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from Edward Hadas:

In defence of financial coercion

Last week the British government gave a new freedom to its citizens, or at least to a relatively privileged group of them. No longer will pensioners with defined contribution retirement plans be forced to invest their accumulated funds in an annuity. The old requirement was a form of financial coercion: government rules which influence behaviour.

For the pensioners in question, the new arrangement may feel like liberation. They will no longer be enslaved to a product which offers meagre yields. For the rest of Britain, though, financial freedom has probably been reduced. All taxpayers will end up paying more for the medical bills of some pensioners, those who would have had an annuity income but who might now be forced to turn to the state if they run out of money when they need expensive care.

The elimination of one sort of coercion for some people brings a new coercion for others. The pattern is typical, and not merely in finance. Freedom is usually tied to constraint. If I am free to play loud music, my neighbour is forced to endure a racket. If I am free to charge as much as I want for a product that is in short supply, the rich are free to buy but poorer people are forced to do without.

In complicated modern economies, this financial coercion is inevitable. Banks and other institutions which collect and disperse money cannot operate well without trusting customers. These intermediaries are so big and distant that customers will not trust them without strong regulatory and legal protection. So the freedom of banks to decide about their capital structures and lending practices is justly restricted for the sake of protecting the value of the funds deposited in the banks. Indeed, more of that sort of financial coercion a few years ago would have saved the global economy a great deal of trouble.

from Expert Zone:

Health insurance sector poised for more growth

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

With the arrival of Cigna TTK, there are now five standalone health insurers offering products and services in India. Religare Health is also a recent entrant that started operations only last year.

At a time when we are seeing several exits in the life insurance sector, this is an indicator of the growth potential in India's health insurance sector.

from The Great Debate UK:

Britain’s floods: How do we pay the £14 billion bill?

-- Nikolas Scherer is researcher at the Hertie School of Governance and Visiting Fellow at LSE IDEAS. The opinions expressed are his own.--

In some parts of the United Kingdom, the recent floods are the worst on record. Since December 2013, over 5,800 homes have been flooded in England alone. The cost to the UK economy had been estimated at as much as £14 billion, from damage, lost business and general economic slowdown. Whatever the exact figures, the bill will be immense.

from Expert Zone:

Taking stock of the insurance sector

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

With half the financial year gone by, it’s time to take stock of the insurance sector. Let me start with life insurance.

It was a tough year as new norms for a majority of insurance products - which were to be effective Oct. 1, 2013 but later postponed to Jan. 1, 2014 - were hanging like a sword over the business.

from Cancer in Context:

Obamacare and Cancer – top doctor sees no maligancy

With the Obamacare rhetoric flying, the president of the nation's leading cancer doctors'  group says worried cancer patients may be unnecessarily concerned. He has come to the view that Obamacare will be a boon for cancer patients, and a high-profile advocate for the controversial new national health care policy.

"I think what’s true for your average cancer patient is that nothing changes,” Dr. Clifford Hudis, president of American Society of Clinical Oncology (ASCO), told me recently. 

from Felix Salmon:

Regulatory arbitrageurs of the day, insurance edition

Well done to Benjamin Lawsky, who is getting serious about the regulatory arbitrage which is endemic in the insurance industry -- or, as he put it in a powerfully-worded letter yesterday, "the gamesmanship and abuses associated with the setting of reserves".

The topic here is decidedly gnarly, but also extremely important. Insurance companies, just like banks, have both assets and liabilities. Their assets are generally financial investments (stocks, bonds, private equity limited partnerships, that kind of thing) -- and therefore pretty easy to calculate. Their liabilities, on the other hand, are fuzzier: at some unknown point in the future, they're going to have to pay out some unknown sum of money to an unknown number of insureds claiming on an unknown number of events.

from Financial Regulatory Forum:

U.S. financial regulation has gaps in risk oversight, insurance, infrastructure, global stability board finds

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By Nick Paraskeva, Compliance Complete contributing author

NEW YORK, Sept 3. (Thomson Reuters Accelus) - A Financial Stability Board (FSB) peer review of U.S. regulation found gaps in oversight of systemic risk, insurance firms and financial infrastructure.

The report called on the United States to develop the Treasury-led oversight council into a "systematic, analytical and transparent macroprudential framework" that better coordinates the work of its member regulators. The 10 agency heads in Financial Stability Oversight Council have not always seen eye to eye.

from Expert Zone:

New ways to distribute insurance policies

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(Any opinions expressed here are those of the author and not of Reuters)

On a rainy day in Mumbai, I was chatting with the taxi driver. It was a prolonged journey, made worse by a never-ending traffic jam. We talked about insurance and I asked him about his insurance cover. I heard the familiar story of a man being cheated into buying an expensive plan; he escaped only after losing a lot of money.

When we think of insurance, it’s typically life, motor and health insurance that come to mind. These are relatively expensive and an already reluctant Indian consumer stays away unless forced into it. This ‘push’ component has become the default sales mode. Motor insurance is mandatory by law and should have ready acceptance. But a large number of vehicles on Indian roads are still not insured.

from Expert Zone:

Indian insurers can now go international

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Global insurers have been participating in the Indian insurance market for nearly 12 years. We may soon see the trend reversing.

The Insurance Regulatory and Development Authority (IRDA), the country’s insurance regulator, has laid down rules for Indian companies to start overseas operations. The criteria being: net worth of 5 billion rupees for life insurance companies, 2.5 billion rupees for general insurance companies and 7.5 billion rupees for re-insurance companies. In addition, the companies should have made a profit in at least three of the last five years.

from Breakingviews:

New York watchdog protests too much over insurance

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By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

 

New York’s financial watchdog is protesting too much over insurance. The state’s brash regulator, Benjamin Lawsky, rubbed fellow overseers the wrong way when he broke ranks to go after Standard Chartered over money laundering. Now he may be doing the same again. His capital-inflation beefs are legitimate, but other U.S. regulators are on the case. What’s needed is coordination, not a vigilante.

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