Pitfalls of insurers: Elusive profits, expensive distribution

Cumulative losses of the top 10 private players in the past decade is in excess of Rs 16,000 crore.

Industry was privatised about a decade back, but profit returns are still tough for most of the life insurers. 

Several insurers are still trying hard to reach the break-even point.

Insurers have shut about 1,000 branches and released about 4 lakh inactive agents after the regulatory changes.

Source: Indian Express

Life insurance industry is struggling to find the right selling channel which can increase their profitability. The industry was privatised about a decade back, but profit returns are still tough for most of the life insurers. Several insurers are still trying hard to reach the break-even point. According to the Life Insurance Council, as on March 31, 2011, there were about 32.54 crore in-force insurance policies in India, one of the highest in the world. However, if we look at the profit and loss account of the industry, the cumulative losses of the top 10 private players in the past decade is in excess of Rs 16,000 crore, according to the IRDA annual report. The biggest issue of finding the “right” distribution channel by the industry remains unresolved, leading to low productivity.

Agency model

The expense ratio for the agency model is high due to

LIC should be one-stop destination for all household needs

Our desire is to make LIC a one-stop-shop for all kinds of financial products

Source: The Financial Express

DK Mehrotra, 58, has taken over as the acting chairman of the Life Insurance Corporation. He was heading the marketing operations of the corporation for last three years. In an exclusive interview with FE’s Sitanshu Swain and Kumud Das, he outlines strategies to expand the business of the corporation. Excerpts:

Do you think the recent developments where the activities of LIC investment department and LIC Housing Finance has come under CBI scanner has created crisis of confidence?

I don’t think so. LIC has been fully cooperating with the government agencies. All I can say is that  though we have already got a robust system in place for investment operations , there was always scope for improvement. I can assure all the policyholders that their money is in safe hands.

What will be your agenda for the LIC ?

LIC should be one stop destination for all household needs of the  country, in matter of financial products. We want to create a formidable synergy among our different operation. We want to create a platform where our agent can cross- sell all these products . We have also tied up with various agency channels for expanding our marketing net-work..

Is the MF business doing well?

With Nomura’s entry, we are getting

LIC to invest R45k crore in stock mkts

LIC has invested around R1,83,000 crore in 2010-11 in other securities & earned R90,000 crore income 

Source: indian express

Life Insurance Corporation(LIC) plans to invest R45,000 crore of its total investment kitty of R2.15 lakh crore in the stock markets this year. LIC has already invested R5000 crore since April.

DK Mehrotra,acting chairman of India’s biggest insurance company says, “Existing regulations stipulate that 50% of the funds have to be deployed in government securities. That apart, we will invest around R45,000 crore in equities, slightly more than the R43,000 crore that we had put in last year.” Mehrotra says LIC booked a profit of close to R17,000 crore during 2010-11 by selling stocks. The corporation, which invested around R1,83,000 crore in 2010-11 in other securities earned income to the tune of R90,000 crore. “We believe the market, after experiencing some volatility, could be stabilising and despite high inflation and rising interest rates, we could add to our portfolio if there is an opportunity,” he observes.

Mehrotra says premium incomes have been

LIC remains the benchmark in settling claims

LIC scores best in claims settlement during 2010-11
Source: Business Standard

Maximum Protection only by LIC!

At a time when customer service and satisfaction is becoming the key to success for life insurance companies, the claim repudiation ratio (in case of death claims) has improved over the last financial year. According to data from company sources, the Life Insurance Corporation of India (LIC) still remains the benchmark when it comes to settling death claims. However, major private players are also fast catching up.

A repudation ratio is a measure of claims rejected.

During 2010-11, LIC improved its repudiation ratio for death claims to 1.09 per cent from 1.21 per cent in the previous year. In the same period, the public sector insurance behemoth settled 97.5 per cent of death claims, whereas claims pending stood at 1.47 per cent.

“Overall, we have settled 99.6 per cent of the total claims in the last financial year. And 95 per cent of the death claims were settled within 15 days of intimation,” said a senior LIC official.

In total, during the 2010-11, LIC has settled around 18.3 million claims amounting to Rs 53,000 crore, which includes survival benefits, maturity and death claims. Of this, Rs 6,000 crore accounted for 721,000 death claims.

Among the

Insurance agent not liable if due care taken

Source: Law et al. news

An agent with Life Insurance Corporation (LIC) of India cannot be held liable for suppression of facts by the insured, if the agent takes due care in verifying details of the insured. Ruling thus the Gujarat High Court allowed an appeal by an agent on the ground that in this case the agent had taken steps to verify the claim of insured who however had concealed his medical history.

The Bench comprising Chief Justice SJ Mukhopadhaya and Justice JB Pardiwala was hearing a petition of one Geetaben Modi. Modi had challenged termination of her agency and forfeiture of renewal commission by LIC. LIC claimed that Modi had suppressed the fact that an insured, SB Gorange, who was suffering from cancer was issued an insurance policy.

Modi claimed that she was unaware of the fact that Gorange was suffering from cancer and claimed to have taken proper care in verifying

Pvt. Life Ins. Cos Close Offices; Downsize employees & Agents

Profit Pressures force (Pvt.) Life Insurers to Downsize

Source: Business Standard

Private Life insurance companies have started to cut down their workforce and branch network following tougher norms that came into force in September and exerted pressure on their bottomlines. More than half a dozen life insurance companies — that are operating for nearly a decade now — have cut their branch presence significantly in the last six months in a bid to cut cost and increase efficiency.

ICICI Prudential Life, the largest private sector life insurance player in the country, has closed down more than 500 branches over the last one year. Currently, it has 1,404 branches as against 1,923 on March 31, 2010.

In the same period, Max New York Life reduced the number of branches by 200, whereas others like HDFC Life, Birla Sun Life, Aviva Life, Tata AIG Life and Bharti AXA Life have reduced 35-75 branches. SBI Life, the second largest private life insurance player, is an exception. It has increased its network from 494 (as on March 31, 2011) to 629 branches. Rough estimates suggest nearly 300,000 of the 2.4 million life insurance agents have shifted out of the industry after the new regulations.

Following the downsize, most of the

What is actual market share of LIC?

Market share of Life Insurance Companies is always quoted in terms of Premium collections and that too on First Premium Income only.  Actually the First Premium Income is used as a magnifying glass to show the presence of Private Insurance Companies, otherwise they couldn’t find place in statistics with their miniscule business.  Whatever the other count you consider, be it the Gross Premium Income, which includes renewal premium, be it the No. of Policies sold for the current year or gross Policies sold from the inception of the company, you will certainly need a magnifying glass to locate the place of the private insurance companies and that’s why IRDA, media and the private companies themselves are always speaking about first premium income. 
They are speaking in terms of their strength!  The word strength is also not a right term as they are actually projecting their better face and that too is not strong!  We have to show our strengths, which are actual strengths!

Here is the market share of Life Insurance Companies

based on the number of policies sold during 2010-11.

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LIC holds 76.91% and

the 22 private companies share

the remaining 23.09%. 

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LIC holds 76.91%

Next in the list holds just 3.95%

Don’t be like an elephant;

Know your strength!

-Arivukkadal

Indians' trust is with LIC

 Brand LIC got a 100% recall  
 in a recent nationwide study 

 by a market research agency 

Source: Business Standard

When a leading private insurance company recently commissioned a market research agency to do a survey on India’s most famous brands, the findings didn’t come as a surprise.

There was a cent per cent recall (which means 100 out of 100 Indian consumers know it) for only one Indian brand – LIC. And 93 per cent of those surveyed said if they buy insurance, it has to be from LIC. So much for private sector competition.

Numbers justify this mega presence. LIC still accounts for nearly 70 per cent of the life insurance market and is also the largest domestic institutional investor in the country.

So what makes brand LIC tick? Why is it that the private sector peers have not been able to come anywhere near this public sector behemoth despite spending huge amounts of money on promotions?

A combination of factors, say ad agency heads. Jude Fernandes, executive director, Mudra Group and chief executive officer, Mudra India, says