Optima Insurance Brokers Pvt. Ltd.

The unusually heavy rains and resultant flooding and landslides have caused unprecedented loss of lives and property across the length and breadth of the state with economic losses expected to cross $3bn. The general insurance industry is likely to receive claims of over $500 million.,’’ said an official.”

Motor insurance will bear the brunt of the claims as the state has one of the world’s highest density of vehicles on the road numbering over 11million , with close to 1 million vehicles added in 2017 alone. The state also has one of the highest numbers of luxury cars registered anywhere in India.

Considering these figures and the total devastation across many districts, the magnitude of motor claims from across the state itself will run into millions of dollars. Over 300 lives have been lost so far and the number is expected to go up as many people were left stranded when the flood waters entered their homes and premises. The life industry is thus also expected to take a major hit.

There have been considerable losses to property and businesses across the state. Though most of the losses are uninsured, substantial claims can still be expected.

Entire luxury condominiums in cities like Kochi and Aluva were submerged by the surging flood waters. Industrial corridors also reported massive flooding and insurers can expect claims from damages to stock, equipment and machinery from factories and warehouses.

The state’s main international airport at Kochi has suspended operations till 26 August, as water entered the complex inundating the terminal buildings and warehouses around the airport premises. Losses here too could run in to millions of dollars as critical plant and equipment and goods stored in the premises have been damaged or destroyed. There is also a possibility that aircraft parked in the airport premises could have been damaged from the flood water.

The general insurance industry paid claims amounting to $200m for the Jammu and Kashmir floods of 2014 and $680m for the Chennai floods of 2015.

Indian insurance companies have stopped providing insurance cover to goods, mainly crude oil imported from Iran. Indian general insurers have stopped giving any cover for Iran oil cargo since 8 May and no existing cover is valid beyond 4 November,’’ said an official.”

Domestic insurers, including New India Assurance (NIA), United India Insurance and reinsurer GIC Re also confirmed they have stopped providing insurance cover for Iranian cargoes.

Public sector insurers rely on reinsurance from India’s only reinsurer GIC Re, which in turn depends on reinsurance companies in both Europe and the US to hedge risk. European and US reinsurers are wary of the risk of breaching sanctions. Without the backing of global reinsurers, Indian insurance companies will find it difficult to manage the risk.

India is the second biggest buyer of Iranian crude after China, and without insurance coverage to protect their plants, the country’s refineries may have to cut down their imports from Iran earlier than anticipated.

In May, the US said it plans to re-impose some sanctions against Iran starting in August, with full sanctions in place by November, after withdrawing from a 2015 nuclear accord with Iran. The first US sanctions on Iran will start on 6 August and a second set will begin on 4 November.

Meanwhile, Iran is offering to insure oil cargoes to India in the face of the impending US sanctions, industry sources said.

India’s proposed National Health Protection Scheme (NHPS), which is likely to be launched on 15 August with Prime Minister Narendra Modi’s Independence Day address, was announced on 1 February by Finance Minister Arun Jaitley in his Budget speech. It would cover more than 100 million poor families and provide INR 500,000 in annual medical coverage for secondary and tertiary healthcare for a family of five.

In fixing the NHPS premium, the government is banking on the scale of the scheme as well as previous schemes such as the Rashtriya Swasthya Bima Yojana, a government-run health insurance programme for those who live below the poverty line. Niti Aayog or the National Institution for Transforming India is in the last rounds of discussions with insurers and States. It is expected to finalise the full details of the health insurance scheme, and also a tender for bids from insurers by this month with an upper limit for the premium. At present, the ceiling is likely to be set for only one year and could be revised from the second year, based on the response.

NHPS is likely to have an annual premium of less than INR1,100 ($16.30) for each eligible household, with the central and state governments saying it should be closer to INR1,050 for every family. However, insurance industry sources say that insurers were keen on keeping the premium a bit higher at about INR1,500-2,000 per year for the scheme to be feasible.

The Indian insurance sector today faces the challenge of limited expertise and skilled workforce. Skilled workforce is required for risk based underwriting, creating innovative products that will appeal to people. Niche high-end skills in complex and highly-specialised areas such as risk management, credit evaluation and financial engineering are also required.

The lack of suitable candidates needed to handle such functions is the biggest challenge employers are facing today. A recent survey estimated that there is a need of at least 2.1 million insurance educated employees by 2025.

There is also a lack of awareness among students and young professionals about national and internationally recognised certifications and training for skill development. A recent market research reveals that awareness level of internationally recognised certifications and training is medium among young professionals, though there are many firms offering such courses.

The insurance industry is struggling hard to meet skill requirements. This is because the current education system does not consider the component of skilling in its curriculum, which in turn fails to churn out a skilled workforce necessary for the industry. Most Indian educational institutions continue to follow the traditional approach to teaching that is based on content delivery rather than on knowledge delivery. All these have created a huge gap in what the industry needs and the output of educational institutions.

More than 700 million Indians are estimated to be in the working age group (15-59) by 2022, of which more than 500 million will require some form of vocational or skill training. Statistics also show that 47% of graduates in India are not employable due to lack of English language knowledge and cognitive skills. For skilling to take wings, integration of skill development and education is essential.

The Health Ministry is drafting a law which will make any breach of privacy of health data punishable by up to five years and a fine of up to INR50,000.This means that insurers which use the health data of people to sell them health or life insurance policies will be affected once the Digital Information Security in Healthcare Act (DISHA) comes into force.

“Digital health data, whether identifiable or anonymised, shall not be accessed, used or disclosed to any person for a commercial purpose and in no circumstances be accessed, used or disclosed to insurance companies, employers, human resource consultants and pharmaceutical companies, or any other entity as may be specified by the Central government,” the draft says.

“Insurance companies shall not insist on accessing the digital health data of persons who seek to purchase health insurance policies or during the processing of any insurance claim. Provided that for the purpose of processing of insurance claims, the insurance company shall seek consent from the owner for access to his or her digital health data from the clinical establishment to which the claim relates,” it adds.

The proposed consolidation of National Insurance, United India and Oriental Insurance will decide the fate of 41,000 employees.Among the first casualties of a horizontal merger of three state-owned general insurers would be the elaborate layers of coordinating management.

The three public sector insurance companies reported a combined underwriting loss of INR155.91 billion (US$2.33 billion) for the financial year ended 31 March 2017.

Whether their merger will help in lowering losses from core operation will depend on how the merged entity goes about cutting costs. The biggest challenge will be streamlining manpower and the government will have to come out with a voluntary retirement scheme to let people move out.

The central government is allowing states to set up their own insurance companies to implement the Prime Minister’s Crop Insurance Scheme (Pradhan Mantri Fasal Bima Yojana [PMFBY]).

The move follows requests from several states as well as observations made by Comptroller and Auditor General (CAG) in its 2017 report that old crop insurances schemes which have now been merged with PMFBY, had been poorly implemented during the years 2011-2016.Launched in April 2016, PMFBY provides comprehensive crop insurance from the pre-sowing to the post-harvest stage against non-preventable natural risks at premiums that are low to cater to farmers.

The premiums are subsidised heavily, with the subsidies borne equally by the central government and the state.Claims are settled on the basis of yield loss assessed at the end of the crop season.

At present, five public sector insurers and 13 private insurance companies are empanelled to offer the scheme, the official said.The public insurers are Agriculture Insurance Company of India, United India Insurance, National Insurance, Oriental Insurance and New India Assurance.

The government is keen to launch the Ayushman Bharat-National Health Protection Mission (AB-NHPM), dubbed ‘Modicare’ and deemed the world’s largest public funded health insurance scheme, before 15 August, which is Independence Day in India.

Last week, Health Minister JP Nadda said the government planned to complete all pre-launch activities, including testing of the information technology systems for the AB-NHPM, by the end of July. The AB-NHPM, when it kicks-in, will subsume two on-going centrally sponsored schemes, the Rashtriya Swasthya Bima Yojana (RSBY) and the Senior Citizen Health Insurance Scheme (SCHIS).

The health insurance scheme, announced in the national Budget in February, aims to provide coverage of up to INR500,000 (US$7,700) to over 100 million poor families or 500 million people. This cover will take care of almost all secondary care and most tertiary care procedures. There is no cap on family size and age in the scheme, ensuring that nobody is left out. The insurance scheme also covers pre and post-hospitalisation expenses. All pre-existing conditions will be covered from Day One. Furthermore, beneficiaries will also be paid a defined transport allowance per hospitalisation.

The programme will require an estimated INR100 billion for the next two financial years starting 1 April 2018 and both the Centre and the various state governments will pay for the scheme.

The IRDAI has extended the deadline for linking Aadhaar, a 12-digit unique identity number issued to all Indian residents, with existing insurance policies from 31 March 2018 until the Supreme Court decides on the matter.

New insurance policies still have to be linked with Aadhaar, said the IRDAI. Policyholders are given six months from the date of buying the insurance policy to submit the Aadhaar number.

In the absence of Aadhaar, a client shall submit any of the officially valid document as mentioned in the Prevention of Money-Laundering (Maintenance of Records) Rules, it said. Under the rules, Non-Resident Indian policyholders are not required to surrender their policy for not having an Aadhaar number

The Supreme Court is hearing petitions that challenge the Aadhaar identification programme citing privacy concerns. There have also been concerns about possible leak and theft of data from the Unique Identification Authority of India (UIDAI) and the potential damage that may cause.

Regulator IRDAI has asked non-life insurers to ensure easy availability of third party motor insurance cover to vehicle owners, a move that will help states in implementing the Supreme Court order on road safety.The Supreme Court Committee on Road Safety had directed the states and union territories to periodically carry out checks to see whether vehicle owners have third party insurance cover.

The IRDAI circular follows complaints by states that cumbersome process of obtaining third party insurance is hampering implementing the apex court order. Several states, the Irdai circular said, have reported that insurers have a cumbersome process that involves inspection of the vehicle concerned and that vehicle owners have complained that it is not an easy process to obtain insurance.

In order to ensure ease of obtaining motor insurance liability, IRDAI said that “Insurers (non-life) shall ensure the easy availability of Motor TP Insurance and in no case can a request for a TP cover be denied”. It also asked them to liaise with the police authorities to facilitate issue/renewal of third party liability policy to owners of the vehicles who are not having third party cover.

The insurers have also been asked to provide facility to make available facility for obtaining online Motor TP.