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Insurance Amendment Bill 2008 and the Challenges

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Information about Insurance Amendment Bill 2008 and the Challenges
Business-Finance

Published on March 7, 2013

Author: joetrichy

Source: authorstream.com

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Indian Insurance Policy 2012 and Punch Joseph Anbarasu: Indian Insurance Policy 2012 and Punch Joseph Anbarasu Insurance at Cross Roads: Insurance at Cross Roads Reforms: Reforms IRDA opened up in August 2000, invited applications Foreign Companies ownership is up to 26% It has the power to frame regulations under section 114A of Insurance Act, 1938 Objective was and is to protect the policyholder’s Interest Subsidiaries of GIS of India were made independent companies GIC was made into a national re-insurer There are 24 general insurance companies and 23 Life Insurance companies Reforms in 2000 and After : Reforms in 2000 and After The Authority has notified 27 Regulations on various issues which include Registration of Insurers, Regulation on insurance agents, Solvency Margin, Re-insurance, Obligation of Insurers to Rural and Social sector, Investment and Accounting Procedure, Protection of policy holders' interest etc. “Sacrifice” called Savings: “Sacrifice” called Savings The domestic savings are for the betterment of local capital formation and local development. To expose this area to foreign investment is to be addressed carefully especially when foreign insurance companies have not done better. Domestic Savings and Growth Engine: Domestic Savings and Growth Engine Domestic savings reduces dependence on foreign capital to aid investment flow, which in turn will drive the growth engine. Interestingly, household savings alone contribute up to 80 % of India's GDS. Gross domestic savings rate fell sharply from 34 % to 30.8 % of the GDP between 2010-11 and 2011-12. Inflation Index Bond.. Paradox - Less Premium and More AUM: Paradox - Less Premium and More AUM India is the 5th largest market in Asia by premium following Japan, Korea, China and Taiwan. A drop in total premium collected by life insurers in India notwithstanding, their total assets under management (AUM) grew by 9% (Life Insurance Council). Less Premium and More AUM: Less Premium and More AUM The total new business premium collected by all life insurers in 2011-12 was Rs.1,13,678 crore - a drop of 9.5% on a year-on-year basis compared to Rs1,25, 618 crore last year. Linked and Non-linked Premium: Linked and Non-linked Premium Linked new business dipped by 67% y-o-y to Rs 17455 crore from Rs 52739 crore last year. However, non-linked new business premium posted a growth of over 32% to touch Rs 96,224 crore against Rs 72878 crore in 2010-11. Dismal Pension Performance: Dismal Pension Performance Individual pension business, which forms a large segment of the new premium for life companies, has fallen drastically in FY 2011-12 to meager 1.80 % of total new business premium. New business premium garnered from individual pension policies is in the chart Declining Investment: Declining Investment In FY 2011-12 the net buying by life insurers in equity stood at Rs 26,990 crore as compared to Rs 30,565 crore last year. In 2009-10 the net buying done by life insurers was Rs 65,411 crore In 2008-09 financial crisis, when FIIs withdrew more than Rs 46,000 crore from equity markets, Indian life insurers had invested more than Rs 55, 000 crore reducing volatility in the equity markets Declining Investment: Declining Investment LIC's share of equity investment in last few years has declined sharply, by over 50%. In 2011-12, the life insurance invested Rs 15,735 crore in equities as compared to Rs 39,215 cr in 2009-10 and Rs 35,835 crore in 2008-09. Health is wealth - Report: Health is wealth - Report India would have more than 630 million people covered under health insurance by 2015, ( world bank study). The new generation of government-sponsored health insurance schemes (GSHISS) were introducing Explicit entitlements, Improving accountability and leveraging private capacity, Particularly with an aim of reaching the poor. Health is wealth - Report: Health is wealth - Report Over 300 million people, or more than 25% of India's population, gained access to some form of health insurance beyond 2011, up from 55 million in 2003-04. Employee State Insurance: Employee State Insurance This The included Employees State Insurance Scheme (ESIS), Rashtriya Swasthya Bima Yojana (RSBY), and Central Government Health Scheme (CGHS). The state level schemes analysed were Rajiv Arogyashri (Andhra Pradesh), Yeshasvini (Karnataka), Vajpayee Arogyashri (Karnataka), Chief Minister Scheme (Tamil Nadu-later re-launched as Chief Minister’s Comprehensive Health Insurance Scheme), RSBY Plus (Himachal Pradesh), and the proposed Apka Swasthya Bima Yojana (Delhi). Amendment Bill: Amendment Bill Insurance laws (amendment), bill, 2008 The foreign equity cap is proposed to be kept at 49 % as against the 26%. Foreign re-insurers will be permitted to open branches only for re-insurance business in India and prohibits an insurer to invest directly or indirectly outside India the funds of policy holder, would apply to such branches. Amendment Bill: Amendment Bill The capital requirement for a health insurance company is now proposed at Rs.50 crore instead of Rs.100 crore for general insurance companies Third party motor vehicle act takes new legislation. The public sector general insurance companies permitted to raise capital from the market to meet the future capital requirements ( 51% govt. Holding not to be disturbed ) The functioning of surveyor s is now under stringent surveillance New Limit: New Limit Foreign investment in pension funds goes up to 49 per cent in line with cap in the insurance sector. Allowing FDI forms a part of the amendments to Pension Fund Regulatory And Development Authority (PFRDA) bill Why FDI?: Why FDI? Companies that have been in business for 10 years can raise fresh capital. If they really do need capital, why not go to the market to raise resources? Why do they have to look to foreign capital? The simple reason is that India is still an attractive market for foreign capital in the medium to long term. Beware Regulators: Beware Regulators The LIC dominates the life insurance market today with 76 % share in premium income and 81 % in the number of policies. The private insurers focused on ULIPs because they had to make much smaller capital provisioning for such policies. The LIC is perhaps the best in the world in settling claims. It settles 99.86 % . The private sector repudiated nearly 11 % of the claims. LIC, the Giant: LIC, the Giant The average annual premium for a policy issued by the private insurers is about Rs.60,000, compared to Rs.9,000 for a policy issued by the LIC. Thanks to LIC’s customer base. The lapsation ratio of LIC in 2010-11 was 5% On average, one-fifth of the policies issued by private insurers lapse after the first year. Twin Threat: Twin Threat A company that has been in business for 10 years can go to the stock market to raise resources through an initial public offer. (What about the profit in 10 years) Allowing the LIC to invest up to 30 per cent of the shares of listed corporate entities, which was earlier set at 10 per cent. Reforms and Policy Concerns: Reforms and Policy Concerns Managing Expenditure, Effective and Easy Claim Procedures, Efficient Fund and Portfolio Management, and Requirement of Capital

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