Car, truck insurance premiums set to go up

This could happen as insurance companies may hike premiums by as much as 40 per cent for commercial vehicles and 10 per cent for two-wheelers and personal cars to compensate for high claims in the motor insurance business.

The general insurance industry is currently in discussions with the regulator on the revision of premium rates for third party motor insurance which will be applicable from April.
Third party coverage

Motor insurance in India has two components — one covering third-party damage in terms of property or life and one covering one’s own damage.

The third-party coverage is mandatory by law for both commercial and personal vehicles.

The Insurance Regulatory and Development Authority had earlier come out with a formula based on inflation and claims experience of insurers to account for risk based pricing for revising premium rates.
‘transparent formula’

“It’s a very transparent formula by which the increase will be given but the problem is that the start itself is 40 per cent lower than what it should be. Though there has been an annual increase in premium rates it is still not adequate and it is trailing behind the claims. So the industry needs a correction of 40 per cent in third party motor premium,” said G. Srinivasan, CMD, New India Assurance.

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Consumer Federation of America alleges unfair insurance practices

A recent study from the Consumer Federation of America revealed some odd findings when it comes to auto insurance.

The CFA used two hypothetical drivers and sought to get them insurance from a variety of carriers. Both drivers were 30-year-old women who had the same amount of experience on the road, lived in similar ZIP codes, and sought the minimum amount of coverage.

As for the differences, one woman was single, rented her house, and hadn't had insurance for 45 days. She also had a spotless record on the roads: no accidents and no tickets. The other woman was married, a high earner with a graduate degree, and a home owner. She had been at fault in an accident that caused $800 worth of damage within the past three years.

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No insurance cover for organ donors

CHENNAI: Srinidhi (name changed), a housewife, donated a part of her liver to her husband a few years ago. Even though she has no complications and is perfectly healthy, she was surprised to find that insurance companies rejected her application for comprehensive health cover.

"Insurance companies don't ask if you have donated an organ. The application forms ask if there is a scar of the body and the reason for it. When you say you donated an organ, the application is rejected," said Srinidhi. The liver regenerates after donation and the donor is as normal as anyone else. "I am willing to prove this with scans and doctor's reports," she said.

 Many donors say they weren't issued policies despite undergoing extra tests. The problem is not confined to new applications. Insurers insist that donors undergo specific tests when policies come up for renewal. "The profile of the patient may have changed post donation, and risks arising out of such changes may not be covered under the original policy," said a senior official from a Chennai-based insurance company.

Jayakar (name changed), 69, who leads a retired life in Bangalore, applied for health insurance six months ago. Three insurance companies, including a public-sector company, rejected his application after he told them he had donated one of his kidneys in 1984.

"I am healthy. I am not diabetic or hypertensive," he said. Jayakar worked for State Bank of India and then the Tata group, both of which covered all his medical expenses. "After retirement, I realized I didn't have health cover. I didn't know I'd be ineligible because of a selfless act," he said.

Kidney and liver are the only two organs people can donate when they are alive. Other organs such as heart, lung and pancreas come from brain-dead persons. Nephrologists say donating a kidney may lead to a slight increase in blood pressure and in protein levels in urine, but it does not increase risk of kidney disease or reduce life expectancy. "On the contrary, I would say kidney donors are healthier than others because before they donate, we ensure that they are free of all diseases," said nephrologist Rajan Ravichandran.

Urologist Dr Sunil Shroff, who heads Mohan Foundation, a non-profit that promotes organ donation, said there were no reasons to reject applications by organ donors. "We must encourage people to donate organs to their loved ones. I wish medical professionals working with insurance companies would stop rejecting genuine cases," he said.

A few do get lucky. New India Assurance has given policies to some organ donors. "A person donates an organ only when it is considered safe by doctors. While there may have been some aberrations in terms of health cover for organ donors, we don't have an issue in terms of providing cover for them," said G Srinivasan, chairman and managing director, New India Assurance. 

Chidambaram plans to introduce insurance, pension bills in Budget session

NEW DELHI: Finance Minister P Chidambaram plans to introduce the insurance and pension bills in the Budget session of Parliament as he is optimistic of securing the opposition's support on the contentious legislations, Bank of America Merrill Lynch said after an investor interaction it hosted with Chidambaram in Singapore.

The insurance bill will propose to raise the FDI cap in the sector to 49% from 26%, while the pension bill will open up the sector to foreign investment up to 49%.

"The FM hopes to pass the insurance bill and the pension bill in the Budget session. He mentioned that behind the noise, there were quiet negotiations with the opposition parties and support from them," Bank of America Merrill Lynch said in a note on Wednesday.

Chidambaram, who is on a four-nation tour to woo investors, had on Tuesday promised a stable budget that will take fiscal consolidation process forward and not include any unpleasant tax measures.

The cabinet had in October last year approved the Insurance Laws (Amendment) Bill 2008 with 49% foreign investment limit in the sector, but the government did not move it in the Parliament's winter session as it lacks the numbers to get the bill passed on its own.

Chidambaram, however, was not hopeful of getting the goods and services tax in place by April 2013, but he could get the legislation for introducing the bill passed by December this year.

The ambitious reform of the indirect tax regime that envisages one goods and services tax in place of many levies is stuck because of differences between states and the Centre over its structure and powers of the two.

The finance minister reiterated the government's commitment to reforms and liberalisation, but said an unstable government in 2014 could be the biggest threat to reforms, the note said. India will elect a new government sometime in May-June next year.

Bank of America Merrill Lynch said the minister also told the investors that 5.3% fiscal deficit target will be met through cost cuts and austerity measures. He also said that the five-year fiscal deficit reduction targets announced by him earlier would be met without raising taxes.

The plan envisages reduction in fiscal deficit to 3% of GDP by 2016-17.

Chidambaram pegged the current year's growth at 5.7%, rising to around 6.7% in 2013-14 and to 8% the next year.

"The FM reiterated that the Cabinet Committee on Investments would speed up project approvals. Moreover, the PSUs have been asked to spend on projects as per targets or return surplus cash by way of special dividends," the note said.

Chidambaram also hoped that the direct transfer of benefits will help reduce leakage in the subsidy scheme and save subsidies, citing 20 to 60% savings in pilots. 

IRDA comes out with framework for monitoring insurance frauds

 The regulator has asked insurance companies to lay down procedures to carry out the due diligence on the personnel and submit a compliance report before June

New Delhi: the Insurance Regulatory and Development Authority (IRDA) has come out with a framework for monitoring frauds in the insurance sector and asked insurers to carry out due diligence on their staff, including agents, reports PTI.

Stating that such fraud reduces consumer and shareholder confidence and can affect the reputation of individual insurers and the insurance sector as a whole, IRDA asked insurers to lay down procedures for monitoring and early detection of frauds.

“Lay down procedures to carry out the due diligence on the personnel (management/staff)/ insurance agent/ corporate agent/ intermediary/ TPAs before appointment with them,” IRDA said in a circular to all insurance companies.

The insurers have to submit a compliance report with the regulator by 30 June 2013.

 “It is required that insurers understand the nature of fraud and take steps to minimise the vulnerability of their operations to fraud,” IRDA said.

It asked insurance companies to ensure that the risk management function is organised in such a way that the insurer is able to monitor all the risk and take steps to address them.

IRDA classified frauds in the insurance sector under three heads—claim fraud or policyholder fraud, intermediary fraud and internal fraud.

It also asked the insurance companies to frame an anti-fraud policy and said that the company’s board would review the policy on an annual basis.

The insurer shall inform both potential and existing clients about its anti-fraud policies, IRDA said, adding that the insurer has to highlight the consequences of submitting a false statement for the benefit of policyholder in the insurance contract.

Buying Home Insurance? Learn How to Choose a Good One

Buying a new home can be a daunting task, even for someone who has owned homes before. The first step in safeguarding your dream investment is to insure it with a good home insurance policy.

What is Home Insurance?

House insurance provides coverage to you in the event of losses incurred due to fire, theft, or damage through certain natural disasters. Getting an economic house insurance is a good first step towards protecting your home. But ultimately, when you decide to buy house insurance, you should go for the best property insurance.

How Do You Choose a Good Home Insurance Plan?

Finding a good house insurance is often considered a lengthy process as there are several plans and companies to choose from. It takes extensive research right from the first step to the last. Over the years, India has seen a rise in house insurance with many dynamic insurance companies offering comprehensive house insurance policies.

Most policies tend to cover a wide range of household items and this in turn increases your premiums. The first thing to avoid this is to make an inventory list of all the household appliances that needs to be covered. Make a note of all your household appliances and write down an estimated value for each of them. Do remember that as household items pile up, coverage increases. And as coverage increases, so do premiums.

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Indian retail non banking finance market in 2011-12: ICRA

 ICRA has come out with its report on Indian retail non banking finance market. According to the rating agency, retail credit for NBFCs is expected to grow by only 17% in 2012-13. Gross NPA% of the NBFCs is likely to deteriorate from March 31, 2012 levels of 1.56% due to an adverse operating environment.

CRA Ratings has come out with its report on Indian retail non banking finance market. According to the rating agency, retail credit for NBFCs is expected to grow by only 17% in 2012-13. Gross NPA% of the NBFCs is likely to deteriorate from March 31, 2012 levels of 1.56% due to an adverse operating environment.

NBFCs1 in India continue to grow profitably by meeting the credit needs primarily of self employed borrowers while maintaining reasonable asset quality and prudent level of leveraging. Understanding borrowers profile and dynamics of borrower segments of such NBFCs is a prerequisite for the performance evaluation of NBFCs. Although NBFCs cater to a wide range of segments, there are common characteristics of borrowers across these segments. A typical borrower (of such NBFCs) needs to be approached to originate a credit deal (is unlikely to walk into a branch to seek credit, except for Gold loan borrowers), is more complex to credit assess (as compared to a salaried person) and could require intensive monitoring and servicing efforts. Given these characteristics, banks particularly Public Sector Banks find it unattractive to operate in such segments, as they struggle to maintain good risk adjusted returns from such segments. As over three fourth of the Indian credit market is served by PSBs, low credit penetration (at around 10%2 as on March 31, 2011) vis. a vis. Deposits (68%) may be a reflection of PSBs inability to cater to such borrowers. It is critical to be nimble footed, service oriented and extremely cost efficient to be profitable in the segment. In light of this private sector banks and NBFCs mostly compete with each other in such segments.

NBFCs have reported a managed advance growth CAGR of 35% in last five years, and as on March 31, 2012 had a gross NPA3% of 1.56%, net NPAs to net worth of 3.8%, Return on Equity (ROE) of 16.24%, and a reported capital adequacy at 19.42% (tier 1 capital % of 15.75%). NBFCs are likely to witness a slowdown in the growth in 2012-13 in light of lower growth in the key segments they operate in; at the same time there may be some build up of delinquencies and a downward bias in interest margins. Despite this NBFCs are likely to report double digit ROE. Key performance highlights and outlook are as follows:

Managed retail credit of NBFCs reported a 32% growth during 2011-12. In light of significant slowdown in Commercial Vehicle (CV), Construction Equipment (CE) and Gold loan portfolio segments in the current financial year (which put together account for around 56% of total NBFC retail credit), ICRA expects retail credit for NBFCs to grow by only 17% in 2012-13.

As per ICRA estimate, total NBFC retail managed credit ~Rs. 2960 billion as on March 31, 2012, was distributed across commercial vehicles (29% of total), gold loans (17% of total), mortgage (16% of total), construction equipment (10% of total), cars (15% of total), unsecured loans (8% of total) and tractor loans (3% of total). This proportion could undergo some shift because of slowdown in vehicle sales and in gold loans and continued expected growth in the mortgage segment.

As for asset quality, Gross NPA% of the NBFCs is likely to deteriorate from March 31, 2012 levels of 1.56% due to an adverse operating environment. Segments that are likely to witness an increase in delinquencies are Commercial Vehicle, Construction Equipment, SME lending and capital market funding.

NBFCs currently report exposures in 180+ overdue bucket as NPAs; The proposed RBI revision, if implemented, in the NPA recognition norm to 90 days, along with the adoption of higher provisioning requirements for NPAs and standard assets (in line with that for banks) could lead to a increase in NBFCs' credit provisions by 0.55% in the short term, impacting the profitability. Over the medium term, the decline in profitability could be in the range of 15-20 bps as NBFCs realign their monitoring and recovery systems to the 90-day.

Budget 2013: Finance Ministry urges PSUs for extra dividend

NEW DELHI: The finance ministry is knocking on the doors of cash-rich public sector units for higher dividends in its usual pre-Budget rush to raise funds that could also bring some cheer to investors.

"PSUs have been sounded out for additional dividend payouts and discussions have begun," said a government official privy to the development.

North Block is leaving no stone unturned to meet the fiscal deficit target of 5.3% for the fiscal and additional dividend income would help it meet any shortfall on the account of spectrum sale targeted at Rs 40,000 crore or tax mop-up.

The ministry has started the pre-budget consultations with central public sector enterprises on the issue.

The Budget 2012-13 has pegged receipts from dividends and profits at Rs 50,152 crore but the finance ministry not only wants to ensure that the target is met but to exceed it.

The Standing Conference of Public Enterprises or SCOPE, the apex body of central government-owned public enterprises, also shot off letters to PSUs about two weeks back cautioning them to spur their investment programmes to avoid paying higher dividends this year.

The government had managed to extract an additional about Rs 7500 crore over its budget estimates in the last fiscal.All profit-making companies in which government has majority stakes are required to declare a dividend of 20% of government's equity or 20% of profit after tax, whichever is higher.

Car insurance for the 21st century

New technologies like advanced safety features and driverless cars could make the way insurance is now priced and sold obsolete.

Cars that jiggle you awake or alert you when you drive out of your lane represent just the beginning of technological changes that will make car accidents less common and, eventually, change how car insurance is priced, bought and sold, say industry analysts.

The recent article in Insurance & Technology magazine "The reshaping of auto insurance," penned by Marik Brockman and Anand Rao of PricewaterhouseCoope​rs, reviews several trends that they believe will significantly transform the way car insurance works.

These trends include:

Risk shifting

Advanced technologies such as telematics, vehicle-to-vehicle communication, lane detection systems and automatic braking will shift responsibility for accidents from driver error to mechanical malfunction.


"In turn, this would shift the key buyer from the end-consumer to the car manufacturer, and fundamentally change the entire value chain, from product definition to pricing, marketing, distribution, underwriting, service, and claims," says the report. In this scenario, carriers would sell policies either at the dealership, or perhaps try to increase market share by "co-marketing with the manufacturer and/or dealer," says the report.

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Chola MS launches Chola Tax plus Healthline Policy

Chennai, December 11, 2012: Cholamandalam MS General Insurance Company Limited, a joint venture between the Murugappa Group and Mitsui Sumitomo Insurance Company Japan, today announced the launch of Chola Tax Plus Healthline Insurance Policy. The policy offers coverage under two sections, namely Hospitalisation and Out Patient Department (OPD) Treatments. The policy also offers full Tax Benefit of upto Rs.35000 under Sec 80(D).

The Hospitalisation section works like a regular Indemnity Health Insurance policy covering Hospitalisation due to all illnesses , 60 days pre and 90 days post-Hospitalisation expenses, Ambulance expense, Organ donor treatment expense and 141 Day care procedures that does not require 24 hrs hospitalisation – one of the largest offered by any general insurance company in India.

The OPD section covers all expenses incurred on healthcare like doctor’s fee, vaccines, spectacles, dental expenses, medicines taken as an outpatient. Treatments taken in alternate streams like Ayurveda, Homeopathy e.t.c are also covered for claiming benefits under this section.

Chola Tax Plus Healthline also offers the broadest tax savings under any health policy. One can avail tax exemption of upto Rs.35000 on his premium under Sec 80(D) with Rs.15000 towards premium for self, spouse and children and an additional Rs.20000 towards premium for parents over 60 yrs of age.

This policy can be bought for self and dependents including parents. It is available as an Individual or a Family floater cover. The maximum entry age for this policy is 65 yrs and it can be renewed lifelong.

Speaking on the occasion, Mr. S S Gopalarathnam, Managing Director, Chola MS, said, “Day to day medical expenses like doctors consultation, lab tests, regular check-ups form a significant part of a family’s typical health care expenditure. This policy not only reimburses OPD expenses but also provide Hospitalisation coverage for all illnesses. The timing of launch is just right as a lot of people would like to plan for their income tax investments during this period. Customer can avail tax exemption of upto Rs.35000 on his premium under Sec 80(D) with Rs.15000 towards premium for self, spouse and children and an additional Rs.20000 towards premium for parents over 60 yrs of age.”

Visit www.cholainsurance.com for more information about the company and its products.

Cholamandalam MS General Insurance Company Ltd
2nd Floor, "Dare House",
No.2, NSC Bose Road, George Town, Parrys Corner
Chennai - 600001, India.
Phone: 044-3044 5400
Fax no: 044-3044 5550
Toll Free No: 1800-200-5544

10 ways to control your home insurance costs

Home insurance costs seem to go up every year. But going without insurance is too risky. So, we grit our teeth and pay the bill each year. Of course, we could competitively shop the policy every year, but that's onerous. It takes a lot of study to understand the difference between policies. Often it's easier to stay with the policy that has the appropriate coverage. And longer-term policyholders can earn discounts for longevity. Here are 10 ways that you can control your home insurance costs:

Increase deductibles. Insurance isn't meant to cover the small stuff. Set deductibles as high as you can afford. For example, a $150,000 house could have a $1500 or 1% deductible.

Make improvements. Install a backup generator, a whole house surge protector, and smoke/CO2 detectors. Refit roof trusses with strapping.

Opt for hip roofs. Hip roofs offer the most slippery shape in high wind settings or storms. You don't want areas that can catch the wind and are prone to damage.

Locate intelligently. Stay away from flood prone areas. Look for brick or stone houses in high wind areas and wooden frame houses in earthquake-prone areas. Locate in communities with professional fire departments. Have your home inspected before purchase. Also check the Comprehensive Loss Underwriting Exchange report of your home before purchase to see insurance claim history.


Don't make small claims. Frequent claims can drive up rates. Don't sweat the small stuff. Insurance is meant to protect from catastrophic loss.

Reinforce your home. Install storm shutters, reinforce the roof, retrofit older homes for earthquake resistance, and modernize heating, plumbing, electrical to reduce risk of fire and water damage.

Improve home security. Add smoke detectors, burglar alarms, and deadbolts.

Exclude land value. It's unlikely the land beneath your home will be stolen or burned in a fire. Insure the value of the home only.

Combine policies with one insurer. Most insurance companies offer discounts for multiple policy households. Combine home and auto insurance. Then buy an umbrella liability policy over both to optimize cost.

Eliminate unnecessary coverage. Don't buy coverage you don't need: earthquake coverage is unnecessary in most zones; don't schedule jewelry if it's inexpensive, etc.

Talk to your agent about other discounts. Sometimes there is a discount for good drivers, or retirees, or people with good credit ratings.

Conversely, be sure you have enough insurance. Don't be penny-wise and pound-foolish. Saving a few dollars a year will seem silly if you find out you've skimped on coverage that later costs you thousands. Be sure to read the policy and ask your agent a lot of questions so you understand what coverage you do and don't have.

Paying attention to your home insurance can ensure that you have the optimal coverage with the right risk/cost balance. That's smart.

Steve Odland, a Forbes contributor, was chairman and CEO of Office Depot and AutoZone. He's now an adjunct professor at Lynn University.

Soon, you can hold insurance policies in electronic form

You will soon be able to hold your insurance policies electronically. At its board meeting here on Wednesday, the Insurance Regulatory Development Authority (IRDA) board licensed the National Securities Depository Limited (NSDL), Central Depository Services Limited (CDSL), Stock Holding Corporation of India, Karvy Group and Computer Age Management (CAMS) Repository Services to act as repositories for insurance policies. This move will enable policyholders to maintain insurance policies in electronic form and make changes, modifications and revisions to them. Policyholders will not be levied any charges for using such facilities as the insurance repositories will be paid directly by the insurance companies.

New Insurance Norm: Of car paint and auto insurance

Getting your insurer to pay up for minor repairs of your car may not be as simple henceforth due to changes in norms brought about by the Insurance Regulatory Development Authority (Irda).

As per an order posted on the Irda website, car paint has been brought under the purview of depreciable parts.

What the regulator says: The order says: “Rate of depreciation for painting: In the case of painting, the deprecation rate of 50 percent shall be applied only on the material cost of the total painting charges. In case of a consolidated bill for painting charges, the material component shall be considered as 25 percent of total painting charges for the purpose of applying deprecation.” Read more here.

 Why this move: The paint of your car as a material has a limited lifetime, and thus it is subject to depreciation, thanks to the various weather conditions our cars are exposed to. But the problem was that, there was no uniform practice as far as deprecation of paint goes, among the insurers. With this order, there is now some method to the madness.

What it means for you: “There is no deduction for painting charges by insurer now. But with this order, you will have to bear a part of the cost,” says Pankaj Mathpal, Certified Financial Planner, Optima Money Managers.

Keep in mind that painting charges include labour charge as well as material cost. “Let’s assume that your consolidated bill for painting charges cost was Rs 10,000. The material cost will be Rs 2,500, and 50% of that amount, that is Rs 1,250, will be the deduction,” says Mathpal. So, while before this circular came into effect, you would have got Rs 10, 000 as settlement amount for the paint job, going forward, you will get Rs 8,750.

In action: Keep in mind that this change will be applicable to all motor package policies whose risk inception date falls on or after 1 February. May be it’s about time, you drive better to avoid scratches and park the car in place where the weather won’t be so harsh.

HSBC Needs China Insurance

 The name of Chinese insurance major Ping An 2318.HK +0.88% translates as safe. HSBC's HSBA.LN +1.03% sale of its multibillion stake in the company looks anything but.

Thai agricultural conglomerate Charoen Pokphand Group agreed last month to buy HSBC's 15.6% stake in Pingan for about $9.4 billion. That deal now appears to be floundering with policy lender China Development Bank apparently getting cold feet about funding part of the purchase.

If the deal falls through, everyone has egg on their face.

HSBC stood to make upward of $7.5 billion in profit over what it paid for the Ping An stake. The proceeds could come in handy to cover a $1.9 billion fine for breaking U.S. anti-money laundering rules. Offloading the Ping An shares also helped in light of Basel III capital rules that make holding shares in other financials tougher.

The big question mark now is whether HSBC will be able to find another buyer for such a large transaction. A $9.4 billion price tag is hardly chicken feed. After a highly public failure, and with concerns about government interference in any future deal, HSBC might find itself in a buyers' market.

Ping An doesn't look much better. Its shares are trading up 15.8% from the price at which HSBC agreed to sell to CP Group. But the stock fell 2.9% on Tuesday. If the deal falls through, HSBC's unsold stake will weigh on Ping An's valuation. CP Group also takes a reputational hit.

China's financial system also takes a blow. Uncertainty about why the deal has foundered, and the role played by state-owned China Development Bank, add to the impression that the markets are not pingan.