Zoom In Issue 5, October ‘16

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Gross Written Premium upto September 2016

GR

The Monthly Insurance Newsletter

General Insurance Industry Snapshot

With the first half of the fiscal over on 30th September, 2016, we take a look at the

performance of the General Insurance Industry and also the performance of the

various constituents. The market size at the end of the first fiscal was Rs.60,407 Crores

Gross Written Premium only for September 2016

Zoom In Issue 5, October ‘16

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The life insurers registered a rise of 61% year-on-year in their new business

premium at Rs.16,767.41 crore for September this year. Of the 24 life

insurers, state-owned LIC collected new business premium of Rs 11,117.48

crore, up 65.3 per cent against last year’s Rs 6,724.88 crore a year ago.

The rest together garnered Rs 5,649.92 crore as new business premium in September,

up 53.1 per cent than a year earlier

As claims from flood-hit areas of Andhra Pradesh start pouring in, non-life

insurers are facing a claim settlement of nearly Rs 300 crore. Most flooding

occurred in low-lying areas of Guntur, which almost recovered in 2-3 days,

the reason why the event was not classified as a catastrophe

The Insurance Regulatory and Development Authority’s (IRDA) Annual

Report for 2014-15, states that INR 701.69 crore life insurance claims were

repudiated by insurers. The report further highlights that “during the year,

insurers have repudiated 8% of the number of claims handled … claims

repudiation was high for benefit-based policies at 22%

Life Insurance companies are filing new benefit-based health

insurance plans with the regulator as they have been barred from selling

indemnity plans. The Insurance Regulatory and Development Authority of

India (Irdai) had given time till October 18 for these products to be

withdrawn from the market. According to information from the Life

Insurance Council, there are 12 health products in-force. Over and above, there are

about 45 riders that are in-force in the life insurance segment. Of these, the majority

are indemnity products, which will have to be withdrawn. In its health

insurance regulations in July 2016, Irdai had said a life insurer could not offer

indemnity-based products in individual or group segments

Buoyed by the success of the 92-paise travel insurance policy for

passengers, IRCTC is now planning to launch another scheme for

passengers' gadgets like mobile phones and laptops. The product is under

discussion with relevant parties

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Japanese insurer Sompo Holdings has bought over US casualty

insurer Endurance Specialty Holdings for $6.3 billion, the latest in a string of

acquisitions. The deal is the second-largest ever by a Japanese insurer, after Tokio

Marine Holdings $7.5 billion purchase of US insurer HCC Insurance Holdings last

year.

Multiple Birth Insurance

Available in the Western Markets, Multiple birth insurance, or twin insurance, pays a lump

sum to the parents of unexpected twins or multiples. The policy has to be secured early in

the pregnancy, between 11 and 18 weeks of gestation. The insurance premiums must begin

prior to an ultrasound confirmation of multiple births.

Payment can be used for anything

The lump sum payment is meant to help with the additional cost

of multiples. In reality the lump sum may be used for anything

the policy holder wishes. The money can be used for clothes

and necessities, to pay medical bills or start a college fund.

You could even use it to buy a bigger car or contribute to

the down payment on a home.

Policies are customized

Policies are generally designed to pay on a sliding scale

increasing based on the number of children in the home. Selected

premium levels yield different levels

of payout. In other words, the more you pay in, the

more is paid out. The policies appear to be more popular in

Europe, but they are available and legal in the United States.

Does not apply to fertility treatments

Premiums also go up based on maternal health and family

birthing history. If there is a history of twins, especially on the

mother’s side, premiums will be higher. Age and lifestyle choices

also affect the payment. Also, the policies are almost never open to women who have

undergone fertility treatments, especially those treatments occurred in the prior two years.

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Putting aside any argument for or against “twinsurance”, for some people

these policies can be very helpful. For many people expecting twins, they

help to eliminate one of the many stresses they face: financial concern.

Business Interruption & Contingent Business Interruption

The port of Tianjin (China) is a hub for

advanced industry and financial activity, and

the massive explosion that occurred in

August of 2015 resulted in 165 deaths; eight

people missing and 798 injured; 304 buildings,

12,500 vehicles and 7,500 containers were either

damaged or destroyed.

The main difference between BI and CBI insurance is

what triggers coverage. In very simple terms, a BI policy covers the loss of profits following

damage as a result of an insured peril to a policyholder’s own facility while a CBI policy covers

the loss of profits following damage as a result of an insured peril that shuts down a

policyholder’s supplier or customer.

Businesses that suffered direct loss and damage as a result of the Tianjin explosion may have

experienced severe disruption to their business with possible long-term consequences.

Having BI insurance is of course a useful financial backstop that protects the business.

However, it does not totally insulate a business from the more serious long-term

consequences of a decline in market share, loss of customer confidence, loss of investor

confidence or a potential plunge in share price resulting from such interruption.

Business today is conducted with customers and suppliers

located around the world. Asia is a hub for manufacturing

and production, with a high concentration of production and

logistics sites scattered across India, China, East Asia and

Southeast Asia. The economic model of sourcing raw

materials and/or critical components from any global

location in order to reduce costs and enhance profits is the

accepted norm. Supply chain resilience is also critical in

ensuring that businesses continue to operate efficiently.

However, recent events - such as the

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Japanese 2011 Tohoku Earthquake and Tsunami, and the Thailand floods of 2011 - were a

wakeup call for the insurance industry. After the Thailand floods in 2011, the supply of hard

drives stalled, causing computer manufacturers around the world to experience disruption -

and as a result, losses in production. The CBI losses from the Thai floods and the

Tohoku earthquake resulted in losses of more than USD 1.5 billion each. The inability to get

production facilities back up and running quickly after these events led to high-level supply

chain disruptions, causing entities inside and outside the loss locations to suffer significant

business interruption losses.

Excerpts from a blog by Edmund Fernandez

We Wish you all

A Very

Happy Deepawali

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The information contained herein is based on sources we believe are reliable and genuine

and should be understood to be general risk management and insurance information only