Optima Insurance Brokers Pvt. Ltd.

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.

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.