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Simple & cost-effective insurance soon for homeowners and firms

May 24, 2019

An IRDAI working group has recommended the standardisation and simplification of fire insurance covers for homes, offices, commercial establishments and micro, small and medium enterprises.

The working group's report released by the IRDAI on 20 May 2019 contains several recommendations keeping the target market segments and the perils they encounter in focus.

Three variations of a standardised simple fire insurance cover

The working group has recommended a single product for fire and all allied perils for dwellings of any value. It has suggested that all existing products with varying terms and coverages should cease to exist.

Three variations of this standardised and simple fire insurance cover have been proposed. The first variation which would be the basic and the simplest with highly relaxed terms would be for homeowners.

A slightly more refined version would be for micro commercial establishments with a risk value up to INR50m ($0.715m).

Commercial risks with value at risk from INR50m to INR500m would be offered a moderated version of the existing product.

Terms and conditions, coverage and add-ons cannot be changed in the new product

The product in all three variations would be standardised and worked out such that there would be no possibility to change its terms, conditions, coverage and add-ons. There would be no provision for offering any discount to opt out of any coverage of the product. All cat perils would be covered in the standard base product itself. Home insurance penetration in India is just about 1%. Hardly 3% of houses in India are insured at present.

All perils, especially Nat CATs would be covered by default

At present, cover for many CAT perils does not form a part of the base product and is sold as an add-on following demand from a customer or a sales push. Earthquakes which have caused large economic losses in various parts of the country are not provided for in a default cover in the fire insurance policy and has to be opted for by express demand according to the working group report.

Vulnerability to catastrophes

Around 60% of Indian subcontinent landmass is vulnerable to earthquakes and other natural catastrophes and at least 38 Indian cities lie in high-risk seismic zones. Furthermore, most Indian cities are densely populated and do not adhere to the best architectural layout standards. Also, a majority of both residential and commercial premises do not comply with earthquake and flood resistance safety guidelines. These aspects make them highly vulnerable to natural and man-made perils.

In the existing product, all contents are insured for only one year. The report recommends coverage for a longer term. The panel also recommends that the insured value of apartments in high rise buildings be equivalent to the total saleable price of the unit based on the rates published by the state government concerned.

The policyholder will now have the option to increase this rate if the actual rate is higher than the ready reckoner, but not reduce below it.

Catastrophe bonds recommended

The working group has recommended that the “government funds Nat CAT losses and then buy a reinsurance solution to reduce the volatility of their outgo. There are many countries where Nat CAT losses are funded by government. Two potential reinsurance solutions for government could be: parametric insurance or capital market solutions via catastrophe bonds”.

Low awareness and confusion about products the main reason for low penetration

The poor fire insurance penetration of homes/ dwellings and other real estate properties in India is primarily due to overall low insurance awareness and confusion in the minds of customers due to multiplicity and lack of clarity of the products in the fire category.

Stakeholders can send in their comments on the report to the IRDAI by 7 June 2019.

Source: Asia Insurance Review

GIC Re to remain as the only locally-owned reinsurer after competitor's license is cancelled

May 13, 2019

The Insurance Regulatory and Development Authority of India (IRDAI) has cancelled the registration of ITI Re citing its inability to commence business within the prescribed timeframe.

Established three years ago, ITI Re first received a certificate of registration (CoR) effective 30 December 2016. The reinsurer had two years from the date of the CoR to secure new business and, having failed to do so, surrendered its license.

This latest development means that General Insurance Corporation of India (GIC Re) retains the position as the only local firm in the country’s reinsurance sector. The sector still has many active international reinsurers.

Seeking to service the direct insurance markets in India and other global markets, ITI Re described itself as the ‘first private sector reinsurance company in India’. The firm was promoted by Investment Trust of India (previously called Fortune Financial Services).

According to, Investment Trust of India holds 80% stake in the reinsurance firm while Lakshdeep Investment & Finance and Suraksha Realty hold 10% stake each. In June last year, the Investment Trust of India was planning to sell its entire stake to Go Digit Infoworks Services, backed by Fairfax Group chief executive Prem Watsa. However, IRDAI did not clear the deal.

ITI Re’s failure can be attributed to the lack of a proper credit system and being subjected to the first preference norm.

Source: Asia Insurance Review

IRDAI directs speedy settlement of cyclone claims as losses could rise to $500m

May 10, 2019

Insurance Regulatory and Development Authority of India (IRDAI) has directed general and standalone health insurance companies to ensure that all claims of the affected insured population in the cyclone Fani ravaged Odisha and neighbouring states are surveyed immediately and the payments disbursed at the earliest. A circular from IRDAI issued by member (non-life) Sujay Banarji has said that the time taken to settle the claims should not exceed the stipulated timeline.

“There is an urgent need for the insurance industry to take immediate steps to mitigate the hardships of the affected insured population by ensuring immediate registration and settlement of eligible claims,” said Mr Banarji.

Extremely severe cyclone Fani made landfall in Odisha on 3 May

Tropical cyclone Fani made landfall on the coast of Odisha state on 3 May 2019. This powerful storm has been categorised by the India Meteorological Department as an ‘extremely severe cyclonic storm’—the equivalent of a strong category 3 hurricane on the Saffir-Simpson scale. In terms of wind speed, it was the strongest April storm to strike Odisha state.

Insurers gear up to expedite claims processing of cyclone victims

India Abroad News Service has quoted an assessment by an Indian public sector general insurance company, that the insurance claims from cyclone Fani may touch INR35bn ($500m). As the cyclone was a short period cyclone, the damages may not go up further. had earlier reported the initial losses due to cyclone likely to be in the region of INR20bn ($290m) with majority of claims expected to come from crop, property and motor portfolios.

Insurance companies are not likely to suffer major losses from cyclone Fani as insurance penetration in Odisha is quite low. Most of the properties of the middle and lower strata of the society are usually not insured.

Source: Asia Insurance Review

Insurers prepare for claims from cyclone Fani

May 07, 2019

Insurers are preparing to manage claims arising from an extremely powerful cyclone which battered the eastern Indian state of Odisha on 3 May causing extensive damage to property, vehicles, crops and the loss of at least 56 lives. According to risk modelling and data analytics firm AIR Worldwide, Fani is the equivalent of a strong Category 3 storm on the Saffir-Simpson Scale and is the strongest cyclone to make landfall in Odisha since Phailin in October 2013. Several news report have also labelled cyclone Fani as the worst storm in four decades affecting eastern India and neighbouring Bangladesh.

A large number of claims are expected for the damage of property, vehicles and hospitalisation while few claims will be for damage to crops, reported local publication The Hindu Business Line. There is also likely to be fewer life insurance claims as the state’s improved disaster-management efforts limited the number of casualties. However, several insurers note that underinsurance is a major challenge. According to research from Lloyd's and the Centre for Economics and Business Research, India was found to have an insurance penetration rate of less than 1% with the absolute cost of the insurance gap standing at $27bn.

The Insurance Regulatory and Development Authority of India is expected to issue advisories for claims processing in the cyclone-affected areas. There are no official figures regarding total insured losses arising from cyclone Fani yet.

Drawing similarities from cyclone Phailin

According to AIR, Phailin and Fani are the strongest storms to hit India since October 1999. Most recently, cyclone Hudhud made landfall near the city of Visakhapatnam in Andhra Pradesh in October 2014 causing widespread damage to property. AIR noted that cyclone Fani is a very strong storm for early May as other historic cyclones on record have all made landfall in October.

Six years ago, cyclone Phailin made landfall as a Category 4 storm on India’s east coast, killing more than 25 people and generating economic losses of an estimated $700m to $4.5bn according to local governments and Swiss Re respectively. Despite its strength, Phailin resulted in very low insured losses due to relatively few exposures in the landfall region and low insurance penetration rates.

To quantify potential losses from Phailin, AIR had conducted a study for GIC Re, the sole reinsurer in the Indian insurance market. The study revealed that insured losses were only a fraction of total economic losses due a relatively low participation for crop insurance and high proportion of uninsured residential losses in the region. The hardest hit regions also had a low insurance penetration rate.

According to AIR, residential structures in India are generally less resistant to wind and water damage compared to commercial/industrial buildings. However, India’s diverse commercial/industrial building stock continues to change as older structures are replaced with others that are engineered for wind and water resistance.

Source: Asia Insurance Review

IRDAI asks insurers to give crop insurance claim details in vernacular languages

Mar 26, 2019

The general insurers will have to provide details about crop insurance claims to farmers in vernacular languages, apart from Hindi and English, regulator Insurance Regulatory and Development Authority of India (IRDAI) has said.

The IRDAI said it has been receiving various complaints and suggestions in respect of crop insurance claims. IRDAI, in a circular, said there is a need for effective implementation of crop insurance schemes.

Insurance companies should put in place a robust system to register all the requests of individuals loss assessment, and if an individual loss assessment is rejected, a written rejection letter mentioning the reason should be sent to insured, IRDAI said.

"Insurers should ensure that all call centres/toll-free numbers responses should be available in state's official language other than Hindi and English. Wesbites of insurers should disclose crop insurance related details in the vernacular language for the benefit of farmers," it said.

Among others, widespread awareness programmes should be conducted for educating farmers on scheme guidelines, claim settlement process and grievance redressal process, it further said.

Source: Business Today

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