negative impact on the insurance industry. Life insurance penetration has shown negative growth over the last few years. It has dropped from 4.6% in 2009 to 2.6% in 2016. Also, you will have to pay 300 basis points more for motor, health and other general insurance products. Service tax of 15% is levied on general insurance products. This will go up to 18%. "Apart from policies becoming costlier by 300 basis points, processes will become cumbersome and we will have to see if we need to register in each state," said Ritesh Kumar managing director and CEO HDFC Ergo. The life insurance council- representative body of life insurance companies- has asked the finance ministry that GST be levied only on the premium collected by the insurance companies only for their life insurance services, excluding the investment portion where the insurance companies act purely in a fiduciary capacity.

The Economic Times

Irdai asks banks/FIs not to sell insurance policies forcibly

Mon, Aug 1, 2016General Insurance

Irdai has directed banking and financial institutions, who act as bancassurance agents for insurance companies, not to forcibly sell policies to their customers or even without their consent. The Insurance Regulatory and Development Authority (Irdai) said it was receiving plaints from policyholders on being mis-sold insurance policies by banks and NBFCs. Most of the plaints where cases of misselling and unfair business practices took place included: Compulsory bundling of insurance products with bank’s products despite expressing unwillingness when customers approach for housing loans; insist to buy insurance or make it a condition, at times, to get locker and issuance of policies without consent. In other cases, customers were also forcibly sold single premium insurance policies in lieu of fixed deposit receipts stating that “this will give better benefits than fixed deposits,” Irdai said in its list of types of complaints. Customers were also issued regular premium policies in place of single premium policies and renewal premiums were debited from their bank account without any intimation, assuring they will get double payment after a select period. Regulations under ‘Registration of Corporate Agents’ expressly forbids compelling the customers to buy insurance, Irdai said, adding there is a specific code of conduct to be aboded by corporate agents. “Regulation 22 (5) of Irdai (Registration of Corporate Agents) Regulations, 2015 states that the corporate agent has to disclose to the Authority the details of specified persons (SP) along with their certificate number issued by the Authority.” “This will help to ascertain the name of the SP who was responsible for such misselling,” the regulator said. When such cases were referred to the insurers, they said banks had taken necessary action against the erring employee. In good number of cases it was informed that the employee has already left service and in many cases premium amount collected by insurer was refunded to the customer or he is allowed to change the mode of payment/type of plan, it added. “It is emphasised that refunding the money or allowing the customer to change the mode of payment or plan is not the solution for this vexatious issue. Instead the banks/NBFCs should have a system which should proactively detect and discourage such kinds of misselling/forced selling/wrong selling,” it said. Irdai directed: “You (Banks/NBFCs) are hereby advised to follow the regulations cited herein scrupulously and bring it to the notice of Specified Persons/concerned officials that such complaints are being viewed seriously by Irdai.”

The Financial Express

General insurers gross premium in June rises 20%

Wed, Jul 27, 2016General Insurance

General Insurance companies in India continue to post positive growth at 20.3% (year-on-year) in gross direct premium in June. Data from General Insurance Council shows private players have continued to see higher growth compared to public sector insurance companies. In June, general insurance industry saw gross premium income at `8,522.22 crore against `7,082.57 crore in June last year. While private insurers registered gross premium income at `3,627.51 crore up by 30.6%% compared to last year. While public sector insurance companies saw growth of 13.3% at `4,374.54 crore in June, 2016. The general insurance sector in the last few months has seen sustained growth and higher participation from private players as against public sector insurers. “Growth by private insurers might be due to their low base compared to public sector insurance companies. However, private sector insurers are gaining foothold in the industry. They are already leading with high market share in motor and fire insurance. But some of the big corporate continue to be clients of public sector insurance companies,” said a top insurance player. In the motor insurance segment, gross direct premium income underwritten by the non-life insurers up to June was Rs 11,452.64 crore with Rs 6,108.67 crore for private sector and Rs 5,343.97 crore for public sector companies. Apart from general insurance, stand-alone health insurance companies also saw surge in their premium income by 30.6% in June. “Stand-alone health insurance companies have started to see pick-up in their business, being just a health insurers has also benefited such players. with growing awareness and importance of health care, we hope this segment will continue to see strong growth,” said an official.

The Financial Express

Aditya Birla Health Insurance becomes 6th stand-alone health insurer, granted registration by IRDAI

Mon, Jul 18, 2016General Insurance

With the IRDAI granting certificate of registration to Aditya Birla Health Insurance Co, your choice of a health insurance provider has widened. The number of stand-alone health insurers registered with IRDAI has now gone up to six. According to a release issued by the insurance regulator on Monday, the certificate of registration to the new company was issued on July 11.

The Financial Express

Reinsurance Group gets initial nod to set up India branch

Sat, Jul 2, 2016ReInsurance

US-based life and health reinsurer Reinsurance Group of America (RGA) has received the first level approval regulator Irdai to set up a branch in the country, a company official said today. The Insurance Regulatory and Development Authority of India (Irdai) has approved R-1 (requisition for registration) application of the company. The nod was given by the regulator at its board meeting held in Hyderabad yesterday, the official said. The company will now apply for final approval R-2, which is likely to be cleared by Irdai during its next board meeting, the official added. RGA Managing Director and Chief Executive-India, Sri Lanka and Bangladesh, Thomas Mathew, was not immediately available for comment. At present, the company is providing reinsurance cover to 23 of the 24 life insurance firms in the country, including state-owned behemoth LIC. It also provides reinsurance cover to four life insurance companies in Sri Lanka. RGA has clients in over 60 countries. It is the global market leader in life reinsurance with total revenue of $10.4 billion and assets of $50.4 billion in 2015. RGA is currently operating in the country as a service company through its Ireland-based entity. Last year, the company did a business of Rs 439 crore in India, where it has 37 per cent of the market share in the reinsurance segment. The company follows the January to December fiscal year.

The Financial Express

IRDA issues first Indian private sector reinsurance licence

Fri, Jul 1, 2016ReInsurance

The IRDA board on Thursday approved the initial license — known as R1 in regulatory parlance — to ITI Reinsurance, promoted by a firm controlled by Sun Pharma co-promoter Sudhir Valia. The Insurance Regulatory and Development Authority of India (IRDA) has given its first phase of licence to ITI Reinsurance, thus clearing the first ever Indian private sector reinsurance company in the country. The IRDA board in a meeting in Hyderabad on Thursday approved the initial license — known as R1 in regulatory parlance — to ITI Reinsurance, promoted by a firm controlled by Sun Pharma co-promoter Sudhir Valia. State-owned GIC Re has been the country’s sole reinsurance company so far. Four global players — Munich Re, Hannover from Germany, Swiss Re from Switzerland and French major SCOR — have also received R1 licences and they are awaiting final clearance from the regulator. Lloyd’s of London has also got the initial clearance from the IRDA. ITI Reinsurance is owned by Fortune Financial Services, in which Valia and others have a majority stake. PK Shah who had earlier worked in New India Assurance and Reliance Industries has been appointed as the MD & CEO of the company. Valia is the brother-in-law of pharma tycoon Dilip Shanghvi, and executive director and co-promoter of the world’s fifth largest generic drug maker Sun Pharma. Valia, along with a couple of high net-worth individuals, bought Fortune Financial Services from its original founders J T Poonja and Nimish C Shah.

The Indian Express

Impact of HDFC Ergo, L&T Insurance merge

Tue, Jun 14, 2016General Insurance

In a board meeting held on 3 June, HDFC Ergo General Insurance Co. Ltd approved the acquisition of L&T General Insurance Co. Ltd. Pending approvals from the Insurance Regulatory and Development Authority of India (Irdai) and the Competition Commission of India, HDFC Ergo will buy 100% stake in L&T Insurance for Rs.551 crore and will subsequently merge the insurer with itself. L&T Insurance is a wholly-owned subsidiary of Larsen & Toubro Ltd; it had launched the insurance company in 2010. HDFC Ergo, on the other hand, is a 51:49 joint venture between HDFC Ltd and Ergo International AG of the Munich Re group. With the buyout of L&T Insurance, HDFC Ergo will also acquire the insurer’s policyholders and distribution network. So, what does this merger and acquisition (M&A) now mean for L&T Insurance policyholders in terms of policies they have or the premiums that they pay, and what should they lookout for? Before we answer these questions, let us look at what L&T Insurance offers retail customers.

Live Mint

Don’t use force to obtain discharge voucher: IRDAI to insurers

Wed, Jun 8, 2016General Insurance

Regulator IRDAI today directed general insurance companies not to use coercion or force to obtain discharge vouchers or receipts of settlement of claims, from insured persons. A discharge voucher represents culmination of insurance claim, which is evidence of payment. Wherever there are no disputes by the insured/s or claimant/s to the amount offered by the insurer towards settlement of a claim, the present system of obtaining the discharge voucher may be continued, IRDAI said. The insurers must ensure that the vouchers collected are dated and complete in all respects while obtaining the signature/s of the insured persons or claimant(s). In case the amount offered is disputed by the insured or claimant, insurers “would take steps to pay the amount assessed without waiting for the voucher discharged” by the insured/s or claimant/s, the Insurance Regulatory and Development Authority of India (IRDAI) said. However, “under no circumstances the Discharge vouchers shall be collected under duress, by coercion, by force or compulsion,” the regulator said. Insurers, on various occasions, had submitted that a circular of September 2015 is not in the line with the IRDA (protection of policyholders interests) Regulations, 2002 (PPI Regulations) and the Indian Contract Act. IRDAI reviewed the matter taking in to consideration the provisions of the Contract Act, PPI Regulations and Apex Court Judgements. It said the directions to general insurance companies including stand-alone health insurers and specialised insurance companies have been issued after taking equal cognisance of the legal rights of the policy holders and insurers.

The Financial Express

HDFC ERGO to turn into third largest general insurer after Rs 551cr L&T unit buy

Sat, Jun 4, 2016General Insurance

HDFC ERGO General Insurance said on Friday it has acquired L&T General Insurance, a wholly owned subsidiary of Larsen & Toubro, reports fe Bureau in Mumbai. HDFC ERGO General Insurance said on Friday it has acquired L&T General Insurance, a wholly owned subsidiary of Larsen & Toubro, reports fe Bureau in Mumbai. The transaction, an all-cash deal, has been valued at R551 crore, a filing to the BSE said. The acquirer is a 51:49 joint venture between HDFC and ERGO International (part of the Munich Re Group) and the fourth largest private sector general insurer in India. The acquisition will make it the third largest general insurer after ICICI Lombard and Bajaj Allianz. In the year to March 2016, it wrote gross premiums of Rs 3,467 crore, earning a profit after tax of R151 crore. In December last year, ERGO had increased its stake in the joint venture from 25.84% to 48.74% at a cost of R1,122 crore. The transaction valued the company at Rs 4,900 crore. L&T General Insurance, which wrote gross premiums of Rs 483 crore in FY16, is among the few players operating without a foreign partner. In 2013, a proposal to merge with Future Generali Insurance fell through. “While a foreign partner was subsequently found, the deal was shelved and so the top management decided it would be better to exit the business,” a senior industry executive said. The consolidation in the general insurance sector, which grew premium income at 13.8% in FY16 to Rs 96,402. 37 crore, will hurt smaller players, experts say. Currently there are 29 players in the space include four from the public sector. With the Insurance Laws (Amendment) Act passed in February 2015, enabling foreign partners to increase their stakes in their Indian outfits from 26% to 49%, activity has picked up. Sun Life Financial upped its holding in Birla Sun Life Insurance from 26% to 49% at an investment 1,664 crore while French insurer AXA increased its stake in both the life and general insurance joint ventures with Bharti Enterprises to 49% for an undisclosed amount. In August last year, Standard Life announced plans to buy an additional 9% stake in its Indian insurance venture HDFC Life to raise its ownership to 35%, valuing HDFC Life at Rs 18,951.4 crore. British insurer Aviva also announced plans to raise its stake in its Indian joint venture with Dabur Invest Corporation to 49%. Deepak Parekh, chairman of HDFC and HDFC ERGO General Insurance, said, “Considering the importance of scale in the insurance business, consolidation within the insurance industry is inevitable. This transaction marks the beginning of this consolidation phase. The acquisition will help HDFC ERGO to further strengthen its presence in the market. The combined size and expertise will result in improved cost efficiencies in the merged entity and benefit policy holders and other stakeholders.”

The Financial Express