Optima Insurance Brokers Pvt. Ltd.

Bulk drug makers have seen a significant jump in insurance premiums for fire and allied perils this year. Premiums have jumped by at least three times from previous rates.

The increase follows a directive from domestic reinsurer GIC Re in February 2019, that mandate insurers to hike fire premiums for eight sectors. Bulk drug manufacturing is one of these sectors that also include rubber goods, plastics, textiles, thermal power plants, chemicals manufacturing steel plants and freight forwarders’ godowns.

Claims data collected from the Insurance Information Bureau showed a significant rise in loss ratios in fire insurance. For some insurers, loss ratios had crossed 150%, which meant that for every INR100 collected as premium, they paid INR150 in a claim. Natural calamities have led to a rise in fire and allied perils, like lightning and explosions, etc. Chennai floods were the trigger point. There was a huge number of claims from the floods that led to losses for insurers. In addition, in previous years, insurers had depressed premium rates as they engaged in price competition.

The Indian Space Research Organisation (ISRO) is looking to buy insurance cover for a domestically launched space satellite, the first since it began launching satellites in 1975.

Two factors explain the space agency’s quest for satellite insurance. First is an unexpected setback in Project Chandrayaan-2, which cost nearly INR10bn ($139.4m), and second is the success of ISRO’s Mars mission, which brought down reinsurance rates for Indian space exploration activities.

Of nearly 75 satellites launched by ISRO, less than a quarter were insured – as the organisation to date has not seen any point in insuring domestic launches. However, while ISRO has not insured launches conducted on Indian soil, it has typically insured launches done in partnership with other countries, such as Russia and the US.

One such example is the 1982 launch of INSAT-1A, an Indian-US joint venture. Launched in 1982 via a Delta rocket, its altitude control propellant was exhausted by September of that year, leading to the abandonment of the communications satellite. ISRO lodged an insurance claim and received a payout of $12m.

New India Assurance and other state-owned insurers were typically those tapped to provide cover for these projects, with reinsurance from the international market.

Insurance companies have been barred from excluding from coverage illnesses associated with hazardous work activity, artificial life maintenance, treatment of mental illness, age-related degeneration and internal congenital diseases. The IRDAI said that age-related ailments such as cataract surgery, kneecap replacements, Alzheimer’s and Parkinson’s disease would also have to be covered

The regulator has also standardised exclusions—which means if an insurer does not want to cover epilepsy, chronic kidney diseases and HIV/AIDS—there are specific wordings to be used and a specific waiting period (30 days-1 year) after which coverage would begin.

Standardisation of health regulations will also help portability. IRDAI said, “If a person transfers from one insurer to the other — and has already completed in part some of the waiting period requirement — then the new insurer may impose only the unexpired/residual waiting period not exceeding 48 months from the date of first issuance of the policy.”

The IRDAI also said,“Every health insurance product shall cover all pre-existing diseases disclosed by the persons to be insured immediately after the expiry of the 48 months waiting period or such lower period as stipulated in the product.”

However, TPAs and brokers warn that while these moves by the IRDAI are pro-customer, they could affect pricing.

The Transport Ministry is establishing an electronic database to store drivers’ licensing data from throughout the country. The database aims to stop the issuance of multiple licences in different states. In India, over 30% of drivers have more than one vehicle licence.

In several cases, it was found that some people had secured a licence from another state after their ‘original’ licence was confiscated by the authorities. The new system would curb such practices. The move would also help insurers in detecting and dealing with errant drivers.

The Indian government has issued a notification putting into effect its decision to allow 100% foreign direct investment in insurance intermediaries. The FDI ceiling was previously 49%. Intermediaries include insurance agencies, brokers, third party administrators, surveyors, and loss assessors. The notification was issued by Department of Financial Services of the Finance Ministry on 27 August.

The decision is expected to encourage foreign brokerages buy into Indian companies and deepen the market in terms of new products and technology. Foreign brokers are already keen to expand. In March, Marsh raised its shareholding in its India joint venture to 49% from 26%, while in May, Gallagher took an undisclosed in Edelweiss Insurance Brokers. Other brokers such as Willis Towers Watson and Howden, owned by Hyperion, are also already in the market.

India is one of Asia’s key emerging markets and the long term potential in the country is clear. Fitch says,“We believe increased international involvement, particularly from developed markets, will contribute positively to the development of distribution networks, use of technology in distribution as well as bring in expertise in areas such as marketing and client-servicing. Fitch also expects the proposal, once implemented, to boost M&A in the fragmented insurance intermediary market over the medium term.”

Despite pressure to the economy, the long term prospects of India are good; around 600 million people in India are under the age of 25. There are plenty of opportunities in India as the economy becomes more sophisticated and the hundreds of millions of young people reach working age.

Three public sector insurance companies have dragged down the non-life industry into a INR440m ($6.2m) loss for the financial year ended 31March 2019 (FY2019). National, Oriental and United India reported aggregate losses of INR42bn, which is more than the collective profits of the remaining 23 companies. The reason for the poor performance of the state owned general insurance companies is their huge underwriting loss.

The insurers reported an aggregate underwriting loss of INR184.9bn for FY2019, a 47% increase over FY2018.

The government is considering a merger and a subsequent listing of National, Oriental and United India. However, due to their poor financial performance, they will require capital infusion.

The Municipal Corporation of Delhi (MCD) and earthquake researchers believe that approximately 90% of buildings in Delhi are at risk of collapse from a strong earthquake. Delhi falls in the “at risk of high damage” seismic zone.

The MCD has drafted a policy under which property owners are required to have building safety audits conducted and obtain quake-proof certification. The policy has been submitted to the Delhi government.

After a safety audit, if a building is found to be vulnerable, the property owner will be given some time to strengthen its structure. If the owner does not take any action to strengthen the building, a fine can be imposed and residents evacuated from the building.

Health insurance policyholders in India could soon be able to select a third party administrator (TPA) of their own choice to service claims on their health insurance policies, depending on their insurer’s ties with TPAs. Insurers would need to explicitly provide the names of the TPAs associated with them, from whom the policyholder may choose one, at the time of purchase or renewal of the health insurance policy.

This move will enhance competition among TPAs and also improve services for health insurance policyholders. The proposed revisions to the rules are set out in an exposure draft published on the IRDAI website.

The concept of TPAs in the Indian health insurance space was first introduced in 2001. TPAs are primarily engaged in the business of servicing claims under health insurance policies by authorising cashless treatment and settling claims. They also carry out pre-insurance medical examinations in connection with underwriting of health insurance policies. According to the data available on the IRDAI website, 26 TPAs are registered with the regulator as at 31 March 2019.

An online survey of thousands of car owners in India provided many interesting insights. The findings were released in conjunction with National Insurance Awareness Day, which was on 28 June. The survey findings indicate that consumers may not be totally aware of the nuances of motor insurance.

The findings include:

• Around one third of the respondents buy motor insurance keeping third party liability in mind.
• As many as 45% of respondents believed that both types of cover— third party liability and own damage—are mandatory.
• Six out of 10 consumers are aware of the benefits under motor third party liability insurance cover. Furthermore, one third of respondents believe that third party liability insurance also provides protection against own damage and theft.
• Five out of 10 motor insurance consumers believe that zero depreciation cover encompasses repairs without deduction, third party liability and also theft of the vehicle.