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Cybercrime cases in India rose 69 per cent in 2014 year-on-year with 9,622 cases registered under the IT Act and related sections of Indian Penal Code (IPC), Parliament was informed.

Cybercrime cases in India rose 69 per cent in 2014 year-on-year with 9,622 cases registered under the IT Act and related sections of Indian Penal Code (IPC), Parliament was informed today. “A total of 3,477 cases, 5,693 cases and 9,622 cases were reported under total cyber crimes (which includes cases reported under the IT Act and related sections of IPC and Special and Local Laws (SLL) involving computer as medium/target) during 2012, 2013 and 2014, respectively, showing a rising trend,” Minister of Communications and IT Ravi Shankar Prasad said in a written reply to Rajya Sabha.

However, no separate data is maintained by the government with regard to online frauds by shopping portals, he added. The minister said complaints regarding unethical practices by e-commerce companies are handled under the Consumer Protection Act 1986, which deals with all fraudulent activities faced by the consumers. Responding to a separate query, Prasad said the Department of Electronics and Information Technology (DeitY) has approved a project titled ‘Information Security Education and Awareness’ (ISEA) Project Phase II in 2014. The project, with an outlay of Rs 96.08 crore for a period of five years, aims at capacity building in area of information security, training of government personnel and creation of mass information security awareness targeted towards various user segments, namely academic and general users.

“The implementation of the academic activities under ISEA Project Phase II is carried out by 51 institutions across the country at three levels — Information Security Research and Development Centre (ISRDC – 4 institutions); Resource Centre (RC), 7 institutions; and Participating Institute (PI) – 40 institutions,” he said. Under academic activities, it has been decided to train about one lakh persons in various formal and non-formal courses and faculty training programmes, Prasad added. In addition, the project also envisages to train more than 13,000 government officials and spread mass awareness on information security to cover around three crore person through direct and indirect mode, he said.

Finance Minister Arun Jaitley yesterday announced several measures in his 2016-17 Budget Speech concerning insurance and pensions, including a proposal for a public listing of the country’s four government-owned general insurance companies.

He also proposed to significantly relax the foreign investment policy in several sectors, including insurance and pension, to attract more overseas investments. He announced too a new health insurance scheme aimed at families below the poverty line. Mr Jaitley said that the general insurance companies owned by government will be listed on the stock exchange. They are: New India Assurance, National Insurance, Oriental Insurance and United India Insurance. However, he did not stipulate a timeline for the initial public offers of the insurers.

Automatic approval route

To attract foreign investors, Mr Jaitley also said that foreign direct investments of up to 49% in companies in the insurance and pension sectors will be allowed under the automatic approval route. This means that the overseas investors will not have to approach the Foreign Investment Promotion Board (FIPB) for approval for their stakes. However, the existing requirements for local insurance companies to be under Indian management and control will have to be verified by the respective regulators, IRDAI and the Pension Fund Regulatory and Development Authority. Last year, the government increased the foreign investment cap in the insurance and pension sectors to 49% from 26%. Currently, foreign direct investments up to 26% are permitted through the automatic approval route. For investments of more than 26% to 49%, the approval of FIPB is required at present.

New health insurance scheme for the poor

Mr Jaitley said that the new health insurance scheme will offer a cover of up to INR100,000 (US$1,466) per family, and for senior citizens aged at least 60, a top-up of INR30,000 will be available additionally. This is expected to cover one third of India’s population against hospitalisation expenditure. At present, India only has the Rashtriya Swasthya Bima Yojana which was envisaged to provide health insurance coverage to poor families. Its beneficiaries are entitled to hospitalisation coverage of up to INR30,000 for most diseases.

Tax incentives for pension schemes

Mr Jaitley proposed uniform tax treatment for recognised provident funds, the national pension system and superannuation funds. He said: “I propose to make withdrawals up to 40% of the corpus at the time of retirement tax-exempt in the case of the National Pension Scheme. In the case of superannuation funds and recognised provident funds, including EPF (Employees’ Provident Fund), the same norm of 40% of corpus to be tax-free will apply in respect of corpus created out of contributions made after 1 April 2016.” In addition, he said that the annuity fund which goes to the legal heir after the death of the pensioner will not be taxable in all three cases. He added: “Also, we are proposing a monetary limit for contributions of employers in recognised Provident and Superannuation Fund of INR150,000 per annum for tax benefit. I propose to exempt from service tax the annuity services provided by the National Pension System (NPS) and services provided by EPFO (Employees’ Provident Fund Organisation) to employees. I also propose to reduce the service tax on single-premium annuity (insurance) policies from 3.5% to 1.4% of the premium paid in certain cases.”

Eight corporate jets which were submerged under flood water at Chennai airport last December are being written off as the damage is beyond repairs. The aircraft have a combined insured value of around INR5 billion (US$72.7 million).The entire claim value will have to be borne by insurance companies, reported the Business Standard.

“The damages to the jets and their parts are severe and cannot be restored. Hence, we will have to dismantle and sell parts as scrap, though we will only be able to recover 20-30% of the costs,” said the Chairman of a large public-sector general insurer which has exposure to these jets. Chennai-based United India Insurance, among other insurance companies, has been involved in the process of assessing the claims through insurance surveyors and loss assessors. The share of state-owned insurers in insuring the jets is higher than that of private-sector insurers. The eight jets belong to TVS Motor, Sun TV, Kalyan Jewellers, Joy Alukkas group and others. They were submerged for a prolonged period under water and there was water ingress in the entire aircraft body including avionics, auxiliary power units and engines.

As damage to the corporate jets in Chennai was substantial, aircraft manufacturers including Hawker, Embraer and Bombardier were called on to carry out an evaluation. “The manufacturers carried out a damage assessment and ruled that the aircraft are beyond economical repair and hence the planes are being written off,” said Sakeer Sheik, Managing Ddirector of Titan Aviation which manages aircraft belonging to V M Aviation, Garuda Jet and Kalyan Jewellers. Jets of these three companies were amongst those damaged during the deluge. The aircraft are being written off as the cost of repair would be higher than their current fair value, sources said. In addition to the damaged corporate jets in Chennai, insurers will also have to bear loss claims four four helicopters and a claim for damage to a SpiceJet aircraft in an animal collision incident in Jabalpur making 2015 one of the worst years in terms of aviation losses in India, according to Global Insurance Brokers, one of the leading brokers in India.

Insurance sector officials said that in relation to the global aviation market, the Chennai flood losses are not very high since no third-party liability is involved. From an Indian perspective, the insurers have not previously faced losses of such a high quantum. “Globally, the Chennai floods may not be considered as a big loss incident in aviation sector. However, we have never faced this big a hit in this segment which will directly hit our books. Some part of it was reflected in the third quarter and some of it will be visible in the fourth quarter,” said the general manager of a public-sector general insurance company.

The health insurance sector, which grew by about 20% per year in the last decade, is forecast to see the same growth trend in coming years, as it is today the most popular and voluntarily sought-after insurance in the country, according to Mr G Srinivasan, Chairman and Managing Director of The New India Assurance, India’s biggest non-life insurer.

“I think with increasing life spans, increasing medical advances and increasing cost of medical treatment, today, health insurance has become absolutely mandatory for every individual and every family, and people understand that,” Mr Srinivasan said in an interview with the Financial Express.

Govt schemes dominate

He said that health insurance premiums in India totalled about INR210 billion (US$3.1 billion) last year, half of which was generated by the corporate or group health insurance segment, another 40% came from individuals and 10% from government health schemes. But the picture is different in terms of the number of people covered by health insurance, he pointed out. Around 25% of the people in the country have some form of health insurance. A large part of it is through government health schemes such as the Rashtriya Swasthya Bima Yojana, and health schemes adopted by states like Tamil Nadu, Maharashtra, and Rajasthan. So, in these cases, the government itself funds the premium and people are covered, especially those below the poverty line, he said. About 16-17% of the population are covered by government health insurance schemes where people don’t really pay much, about 4% would be corporate insurance which employers pay for, and only about 5% of individuals buy health insurance policies, he said.

Challenges

Mr Srinivasan believes that all Indians should be covered by health insurance. “But it is not happening because: firstly, there is lack of awareness, people don’t know that there is a product available that takes care of their health needs, secondly, some of them clearly cannot afford to take up health insurance, thirdly, there is a question of accessibility. People want someone to come to their home, explain the benefits of health insurance. So, these are some of the reasons why health insurance has not achieved higher penetration. “As insurers, we have to make sure that there are more intermediaries available, more foot soldiers who can reach out to customers and make our products more simple and affordable. Then I think that the penetration levels will go up.” As for New India, health insurance is a very important segment, he said. “We are the market leader in health insurance. About 28% of our business comes from health insurance. It is also growing at about 20% each year. Thus, it is a key portfolio for us,” Mr Srinivasan said.

The insurance industry has been considering increasing premiums for natural catastrophe cover by 10-20%, following several natural disasters such as floods that have struck the country in the past two years.

The hikes are likely to take effect from 1 April, reported the Business Standard. Insurance companies have taken a hit of INR48 billion (US$710 million) due to claims arising from the recent floods that hit Chennai and other parts of southern India. In 2013, floods and landslides in Uttarakhand in northern India led to losses of INR30 billion for insurance companies. Insurers have seen an influx of claims on corporate all-risk policies, which include business interruption coverage since several factories and offices were submerged for more than three days. In terms of numbers, motor insurance topped the list of claims, as several cars and motorcycles were damaged in the floods.

On Monday, Mr T S Vijayan, the Chairman of the insurance regulator IRDAI, said on the sidelines of a conference that there is a need for price corrections in the general insurance space, especially in disaster cover. He told reporters: “Some revision in pricing is required especially in areas like insurance for natural catastrophes.” “The general insurance industry on a whole is not making a lot of money. It requires some base corrections to premium rates, especially in a case like the recent heavy rains in Chennai, which resulted in huge losses,” Mr Vijayan said.

State-owned national reinsurer GIC Re will start operations in China within the next two or three months as it aims to become among the world’s top 10 reinsurers in the next couple of years.

“We will be opening our branch office in China within the next two to three months,” said Mrs Alice Vaidyan who was appointed the reinsurer’s Chairwoman and Managing Director last week. India’s sole reinsurer is currently placed 14th in global rankings.Mrs Vaidyan said last week that GIC Re is expanding its reach overseas, with China among the reinsurer’s main target markets.

She said: “We are aiming for focussed growth in countries like Latin America, China and CIS countries. These three are the main target countries for us as of now.”GIC Re is also planning to open a branch in Brazil this year. Meanwhile, it has discarded a plan to acquire a company in the UK, reported the Press Trust of India. Mrs Vaidyan said: “Though we have dropped our plan to acquire a company at Lloyd’s market in London, we will be developing our own syndicate over there in future.”

Insurers should have a long-term digitisation roadmap, the international consulting firm Boston Consulting Group (BCG) and the Federation of Indian Chambers of Commerce and Industry (FICCI) have recommended in a joint report entitled “The Changing Face of Indian Insurance: In Pursuit of Profitable”. .

“As most Indian insurers are just embarking on the digitisation journey, it is important to prioritise processes, build supporting capabilities and define strategies for implementing and driving adoption,” reported the Business Standard citing the document. While almost every insurance process can be digitised, Indian insurers need to individually evaluate their starting position and prioritise processes and initiatives that can deliver maximum value. .

“At BCG, we have identified major trends such as digitisation, changing consumer needs and ageing changes that are expected to impact the sector in its next phase. However, the challenge lies in sustaining profitable growth” said Mr Alpesh Shah, Senior Partner & Director at BCG, India and Head – Insurance Practice in Asia. Some key trends that are expected to impact the sector include the digital imperative, changing consumer needs and behaviour, apart from factors like regulatory activism, said the report. It also added that digital is likely the most important trend amongst all of the above.

The odd-even scheme for cars, if fully implemented, might lead to a reduction in motor insurance premiums in the near future, as risks would be cut when vehicles can ply only on alternate days, according to industry players. .

In a pilot run which started on 1 January in New Delhi, only cars with odd-numbered licence plates will be allowed on the roads on odd-numbered dates and those with even-numbered plates on the other days, except on Sundays when the rule does not apply. The pilot, which lasts till 15 January, is aimed at seeing how the odd-even scheme would work as the government tries to cut smog in the world’s most polluted capital. Mr Mukesh Kumar, Executive Director at HDFC ERGO General Insurance, said: “The cars would be out on the streets only for half the number of days than before. This may bring down the risks of accidents and there is a case for premium revisions downwards.” .

He added that comprehensive motor insurance cover might see a reduction in premiums, reported the Business Standard. Insurers offer own-damage and third party liability covers as a comprehensive cover. Mr K G Krishnamoorthy Rao, Managing Director & CEO of Future Generali India Insurance, said that over a period of time, there is a case for premiums to be revised based on data received, if there is a decline in the number of motor accidents. However, he did not rule out the possibility of speeding as there would be fewer vehicles on roads. A Supreme Court ban on the registration of large diesel vehicles in Delhi-National Capital Region might also have an impact on insurance. Mr Rao explained that with fewer such vehicles on the road, spreads would reduce, leading to an increase in average premiums. .

• Impact of Chennai floods

In a separate development, vehicle owners in the metropolises of Mumbai, New Delhi, Chennai and Kolkata may have to pay 15% higher premiums than those in other parts of the country as insurance companies believe the risk of insuring cars in big metros are higher after the Chennai floods last year, reported The Economic Times. “We will have to build in the factor of flood for all big cities that are developing fast and premiums should go up by 10-15%,” said Mr Vijay Kumar, head of motor insurance at Bajaj Allianz General Insurance. “After the Chennai experience, we know that the severity of claims is higher in metros, so there will be an increase in premiums,” said Mr SS Gopalaratnam, Managing Director & CEO of Cholamandalam MS. “We are trying to see if flood-related policy rates could be revised both in motor and property, because losses are higher by up to 10%.”

Engineering and fire insurance is expected to pick up this year, after a decline in growth of 10-12% last year that was the result of few projects taking off in the country, according to industry players.

Mr K G Krishnamoorthy Rao, Managing Director & CEO of Future Generali India Insurance, said: “Stalled infrastructure projects would finally kick off in 2016, thereby boosting the engineering insurance sector as well.” Overall, industrial production numbers are also seeing positive signs now. Insurers have also been offering heavy discounts in insurance premium rates for fire and engineering business, reported Business Standard.

This segment largely covers manufacturing plants and large-scale industrial projects from fire and other risks associated with construction and maintenance. Other than manufacturing, fire and engineering policies are offered to sectors such as auto, oil & gas, power, and infrastructure. The World Bank last week projected that India will grow by a robust 7.8% in 2016 and 7.9% in the next two years, and become the fastest growing economy in the world in the next three years. For the current fiscal year ending in March, the latest estimates peg India’s GDP growth rate at 7-7.5%.

The Insurance Regulatory and Development Authority of India (IRDAI) has proposed allowing the issuance of trade credit insurance policies to entities registered by the central bank, the Reserve Bank of India (RBI), for factoring services. This would liberalise existing guidelines which say that a trade credit insurance policy shall not be issued to banks, financiers and lenders.

In an exposure draft titled “Amendment to Guidelines on Trade Credit Insurance”, IRDAI said that changes in the economy, especially in the micro, small, and medium-enterprise (MSME) sector, has increased the need for trade credit and enhanced the scope for the credit insurance sector. “Therefore, in order to give a fillip to the growth of the credit insurance market, it is felt necessary to revisit the guidelines which regulate the credit insurance business in India,” the regulator said. “This cover shall be restricted to short-term financing against receivables, representing supply of goods, materials and services,” said the exposure draft. To protect interest of financiers, proceeds of a claim under a trade credit insurance policy may be made to banks or non-bank financial institutions, it said.

The various proposed changes include indemnity of not more than 85% of the trade receivables in a trade credit insurance policy. Under the existing law, a policy holder normally can be offered indemnity for up to 80% of the trade receivables from each buyer or 90% of the cost incurred by seller for previous year, whichever is lower. The draft also proposes that no trade credit insurance policy would be allowed to cover reverse factoring and bill discounting. Also, factoring transactions by entities not registered with RBI shall not be allowed to be covered under a trade credit insurance policy. Currently, the rules bar trade credit insurance for factoring, reverse factoring and bill discounting. The proposed guidelines, IRDAI said, shall be applicable to all registered general insurance companies except Export Credit Guarantee Corporation of India.