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The general insurance industry is likely to see claims of around INR5 billion (US$75.6 million) after record rains caused massive flooding in Chennai and some areas in Tamil Nadu in southern India.

A senior official from the General Insurance Corporation, the sole domestic reinsurer, said that the company is still receiving estimates from insurers but cumulative losses are likely to be under INR5 billion for the industry, reported the Hindu Business Line. Most claims are from automobiles and property and small and medium enterprises (SMEs). Chennai-headquartered United India Insurance has so far received the largest number of claims amounting to INR1.3 billion, primarily for automobiles and from small-scale units.

Mr G Srinivasan, Chairman and Managing Director of New India Assurance, said that the company has received claims amounting to INR350 million. He said that the magnitude of loss for general insurers may not be as big as that seen last year during Cyclone Hudhud and the floods in Jammu and Kashmir as most claims have come from flooding in low-lying areas and there have been no major losses to industries, apart from small stock losses. Last year, natural disasters such as the floods in Jammu and Kashmir and Cyclone Hudhud led to insured losses of around INR15 billion and INR40 billion, respectively. “We don’t see a major trigger for large claims as it was not a cyclone and most of the claims will come from only flooding,” Mr M Ravichandran, President of Tata AIG, said.

Heavy flooding in the past week in the southern province of Tamil Nadu have resulted in numerous insurance claims, particularly from businesses in industrial zones.

Several large insurance companies have set up special teams to deal with the claims from affected factories. Industry players say that it is too early to give an overall estimate of insurance losses. State-owned Chennai headquartered United India Insurance has so far received claims exceeding INR1.1 billion (US$16.6 million) and more claims are expected, the company’s Chairman and Managing Director, Mr Milind Kharat, told the local media. The majority of claims are from Chennai, which is the capital of Tamil Nadu.

Chennai received its highest rainfall in the last 10 years, recording 246.5mm rainfall in 24 hours last Monday, causing extensive damage to property and life. The floods have claimed more than 70 lives in the past week. Another state-owned insurer, New India Assurance, has received claims so far totalling INR300 million in Chennai. “It’s early days. We are still awaiting the full claims data. While the sudden flooding in Chennai has resulted in claims coming from the city, claims have not yet come in from other parts of the state,” the company’s Chairman and Managing Director, Mr G Srinivasan, said.

Private insurer Bajaj Allianz General Insurance expects substantial losses in the motor and property line segments. “The city has a higher concentration of high-end vehicles, hence we are expecting considerable losses from this segment. Of the claims that have been reported for motor, many of them pertain to high-end cars. In case of property insurance, we have received claims for damage to stocks and other assets from business and commercial set ups due to inundation,” the Times of India reported, citing the insurer’s Chief Technical Officer, Mr Sasikumar Adidamu. Meanwhile, questions are being raised over Chennai’s basic infrastructure. “The master plan itself has been put together with absolutely no thought to hydrology,” said Nityanand Jayaraman, an environmental activist and writer, according to a report by Livemint. Located on the east coast of India, the city often faces cyclones and heavy rains.

To give new business from single-premium business a boost, life insurers in India plan to ask the government to do away with the 2% tax deducted at source on such policies.

In particular, the country’s biggest life insurer, state-owned Life Insurance Corporation (LIC), has seen first-year premiums from individual single-premium products plunge by 43% to INR37.52 billion (US$573 million) for the six months ended 30 September 2015, reported the Financial Chronicle citing data from the Insurance Regulatory and Development Authority of India.

The premium decline is attributed to an amendment to the Income Tax Act following last year’s Budget. Under it, the insurance company has to deduct 2% tax at source from the maturity proceeds of a life policy if the premium paid out turns out to be more than 10% of the sum assured. Speaking to Financial Chronicle, a top LIC official, said: “The life insurance industry would also be writing to the government through the Life Insurance Council while we would also write separately.” However, for the 23 private life insurers, the combined first-year premiums from single-premium policies grew by 16% to INR12.51 billion for April to September.

Insurance companies in India, hit hard by higher hospitalisation expenses in leading metropolises, are increasingly moving away from the concept of ‘one policy, one price’. Most insurers are switching to geographical pricing to address inconsistencies in healthcare costs.

KPMG, an international consultancy, estimates that 30% to 40% of all healthcare claims come from India’s top six cities, and their average claim size is about 30% higher than the all-India average, reported Business World. Mumbai is by far India’s most expensive city for healthcare. Its average claim size is 70% higher than the rest of the state of Maharashtra alone. “We have demarcated various zones across the country based on the prevailing medical costs and trends in costs,” said Mr Sandeep Patel, Managing Director & CEO of Cigna TTK Health Insurance. Zonal premium rates also take cognizance of the existing health infrastructure because tertiary care hospitals in the private sector are fairly expensive, said Mr Patel.

Zone-based health insurance pricing is seen as fair to people living in smaller cities. “Zone-based pricing ensures that customers in Tier II/Tier III cities do not cross-subsidise customers in a Tier I city by paying the same premium,” said Mr Patel. Keeping premiums lower in smaller cities also helps push purchases of health insurance in those areas, which Mr Patel said have a very low penetration compared to major cities. “I expect the pricing differential to grow to reflect the significant disparity between the cost of health care in leading cities and the rest of India,” said Mr Shashwat Sharma, Partner, Management Consulting, at KPMG in India.

To increase the penetration of health insurance in cities, Mr Sharma also expects insurers to take cognizance of the variations in the cost of healthcare between corporate hospitals and smaller hospitals, including those run by charitable trusts, and nursing homes. “The cost of health insurance must fall for huge numbers of low-income customers in metro cities to be brought into the health insurance net,” he said. “One way of achieving this is to offer policies for different classes of hospitals, based on the understanding that economically less privileged people would be willing to get treated in a less expensive government or trust hospital or nursing home.”

Finally, clarity on ownership and control for insurance firms looking to raise funds from abroad. The Insurance Laws (Amendment) Act, 2015, passed during Parliament’s budget session, allowed insurance companies to raise their foreign ownership from 26% to 49%, with the requirement that the company be Indian owned and controlled.

The industry, however, waited for further clarification. It came on 19 October with the Insurance Regulatory and Development Authority of India (Irda) announcing guidelines. The insurance regulator said the expression “control” includes the right to appoint a majority of the directors or control the management or policy decisions, including by virtue of their shareholding or management rights or shareholders’ agreement or voting agreements. This means the majority of directors, excluding independent directors, will have to be nominated by Indian promoters or Indian investors. According to the guidelines, even the appointment of key management persons that include chief executive officer, managing director or principal officer in case of an insurance broker will have to be through them or the board of directors.

The guidelines, however, allow for the nomination of key persons except the chief executive officer by foreign investors, provided such appointments are approved by the board, which must have a majority of directors that are the nominees of Indian promoters or investors. The guidelines are also applicable to insurance intermediaries such as brokers and third- party administrators. However, in case an insurance intermediary has more than 50% of its revenue from non-insurance activities, these guidelines are not applicable. The guidelines further state that wherever the chairman of the board has a casting vote, the chairman will be nominated by Indian promoters or Indian investors. “Now that Irda has clarified the management controls, the process of approving foreign direct investment (FDI) hike will be quick,” said Anuraag Sunder, director, insurance, PwC India. “FDI hike has to be approved by the Foreign Investment Promotion Board (FIPB) first, then the Competition Commission of India (CCI) and, ultimately, Irda. Given that all the insurers have three months to comply with the definition, most of the FDI hike requests that come will have an Indian owned and controlled management already in place.

This will help the authorities approve the FDI hike faster,” Sunder said. According to Sunder, when the sector opened up to private insurers, Indian promoters didn’t have the expertise to run the insurance business. “As a result, the management control automatically went to the foreign partners and still continues to be the case. Irda wants that to stop and make Indian shareholders more responsible. Now, regardless of the hike, management needs to be Indian owned and controlled. This means that management control will no longer be a deciding factor for the foreign promoters to hike their stake and many would want to increase the stake for a fair valuation,” added Sunder.

Over a lakh books, magazines, stationery, DVDs and furniture were destroyed in a fire that broke out at the Crossword book store at Sohrab Hall, located behind the Pune railway station, on Sunday (27 Sept 2015) night.

Fire brigade said the cause of fire is not known, but store general manager Bhaskar Nighojkar issued a statement on Monday blaming short-circuit for the accident. The store is located in shops numbering 135 to 152 on the first floor. The fire broke out around 8.30 pm when the shop had shut down.The staff broke the lock and used three fire fighting equipment, but failed to control it. Fire tenders rushed to the spot on receiving a phone call from the police control room. The accident threw traffic out of gear for several hours on Sunday night as vehicles moved at snail’s pace. Chief fire officer Prashant Ranpise said, “Thick fumes were emanating from the store because of lack of ventilation. The situation prevented us from entering the shop for some time. The windows could not be opened because they were sealed with plywood and book racks.”

Two fire men sustained minor injuries when they tried to break the windows. “Finally, we had to use a JCB machine and a crane to break the windows, plywood sheets and enter through the balcony. We pressed in 13 fire tenders, 10 officers, 50 firemen and two water tanks. We could finally gain control by 5 pm. We kept spraying water till Monday afternoon because the goods were constantly catching fire at some or the other place. We also sprayed sufficient water on the nearby premises to ensure the fire does not spread.” Four people trapped inside the building were rescued. Three people on the terrace were brought down safely. “We used a snorkel to bring down another person stuck on the fifth floor. We don’t know why the store had sealed all the windows,” Ranpise said. Assistant divisional fire brigade office D N Nagalkar said, “Thick black fumes had engulfed the building when we reached the spot. We could not identity the source of fire. This made our task extremely difficult. We then pulled our men from Ganapati immersion duty and broke the wall to give an outlet to fumes. Meanwhile, our team had surrounded the building with six hose pipes.”

“The Sohrab hall has a fire fighting system but it could not be used because it was not properly maintained. We utilized the water stored on the premises. We will issue the hall management a notice to improve its fire fighting system,” Nagalkar said. The hall’s property manager Nikhil Madhur said, “Our staff broke store lock and used fire fighting equipment, but in vain. We then alerted the fire brigade which rushed to the spot. Nearly 100 shops and offices may remain close for one or two days. We have switched off four transformers, four elevators and a water pump for security reasons. The incident did not cause damage to other properties because of preventive measures taken by the fire brigade.” Meanwhile, the store’s general manager Nighojkar said, “We are in the process of calculating the losses. We will adopt safety measures to avert such incidents in future. The store will be renovated at the earliest.”

India’s insurance regulator has constituted a four-member committee to work on developing a revenue-sharing motor vehicle database for insurers and state-level entities.

The sharing of data in a seamless manner could bring efficiencies in insurance sales and services, reported Press Trust of India citing the Insurance Regulatory and Development Authority of India (IRDAI). General insurance companies would use the data to decide on billing and claim settlement frequency and processes.

The Insurance Information Bureau of India would be in a position to obtain data from various national-level entities such as the Ministry of Road Transport and Highways and state governments, IRDAI said in a statement. The Indian non-life insurance market is dominated by motor insurance business with a share of around 45% in the gross written premium. At the same time, estimates are that over 55% of vehicles plying on Indian roads are uninsured according to insurers.

India’s top 10 cities have US$179.8 billion GDP at risk from a series of threats over the next decade, according to new research for Lloyd’s, the specialist insurance market.

The Lloyd’s City Risk Index found the cities of Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kanpur, Kolkata, Mumbai, Pune and Surat together will generate an average annual GDP of $1.4 trillion in the coming decade. However, 12.6% of this economic growth is at risk from a combination of 18 man-made and natural threats. Catastrophes caused by natural events, such as extreme weather, pandemics and plant epidemics account for over half ($98.1 billion) of GDP at risk in the 10 cities.

Across the 10 cities combined, the largest economic exposure is to pandemic risk, which could put $39.65 billion of GDP at risk, followed by flood at $33.84 billion, market crash at $21.13 billion, oil price spike at $20.81 billion and terrorism at $16.07 billion. The immense density of populations in urban areas, large numbers of people commuting and access to health services are significant contributing factors in the vulnerability to a pandemic. Mumbai has the largest total GDP at risk with a $47.38-billion risk exposure. Almost one quarter of the city’s potential losses are related to pandemic risk, followed by terrorism at 16.77%, market crash at 12.94% and flood at 12.89%. Globally, Mumbai has the largest GDP exposure to terrorism in the Index at almost $8 billion and the second highest exposure to power outage with $1.92 billion of GDP at risk.

The Lloyd’s City Risk Index presents the first-ever analysis of economic output at risk (GDP@Risk) in 301 major cities from 18 manmade and natural threats over a 10-year period. Based on original research by the Cambridge Centre for Risk Studies at the University of Cambridge Judge Business School, the Index finds that a total of $4.6 trillion of projected GDP is at risk from manmade and natural disasters in these major cities around the world. Lloyd’s has produced this Index to help increase the understanding of, and shape the world’s response to, the shifting risk landscape.

While an overwhelming majority of employees – 73% – in India expect their employers to offer life cover under group schemes, only 30% employers actually provide the benefit, according to the PNB MetLife Employee Benefits Trend Study 2015. This indicates a mismatch between employee expectations and the benefits actually being offered by employers in India.

Commenting on another finding, Ms Maria Morris, Executive Vice-President of Global Employee Benefits at MetLife said: “From an employee’s perspective, only 39% want a critical illness policy but here, 85% employers are willing to offer it.” People prefer a life insurance over a critical illness policy. One solution to the expectation gap is for employers to offer employees a choice to customise their own personal benefits through flexible or voluntary benefit programmes. The study showed employees are willing to take up additional coverage on health, life and accidents either jointly paid by employers and employees or from employees’ own purses. 61% would buy life insurance without support from employers.

General insurer ICICI Lombard’s Head of Underwriting and Claims, Mr Sanjay Datta, said: “Entities that are able to distribute insurance products to bring down insurance under-penetration are welcome. These new distribution channels are also likely to bring our costs down as they will be working on a digital platform. We are looking at increasing our business in the low-ticket segment.”

According to the study, 70% of Indian employers feel highly challenged to retain employees; and only 51% of employees are satisfied with their current job with 47% saying they will look for another job within the next year. The study reveals a strong correlation between employees who are provided benefits and those employees who feel “a strong sense of loyalty to my employer”. Underscoring the importance of benefits, more than half (55%) of employees who are considering moving jobs said improving their benefits package would be a reason to stay.

Insurers see payments banks (PBs), a new form of banks to be established in the country, as a boon as they would give rise to cross-selling opportunities that would help deepen insurance penetration in rural areas.

The Reserve Bank of India, which is the country’s central bank, last week gave in-principle approval to 11 applicants to set up payments banks. With these licences, the differentiated banks can sell third-party insurance products and mutual funds. Designed to boost financial inclusion, payments banks will allow transfers and take deposits up to a limit of INR100,000 (US$1,504), and are expected to reach customers predominantly through mobile phones. “For any new network like payments banks, there will be an opportunity for us to grow our business and there could be some online sale opportunities,” SBI Life Managing Director and Chief Executive, Mr Arijit Basu, told the Press Trust of India.

General insurer ICICI Lombard’s Head of Underwriting and Claims, Mr Sanjay Datta, said: “Entities that are able to distribute insurance products to bring down insurance under-penetration are welcome. These new distribution channels are also likely to bring our costs down as they will be working on a digital platform. We are looking at increasing our business in the low-ticket segment.”

Mr Nageshwar Rao, Managing Director and CEO of National Securities Depository Limited (NSDL), which is among those entities that won a payments bank licence, said: “Once our payments bank becomes operational, it will enable our customers to make their premium payment directly from their bank accounts,” NSDL maintains electronic insurance account services where a policyholder keeps all insurance policies in a single online account.