Premium

‘Three Things Intermediaries Must Do’

Administrator — Thu, 19 Jan 2012 05:40:38 +0000

Premium: What are the major challenges in General insurance personal lines today?
Mr Ritesh Kumar: Controlling costs. Lets take Motor insurance. It is very transactional. So the way to save on transaction costs is to either give ground up cover or impose a substantial deductible. A deductible is imposed so that the insurance company does not incur the same high cost for handling a small value claim. A Rs 1,000 deductible on a Motor policy is neither here nor there. We also have to periodically revisit the deductible and adjust for inflation.
The client has to understand that small claims means he loses premium (no-claim) benefit.
Premium: How do we do that? Spreading awareness.
Mr Ritesh Kumar: Everyone should play a role in it. General awareness is not possible. The efforts are usually lost. There is more to it than awareness about deductible. Take depreciation. A Motor policy claim is adjusted for the depreciation on the vehicle. In this case, unless the client is experiencing it for the first time, the awareness is high but acceptability is low.

Premium: What is the thumb rule for claims processing cost?
Mr Ritesh Kumar: Three out of 10 policies end up in claims. That is 3.5 per cent market share just on account of Motor claims. Less than 5,000 of the total number of claims take up deductibles and reduce their premium due to it.
Premium: What is the business mix of your portfolio?
Mr Ritesh Kumar: Motor, Accident and Health and Commercial lines are one third each. We are deliberately trying to maintain these ratios. Insurance is about adequate risk spread.
Premium: What is the premium rate trend after detariffing?
Mr Ritesh Kumar: Price discovery being done in the market. Right now the law of gravity is having its effect!
Premium: Apart from Fire insurance is that in Health insurance?
Mr Ritesh Kumar: Health insurance can be seen as corporate, mass and individual Health insurance. Premium rates in corporate Health is getting better, we see a lot more sanity. What is very important to remember is that people don’t value anything that comes free. Yet, corporates can’t afford annual premium hikes. So the whole effort has to be on how to control costs.
It’s easy to tell others to do it so we put in co-pays on our own corporate Health insurance policy. This ensures controls starting with the fact that a person reads the bill when he is discharged.
They also tend to learn how the coverage works. For example there are caps on room rent and so they are more aware about using what they pay for. The bills get contained.
Premium: How did you structure your corporate Health policy?
Mr Ritesh Kumar: We created two categories of employees. We had different slabs of coverage and a cap for the junior level employees and no cap for the senior. We had different co-pays too.
Premium: What about the premium, do the employees share the premium paid?
Mr Ritesh Kumar: No they don’t share premium, only the bill. But this year we have introduced a small token payment for parents.
Basically we told our clients that their employees needed to feel the pain of paying too in order to use the facility in a responsible manner. And once they studied what we had done with our corporate Health policy they just replicated it for themselves.
The initiative is because we have to make corporate Health insuance sustainable. Or the coverages will become narrower since corporates won’t be able to afford full-blown cover.
The other trend that will happen is the room rent gap. Hospitals charge everything based on room rent – most people don’t know that.
My basic analogy is that of a canteen. I tell my Corporate Health clients ‘you want to provide a canteen at your office, would you provide the Taj?’ When put like that they say, ‘no’.
Premium: What you are saying is that the client has to learn to say ‘thus far and no farther’ in terms of the scope of the medical coverage he wants to provide.
Mr Ritesh Kumar: Yes, and the sooner the corporates realise it the better because it is not sustainable if it goes on like this and the only choice is that they will have to withdraw it slowly.
Premium: What type of clients have started making these changes?
Mr Ritesh Kumar: Those who thought of it three years ago. They are the ones who have initiated action in cases of fraud and worked to contain costs.

Premium: Please tell us about mass Health insurance. What are the economics of the Rashtriya Swasthya Bima Yojana (RSBY)?
Mr Ritesh Kumar: This has to be a sustainable opportunity rather than a way of meeting rural and social obligations. The opportunity is that Health and Weather insurance are a way to gradually build rural distribution to get into policies for small householders and so on.
For mass Health insurance to be successful third party distribution will have to be key. We need extant channels as well as third party and technology led distribution.
Otherwise it won’t give results and will not be sustainable. I can’t pay Rs 1.5 lakh rent for an office that brings in Rs 15 lakh premium. We should be able to use banking correspondents and those who sell other products since distribution for those is already set. These channels should be underwriting Accident and Health as well as Weather insurance. This way the business would grow faster as far as we are careful about moral hazard.
Premium: Why does Health insurance premium rise so much and so often?
Mr Ritesh Kumar: There are two factors. One is Health inflation – it is 1.5 to two times the rate of normal inflation. The second is that Premium increases with age. When you combine the two, aggregate risk is higher. What we should do is small premium increases at short intervals and we should communicate why this is happening.
The reason why Health premium increase is surprising people is that the premium rates were set in a particular way historically. When Mediclaim was introduced the premium was low at Rs 1,500 and lower coverages were given at proportional premium which was actually part of the structure then.
This got corrected in the middle 2000s. If I buy a policy today I should think about what the cost of medical treatment would be in the future. People don’t see inflation and I would say to the General insrurance industry: Don’t sell a Rs one lakh policy, you are doing a disservice to the customer. You are giving him a false sense of security.
Just like Life insurance insufficient insurance is no insurance. A minimum cover needed today is Rs 3 or 4 lakh.
It is okay if it is unaffordable but the customer has a right to know what he is buying and the right to be educated about health care inflation.
Premium: What is the role of the intermediary here? Can you tell us what the top three responsibilities of an agent or any other intermediary selling insurance according to you?
Mr Ritesh Kumar:
The first thing an intermediary should do is to tell the prospect about the policy exclusions. What is excluded in the first year, the first two years, the first three years and so on. This is an issue of trust. The client should not feel: ‘When you wanted me to buy the policy you sold me the stars, now you say read clause no 42’.
The next thing is to advise the prospect to take sufficient insurance. It could be Rs 2 lakh or 3 or 4 lakh. It’s okay if it’s unaffordable but the prospect has to be told about healthcare inflation and first and foremost he has the right to know what he is buying.
Then his responsibility is to provide all the correct disclosures. Just like on the Life insurance selling side lots of disconnect happens because of hiding material facts on health and health records don’t tell a lie. The intermediary has to advise the prospect that without proper disclosure claims will run into trouble.
Premium: How do the various channels fare in your overall business?
Mr Ritesh Kumar: 50-55 per cent of our business comes through bancassurance. Another 10 to 15 per cent is direct business and the rest through agency. Agency will play a key role. The cost of managing agency is high but we will get more out of them in the future. We need multi-year products for offering a higher ticket size making it cost-effective and to increase General insurance penetration.
Premium: What about servicing policies. How are the different channels involved?
Mr Ritesh Kumar: Servicing is usually taken care of by third parties. The workshop in the case of Motor and so on. Except brokers’ involvement in commercial lines the post-sale role of the intermediary is marginal. Servicing is more important in corporate policies.
We also have other avenues like SMS, the internet and call centres for servicing. What the intermediary should do is to be the direct contact. He should offer a platform for the customer to contact should he require it.
The more interesting role an agent could play is to cross-sell other General insurance policies to his clients.
Small and medium enterprises (SME) is a significant market for independent agents. Agency is the best channel to assess the risk or moral hazard but their knowledge of preliminary underwriting leaves something to be desired. We want to segment the agent and utilise their strengths for SMEs. SMEs will be buying Health policies for their employees and so on and the premium rates would be higher for SMEs than for large corporates and agents can also earn more.
The outlook for General insurance demand is significantly higher. The premium will be Rs 1,00,000 crore by 2015.

HDFC Ergo to boost capital General insurer HDFC Ergo will see a capital infusion of...
Cos cut staff medical perks No fewer than 188 companies including large corporations such as...
IRDA hikes Motor TP premium, to be annual exercise Insurance Regulatory and Development Authority (IRDA) has notified new, higher...

Related posts brought to you by Yet Another Related Posts Plugin.

Administrator — Thu, 19 Jan 2012 05:30:45 +0000

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

Three Simple Ideas that Drive High Performance

Administrator — Thu, 19 Jan 2012 05:20:57 +0000

High performance is not an option any more. Economics, competition and regulators everywhere make it a necessity. Today, either you perform at the top of your game or you will become irrelevant. And, that would be a shame because the need for what financial services advisors of all descriptions do today is more important than ever.

It’s one of my favourite business proverbs – “high performance is simple, but not necessarily easy”. The trick is to understand the nature of the art of high performance and you have a fair chance of making it happen for your self.

Art of Hi-Performance

What is The Art of High Performance? It is the process of deliberately arranging ideas, resources and behaviours to consistently influence and maximise value and results. The key to this new definition is the idea of “deliberate arrangement”. Do you deliberately arrange your business and personal affairs to maximise your value and results?

You must. If you don’t do it deliberately, it happens on its own by default and you are like a ship without a rudder. Your results reflect wherever the wind happens to blow your business. Reality happens to you. You don’t make it work to your advantage.

You can also take this same attitude when working with your prospects and clients. Think about it. As a wonderful answer to the question “What do you do?” you now have “I deliberately arrange consumers’ insurance programmes to maximise their value to their families and improve their overall results.”

This idea works as well if you’re a financial planner, investment advisor or any other financial professional. A little tweaking to the definition and you are on your way.

This approach is an exciting new way to express the nature of what you do. It attracts prospect interest and attention and gives you an ideal launching pad for a relationship. It builds on ’deliberate arrangement’ – that specific and purposeful action that helps people and is the foundation for any successful business.

Importance of Purpose

Purpose is often the missing link between sales professionals and high performance. When you clarify and express a firm purpose to your marketplace, you do more than give yourself and your business meaning. You create a power you can draw on every day to maximise your influence and results. Here’s a definition you need to remember:

“A firm purpose in business changes the nature of every activity and experience required to achieve it, making success easier and quicker.”

When you have a firm purpose, you will be more mentally tough. You will be more resistant to rejection, put-offs and putdowns in the course of your day. You will be more resilient and able to bounce back from the day-to-day setbacks that afflict all sales professionals. You will better appreciate the value of what you do for the people you do it for. You will more easily reject call reluctance and deflect rejection.

It all starts with a Firm Purpose. Design your own firm purpose from the definition of the art of high performance and you will naturally take your business to levels you only dream about today. Do it today.

Be and Artist, not a Scientist.

Believe that your success in this business is much more a function of your talent as an ’artist’, rather than your skill as a ’scientist’. It is your artistic talent working with people and their goals and dreams that makes all the difference to your long-term success. You must achieve this level of communication to be able to get the chance to deal with the ’science’ of planning and their needs and objectives.

The art of dealing with people is the leverage that makes the science of insurance products and planning most effective and valuable. It brings it all to life for prospects and clients and gives it real value. Be an artist.

Three Simple Ideas

Here are three simple ideas that will help you be a high-performance insurance advisor and help more people:

1. Advise, don’t ‘optioneer’ – One of the reasons many advisors don’t build a referable reputation is that they come off more as ’optioneers’ rather than advisors to their clients.

‘Optioneering’ is that common industry practice of providing options rather than advice to clients. You know the idea, “Mr. Prospect, here are three possible options to solve your problems. Which one makes the most sense to you?” I appreciate that this approach is well-intentioned but it is also out of date. As the industry and financial products get more and more complicated, actual advice on the approach to take is more and more valuable. It is also a strong differentiator. You need to stand for something. You need to be the ’expert’ who knows the prospect, contextualises options well enough that you can direct them to their best alternatives.

Of course, you can’t be certain of all prospect concerns. You need backup recommendations to your first advice, if and when it doesn’t pass muster. If your first recommendation won’t work for your prospect, you need to have another, second best piece of advice. That is real professionalism

Deliberately arranging a prospect’s insurance and financial affairs suggests giving direct advice. It’s also what clients need from you. Using the optioneer approach makes the prospect his own advisor. If the prospects have to make all their own decisions, they don’t need you. Be an advisor.

Bring your prospects the information and interpretation they need to make decisions that will fetch them the results they want for their lives. This way you will attract referrals and business.

2. Work ‘By referral to your natural audience’: Referrals are the most important and most challenging part of business. Getting many of them regularly makes business easy. Not getting any means that your work is more difficult than it has to be.

Research since the early 20th century in this business has always identified asking for referrals as the most challenging part of high performance. Advisors are always looking for the magic pill that makes it all happen.

Regrettably, there is no magic pill, beyond this simple reminder: “If you don’t ask, you don’t get”. The courage to ask the question, “Who do you know that I should be talking to?” has to be part of every discussion you have with clients and prospects.

One way to be sure you have this discussion is to add one simple phrase to your business introduction anytime you get the chance. For instance, “I deliberately arrange my clients’ insurance portfolios to maximise their value to themselves and their families. I work by referral to young professionals in this area.”

Adding this simple line to your business description gets the dialogue started and gives people the opportunity to ask, “How does that work?” It’s the ideal question and you’re off.

Add “by referral to your market” to your business description every time and attract more referrals than ever.

3. Do one thing every day to attract a new client. Building a business means adding new clients regularly. The trouble is that many advisors have activity requirements that make it harder and harder every day,

Here’s what I mean. If you have to make a certain number of contacts every day and the missed ones accumulate, eventually, this growing number becomes a disincentive to high performance.

For instance, when I was a young agent, I had to make 25 telephone calls a day to prospects. If I didn’t do some today, I had to add them to tomorrow. That meant that if I missed my targets for a while, I soon had to make an impossible number of calls to be on target. So, I didn’t. It held me back.

Here’s a better idea. Do just one thing every day to attract a new client. Just one thing.

Here’s the kicker. There is no ‘carry-forward’ and no ‘catch-up’ required. That means, if you miss for a few days, you only have to do one thing (anything you think gives you a chance of attracting a new client) when you get back at it. That makes it easy to get back into business, despite setbacks.

If you do ten things one day, you still have to do one tomorrow. That keeps you consistent and builds momentum in your favour.

“We need reminding as often as we need educating,” wrote Thomas Carlisle

As you can see, these are just simple ideas, but they are powerful tools used by most high performers around the world. Use them for yourself and you can join them. These reminders will help you stay on track and be the best you can be.

The author is a US-based Professional Speaker and Performance and Productivity Expert. Comments and feedback on this column are welcome. Please email feedback@premiumonline.in

Three Questions You MUST Answer Besides finding your ‘natural audience’, having a firm purpose and...
Get a Permanent Winning Attitude In this new column for Premium, Mr Jim Ruta brings...
Are you a Distributor or Advisor? For the customer, choice is more often than not confusion....

Related posts brought to you by Yet Another Related Posts Plugin.

Administrator — Thu, 19 Jan 2012 05:00:59 +0000

Bajaj Allianz Guaranteed Maturity Plan

Company: Bajaj Allianz Life Insurance Company

Type of policy: Single premium unit-linked Life insurance plan which offers you ‘Guaranteed Maturity Certificates’ of single premium of Rs 5,000 each. The policyholder has the choice to buy any number of these certificates under a single policy.

Age at entry:

Minimum: 8 years last birthday

Maximum: 50 years last birthday

Age at maturity:

Minimum: 18 years last birthday

Maximum: 60 years last birthday

Sum Assured: A multiple of the single premium Guaranteed Maturity Certificate. This is five times the single premium for the first policy year and for subsequent years, will reduce to 1.25 times the single premium for age-at-entry less than 45 years and 1.10 times of the single premium for age-at-entry 45 years and above.

Policy term: 10 years

Premium paying term: Single premium

Benefits:

Death benefit: On death of the policyholder during the policy term, the Sum Assured will be paid to the nominee.

Maturity benefit: This is a pure protection plan and hence there is no maturity benefit payable.

Tax benefit: Tax benefits as per Section 80C of the Income-tax Act 1961 will be applicable.

LIC’s Samridhi Plus LIC’s Samridhi Plus is a Close-ended Unit-Linked Insurance Plan with...
Sahara Utkarsh Jeevan Bima Sahara Utkarsh Jeevan Bima is a Unit-Linked Insurance Policy offered...
Edelweiss Tokio Life Education Company: Edelweiss Tokio Life Insurance Company...

Related posts brought to you by Yet Another Related Posts Plugin.

90% of plaints attended to, says IRDA

Administrator — Thu, 19 Jan 2012 05:00:57 +0000

Thanks to the IGMS (integrated grievance management system) set up by the Insurance Regulatory and Development Authority in April, redress of grievances in the insurance sector is faster now. The average time to settle a complaint is just around 14 days, media reports quoted Mr J Hari Narayan, Chairman, IRDA, as saying.
Ever since the system was put in place, “over 90 per cent of the complaints registered have been attended to by the IRDA. The complaints registered as on December 9 totalled 2,71,324. Of these, nearly 1.95 lakh were attended to and many are in various stages of being resolved, he added.
“The IGMS is also giving us insights into the very operation of the insurance industry and its response to customers as we can simultaneously monitor customer-interface of insurers in real-time,” Mr Hari Narayan said.
The on-line portal is integrated with the portals of 48 Life and non-Life insurers. The number of on-site inspections has also gone up. “About eight crore insurance policies are sold every year. So, fewer than three lakh complaints are not that many,” he added.

IRDA plans e-platform for reinsurance Insurance Regulatory Development Authority (IRDA) is planning to introduce an...
IRDA hikes Motor TP premium, to be annual exercise Insurance Regulatory and Development Authority (IRDA) has notified new, higher...
IRDA warns Gen cos on discounts Insurance Regulatory and Development Authority (IRDA) has said unhealthy marketing...

Related posts brought to you by Yet Another Related Posts Plugin.

Administrator — Thu, 19 Jan 2012 05:00:52 +0000

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

Kotak Invest Maxima

Administrator — Thu, 19 Jan 2012 05:00:51 +0000

Company: Kotak Mahindra Old Mutual Life Insurance Company

Type of policy: Unit-linked insurance policy

Age at entry: Minimum: 0 years, maximum: 60 years

Age at maturity: Minimum: 10 years; maximum: 75 years

Policy term: Regular premium: 10, 15, 20, 25 and 30 years. Limited Pay: 10, 15, 20, 25 and 30 years and single premium: 10 years

Premium paying term: Regular Pay: Same as policy term chosen and Limited Pay: Five years

Minimum and maximum premium: Regular Pay: Rs 50,000 /Rs 1 lakh, Limited Pay: Rs 75,000 / Rs 1 lakh and single premium: Rs 1 lakh / Rs 2.5 lakh

Sum Assured (SA):

Single premium: Option I: 5 times single premium or SP, Option II: 1.25 times SP

Regular and limited premium:

Minimum SA:

Age less than 45 years: Higher of (10 x annualised premium or AP) or (0.5 x Policy term x AP)

Age more than or equal to 45 yrs: Higher of (7 x AP) or (0.25 x Policy term x AP)

Maximum SA: 25 x AP

Portfolio Management Strategy Options (PMSO): There are two PMSO options available to the policyholder under this policy.

Self-Managed Portfolio Strategy: This option allows the policyholder to manage his portfolio with the benefit of the five fund options outlined below.

Systematic Switching Strategy: This allows the policyholder to invest all or some part of the investment in Money Market Fund and transfer a pre-defined amount every month into either the Classic Opportunities Fund or the Frontline Equity Fund.

Fund options, objectives and risk-return profile:

Classic Opportunities Fund: Aims to maximise opportunity through long-term capital growth, by holding a significant portion in a diversified and flexible mix of large/medium-sized company equities. 75-100 per cent in equities and 0-25 per cent in debt including money market instruments. Risk-return profile: Aggressive.

Frontline Equity Fund: Aims at a high level of capital growth by holding a significant portion in large-sized company equities. 60-100 per cent in equities and 0-40 per cent in debt including money-market instruments. Risk-return profile: Aggressive.

Balanced Fund: Aims at moderate growth by holding a diversified mix of equities and fixed interest instruments. 3 to 60 per cet in equities and 40 to 70 per cent in debt including money-market instruments. Risk-return profile: Moderate

Dynamic Bond Fund: Aims to preserve capital by investing in high-quality corporate bonds that generate relatively higher fixed returns: 100 per cent in debt, including money-market instruments. Risk-return profile: Conservative.

Money Market Fund: Aims to protect capital and prevent downside risks: 100 per cent in debt, including money-market instruments. Risk-return profile: Secure.

Discontinued Policy Fund: Aims to provide secure returns to policies in the discontinued state, by investing in low-risk debt instruments: 100 per cent in debt, including money-market instruments. Risk-return profile: Secure.

Death Benefit: On death of the policyholder the nominee would get the higher of: Basic SA, 105 per cent of the premium(s) paid up to the time of death and fund value in main account and top-up accounts, including survival units, if any.

Maturity Benefit: Maturity benefit will be the sum of fund value in the main account, including survival units, if any, and fund value in top-up accounts, if any.

Tax Benefit: Premiums are eligible for deduction under Section 80 C of the Income-tax Act 1961 and maturity and death benefits are tax-free under Section 10 (10 D).

Kotak launches Invest Maxima Kotak Life Insurance has launched its Invest Maxima, a unit-linked...
Bharti AXA Future Invest Company: Bharti AXA Life Insurance Company...
IDBI Federal Wealthsurance Dreambuilder Company: IDBI Federal Life Insurance Company Type of policy: Unit-Linked...

Related posts brought to you by Yet Another Related Posts Plugin.

United India’s rating affirmed

Administrator — Thu, 19 Jan 2012 05:00:51 +0000

A.M. Best Co. has affirmed the financial strength rating of B++ (Good) and issuer credit rating of “bbb+” of United India Insurance Company Limited. The outlook for both ratings is stable.
The ratings reflect United India’s strong capitalisation, strong business profile in India’s insurance industry and the management’s commitment to improve the company’s underwriting performance, media reports said.
United India continues to show a high growth rate despite competition from private companies. Its market share is showing stabilisation going forward. A.M. Best believes United India is likely to maintain its strong business position in India.

United India Ins premium zooms, to have more agents United India Insurance has had a spectacularly successful third year...
A.M. Best Rates UIIC B++ A.M. Best Co. has assigned a financial strength rating of...
A.M. Best Affirms ‘a-‘ Rating of GIC A.M. Best Co. has affirmed the financial strength rating of...

Related posts brought to you by Yet Another Related Posts Plugin.

IRDA plans e-platform for reinsurance

Administrator — Thu, 19 Jan 2012 05:00:50 +0000

Insurance Regulatory Development Authority (IRDA) is planning to introduce an electronic re-insurance platform for insurers and both Indian and foreign re-insurers.
“The proposed platform will have to be mandatorily used by insurers and Indian reinsurers as well as foreign reinsurers operating in India,” Mr J Hari Narayan, IRDA Chairman, has said.
IRDA had taken up an ambitious programme of designing an exchange or an inter-faceted, interlinked, electronic platform, on which reinsurance broking transactions would be executed. “The entire operation on the reinsurance side will be done through this particular platform when it is in place,” he added. May 2012 is when the platform will be operational, it is believed

Nod for foreign branches Private insurers who have been operating for more than 10...
IRDA keen on setting up client database The Insurance Regulatory and Development Authority (IRDA) is thinking of...
IRDA Plans Motor TP Premium Hike IRDA published on January 4, 2011, its proposed revised Motor...

Related posts brought to you by Yet Another Related Posts Plugin.

Administrator — Thu, 19 Jan 2012 05:00:49 +0000

Edelweiss Tokio Life Education

Company: Edelweiss Tokio Life Insurance Company

Type of policy: Term insurance plan

Minimum and maximum age at entry of Life Assured: 18 to 60 years (last birthday)

Minimum and maximum age at entry of child: 28 to 70 years (last birthday)

Policy term: 10 to 30 years

Premium payment frequency: Annual

Premium paying term: Single, regular, 5 pay, 10 pay if policy term is above 20 years and 15 pay if policy term is above 25 years

Minimum Sum Insured: Rs 15 lakh

Maximum Sum Insured: No limit (subject to underwriting)

Minimum premium: Rs 20,000 (annual mode) , Rs 10,000 (half-yearly), Rs 5,000 (quarterly) and Rs 2,500 (monthly mode)

Maximum premium: No limit (subject to underwriting)

Policy benefits:

Death benefit: Sum assured will be paid to nominee

Survival benefit: None

Maturity benefit: None

Tax benefits: Premiums are eligible for deduction under Section 80 C of the Income-tax Act 1961 and maturity and death benefits are tax-free under Section 10 (10 D).

Birla Sun Life ‘Vision’ Company: Birla Sun Life Insurance Company Type of policy: Whole...
Kotak Wealth Insurance Kotak Wealth Insurance is a Unit-linked insurance policy offered by...
LIC’s Jeevan Arogya LIC's Jeevan Arogya ...

Related posts brought to you by Yet Another Related Posts Plugin.