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India is likely to face more floods in future, the New Delhi-based Centre for Science and Environment (CSE) has warned in a report issued in the wake of the worst floods to hit Jammu and Kashmir (J&K) in the northern part of the country in more than 60 years.

“India will be hit more and more by extreme rainfall events,” said the CES whose  researchers have found that heavy (>100mm/day) and very heavy (>150mm/day) rainfall events in India have increased over the past 50-60 years, according to local media reports. India will get more rainfall but in a much shorter duration, say the results, also predicting extreme precipitation during monsoons.

The study stressed that such extreme weather conditions are being induced by climate change. “The Kashmir floods are a grim reminder that climate change is now hitting India harder. In the last 10 years, several extreme rainfall events have rocked the country, this being the latest calamity in the series,” said Mr Chandra Bhushan, CSE Deputy Director General and the head of its climate change team.

Anticipating more such calamities in India, CSE Director General Ms Sunita Narain called for a policy change based on the predictions made by climate models. “The Indian government must discard its ostrich-like policy and get out of its denial mode. We will have to see the linkages between climate change and events such as those unfolding in J&K,” she said.

Separately, Dr RK Pachauri, director general of The Energy and Resources Institute (TERI), also warned that more such floods will occur in the country due to erratic weather patterns. Coastal floods and storm surges are also expected to increase in the future.

Meanwhile, insurance companies are expected to be hit with a loss of INR8 billion (US$131.3 million) to INR9 billion from the J&K floods which have displaced hundreds of thousands of people. Claims are expected on motor, household and shopkeeper policies.

Apart from direct cover by owners, a New India Assurance executive said that financial institutions, agencies and banks had taken insurance against loans given to individuals for houses, motor vehicles and shops.

The Insurance Regulatory and Development Authority (IRDA) has asked insurance companies to settle claims quickly. The regulator has increased the limit of losses required to be surveyed for settlement of claims in flood-hit J&K to INR50,000 from INR20,000. It said that the special dispensation is given to ensure expeditious settlement of claims and to mitigate hardship faced by policyholders in the affected region.

India’s insurance regulator, the Insurance Regulatory and Development Authority (IRDA), is set to scrap the decade-old standardised general insurance policy format covering fire, accidents or floods, leaving customers free to pick the kind of risk they need protection against.

The move could lead to reduced premiums for companies that want fewer events covered, reported the Economic Times.

For example, a power plant located in a desert state could seek cover against fire and explosion, but exclude flood. Meanwhile, factories near a river or located in low-lying areas could seek only flood cover.

“This will change the way companies buy insurance, and insurance companies price products,” an industry source familiar with the development told the newspaper. “This is the evolution from risk-based pricing to risk-based coverage. Smaller companies can avail themselves of customised products as per their needs.”

The move will bring certainty and transparency for insurance clients. Products could be customised to suit the needs of clients and supported by reinsurance, experts said.

Previous reforms in the insurance sector have been piecemeal. The first phase of liberalisation took place in 2007 when premiums were de-tariffed, with insurance companies allowed to set their own rates. In 2009, while freezing the basic wording, IRDA allowed companies to write add-ons. The latest proposal, when implemented, will constitute the long-awaited third phase of liberalisation for insurers.

The government has a Telecom Regulatory Authority of India (TRAI) to regulate prices of telephony, an electricity regulator to control power prices and so on. But India has no body to ensure that medical device companies do not overcharge patients. The result is loot.

Most patients are forced to pay anything between Rs 60,000 and Rs 1 lakh or more for cardiac drug eluting stents (DES) though the same stents cost Rs 28,000-Rs 48,000 even in rich European countries and the UK, where there is price control or a fair pricing mechanism for medical devices.

As senior doctors pointed out, almost all the over-priced stents are imported and hence the government has the bill of entry giving the price at which the stent is being imported, typically a third of the price charged to patients or even less. Yet, the government has done nothing to stop companies and hospitals from looting patients.

The Food and Drug Administration (FDA) of Maharashtra had done a detailed investigation into the overcharging of various medical devices including stents and had submitted the report to the National Pharmaceutical Pricing Authority (NPPA) over a year back, recommending that medical devices including drug eluting stents be brought under price control. The FDA’s report included pricing details of other devices too such as cochlear implant, bone cement and orthopaedic implants and pointed out that the price of most devices was hiked by over 100% at least.

The Maharashtra FDA report cites the example of drug eluting stents manufactured by Abbotts Vascular Devices Holland BV, a Holland-based firm. These stents were imported into India by Abbotts Healthcare Pvt Ltd at Rs 40,710 and sold to the distributor Sinocare at Rs 73,440 against a marked MRP of Rs 1.5 lakh. The distributor then sold it at Rs 1.1 lakh to Hinduja hospital, which in turn charged the patient Rs 1.2 lakh, a near three-fold jump over the import price.

Medical devices including drug eluting stents, orthopedic implants, disposable syringes, ocular lens and heart valves are notified as drugs under the Drugs and Cosmetics Act, 1940 but not included under the Drug Price Control Order (DPCO). Hence, their prices are neither monitored nor controlled. The multinational companies that dominate the market import the devices and mark MRP at whatever level they think the market can bear in the absence of any regulation. These devices even get customs duty concessions, the duty on cardiac stents being zero.

The NPPA has neither replied to the Maharashtra FDA after the report sent over a year ago nor has taken any action on pricing. When contacted, NPPA chairperson Injeti Srinivas told TOI that he was not aware of the FDA report as he had joined recently (in June this year) and that he would look into it.

“If the government was serious about doing something, it would have brought in price control as is done in even rich Western countries. The government knows this is happening because they can see the huge difference in cost between the import price and the price at which these devices are being sold to patients even in government hospitals. They just choose to close their eyes to this,” lamented a senior doctor in a government hospital.

Insurance companies including New India Assurance and General Insurance Corporation are expecting a combined loss of INR6.5 billion (US$107 million) from a fire that broke out at Mittal-Hindustan Petroleum refinery in northern India in June.

In comparison, the 2011 terror attack on the two Mumbai hotels, the Taj and Oberoi, had led to insurance claims totalling INR5 billion. However, those claims were paid out of a national terrorism pool whereas insurers will have to pay for the refinery fire losses themselves, reported the Economic Times.

The refinery was insured for INR75 billion under a mega risk policy which also covers loss of profit due to business interruptions. New India Assurance, which is India’s largest general insurer, is the lead insurer with a 75% share in the policy. A New India Assurance executive said that surveyors are assessing the loss and added that the company could pay out up to INR500 million.

Other insurance companies involved include United India and SBI General Insurance. India’s national reinsurer GIC Re is the lead reinsurer in this instance.

Mr A K Roy, Chairman and Managing Director of GIC Re, said that the expected claim of around INR6.5 billion from the vapour fire explosion is the biggest in recent times. He said:  “We have provided reinsurance and have got protection against it. Our exposure can go up to INR1 billion.”

The fire had broken out in vacuum gas oil treating unit of the refinery. According to media reports, a statement issued by the company had said that there was no casualty or injuries of any kind.

Non-life insurance companies in India have welcomed action by the Competition Commission of India (CCI) to impose a heavy fine on 14 car makers indulging in restrictive practices which cost the insurers and vehicle owners heavily.

Last month, CCI levied a penalty of INR25.45 billion (US$422 million) on 14 car manufacturers for violating the competition law. It found that these car makers  pursued restrictive practices that prevent independent repairers coming into the market. It also directed the car companies to put in place an effective system to make the spare parts and diagnostic tools easily available through an efficient network.

“If more independent repairers come into the market and the component makers are able to sell to them at more competitive prices, then it is good for the vehicle owners as well as the general insurers,” Mr SS Gopalarathnam, managing director of Cholamandalam MS General Insurance, told the Indo-Asian News Service.

The car makers have also been directed to publish information regarding vehicle spare parts, retail prices, arrangements for availability over the counter, and details of matching quality alternatives, maintenance costs, provisions regarding warranty and any such other information which help consumer choice and facilitate fair competition in the market.

Separately, insurance companies complain that vehicles in India are designed in such a way that the car owner is forced to change the entire assembly than a small component, whenever there is a fault with the car.

Overseas the same companies follow the concept of “child parts”, that is, replacing the damaged or defective part and not the entire assembly whereas in India, many companies do not do so, according to insurance industry executives. Non-life insurers say that car makers have to take this into account while designing their vehicles, a measure which will also be environment friendly.

Non-life insurers are upbeat about the agricultural commodity market following proposed new rules by the Forward Markets Commission’s (FMC) requiring warehouse service providers (WSPs) to have full insurance cover for deliverable commodities on futures exchanges.

Insurance coverage for commodities currently accounts for less than 5% of the overall business of the non-life insurance sector. Experts say that if all WSPs took up insurance cover for crops, this might rise to 8% in the next six-eight months.

“Though banks providing finances to WSPs usually take up insurance cover to protect against losses, WSPs taking financial assistance from other private sources are not covered by insurance. With the regulator asking all WSPs to take full insurance cover, there could be an immediate rise of 15-20% in business, especially for state-owned insurers,” said a senior official with a public-sector insurer.

In draft guidelines issued last month, the FMC said that WSPs seeking accreditation with the National Multi Commodity Exchange would have to fully cover the value of goods at exchange-approved warehouses for risks such as fires, floods, cyclones, earthquakes, burglaries, thefts, etc, reported Business Standard.

The WSPs will also need fidelity guarantees and indemnity covers for all stocks deliverable on the exchange. The value of the goods to be insured would be marked-to-market on the replacement value, on an ongoing basis, the FMC said. It is seeking public feedback on the draft guidelines by 15 September.

“With the FMC asking WSPs to take insurance cover for their goods, there will be business opportunities for companies such as ours. Since there is always a risk of losing these commodities to fire, flood and other perils, the mandatory insurance will lead to additional opportunities for insurers,” said Mr Rakesh Jain, chief executive of Reliance General Insurance.

While both private and public-sector general insurers offer covers for commodities, the fidelity guarantee is a new growth area for insurers. In fidelity guarantee insurance, an insurer would indemnify the insured against a direct pecuniary loss due to fraud, etc. The size of the cover depends on the type of commodity being dealt with.

The Insurance Regulatory and Development Authority (IRDA) has given approval for general insurance companies to provide third-party motor cover for two-wheelers for three years instead of renewing the cover annually as is the current practice. The new measure could be replicated for four-wheeler and commercial vehicles.

IRDA said the new policy had been introduced following representation from various general insurance companies for long-term motor products, according to local media reports.

IRDA has also spelt out conditions for the new product. The regulator said that the total premium charged for the third-party coverage would be thrice the annual premium for two-wheelers as decided by the regulator. The entire premium would have to be made in one payment.

Insurers will not be able to revise the premiums during the three-year term of the policy. They will also not be allowed to cancel standalone third-party cover, except in the case of total loss where the premium for the unexpired period of the policy will have to be refunded.

IRDA said that insurers can also file a three-year term comprehensive policy for two-wheelers.

General insurers welcome the IRDA move. At present, getting insurance for two-wheelers at the time of purchase is mandatory. The problem arises from the second year onwards when owners often fail or forget to renew their vehicle insurance cover, according to industry players.

Health and motor insurance are likely to be introduced on India’s insurance repository system (IRS) by December. The move is expected to speed up the conversion of policies into electronic form.

“We are planning to roll out health and motor insurance on IRS by the end of this calender year. We expect these two general insurance segments to be the main volume driver for the insurance repositories,” Karvy Insurance Repository executive director, Mr Viiveck Verma, told Press Trust of India.

At present, only life insurance policies are stored by insurance repositories.

Mr Verma said that he expects the pace of converting insurance policies into electronic form to increase after the Insurance Regulatory and Development Authority (IRDA) makes e-insurance mandatory. “We expect the decision in another one year,” he said.

IRDA launched a pilot programme for two months from 1 July, in which it is mandatory for all life insurers to participate. In the pilot programme, each life insurer is to convert to electronic form a minimum of 1,000 or 5% of the existing individual policies (issued in hard form and currently in force), whichever is less, for each of the insurance repositories.

After the pilot scheme is over, the five insurance repositories, IRDA and the Life and General Insurance Councils, will together create a mechanism to promote insurance repositories in the country,” Mr Verma said.

Apart from Karvy, the other insurance repository companies are NSDL Database Management, Central Insurance Repository, SHCIL Projects, and CAMS Repository Services.

General insurers in India are planning to introduce a “base rate” system to price premium rates. The move is expected to arrest the rise in underwriting losses in the face of intense competition.

The General Insurance Council, which represents non-life insurance companies, discussed the idea last month at a meeting attended by the heads of New India Assurance, GIC Re, ICICI Lombard, HDFC Ergo and Tata AIG General Insurance, reported the Press Trust of India.

“We are in discussions to standardise best practices in underwriting property and health risks,” General Insurance Council secretary general, Mr R Chandrasekaran, said. He added that the move is to ensure that the risk is properly evaluated by general insurers and taken into account in pricing.

New India Assurance chairman and managing director , Mr G Srinivasan, said: “There is a feeling that premium rates in the domestic market are on the low side. Insurers have been discussing for some time how to ensure that the rates are at the right level and that there is some semblance of uniformity.

“At the July meeting, we had discussed how to bring the rates to the right level across the sectors, including health, motor and fire & engineering.”

“The Insurance Information Bureau is already trying to do it in the fire segment. Along similar lines, we want to have some kind of technical rates in the industry,” he added.

Fixing minimum rates could take insurers back to pre-2007 when tariffs were in force. Insurers have been slashing premium rates since 2007 when the Insurance Regulatory and Development Authority (IRDA) removed its fixed-tariff system for all business lines except for third-party motor insurance. De-tariffing allows insurers to price their products freely.