General Insurance

Incredibly High Claim Ratio of 170% for Government Backed Insurance Policies

Posted on 16 Aug 2017 by Easypolicy

The 2015 Budget Speech by Finance Minister Arun Jaitley mentioned about a couple of government backed life insurance schemes. Currently, about 20% of the entire population of the country has any life insurance and the intent of these was to increase that number.

Two years down the line, both the schemes Pradhan Mantri Jeevan Jyoti Bima Yojna (PMJJBY) and Pradhan Mantri Suraksha Bima Yojya (PMSBY) are knocking the doors of almost unsustainable claims to premium ratio. The PMJJBY has hit about 121% claims is to premium ratio only in its second year, while the PMSBY has even higher rates of 170% for the year 2016-2017.

The annual premium amount for both the schemes stands at Rs. 330 and Rs. 12 for PMJJBY and PMSBY respectively. The first year of operations saw the same ratio at 88% for PMJJBY and 121% for PMSBY. For reference, regular term and accidental insurances have a ratio at 40-45%.
This has sent the insurers into a frenzy and they are having talks with the government to increase the premium for PMSBY to about Rs. 75-100 for an increased coverage of Rs. 4 lacs as against the current 2 Lacs for PMSBY. But the government wants to keep an eye for a couple of years before making any changes to the premium prices.

Insurers will have to deal with more taxes in GST Regime: Report

Posted on 23 Aug 2016 by Easypolicy

MUMBAI: Insurance companies will potentially have to deal with more taxes once the GST is implemented with the emergence of the Centre and states as dual stakeholders, a report said. 

The number of taxes will increase as calculation of input-output tax credits will be done separately for each individual state in which they are earned, it added.

Insurance, being a service industry, deals with one single tax (service tax) with one administering authority (the Central government), the EY and CII 'Insurer of the Future' report said.

"One of the significant impacts on insurance industry under the dual GST structure would be the emergence of dual stakeholders in every taxable supply of service, the state government, where the supply is made and the Centre," it said.

From dealing with a central service tax for pan-India operations, insurers now will potentially start dealing with 38 taxes, including 35 state GSTs (SGSTs), including Union Territories, one Central GST (CGST) and IGST on inter-state supplies, it pointed out.

The report added that the reinsurance industry is undergoing a major change, with foreign insurers being permitted to set up branch offices in India.

The new rules are expected to create an even greater focus on services by foreign insurers as they compete for a share of the market, it added. 

The market for emerging risks such as cyber insurance, customised liability insurance and specific disease insurance is expected to grow, driven by the willingness of customers to pay a premium for specialised and innovative solutions.

Reinsurers have a key role to play in helping the insurance industry innovate and cover new frontiers, as the industry looks to them when it comes to exploring the unknown.

The report also stated that technology will form the backbone for this transformation, acting as both an enabler and disruptor.

Its role is expected to rapidly change from its current ancillary function to becoming a core competency for insurance businesses.
Solutions such as data analytics, robotics process automation, block chain and cloud, which is already being implemented, however, is only the tip of the iceberg in terms of their potential applications and overall ability to transform businesses.

The digital bar for insurers is rising continuously and the companies that can meet this challenge will build greater customer loyalty, improve cost efficiency and increase profitability, it added.

Source: Economic Times

Dated: 12th August, 2016

HDFC, Max Group Merge Life Insurance Businesses to Create Company Worth Rs 67,000 Crore

Posted on 10 Aug 2016 by Easypolicy

HDFC Chairman Deepak Parekh and Max Group Chairman Analjit Singh announced a deal merging their life insurance businesses to create what will eventually be India's largest listed life insurance company with an estimated market value of Rs 67,000 crore once the all-share transaction is completed in about 12-15 months.

The Max promoter group will be paid a non-compete fee of Rs 850 crore over four years. The boards of HDFC Life, Max Life and Max Financial Services approved the scheme of arrangement for merging the insurance businesses on Monday.

Arpwood Capital was the lead financial adviser to the deal. "As per the agreed valuation and exchange ratio, the relative valuation of HDFC Life and Max Life would be 69 per cent and 31 per cent, respectively," HDFC Life said in a release on Monday.
The merged entity will retain the HDFC Life name. Once regulatory and other approvals come through, the companies will engage in a series of transactions before the deal is completed: Max Life will be absorbed by listed parent Max Financial Services.
Source: Economic Times
Dated: 9th August

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