Optima Insurance Brokers Pvt. Ltd.

Public sector general insurance companies are losing market share, in terms of premium income, to their counterparts in the privately held sector.

Data released by the General Insurance Council show that the four public sector insurers — New India Assurance, United India Insurance, National Insurance and Oriental Insurance — had a market share of 42.5% for the fiscal year ended 31 March 2019 (FY2019), as compared to almost 48% for FY2018.

In FY2019, government run general insurers posted premium collection of INR687.2bn ($9.9bn), a 1.37% increase over FY2018. Privately held insurers (excluding standalone health insurers) generated total premium of INR816m in FY2019, an increase of almost 25% over FY2018.

Industry sources attribute the loss in market share to the government’s proposal to merge United India Insurance, National Insurance and Oriental Insurance and solvency issues.

IRDAI, the insurance regulator in India, has asked all non-life insurers to offer a standard health insurance product so that customers can have access to a basic health cover. This standard product shall have the basic mandatory covers, which shall be uniform across the market. No additional add-ons or optional covers are allowed to be proposed to offer, along with the standard product.

The regulator has let non-life insurers determine the price of the product. While the coverage will be the same the pricing will vary as all the insurance companies will be pricing it on experience. The IRDAI has also asked non-life insurers to devise their pricing for the standard health product in a way that it incentivises the early entry of young prospective policyholders of the health insurance market, and that would encourage young people to renew their cover and have a favourable claim experience, where applicable.

The sum insured for the product will be in the range of INR 50,000 ($702) to INR 1 million (USD 15,000). The product will cover hospitalisation expenses, which include room, doctor, intensive care unit charges, medicine and drug costs. In addition, post hospitalisation expenses for a period of up to 60 days from the discharge from hospital will be covered. This would include consultant fees, diagnostic charges, medicine and drugs wherever required. The minimum 24-hour hospitalisation rule will not apply when medical treatment does not require hospitalisation. The product would have a lifelong renewability option for those in the age group of 18 and 65. The regulator has also decided to include wellness activities in the standard product to promote and maintain a wellness regime. The product will be available across various channels, including micro insurance agents and common service centres.

Microsoft co-founder Bill Gates has congratulated the Indian government for the successful completion of the first 100 days of the healthcare scheme Ayushman Bharat from its launch. The response from Gates came after Union Health Minister JP Nadda wrote on Twitter that 6,85,000 beneficiaries have availed free health care in just first 100 days of the scheme and the number is rising rapidly.

World Health Organization (WHO) director general Tedros Adhanom Ghebreyesus on 3 January had praised Prime Minister Modi and the health minister for leadership which helped around seven lakh people avail themselves of benefits of the healthcare scheme.

The scheme, which was launched by Prime Minister Narendra Modi from Ranchi in Jharkhand on 23 September, aims to provide healthcare cover of Rs five lakh per family annually to more than 10.74 crore poor families or 50 crore people for secondary and tertiary care hospitalisation, through a network of empanelled health care providers. The world’s largest ambitious healthcare scheme, it claims to cover medical and hospitalisation expenses for almost all secondary care and most tertiary care procedures. It has defined 1,350 medical packages covering surgery, medical and daycare treatments including medicines, diagnostics and transport.

Insurance is rapidly evolving and hence there is constant endeavour from IRDAI and insurance companies to upgrade the products, processes and technology.

Some of such trends expected in 2019 are as below:

Digitised insurance policies – IRDAI may make it mandatory for insurers to offer insurance policies only in a digital format. Currently, the number of digital insurance policies is very low.

Mental health insurance products – The Mental Healthcare Act took effect in July 2018, making insurance for those with mental ailments mandatory by law. However, due to a lack of clarity on the product structure, insurers have stayed away from offering the products. This year insurers could bring out products with a series of inclusions and exclusions.

Sandbox –  Another change is that IRDAI will allow companies to test products in a particular area, or among a set of policyholders, before they are made available in the market. IRDAI chairman Subhash Khuntia said that if the products tested in the sandbox are successful, such products can be filed for approval. Thus, insurers may begin testing products within a close group of customers to get their views and to ascertain the commercial viability of the products.

New capital rules – IRDAI is expected to release a detailed timeline on how risk-based capital will be implemented and the processes to be followed by insurers in pricing each risk. Under this system, insurers will have to maintain capital depending on the type of business that they write.

Technology-Linked Products – This year is expected to see more technology-linked products introduced in the Indian insurance sector. Among the expected trends this year is the use of wearables in insurance. An IRDAI committee has recommended that insurance companies make use of activity data monitored by fitness trackers in pricing their products. Insurance companies may soon require the customer to have a fitness tracker to capture their health status in an accurate manner.

The insurance regulator has indicated that it would stop setting tariffs for compulsory motor third party liability (MTPL) insurance with effect from the fiscal year starting 1 April 2020.

MTPL is the only business line for which the IRDAI currently sets tariffs. IRDAI’s decision would pave the way for insurance companies to set all their own pricing and the rates could fall because of stiff competition.

As per the officials, stopping the fixing of MTPL tariffs came up for discussion last week when the Prime Minister’s Office held a meeting to discuss the demands of truckers who called on the government to roll back a steep increase of nearly 28% in their premium in the current fiscal year. Mr Piyush Goyal, who acted as finance minister from 14 May to 22 August, had assured truckers’ organisations that the premium hike would be lowered to 15%, but action is still pending on this.

Finance Minister Arun Jaitley said on Tuesday, as many as 3 lakh poor people have benefited from Ayushman Bharat health scheme in the last one-and-a-half months.

Prime Minister Narendra Modi in September launched the Ayushman Bharat Pradhan Mantri Jan Aarogya Yojana which aims to provide coverage of Rs 5 lakh per family annually, benefiting more than 10.74 crore poor families for secondary and tertiary care hospitalisation through a network of empanelled health care providers.

Around 66 per cent of the total beneficiaries have availed treatment in private hospitals under the Ayushman Bharat scheme with a majority of them being recorded in Gujarat, Tamil Nadu, Chattishgarh, West Bengal and Madhya Pradesh respectively, an official said.

Dinesh Arora, deputy chief executive of the National Health Agency (NHA), the apex body implementing the scheme, said till November 26, of the total 3,65,394 beneficiaries who were admitted to hospitals for undergoing various surgeries and procedures, 204,000 have been treated in private hospitals.

Over 10,000 hospitals have been empanelled for the scheme, and 33 states and Union Territories have signed memorandums of understanding (MoUs) with the Centre for implementing the programme.

Prime Minister Narendra Modi formally launched the world’s largest public health insurance scheme, Ayushman Bharat – Pradhan Mantri Jan Arogya Yojna (AB-PMJAY) in Ranchi on Sunday, 23rd September 2018.

The cashless scheme, which offers an annual cover of Rs 5 lakh to economically weaker section of society is expected to benefit 5.7 million families in this state alone. The PM will also inaugurate 10 wellness centres, as part of the scheme, in Jharkhand.

Ayushman Bharat scheme aims to cover around 550 million people, across the country.

Many multinational corporations (MNCs) have approached insurance companies seeking a group health policy that will cover partners of those in same-sex relationships. The requests are aimed at their global diversity policy that aims to provide equal benefits to all employees. Many progressive organisations are providing this cover, but it has not happened in India because the underlying relationship was not considered legal’’ said an official.”

Globally, there are policies that cover same-sex partners. As there is no prohibition on providing such a cover as it is between the company and the insured. Now with the section 377 of the Indian Penal Code (IPC) being struck down, such covers can be provided here too.

According to an ex-official of a public sector insurance company, who headed the company’s health business for several years, there are complexities surrounding insurance in terms of relationships and identification of the beneficiary. What this means is that there is a risk that an outsider requiring medical treatment might be brought in to avail of the group policy benefits. Unlike individual policies, many group health covers do not exclude pre-existing conditions. Therefore, insurers might be more open to providing this cover to multinationals since they document the relationship in advance and there is a high level of compliance in these organisations.

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.