Expert Zone

Straight from the Specialists

Third party premium for motor insurance increased

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

It is compulsory for every vehicle in India to have a third party insurance, which covers risks involving damage or loss to others caused by the vehicle you drive.

Since it is mandatory, the pricing has traditionally been administered by the insurance regulator, IRDA. With the price controlled and risk unlimited, the portfolio is bound to look messy.

The regulator currently revisits the pricing once a year and ends up increasing the premium based on a predetermined formula. To see the current increase for two wheelers and cars, see the table below. Type of Vehicle New 3rd Party Premium (Rs) Increase (Rs)   Private Cars Not exceeding 1000 cc 1129 188 1000 to 1500 cc 1332 222 Greater than 1500 cc 4109 685 Two Wheelers     Not exceeding 75 cc 455 41 75 to 150 cc 464 42 150 to 350 cc 462 42 Greater than 350 cc 884 80

Premiums for all other vehicles, including commercial ones, have also been revised.

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.

Time for a relook at FDI in insurance intermediaries

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

Insurance companies in India have an FDI limit of 26 percent, which may be revised upwards in the coming months. The industry requires funds to grow and the revision can be an enabler, but the process may take some time as it requires legislative approval and there seems to be some opposition to the move.

Since the industry is still in its nascent stage, the insurance regulator also places the same FDI cap on insurance intermediaries such as brokers and web aggregators, severely limiting their ability to raise funds to grow their business.

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.

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.

Third-party motor insurance premiums fixed for new financial year

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

A motor insurance policy consists broadly of two parts — third-party cover, which is regulated; and an ‘own damage’ cover, the premium for which is left to market dynamics.

The premium for ‘own damage’ cover, which forms the larger chunk of the insurance premium, is based on risk and competitive pressures.

Pension plans are making a comeback

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

Life insurance companies had all but exited the pension sector after tough regulations were put in place to guarantee returns for the investor. This is a vital sector for insurance companies and hit overall business.

In 2010/11, new business of 122 billion rupees was added in the pension sector. This fell to 111.7 billion rupees in the following fiscal year. Worse, deletions in the business increased from 68.9 billion rupees to 195.2 billion rupees last year — surely that would have hurt.

Parallel between cash transfer schemes and health insurance claims

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

The more I think about it, the more I am convinced that the direct cash transfer scheme is a money saver for the government and the taxpayer. A direct parallel is the way insurance companies handle claims in health insurance plans.

Why online is the right way forward in life insurance

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

Insurance in India is divided into two broad categories — life insurance and non-life insurance (also called general insurance). For the record, most retail non-life products such as health insurance, car insurance and travel insurance are already sold completely online by most insurers.

Life insurance still struggling, non-life continues to grow

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

The lean half of the financial year for insurance sales is behind us and the numbers for the life insurance vertical are not impressive. But the general insurance or non-life vertical has shown a healthy growth rate. Highlights are given below.

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