Indian insurers to up IT spending in 2011: Gartner

As per Gartner, the market analyst firm, Indian insurers are expected to spend $1.8bn on IT products and services this fiscal, an increase of 11.7% over last year. Insurers in India had spent $1.6bn on such services in 2010-11.

This clearly indicates that Indian insurers are finally opening up to technology and adopting it more openly in an effort to drive efficiency across the insurance business value chain. Evolving regulatory changes, volatile economic conditions and catastrophic events are compelling insurers to streamline and apply more thought to their business processes.

Health Insurance Portability in India finally sees daylight

The scheme was proposed to come into force from July 1 earlier, but was deferred for three months due to certain outstanding issues with insurance companies.

Health portability will allow consumers to change their service provider without losing the basic coverage of health insurance. As per portability rules, consumers will get credit for the time already spent for covering the pre-existing disease along with bonus accrued to him from his past insurer.

However, health insurance portability will be limited to non-life insurers, which will allow policy switch with respect to all individual policies, including family floater policies.

Even individual members, including the family members covered under group health insurance policy of a non-life insurer, will be able to migrate from a group health policy to an individual policy or a family floater with the same insurer.

India's Formula1 Grand Prix gets $100mn insurance cover

JPSI (Jaypee Sports International Ltd), the organiser and sponsorer of India's first Formula1 Grand Prix to be held at Buddh International Circuit in Greater Noida, has sought an insurance cover of $100mn (around Rs 490 cr) for the event.

The cover includes two policies:

1. $15mn event cancellation policy - covering for loss of revenue on account of cancellation of the event due to reasons beyond the control of the organisers. Expected to be underwritten by HDFC Ergo.
2. $85mn terrorism and third party liability cover - Apart from any terrorist activity, it covers third-party liability risks like personal accident covers for ground crews, instruments of the organisers and property damages. To be provided by Reliance General Insurance Company.

Approximately 70% of the risk has been reinsured to global reinsurance majors. The General Insurance Corporation of India (GIC Re) was ceded 10% of the risk. 20% of the risk to be retained by the insurers.

Total premiums expected to be in the region of Rs 7-10 crore

Event date: October 28-30, includes three practice & one qualifying sessions and final race
Laps: 60

Indian Insurance - One of the fastest growing insurance markets

Here's interesting growth facts of Indian insurance market as per The Associated Chambers of Commerce and Industry of India (ASSOCHAM):

1. Annual gross written premiums (GWP) of Rs. 2.7 lakh crore set to grow by 13-14% to reach Rs. 5.17 lakh crore by 2015
2. Strong underlying demand tailwinds would catapult premium income of Indian insurance industry to Rs 18 lakh crore by 2020
3. Indian insurance to contribute 10% of total global premium growth by 2020 being one of the few markets to grow at double digit rates
4. Growth of life insurance sector in India during 2000 and 2010:
• New Business Premiums: Grew by 28%
• Annual Premium Equivalent (APE): Grew by 27%
• Gross Written Premiums: Grew by 25%
5. An interesting observation made by secretary general DS Rawat highlighted the level of protection (measured by sum assured to GDP) at about 55%. This is quite low compared to the benchmarks in developed markets of 150-250%

MetLife India and Punjab National Bank join hands in a strategic insurance deal

MetLife and Punjab National Bank (PNB) have entered into a strategic business partnership to distribute life insurance products of MetLife. PNB has acquired a 30% stake in MetLife India's operations and a 10 year agreement to distribute its products through it's channels.

Final approval by the Govt. and financial regulators is awaited, post which MetLife would be known as PNB-MetLife India Insurance Company.

Read more on this here, Annuity News Journal

Public sector general insurers establish PPN to address health insurance challenges

On July 1st 2010, GIPSA set forth the Preferred Provider Network (PPN), setting new requirements for hospitals offering cashless services in India. Under the PPN, GIPSA fixed the cost for 43 common surgical packages, offered as part of the cashless claims insurance policy. Hospitals enrolled in the PPN would have to meet these requirements and agree to the fixed costs of procedures in order for their patients to be able to utilize the cashless claims insurance services. Shortly after the PPN was established, the number of facilities offering cashless services fell from 900 to just over 70 hospitals. A number of hospitals were said to be reviewing and adjusting their fees in order to participate in the PPN.

Healthcare providers have argued that the fees set by the PPN are too low and in turn are damaging the quality of services that the hospitals can offer. The medical fees set by insurance companies were said to fall 50 percent lower than other hospital rates.

GIPSA is hoping to increase the number of hospitals listed on their network, however, given the discrepancy of healthcare fees, the number of hospitals listed on the PPN may drop in return.

GIPSA has argued that the PPN is a ‘policy-holder friendly system’, given that the low hospital rates would reflect in its low premiums. It also allows policyholders to claim directly, without going through the reimbursement process and therefore not having to worry about insurers not covering the treatment.

However on July 1st 2010, the Union Government of India introduced a 10.3% service tax charge to every cashless claim made by patients under the insurance policy. Although the service tax is paid through TPAs, as they reimburse the hospital claim, the patient’s policy is ultimately affected – given the accommodation needed for the service tax fees which is likely to increase the insurance premium in the long run. Patients who claim through the reimbursement system are not charged the service tax fee.

GIPSA have experienced considerable losses on their cashless service claims, as the medical costs incurred from claims has so far outweighed their premium revenue. The loss ratio, in some instances, was calculated as high as 130 per cent. The PPN have therefore set tight limitations on hospital packages, with the aim to avoid future mismanagement of claims.

For more on this, please refer here

India's GIPSA on the look for TPA partner

India’s General Insurers Public Sector Association (GIPSA), have shortlisted 9 companies to create a captive joint-venture third party administrator (TPA) to manage their cashless claims services.

GIPSA’s group of four public sector general insurance companies — New India Assurance; United India Insurance; Oriental Insurance and National Insurance; own 80% of India’s cashless claim insurance market.

GIPSA aims to utilise technical support from the proposed joint-venture TPA to control and recover its recent health insurance losses that have resulted from mismanagement of its cashless service claims.

There are currently 9 companies competing for the opportunity to be part of the joint-venture TPA. Aetna is continuously seeking ways of expanding its market globally and this is one of its most recent moves. Other companies looking to become GIPSA’s partners in the captive TPA include United Healthcare, Patni Computers; Coris International; Cambridge Solutions; Lason; and existing TPA’s E-Meditek & Medi Assist.

For more, please refer here

Health Insurance and Portability

Health insurance portability is slated to come into effect from July 1, 2011. While this is for individuals, there has been talks to extend this to group medical policies as well.

Health insurance penetration is at present a lowly 4.22% of the population. However this has improved from 2.5% to 3% in 2009-10.

Builders' insurers must cover disabled workers: Bombay High Court

In a recent order, the Bombay high court held that workers rendered disabled in an accident at a construction site were liable to be compensated by the builder’s insurer.

The New India Insurance Company (NIIC) had challenged the order of the commissioner of the Workmen’s Compensation Act that had asked the insurance company to pay the workers. The NIIC’s contention was the there was no employee-employer relationship between the workers and M/S Yamuna Builders who were their clients. They stated that the claims of the workers to earn Rs.4,000 a month were false as they were working for the builders on a piece-rate basis.

Brushing aside the argument that the workers were not employees of the builder, the court held that the four workers were disabled to an extent that they would not be able to carry out the same work to earn their livelihood. Hence, they had attained “total disablement” as defined under the Workmen’s Compensation Act, 1923, and were fit to receive compensation.

For more on this, read DNA