Optima Insurance Brokers Pvt. Ltd.

China and India, the world’s biggest population giants, are facing a cancer crisis, with smoking, belated diagnosis and unequal access to treatment all causing large-scale problems. Public awareness of cancer risk remains extremely low, tinged by either fatalism or a misplaced faith in traditional medicine to tackle the disease.

In a major report, published in The Lancet Oncology, more than 40 specialists warn that Asia’s two emerging giants are facing huge economic and human costs from the disease.

In China, cancer now accounts for one in every five deaths, ranking second only to cardiovascular disease as the most common cause of mortality, according to the study.

Sixty percent of cancer cases in China are attributable to “modifiable environmental factors,” including smoking, water contamination and air pollution, it said. The experts recommend that an urgent and ongoing effort should be made to reduce pollution in China’s air, water and soil.

But funding is also an issue. China currently spends only 5.1 percent of its national income on health care — roughly only half the rate of European countries — and just 0.1 percent of this spending goes specifically to cancer. Patients in China also need to pay for most cancer treatment themselves, which can lead to catastrophic health care bills, while urban areas have twice as many cancer care beds than rural areas, even though half of China’s population live in the countryside.

In India, around one million new cancer cases are diagnosed each year, a tally that is projected to reach 1.7 million in 2035. Deaths from cancer are currently 600,000-700,000 annually, although this figure is also forecast to rise, to around 1.2 million.

The study showed that while incidence of cancer in the Indian population is only about a quarter of that in the US or Europe, mortality rates among those diagnosed with the disease are much higher.

Diagnosis is a problem, with a lack of cancer care in the north, centre and east of the country forcing many patients to travel long distances for treatment, and often to live in very harsh conditions. In rural India, more than three quarters of private practitioners, who are often the first personnel to whom people sick with cancer turn to for treatment, have no medical qualifications, the report said.

The Securities and Exchange Board of India (SEBI) has said that the top 100 companies listed on India bourses must establish risk management committees immediately, to comply with revised corporate governance standards which it released last week. All other companies have to implement the revised corporate governance norms by 1 October.

The capital market regulator said that the rules are applicable to insurers, banks and financial institutions to the extent that they do not clash with any regulations of their respective primary regulator, that is the Insurance Regulatory and Development Authority and the Reserve Bank of India. The rules are not applicable to mutual funds, SEBI said.

The risk management committees identify, evaluate and mitigate all risks associated with business, interest rates, currencies and other challenges companies face.

In its circular last week, SEBI said that the boards of these companies have to define the roles and responsibilities of the committee and may delegate monitoring and reviewing of the risk management plan to the panel.

For insurance companies, according to a biennial survey of insurance risks conducted by the London-based independent think tank, Centre for the Study of Financial Innovation, and the international accounting and advisory firm, PwC, that was released last August, business practices and quality of risk management are among the top risks that the Indian insurance industry at present faces. Other major risks are regulation, natural catastrophes and quality of management.

Companies in India have been snapping up D&O insurance policies to cope with new provisions in the Companies Act that kicked in on 1 April, so as to obtain protection in case their directors or senior executives get embroiled in allegations of fraud or mismanagement.

“We have seen a significant uptick in D&O policy sales ever since the new Companies Act sections were unveiled in November. Companies, which have taken this policy, are increasing their cover,” Mr Sushant Sarin, Senior Vice President – Commercial Lines of Tata AIG General Insurance, told the Hindu Business Lines. The number of policies sold has grown by 25-30 percent this year, and more sales are expected in this class of business.

The new legislative provisions set stiff penalties for auditors, directors and top managers if the company they work for is accused of fraud or mismanagement. “Penalties, which were in hundreds and thousands of rupees, now run into lakhs (hundreds of thousands),” said Mr Jamil Khatri, Global Head of Accounting Advisory Services at KPMG.

Mr Sarin said that listed companies, particularly from new-age sectors such as IT, entertainment, communications and biotech, opt for a higher cover as their stock price is more volatile than, say, that of a manufacturing company.

The sum assured on D&O policies starts from INR10 million (US$164,000) rising to INR5 billion. Premiums vary from INR50,000 to INR100,000 for the minimum cover to about INR20 million to INR30 million for higher covers. “While limits vary from industry to industry, companies tend to take 10-20 per cent of their turnover as cover. The base (premium) rate comes to around 0.2 percent, and again it depends on the kind of risk and industry the companies are in,” said Mr Sanjay Datta, Chief of Underwriting and Claims at ICICI Lombard General Insurance.

Private-sector health insurers cover nearly 65 percent of Indians who have health insurance but are beaten by state-owned insurers which command 61 percent of health insurance premiums, according to a study by The Associated Chambers of Commerce and Industry of India (Assocham), an apex trade association in India.

In terms of distribution channels, individual agents bring in the majority of medical insurance business with a 72.9-percent share, said the study which is titled “Health Insurance in India: A review”. However, direct business is the major contributor in terms of premium collection with about 37-percent share, followed by individual agents (31.6 percent) and brokers (21.4 percent).

Referrals constitute a meagre 0.1 percent in terms of both the number medical insurance policies sold as well as insurance premiums collected.

Assocham Secretary General, Mr D S Rawat, said that private health insurance will continue to grow in terms of covering the non-vulnerable, the middle class and higher income segments of the population that can afford to purchase it, reported the Press Trust of India.

The study added that addressing the coverage gap is a huge challenge for the insurance industry because of low public spending on health along with high levels of informal or unorganised labour, a large dispersed rural population, high levels of poverty and few providers serving the poor.

The study suggested that the government’s priorities in healthcare financing must be to meet the basic objectives of affordability, reach and quality of services.

Medical insurers in India have increased the number of daycare procedures for which they provide cover – a marked departure from the previous standard practice of requiring at least 24-hour hospitalisation for medical cover to come into force.

Star Health and Allied Insurance now covers over 200 daycare procedures. Similarly, HDFC Ergo provides insurance for over 100 daycare procedures. “Increasingly, health insurance covers are becoming more inclusive as the industry gains more experience from claims data and history,” Mr Mukesh Kumar, head, human resource, marketing and strategy planning, HDFC Ergo, told The Times of India.

Industry observers attribute the change to medical advances. “Over the years, advances in medical technology have ensured that many surgical procedures have become a day affair now and the list is only set to grow,” Mr Rahul Aggarwal, CEO of insurance advisory Optima Insurance Brokers, said. Mr V Jagannathan, Chairman and Managing Director of Star Health, said: “Over time, systems, records and technology have improved, which ensure a person can walk in and out of surgery on the same day itself.”

Also, the insurance regulator, Insurance Regulatory and Development Authority, has been urging insurers to offer more daycare health insurance covers. Last year, the regulator set out standard definitions for 46 commonly-used health insurance terms such as daycare treatment, co-payment and domiciliary hospitals, which insurers find helpful.

However, some day surgical procedures can be more expensive on account of the use of new technology, medical equipment and procedures. Nevertheless, there are cost savings in that insurers and the insured can avoid room charges and nursing fees.

Medical insurance companies are reporting more claims by cancer patients, indicating a rise in the incidence of the disease. Every year, at least one million new cases of cancer are detected in India and 600,000 die of it.

On the bright side, analysis of claim reimbursement data shows that the number of patients fighting cancer—and surviving it—is increasing, say medical and insurance experts. On the other hand, though cancer is mainly considered a disease of the elderly, almost half of the claims are from younger patients. Persons between 46 and 55 comprised almost a quarter of all claims from a private insurer, while almost one in five reimbursement demands came from those between 36 and 45, reported The Economic Times.

Data collated by the insurance regulator, Insurance Regulatory and Development Authority, show average claims paid for cancer treatment are the fourth highest among all ailments. In 2011-12, the latest year for which entire industry data are available, 47,182 claims for cancer treatment amounting to INR1.63 billion (US$26.2 million) were settled. Last year’s claims would be a multiple of this number, said industry officials.

Insurance experts say the growth in claims for cancer indicates that better and earlier diagnosis is leading to more patients seeking early treatment and, hence, better recovery rates. They also say that rising cancer rates have prompted people to purchase more health insurance policies with higher sums insured.

Public-sector non-life insurance companies are slipping in their market shares as they work to increase their revenues by focussing on large corporate accounts. This strategy has allowed their private-sector rivals to increase market share in profitable retail lines.

For instance, during the financial year ended March 2013, private insurers increased their market share in individual health insurance to 23 percent from the previous year’s 21 percent. In contrast, the four public-sector insurers that had a market share of 71 percent in 2011-12 saw it dip to 67 percent in 2012-13, reported the Financial Chronicle. The four state-owned insurers are New India Assurance, Oriental Insurance, United India Insurance and National Insurance.

Similarly, in personal accident insurance, which is another profitable segment, the private non-life insurers increased their market share to 57 percent in 2012-13, up from 48.75 percent in 2011-12. The public-sector non-life insurers saw their market share decline in personal accident to 40 percent in 2012-13 from 49 percent in 2011-12.

Mr Mukesh Kumar, head of strategic planning at HDFC Ergo General Insurance, told Financial Chronicle: “Post detariffing in 2007, the large private non-life insurers started focusing on profitable lines of business especially individual health, personal accident, home and liability insurance. In order to increase the topline, the public-sector insurers have been aggressive in group health and large corporate accounts for property insurance.”

According to the 2012-2013 annual report released by the Insurance Regulatory and Development Authority, the incurred claims ratio (ICR) for group insurance for the insurance industry was 104.4 percent, while that for individual policies, excluding family floater policies, was 90.2 percent. The ICRs for family floater policies and government sponsored health insurance schemes were 70.51 percent and 87.13 percent, respectively, for the industry.

In addition, private insurers exhibited better underwriting discipline in group business than the public-sector general insurers. For private non-life insurers, the individual insurance business was profitable with an ICR of 50 percent while the group health insurance business had an ICR of 92 percent. The public-sector general insurers reported an ICR of 110 percent for group health and 101.20 percent for individual business.

Public-sector general insurance companies are planning to join their private-sector rivals in launching healthcare policies offering cashless outpatient department (OPD) medical cover as well as the reimbursement of medical expenses incurred overseas.

“OPD consists of almost 60 percent of overall medical spending in India, so we need to get into that space and offer reasonably priced products in a few months,” Mr G Srinivasan, Chairman and Managing Director of New India Assurance told the Hindu Business Line. The insurer is also planning to offer cover for treatment outside India, he said. The four public-sector insurers – New India Assurance, United India, Oriental Insurance and National Insurance – control 70 percent of the health insurance market.

Healthcare insurance in India typically covers medical expenses incurred during a hospital stay of at least 24 hours. According to a recent report by ICICI Lombard, only 2 percent of the health insurance products currently available cover OPD. These are sold by private-sector general insurance companies and standalone health insurers.

For insurers, covering OPD is not an easy proposition as claims are small and frequent. “While there are difficulties in managing OPD, we need to take care of the loss experience to ensure that it does not become an unviable portfolio,” said Mr Srinivasan.

The move to cover the OPD expenses will provide a wider portfolio for general insurers. Health insurance is already one of the rapidly growing sectors of the industry, expanding by 18.7 percent to INR139.75 billion  (US$2.27 billion) for the financial year ended 31 March 2013.

The organisers of the Mumbai Marathon, which took place yesterday, bought comprehensive insurance cover INR200 million (US$3.25 million) against event cancellation, public liability and terrorism. Around 40,000 runners participated in the 42-km run, the 11th annual marathon in the city.

Security threats at marathon events have increased following bombings at last year’s Boston marathon.

Procam International, organisers of the Mumbai Marathon, sought a repeat of last year’s comprehensive cover with New India Assurance and Reliance General Insurance.

“This year we have covered all the participants through third party liability insurance in case of any injuries during the event,” Mr Bruno Goveas, public relations director of Procam International, told Hindu Business Line.

He said that since there had been no untoward incident in previous, the organisers did not see a need for a higher insurance cover. The sum insured was based on the organisers’ estimate of expenses as funding for the marathon was received through sponsorships.

The organisers increased security for the event and the Mumbai police took special security measures. Around 2,000 police personnel were on duty, patrolling, helping runners and taking care of the crowd control. Two dozen anti-terror teams and anti-sabotage squads were on standby too. Some personnel kept a lookout in watchtowers and others videographed the proceedings. There were also 1,000 private security personnel.

Mr Praveen Vashishta, chairman of Howden Asia Insurance Brokers, says that in events such as marathons, organisers do not perceive much liability risk since the event takes place in a public place. However, he adds, organisers generally take insurance cover against event cancellation or abandonment due to adverse weather conditions or political tensions.

The Mumbai marathon is a high-profile public event, attracting international runners, CEOs and celebrities. Yesterday’s race was completed uneventfully.

Regulator against attempts to hardsell earlier products before the Dec 31 deadline

Life Insurance Corporation of India has been slapped with a show-cause notice by the insurance regulator for allegedly misleading the public through advertisement.

Insurance Regulatory & Development Authority (Irda) has put a question mark on certain LIC advertisements that had the catch line — ‘last time to buy your favourite product’. The advertisements released in December preceded the withdrawal of as many as 34 LIC products, including ‘Jeevan Tarang’, ‘Jeevan Anand’ and ‘Bima Bachat’, from January 1. New rules announced by Irda on traditional products drove most insurance companies to pull back many of their existing offerings.

Irda, which perceives that the new products are more customer-friendly, objected to the insurer’s attempt to hardsell earlier products before the December 31 deadline. According to the regulator, since the new products were more favourable to investors, LIC should have refrained from describing earlier insurance plans as “favourite products”. LIC, the country’s largest insurer and the most prominent domestic institutional investor, has sought a month’s time to respond to the show-cause notice.

“We have sent the show-cause notice to LIC for misleading people through its advertisement,” a senior Irda official told ET. “There is another show-cause notice sent on the Cobrapost expose,” said the person. A report by Cobrapost, a news website, has alleged misselling and money laundering by LIC employees and agents. Rules Okayed in Feb 2013.

Since January 1, the guidelines for traditional insurance products have been changed to offer policyholders guaranteed surrender value and lower commission charges. Traditional policies are debt-oriented products in which bulk of underlying investment is in government and corporate bonds, with a maximum of 15% being deployed in equities.

The new rules, approved in February 2013, were originally scheduled to become effective from October 1. But the launch date for new products was pushed back to January 1 following representations from life insurers.

Taking advantage of the threemonth window, all life insurance companies pushed their agents to maximise sale during the third quarter of the current financial year. One of the selling points of LIC agents was that customers would have to bear the service tax on the new products. LIC hires more than 11 lakh agents.

The Union Budget for 2013-14 had almost doubled the service tax to 3.09% on traditional life insurance policies from 1.55%. While all private sector insurance companies levied service tax upfront, LIC absorbed the service tax on behalf of policyholders. On a premium of Rs 1 lakh, policyholders are now paying Rs 3,000 as service tax. LIC has collected Rs 37,906 crore in the April-September period, up 7.25% from the yearago period.