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Term life insurance premiums have plummeted over the last six years, thanks to increasing life expectancy, online sales and declining reinsurance rates.

Since 2009, term insurance premiums have plunged by as much as 75% as sales have increasingly moved online, Mr Yashish Dahiya, CEO of PolicyBazaar.com. For instance, an INR10-million (US$149,000) cover for a 30-year-old male cost around INR30,000 in 2008, but the premium today for the same cover would be around INR8,000, reported the Hindu Business Line.. Insurers also attribute the increase in longevity, with the average life span increasing from 62 to 72 years due to medical advancements, as a significant reason for the decline in term insurance premiums. Mortality is one of the key factors used in determining premiums.

“We have seen a 10-15% decline in the premiums rates of online term plans during the last fiscal year. Premium rates in the Indian market are now on par with term insurance premiums in countries like Hong Kong and Singapore,” said Mr Sunil Sharma, Appointed Actuary and Chief Risk Officer, Kotak Life Insurance. The country’s largest insurer Life Insurance Corporation (LIC) has also seen a decline in pure risk premium adjusting for increasing life expectancy last year. This has also resulted in a fall in reinsurance rates, which are reflected in the latest mortality table as private insurers now have their own experience. “In the last decade, the industry was using LIC’s mortality assumptions for private companies. Now that private companies have their own experience, reinsurers have realised that the segment of customers that private companies underwrite is slightly better,” said Mr Srinivasan Parthasarathy, Chief Actuary and Appointed Actuary of HDFC Life.

Insurers are also willing to offer much better rates for online term plans as the customer segment is perceived to be more affluent and there is no intermediary involved in the buying process. Mr Niraj Shah, Director – Marketing, Strategy & Products, PNB Metlife, said that disclosure levels are higher in the online channel as the customer is purchasing the policy according to his/her own need, enabling finer pricing. Persistency rates are also significantly much higher for those who purchase term plans online which reflects in the pricing, said Mr Pradeep Pandey, Chief Marketing Officer at Future Generali Life insurance. Insurers says that for online term plans persistency is above 90% while for other policies persistency levels are around 65%.

The heaviest rainfall in over a century to hit the southern state of Tamil Nadu has caused massive flooding and increased sharply estimates of losses by insurance companies to more than INR20 billion (US$300 million)

The heavy rain started around 8 November and insurers last month had estimated that losses could reach INR5 billion. Given that the rains are expected to continue, the insurance industry is anticipating a spike in claims.Insurers are expecting a large number of claims from automobiles, property, factories and small and medium enterprises, reported the Hindu Business Line. Chennai-based government-owned insurer United India Insurance is anticipating major claims after the floods, reported the Hindu Business Line. It is said to have the biggest exposure to the disaster as it is based in the state. “We have already received claims of around INR3 billion, and after major flooding since Tuesday, we are expecting more losses. We expect to see major losses in householders, shopkeepers and motor insurance policies as most vehicles are under water,” said Mr Milind Kharat, Chairman and Managing Director of United India Insurance.

Mr G Srinivasan, Chairman and Managing Director of New India Assurance – the country’s largest general insurer – said that the company had received claims worth INR1 billion following floods in Tamil Nadu in November. And after the severe flooding this week, the quantum of claims is expected to mount. Insurance industry officials said most insurers are still in the process of receiving loss estimates as surveyors have not been able to visit the affected areas and most employees have not been able to reach their offices. The floods have caused massive business disruptions with factories and offices shut down. Chennai, India’s fourth most populous city, is a major auto manufacturing and IT outsourcing hub. Airlines have suspended flights into Chennai’s flooded international airport which was closed down. Insurers last faced heavy losses from floods in September 2014 in Jammu and Kashmir in northern India that cost an estimated INR24 billion in claims.

Around 95% of middle-class Indians lack adequate health insurance to cover some of the most common procedures and ailments in the country, according to a report by BigDecisions.com, one of India’s leading personal finance advice platforms.

Consumers above 45 who are at higher risk of health problems and closer to retirement, are least prepared for emergencies as they are under-insured by an average of 69%, reported the Indiainfoline website citing the report. The BigDecisions study is based on data obtained from 10,000 consumers across eight major cities, aged 25 to 45+ and in the income bracket ranging from INR600,000 (US$9,000) to INR3.6 million annually. “An increased appreciation of rapidly rising healthcare treatment costs does not seem to have translated into Indian consumers being better prepared. This is either because we, as consumers, believe that we are a genetically healthy bunch or are unaware of just how expensive medical procedures have become,” said Mr Manish Shah, co-founder and CEO of BigDecisions.

The report further points out that it is getting more expensive to treat some of the most commonly occurring diseases in India. Amid an inflationary environment in India for at least a decade, prices four years ago were not exactly low. The fact that they have again risen, by double digits in some cities, is noteworthy. The costs are expected to increase further. “We analysed 700,000 insurance claims over four years to understand incurred treatments costs, inflationary trends, claims and reimbursements for various groups of ailments within large Indian cities across different hospital types,” said Mr Gaurav Roy, co-founder and COO of BigDecisions. “We further analysed data entered by 10,000 decision makers on our website to understand their current health insurance cover versus their requirements, and found coverage to be abysmal. These findings are derived from an involved decision-making process where many of these users eventually go on to make health insurance purchases with our partners for amounts to make good their shortfall,” he adds.

The Insurance Regulatory and Development Authority of India (IRDAI) is working on a commission structure, which would have maximum and minimum limits for agents. This means that insurers could soon have their own bands for commissions for their agents instead of a fixed percentage structure.

The new caps, if implemented, would mean that a customer might have to pay higher premiums so that higher commissions are paid to agents. This is because commissions are paid out of the policy premium given by a policyholder, reported Business Standard. Under guidelines for traditional products in force since 1 January 2014, commissions are linked to the tenure of a policy. The longer the duration, the higher is the commission. IRDAI has said that commission rates on policies with a longer tenure would be higher than those on short-term policies. For policies with tenures of at least 12 years, the commission would be 35% of the premium.

The Insurance Laws (Amendment) Ordinance passed last March has omitted Section 40A of the previous Insurance Act 1938, which pertained to commission to insurance agents. Under Section 40A of the earlier Act, no insurance agent would get a commission exceeding 7.5% of the first year’s premium, and 2% of each renewal premium payable on the policy, where the latter grants a deferred annuity in consideration or requires more than one premium payment.

The general insurance industry is likely to see claims of around INR5 billion (US$75.6 million) after record rains caused massive flooding in Chennai and some areas in Tamil Nadu in southern India.

A senior official from the General Insurance Corporation, the sole domestic reinsurer, said that the company is still receiving estimates from insurers but cumulative losses are likely to be under INR5 billion for the industry, reported the Hindu Business Line. Most claims are from automobiles and property and small and medium enterprises (SMEs). Chennai-headquartered United India Insurance has so far received the largest number of claims amounting to INR1.3 billion, primarily for automobiles and from small-scale units.

Mr G Srinivasan, Chairman and Managing Director of New India Assurance, said that the company has received claims amounting to INR350 million. He said that the magnitude of loss for general insurers may not be as big as that seen last year during Cyclone Hudhud and the floods in Jammu and Kashmir as most claims have come from flooding in low-lying areas and there have been no major losses to industries, apart from small stock losses. Last year, natural disasters such as the floods in Jammu and Kashmir and Cyclone Hudhud led to insured losses of around INR15 billion and INR40 billion, respectively. “We don’t see a major trigger for large claims as it was not a cyclone and most of the claims will come from only flooding,” Mr M Ravichandran, President of Tata AIG, said.

Heavy flooding in the past week in the southern province of Tamil Nadu have resulted in numerous insurance claims, particularly from businesses in industrial zones.

Several large insurance companies have set up special teams to deal with the claims from affected factories. Industry players say that it is too early to give an overall estimate of insurance losses. State-owned Chennai headquartered United India Insurance has so far received claims exceeding INR1.1 billion (US$16.6 million) and more claims are expected, the company’s Chairman and Managing Director, Mr Milind Kharat, told the local media. The majority of claims are from Chennai, which is the capital of Tamil Nadu.

Chennai received its highest rainfall in the last 10 years, recording 246.5mm rainfall in 24 hours last Monday, causing extensive damage to property and life. The floods have claimed more than 70 lives in the past week. Another state-owned insurer, New India Assurance, has received claims so far totalling INR300 million in Chennai. “It’s early days. We are still awaiting the full claims data. While the sudden flooding in Chennai has resulted in claims coming from the city, claims have not yet come in from other parts of the state,” the company’s Chairman and Managing Director, Mr G Srinivasan, said.

Private insurer Bajaj Allianz General Insurance expects substantial losses in the motor and property line segments. “The city has a higher concentration of high-end vehicles, hence we are expecting considerable losses from this segment. Of the claims that have been reported for motor, many of them pertain to high-end cars. In case of property insurance, we have received claims for damage to stocks and other assets from business and commercial set ups due to inundation,” the Times of India reported, citing the insurer’s Chief Technical Officer, Mr Sasikumar Adidamu. Meanwhile, questions are being raised over Chennai’s basic infrastructure. “The master plan itself has been put together with absolutely no thought to hydrology,” said Nityanand Jayaraman, an environmental activist and writer, according to a report by Livemint. Located on the east coast of India, the city often faces cyclones and heavy rains.

To give new business from single-premium business a boost, life insurers in India plan to ask the government to do away with the 2% tax deducted at source on such policies.

In particular, the country’s biggest life insurer, state-owned Life Insurance Corporation (LIC), has seen first-year premiums from individual single-premium products plunge by 43% to INR37.52 billion (US$573 million) for the six months ended 30 September 2015, reported the Financial Chronicle citing data from the Insurance Regulatory and Development Authority of India.

The premium decline is attributed to an amendment to the Income Tax Act following last year’s Budget. Under it, the insurance company has to deduct 2% tax at source from the maturity proceeds of a life policy if the premium paid out turns out to be more than 10% of the sum assured. Speaking to Financial Chronicle, a top LIC official, said: “The life insurance industry would also be writing to the government through the Life Insurance Council while we would also write separately.” However, for the 23 private life insurers, the combined first-year premiums from single-premium policies grew by 16% to INR12.51 billion for April to September.

Insurance companies in India, hit hard by higher hospitalisation expenses in leading metropolises, are increasingly moving away from the concept of ‘one policy, one price’. Most insurers are switching to geographical pricing to address inconsistencies in healthcare costs.

KPMG, an international consultancy, estimates that 30% to 40% of all healthcare claims come from India’s top six cities, and their average claim size is about 30% higher than the all-India average, reported Business World. Mumbai is by far India’s most expensive city for healthcare. Its average claim size is 70% higher than the rest of the state of Maharashtra alone. “We have demarcated various zones across the country based on the prevailing medical costs and trends in costs,” said Mr Sandeep Patel, Managing Director & CEO of Cigna TTK Health Insurance. Zonal premium rates also take cognizance of the existing health infrastructure because tertiary care hospitals in the private sector are fairly expensive, said Mr Patel.

Zone-based health insurance pricing is seen as fair to people living in smaller cities. “Zone-based pricing ensures that customers in Tier II/Tier III cities do not cross-subsidise customers in a Tier I city by paying the same premium,” said Mr Patel. Keeping premiums lower in smaller cities also helps push purchases of health insurance in those areas, which Mr Patel said have a very low penetration compared to major cities. “I expect the pricing differential to grow to reflect the significant disparity between the cost of health care in leading cities and the rest of India,” said Mr Shashwat Sharma, Partner, Management Consulting, at KPMG in India.

To increase the penetration of health insurance in cities, Mr Sharma also expects insurers to take cognizance of the variations in the cost of healthcare between corporate hospitals and smaller hospitals, including those run by charitable trusts, and nursing homes. “The cost of health insurance must fall for huge numbers of low-income customers in metro cities to be brought into the health insurance net,” he said. “One way of achieving this is to offer policies for different classes of hospitals, based on the understanding that economically less privileged people would be willing to get treated in a less expensive government or trust hospital or nursing home.”

Finally, clarity on ownership and control for insurance firms looking to raise funds from abroad. The Insurance Laws (Amendment) Act, 2015, passed during Parliament’s budget session, allowed insurance companies to raise their foreign ownership from 26% to 49%, with the requirement that the company be Indian owned and controlled.

The industry, however, waited for further clarification. It came on 19 October with the Insurance Regulatory and Development Authority of India (Irda) announcing guidelines. The insurance regulator said the expression “control” includes the right to appoint a majority of the directors or control the management or policy decisions, including by virtue of their shareholding or management rights or shareholders’ agreement or voting agreements. This means the majority of directors, excluding independent directors, will have to be nominated by Indian promoters or Indian investors. According to the guidelines, even the appointment of key management persons that include chief executive officer, managing director or principal officer in case of an insurance broker will have to be through them or the board of directors.

The guidelines, however, allow for the nomination of key persons except the chief executive officer by foreign investors, provided such appointments are approved by the board, which must have a majority of directors that are the nominees of Indian promoters or investors. The guidelines are also applicable to insurance intermediaries such as brokers and third- party administrators. However, in case an insurance intermediary has more than 50% of its revenue from non-insurance activities, these guidelines are not applicable. The guidelines further state that wherever the chairman of the board has a casting vote, the chairman will be nominated by Indian promoters or Indian investors. “Now that Irda has clarified the management controls, the process of approving foreign direct investment (FDI) hike will be quick,” said Anuraag Sunder, director, insurance, PwC India. “FDI hike has to be approved by the Foreign Investment Promotion Board (FIPB) first, then the Competition Commission of India (CCI) and, ultimately, Irda. Given that all the insurers have three months to comply with the definition, most of the FDI hike requests that come will have an Indian owned and controlled management already in place.

This will help the authorities approve the FDI hike faster,” Sunder said. According to Sunder, when the sector opened up to private insurers, Indian promoters didn’t have the expertise to run the insurance business. “As a result, the management control automatically went to the foreign partners and still continues to be the case. Irda wants that to stop and make Indian shareholders more responsible. Now, regardless of the hike, management needs to be Indian owned and controlled. This means that management control will no longer be a deciding factor for the foreign promoters to hike their stake and many would want to increase the stake for a fair valuation,” added Sunder.