Insuring Brand Value

27-Apr-2011
Source : Business Standard
By Niladri Bhattacharya & Viveat Susan Pinto.

Brand LIC got a 100% recall in a recent nationwide study by a market research agency.
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 the stature of the organisation is what counts. "When you think LIC, you think insurance. It defines the category in India. And when you come from that position, there is a certain tone and style in which you present the brand,&" he says.
It helps that the insurance giant spends as much as Rs 300 crore annually on ad spends. Geeta Prabhakaran, an officer at LIC associated with brand development, says "we are present everywhere across gender, class and demographies -- be it a village fair or puppet shows, or a cultural evening in a posh Bandra locality. We have no problem in talking about our products anywhere – whether it’s a festival in IIMs or a small town district college&". LIC even shows short movies in rural theatres to create awareness about insurance.
LIC is present through television commercials in 12 different languages and is getting its act together in the digital space as well through promotions in four social networking sites.
Mudra has the honour of coining LIC’s famous baseline - Zindagi Ke Saath bhi, Zindagi Ke Baad bhi, over a decade ago. Fernandes says, "The baseline stands to this day. LIC has felt no need to change it because it epitomises what it is all about - With you during Life. With you after Life.&"
The challenge, says Fernandes, when working on the LIC business is to keep in mind both the urban and rural clientele of the insurance giant. "Its customer cuts across segments, which is why one has to keep in mind both the India and Bharat when devising ads for LIC.&"
The point is endorsed by Nitin Karkare, chief operating officer, DraftFCB Ulka, Mumbai, "The two important factors about LIC is trust and scale. If the trust wasn’t there, the insurer wouldn’t be able to scale up its business. Both go hand in hand, but trust matters the most,&" he says.
"Ultimately it boils down to trust,&" says Vipin Anand, Chief, Corporate Communications, LIC, adding, "We are still servicing some of the polices given by the erstwhile insurers and our rejection ratio is by far the lowest in the industry.&"
According to data provided by the Insurance Regulatory Development Authority (Irda), the number of claims rejected in case of claims for LIC is just above 1 per cent — much lower than its peers.
These are the things which are carefully injected into the process when it comes to marketing the product. "The tone of LIC’s ads is sincere,&" Karkare says.
To make sure that its agencies have understood what it wants, LIC has devised an elaborate procedure for its advertising. It briefs at least two or three of its roster agencies. This includes RK Swamy/BBDO, DraftFCB Ulka, JWT and Mudra. The agencies then have the task of presenting the creatives based on the brief given. The best one is eventually selected.
"This encourages the empanelled agencies to come up with the best creative,&" says Fernandes. "The beneficiary eventually is LIC.

Balanced portfolio helps LIC dominate new business growth

28-Apr-2011
Source : Financial Chronicle

First year premium data, which indicates the growth in insurance sector, clearly signals that the individual policyholders have maintained distance from the sector.
While the industry was growing at 25.47 per cent in FY10, the growth has dropped to 15.13 per cent in FY11. Although the government-run Life Insurance Corporation of India, managed a growth of 21.94 per cent, the private insurers grew at only 2.56 per cent.
The 22 private life insurers has contributed only 31.3 per cent or Rs 39,381.30 crore of the total first year premium of Rs 1,25,826.03 crore compared to Rs 86,444.72 crore by LIC of India, almost 69 per cent.
The premium collected by private insurers at the end of financial year 2008-09 was Rs 34,153.71 crore, approximately 40 per cent of total premium of Rs 87,107.62 crore and by the end of year 2009-10, although premium had increased to Rs 38,399.33 it accounted for 35.14 per cent of total industry premium of Rs 1,09,290.37.
“LIC having balanced portfolio of traditional and Ulip plans was able to increase its market share this year after the change in Ulip norms, however, we hope that private players by introducing right mix of Ulips and traditional plans will get back their due share,” said Vinay Taluja, principal officer, Bajaj Capital.
The new Ulip norms have forced insurers to restructure their product portfolio, which hurt individual regular premium policies. The total collection from individual regular premium policies is Rs 46,781.08 crore this year, showing a fall of 10.13 per cent, as 15 out of 23 insurers saw negative growth. In FY10, the segment was, however, growing at 16.49 per cent with total premium of Rs 52,056 crore.
“At present, the shift is towards traditional and single premium policies, however, the insurers have now factored in the change and are coming out with regular premium products,” said MN Rao, MD and CEO, SBI Life Insurance Company.
“The guideline has made Ulips a very viable option for policyholders and once they understand the product and cost structure the sale will rise,” said Joseph Thomas, head of investment advisory and financial planning at Aditya Birla Money.

Cibil makes credit scores available to individuals

21-Apr-2011

Source : The Economic Times

Credit Information Bureau (India) Limited (Cibil), the agency gathering data on credit histories of individuals, has now made credit scores available to individuals for a fee of Rs 450 per request. An individual’s credit score would be a three-digit numeric summary of his credit history for the last three years, and this would be rated on a scale of 300-900.
The higher an individual’s score, the better would be his chances of securing a loan. Banks have, for the last two years, used this data as an important factor in deciding on whether to approve or reject a loan.

In August 2009, Cibil had made credit information reports available to individuals for a fee of Rs 142. “The response was huge and these customers started requesting for their credit scores too. Hence, we decided to make the score available to them,” said Cibil Managing Director, Arun Thukral. The format of the report was revised this month and the reports would now also show whether nor nor the data provided by banks is accurate.
Through Cibil’s website, individuals can request for their credit scores online. They can also make the payments online, after which, they would have to send proofs of their identity to Cibil. The score, along with the report, would be delivered to them in seven-ten days. “We are working towards an online authentication system. Once this is done, it would help in delivering scores and reports online,” Thukral said.
Making credit scores available to borrowers can also be seen as a step towards risk-based pricing, a trend not practiced by retail borrowers in India. Risk-based pricing essentially means the interest rate on a loan is also determined by the lender’s estimate on whether or not the borrower would default on the loan.
“Banks might consider such an approach only in a scenario of intense competition. Presently, barring a few, not many banks are aggressive on retail loans. This may happen, but will take at least two years,” said Sanjay Agarwal, senior vice-president and group head (retail strategy and branding), ARCIL.
Credit scores give banks an estimate of an individual’s ability to repay a loan, since they are based on parameters like the loan amount, the nature of the loan, payment frequency and prior delinquency. Cibil research shows 58 per cent of individuals with credit scores of 800 or above were able to secure loans in 2010.

ICICI Prudential denies widow’s policy claim by ‘forging papers

Consumer forum directs company to pay Rs 11.48 lakh policy amount with interest to wife of late BSNL superintendent

Pune Mirror
Vijay Chavan

12-Apr-2011

Her happiness knew no bounds when the widow of Ashok Deshpande, a superintending engineer with the Bharat Sanchar Nigam Ltd (BSNL), won a four-year battle against the ICICI Prudential Life Insurance Company on Monday.

Vaijayanti Ashok Deshpande, a resident of Pimple Gurav, proved in the District Consumer Redressal Forum that the insurance company produced fake documents of her husband’s medical history to deny her the policy claim of Rs11.48 lakh.

The forum has directed the company to pay the policy amount along with interest to Vaijayanti, whose insurance policy was rejected on the grounds that her husband was an alcoholic and had a history of several diseases.

The insurance company failed to prove that the medical documents were original as it had submitted photocopies of the papers and also did not provide the affidavit of the concerned doctor to support the legality of the documents.

According to the complaint, Ashok Deshpande had obtained a home loan of Rs 10.70 lakh in 2007. To give security to the loan, he had also obtained an insurance policy from ICICI Prudential Life. In April 2007, he had also deposited a one-time premium of Rs 78,000.

Ironically, Deshpande suffered a massive heart attack and died eight months after availing the loan. Later, his widow applied for the insurance claim. But the company refused to settle the claim saying that the policy-holder did not divulge his previous ailments in the medical history while taking the policy. Vaijayanti then approached the consumer forum through her lawyer Srikant Gawali to get the insurance amount and compensation.

The company argued in the forum that Deshpande did not reveal that he was an alcoholic and had blood pressure and diabetes. To prove its claim, the company provided photocopies of the treatment Deshpande undertook from a Nagpur- based doctor.

However, the forum observed that the documents were photocopies and cannot be considered as original evidence. It also said that the doctor’s affidavit with the certificate was not attached. Thus, the company acted in an illegal manner and also showed deficiency in its service.

“The insurance company shall pay to the policy holder a sum of Rs 11, 48,303 along with nine per cent interest since the day of policy denial letter, on account of policy expenses Rs 10,000 (compensation) towards harassment and mental agony and Rs 3,000 as litigation charges,” the forum’s order stated.

The official company spokesperson said, “We are not in receipt of any official communication from the relevant authorities. Therefore, it would be premature to comment at this point of time. However, we will decide the future course of action after evaluating the order.

We would like to reiterate that at ICICI Prudential Life Insurance, the claims philosophy is to ensure faster settlement of genuine claims and we handle every claim with utmost sensitivity and ensure complete hand holding of the claimant at every step of the settlement process.”

► We will decide the future course of action after evaluating the order

- Official spokesperson, ICICI prudential life insurance

Coming Soon!! Biometric PAN cards

12-Apr-2011
Source : Magicgyan Team


The government has decided to issue biometric PAN cards to taxpayers across the country.
A decision to this effect was taken recently by the Finance Ministry and it comes in the wake of a Comptroller and Auditor General (CAG) report that asked the Income Tax department to ensure that a single tax payer is not issued multiple cards.
The proposed new biometric Permanent Account Number (PAN) cards would bear the I-T assessee’ fingerprints (two from each hand) and the face.
An option to existing PAN card holders to opt for the biometric cards would also be offered.

Losses accompany insurance sector growth cumulative red ink Rs 46k cr

11-Apr-2011
Source : Business  Standard

India is likely to count among the top three life insurance and 15 general insurance markets in the world by 2020. However, private insurance companies are yet to find a way to operate profitably.
Their cumulative losses are Rs 46,000-crore, says an industry report, prepared by industry chamber Ficci and The Boston Consulting Group (BCG). To be released tomorrow, it said: “The insurance industry is expected to reach $350-400 billion in premium income by 2020.”
There are 24 general insurance and 23 life insurance companies in India. Before August 2000, the insurance sector was closed to private companies.
According to the report, titled ‘India Insurance – Turning 10, Going on 20’, the total penetration of insurance (premium as percentage of GDP) has increased from 2.3 per cent in 2001 to 5.2 per cent in 2011.
In addition, there has been a vast increase in coverage. The number of life policies in force has increased nearly 12–fold over the past decade and health insurance nearly 25–fold, the report said.
The progress has been aided by the dramatic shift in the availability of products such as better term, Unit-linked, whole life, maximum Net Asset Value guarantee, auto assistance, auto pay per km insurance, disease management, wellness. However, the industry is yet to find a profitability solution. “Private life insurers accumulated losses of Rs 16,000 crore till March 2010. Similarly, the non–life industry has cumulative underwriting losses of nearly Rs 30,000 crore,” said Alpesh Shah, Partner & Director, BCG India, and author of the report.
The report said multiple elements contribute to this profitability challenge. For example, it said, insurers’ fascination for top line growth at any cost has resulted in inefficient operating models and, hence, inferior operating expense ratios as compared to global benchmarks, in both life and non–life.
The economics of various channels are challenged, be it agency model, bancassurance, brokers, auto dealers, corporate agency or in–house salaried sales force. The report said claims costs in the case of non–life are very high because of third-party liability claims and fraud in the case of auto and health insurance. There is limited focus on the end customer and the intermediary is being given a more prominent position by insurers, with insufficient focus on maximising value from existing customers, according to the report.
A bill to raise the foreign direct investment cap in private insurance from the current 26 per cent to 49 per cent is pending in Parliament. The report calls for relaxing the ownership norms.

Medi-Claim: Settlement Star Health Insurance tops

New Delhi, March 27, 2011

Star shines brightest in claim settlement

When it comes to claim settlement, private insurance companies are perceived to be better than their public sector counterparts, reveals the findings of the Hindustan Times-MaRS survey.
Respondents to the survey ranked India’s first stand-alone health insurance company, Star Health & Allied Insurance Company, as the best in terms of settlement of medi-claim policies.
Health insurance in India covers around 11% of the population, according to the latest Comptroller and Auditor General (CAG) report.
But low penetration notwithstanding, health insurance is the most sought after portfolio next only to motor insurance.
And as Gopal Verma, director, e-Meditek, a third-party administrator (TPA) points out; stand-alone health insurance companies will play a critical role in the domestic market to increase penetration.
“Star Health & Allied Insurance Company along with a few other companies have a single window clearance mechanism which reduces the settlement to less than a week,” said Verma.
Industry experts said that once the regulatory issues including the foreign direct investment (FDI) norms are addressed, several more standalone health insurance companies will foray into India.
The Insurance Amendment Bill, that is pending in Rajya Sabha, seeks to enhance the cap on FDI in private insurers from the current 26% to 49%.