Digit Insurance raising $200 million in funding

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Insurtech startup Digit is raising up to $200 million with existing investor Faering Capital and new investors Sequoia Capital India, IIFL Alternate Asset Managers and a few others, in their latest round of funding.

This is subject to IRDAI approval.

“This will bring the total capital infused into Digit Insurance up to $442 million, valuing it at $3.5 billion,” it said in a statement on Friday.

Digit saw a smaller round in January 2021, wherein it was valued at $1.9B.

“We will continue to focus on increasing insurance penetration and simplifying processes through technology. Customer service remains our key focus,” said Kamesh Goyal, Chairman and Founder, Digit Insurance.

Prem Watsa, Chairman, Fairfax Financial holdings, the first investor in Digit Insurance, said, “It was a difficult year for economies the world over but I am glad to see Digit continuing to stick to its mission of simplicity and growing ahead of the industry. Their relevant products, tech-enabled, simple processes and customer-centric approach sets them apart. My best wishes to the team.”

Amongst Digit’s investors are also TVS Capital Funds, A91 Partners, Indian Cricket Team Captain (Men’s) Virat Kohli and the employees of Digit.

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All India Insurance Employees’ Association urges govt to drop United India privatisation plan

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The All India Insurance Employees’ Association (AIIEA) has opposed any move towards privatisation of United India Insurance.

“It is unfortunate that the government which had earlier decided on merger of three public sector general insurance companies has given up these plans and is now pushing for privatisation. The AIIEA demands the government to revive the plan for merger which would bring economies of scale and benefit the national economy and weaker sections of population,” the Association said in a statement on Wednesday.

Finance Minister Nirmala Sitharaman had in the Union Budget 2021-22 announced that the government would take up the privatisation of one general insurance company in 2021-22. According to reports, the NITI Aayog has recommended privatisation of United India Insurance.

Urging the government to drop any move towards privatisation of United India Insurance, the association also said it has been mobilising public opinion against the disinvestment of public sector institutions in general and public sector general insurance companies in particular.

Its units have also approached over 350 Members of Parliament on the issue.

“Insurance employees under the banner of the AIIEA are determined to carry forward the resistance against the move of the government to privatise United India Insurance Company and the public sector institutions at large,” it said.

The association also pointed out that public sector general insurance companies implement all the schemes announced by the government, including the recently announced scheme of death coverage to frontline workers due to Covid-19.

United India is the insurer for TN Chief Minister Health Insurance Scheme for 10 years and Maharashtra Government’s Mahathma Jyothiba Phule Jan Arogya Yojana Health Insurance Scheme from 2020. It has also underwritten the Prime Minister Suraksha Bima Yojana on a large scale which the private insurance companies hesitate to underwrite, the association said.

The AIIEA is of the firm opinion that privatisation of United India Insurance or any other public sector general insurance company will be antithetical to the government’s objective of Aatmanirbhar Bharat, it further said.

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LIC registers improved persistency ratio for individual business in FY21

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Life Insurance Corporation of India seems to have beaten the odds of the pandemic, with its 13th month persistency for individual business registering improvement in 2020-21.

For the quarter ended March 31, 2021, LIC reported a 13th month persistency of 63 per cent by number of policies and 74 per cent in terms of annualised premium for its individual regular business.

For the full fiscal 2020-21, its 13th month persistency for individual business was 67 per cent by number of policies and 79 per cent by annualised premium.

In contrast, LIC had reported a 13th month persistency of 61 per cent by number of policies and 72 per cent by annualised premium in 2019-20 for individual business.

The IPO bound life insurance behemoth also showed improved persistency ratios for the 61st month in the segment under review.

It was 48 per cent by number of policies and 59 per cent by annualised premium in 2020-21 as against 44 per cent and 54 per cent respectively in 2019-20.

Persistency ratio is an important benchmark for life insurers as it reflects the number of policyholders who paid their renewal premium. It is widely seen as an indicator of the quality of the sale as well as future growth.

This was especially important last fiscal when many insurers had initially announced a drop in persistency levels as customers faced job losses and salary cuts. However, by the end of the fiscal year, most life insurers reported a return in renewals and persistency levels.

Over the last year, LIC had also launched special measures to help customers amidst the pandemic, including a special campaign to revive lapsed individual life cover policies.

Meanwhile, in terms of first year premium this fiscal, LIC has seen better performance compared to last fiscal.

According to IRDAI data, it registered a drop of 12.38 per cent in May 2021 to ₹8,947.64 crore in May 2021, compared to a decline of 24.3 per cent in May 2020.

It registered flat growth in first year premium in the first two months of the fiscal 2021-22 at ₹13,804.40 crore compared to ₹13,793.18 crore in the same period last fiscal.

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KG Information Systems acquires Malaysian insurtech firm AETINS

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The ₹250-crore Coimbatore-based KG Information Systems Pvt Ltd, a part of the $750-million business conglomerate KG Group, has acquired Malaysian firm AETINS Sdn. Bhd through its wholly owned subsidiary in Malaysia, KG Information Systems, for an undisclosed sum. The acquisition is a part of KGISL’s growth strategy in the InsurTech space.

Aetins, which has around 250 employees, brings a range of insurance solutions for life, general and ‘Takaful’ (Islamic insurance). It serves clients in Asia Pacific, West Asia and North Africa.

KGISL has had its market presence in the Malaysia InsurTech space since 2006 and has grown with its point of sale and claims management solution for the non-life insurance segment. The acquisition will bring core insurance product and insurance solution framework into KGISL’s product offerings and open doors to enter the wider Asia Pacific, West Asia and Africa markets covering the life, non- life and Takaful insurance segments, said a release from KGISL.

Prassadh Shanmugam, Director and CEO, KGISL, said Aetins’ core insurance products, Takaful offerings and the West Asia market are the missing pieces in KGISL’s insurance offerings. “It would have taken years for us to build this capability, so the acquisition is a perfect fit for KGISL,” he said.

Speaking to BusinessLine, Shanmugam said the acquisition would be with immediate effect. Aetins’ products and solutions will alone bring over ₹200 crore revenue for KGISL in the next couple of years.

Aetins has customers in Vietnam, Pakistan, Qatar, MENA and Cambodia. The acquisition will give access to MENA markets for KGISL, which has a good presence in the Eastern markets.

KGISL currently has 260 clients, and with its new acquisition will add 30-plus larger insurance clients. Nearly 40 per cent of the company’s revenue is from the insurance space, he said.

On plans for the next four years, Shanmugam said that KGISL plans to induct 6,000 to 8,000 employees and reach revenue of around ₹1,000 crore. The company has plans to enter the UK and US markets, he said.

“We plan for an IPO in 3-4 years with employee stock options. We will continue to look for acquisition for growth,” he said.

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CCI approves combination involving Magma HDI General Insurance

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The Competition Commission of India (CCI) has approved a combination transaction involving India Advantage Fund S4 I (IAF) and Dynamic India Fund S4 US I (DIF) together, picking less than 25 per cent and NHPEA Trisul Holding B.V (NTH) picking up less than 10 per cent combined interest in Magma HDI General Insurance, a non life insurance company.

The IAF/DIF transaction and the NTH transaction are collectively referred to as the “proposed combination”.

NTH is an investment holding company that ultimately belongs to a fund managed or controlled by an affiliate of Morgan Stanley.

The CCI has concluded that the proposed combination will not lead to any change in the competitive landscape or cause any appreciable adverse effect on competition in India irrespective of the manner in which the relevant markets are defined. The relevant market has been broadly defined as “the market for general insurance in India”.

Magma HDI was established in 2012 and had 133 branches as of December 30, 2020.

This General insurer offers 62 products across various categories including motor, health, personal accident, home, fire, engineering to secure all major risks in general insurance sphere.

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How savings were impacted by Covid second wave

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Faced with the surge of Covid-19 infections in recent months combined with lockdowns that led to job losses and drop in income, many households are understood to have started using their accumulated savings to fund expenditure.

This, in turn, has led to concerns over a decline in the savings rate that could hamper further recovery.

According to the Reserve Bank of India’s monthly bulletin for March, household net financial savings rose to 21 per cent of GDP in the first quarter of 2020-21 and fell to 10.4 per cent in the second quarter. A report by Motilal Oswal in April had said household net financial savings had likely fallen to 8.4 per cent of GDP in the third quarter last fiscal.

Anecdotal data as well as the slowdown in bank deposits indicate that household savings have been impacted by the second surge of Covid-19 infections.

Bank deposits

Deposits of commercial scheduled banks grew 9.7 per cent on an annual basis to ₹1,51,66,808.18 crore for the fortnight ended May 21, 2021 as against a 9.9 per cent growth in the fortnight ended May 7, 2021.

“Growth in deposits with scheduled commercial banks (a proxy for household saving, having about 50 per cent share in households’ overall savings portfolio), has declined starting April 2021. Last year, in contrast, deposit growth had moved up. This could be indicative of pressure on incomes and a simultaneous rise in medical expenditure given the heightened ferocity of the second wave,” said a recent report by Crisil.

People also seem to be withdrawing funds from retirement savings. By May 31, 2021, the EPFO had settled over 76.31 lakh claims under the Covid-19 advance scheme amounting to over ₹18,698.15 crore. The government has now allowed a second round of such withdrawals from the Employees’ Provident Fund.

Gold auction

Gold loan NBFCs are auctioning more gold in recent months indicating higher distress amongst borrowers. For instance, Manappuram Finance said it auctioned gold worth ₹404 crore in the fourth quarter of 2020-21 compared to ₹8 crore in the nine month period ended December 2020.

Sale of life insurance policies has also declined in recent months but there are expectations that it may revive in coming months.

“Equity markets have been performing well. It is expected that products such as mutual funds and ULIPs will continue to do well this fiscal as bank deposits have lost their sheen,” said an executive with a private insurer.

 

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Bharti AXA General Insurance back in black in FY21; reports ₹120 crore PAT

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Bharti AXA General Insurance recorded a net profit of ₹120 crore on a gross written premium of ₹3,183 crore during financial year 2020-21.

The private general insurer had recorded a net loss of ₹243.63 crore on a gross written premium of ₹3,157 crore in FY20.

Bharti AXA General Insurance achieved a lower combined ratio at 110.5 per cent during FY21 compared to 120.7 per cent in FY20 on account of improved profitability. Market ranking of the company in the private General Insurance sector also improved to 10th from 11th position in previous year despite the pandemic.

Sanjeev Srinivasan, Managing Director and CEO, Bharti AXA General Insurance, said in a statement, “Owing to the Covid-19 pandemic, FY21 has been a challenging year for the industry and especially for us at Bharti AXA General Insurance.

While the overall demand for goods and services across the economy has been relatively low, consumers felt an evident need of insurance on the back of the uncertainty the pandemic has brought.This changing consumer behaviour helped us respond with required solutions and agility through tech advancements. Further, the year demanded realignment with focus on the health and commercial lines segment, and we managed to drive growth in these lines of business on account of increased awareness and launch of new products.”

While the health segment saw a 11 per cent growth at ₹457 crore in FY2020-21 against ₹410 crore last year, Retail health grew by 48 per cent driven by launch of new products and increased awareness due to the pandemic.

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What is insurance bonus – The Hindu BusinessLine

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Two neighbours’ daily routine of watering plants leads to an interesting conversation.

Sindu: This mint family plant took only about three weeks to grow and it smells good.

Bindu: That is a sage plant. Not only is it aromatic, but it has medicinal qualities too.

Sindu: Great. That’s a bonus! Just what we need during these tough times.

Bindu: Speaking of bonus, my life insurance policy matured and I got extra cash as bonus.

Sindu: That explains your extra plants on the walls. But what is a bonus in life insurance?

Bindu: Well, ‘bonus’ in insurance is a benefit given by the insurer to a policyholder over and above the maturity amount of the policy. So when a life insurer makes profit, it is distributed in the form of bonus.

Sindu: Does every life insurance product offer bonus?

Bindu: No. Bonuses are usually offered with traditional products, that is, ‘with profit’ policies.

Sindu: How many types of bonuses are there?

Bindu: There are broadly three types – terminal, interim and reversionary bonus. Terminal bonus is a one-time benefit offered by an insurer when the policy matures, though it is left to the discretion of the insurer to pay this. Interim bonus is declared in cases where an insurance policy matures before the end of the financial year or in case of the insured person’s demise during the term of the policy. In case of reversionary bonus, a certain bonus value is added regularly to the policy. These bonus amounts continue to accrue until the policy term and are paid out at maturity. After declaring reversionary bonuses, if there are still residual profits available with the insurer, they normally are declared as terminal bonus.

Sindu: Do we know how much will be the bonus at the time of taking the policy?

Bindu: Not always, though there are products that do mention the bonus at the inception itself. Bonus is declared either as a certain amount (say ₹20 or ₹50) per ₹1,000 sum assured or as a percentage of the sum assured. As bonus is declared only when an insurer make a profit, it may not be known at the inception of the policy.

Sindu: Can I purchase a policy based on the bonus payment?

Bindu: You can. While you can check the historical bonus paid by an insurer on their websites, that shouldn’t be the only criteria for selection.

Sindu: Bonuses are a reward for staying invested for long-term.

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Bharti AXA Life in bancassurance pact with Shivalik Small Finance Bank

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Private life insurer Bharti AXA Life Insurance has entered into a bancassurance partnership with Shivalik Small Finance Bank for the distribution of its life insurance products through the bank’s pan-India network of branches.

Under this agreement, Bharti AXA Life Insurance will offer its suite of life insurance products, including protection, health, savings and investment plans, to customers of Shivalik Small Finance Bank across its 31 branches and digital network across the country.

This alliance will enable over 4.5 lakh customers of Shivalik Bank to access the range of products offered by the company to provide financial security.

Bharti AXA General launches Health AdvantEDGE

Expansion of distribution footprint

Commenting on the association, Parag Raja, Managing Director and Chief Executive Officer, Bharti AXA Life Insurance, said in a statement: “The outbreak of Covid-19 has led to a notable shift in customers’ perception of life insurance, which is fundamentally about protection. With our alliance with Shivalik Bank, we shall empower the bank’s customers with protection and holistic insurance solutions and help us strengthen our commitment while reaching out to urban, tier-II and tier-III markets. We believe this partnership will enrich our distribution footprint and help us increase insurance penetration in the country.”

UP-based Shivalik SFB commences operations

Suveer Kumar Gupta, Managing Director and Chief Executive Officer, Shivalik Small Finance Bank, said this alliance is a part of the bank’s various measures towards financial inclusion and acceleration of wealth creation for its customers.

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Why Indian banks are banking on the rich

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Picture a lazy Saturday morning. You get a call from a soft-spoken representative of one of the well-known private sector banks, telling you how they have customised a neat deal encompassing services, offerings and add-ons just for you.

Surprised? Don’t be! As the number of rich individuals grows in the country, banks are developing services for the well-to-do so that these customers bank with them. Most of these promised goodies will cost you virtually nothing. Banking services for the rich carry names that contains words such as wealth, privilege, preferred, class, priority, league and premier etc., and this itself is a great ego boost for customers. But remember that beneath the super-slick glib, the grandeur and the goodies, there is always a profit motive. While this is not wrong, you will do well to know what’s at stake before you sign up for such services.

A good hook

Broadly speaking, banks generate money from three areas: interest income, capital markets income and fee-based income. With intensifying cost pressures and rising competition, banks are trying to find clients who can generate a good amount of revenue individually. A high-income professional customer, a highly paid salaried customer or a businessman customer can help a bank bring in more income compared to scores of savings account holders who merelyhold small deposits at a bank.

Customers are segmented based on the total relationship value (TRV). This is an aggregate of the value of the savings balance, fixed deposits, investments, etc. Depending on this total value, banks will offer you various levels of service. Common offerings across banks aimed at rich customers are personalised banking services via a dedicated relationship manager (RM), priority servicing, discounts on many products including lockers and demat accounts, relationship pricing and waivers on a variety of products, including loans, and services. The higher the TRV, the bigger is the range of services and products offered – a client relationship manager, a wealth manager/investment counsellor, invitation-only credit cards, access to exclusive events, etc. All these goodies have a direct relationship with the core revenue areas for the bank.

Measured bet

It may be easy for the bank with which you have an existing relationship to know the details of your ‘relationship value’. But for other banks to attract you, your details need to be dug out. Business intelligence teams, with the use of big data, map prospective customers based on your transactions such as credit/debit card payments, shopping pattern, etc.

It’s an attractive proposition for a bank to become primary bank for a rich customer. Once onboarded, there are ways to ensure that such a customer stays with the bank. One way is by offering loans. Even the rich and high-income people need loans, obviously for different purposes than the hoi polloi. Second, is by selling various investments and insurance products which will result in a sticky relationship. Not only do the investments facilitated by the banks provide fee income, once people have a bank account linked with income tax, mutual funds, stocks or insurance, they hardly change the bank. Third, in case of business or self-employed rich customer, offering a current account gives additional float (money) and keeps the transaction volume up. If employee salaries or vendor payments are paid, then cash management services come into play.

Do your homework

From a customer point of view, getting top-quality banking services is a feel-good experience. But it is important to not let down your guard. Customers who are NRIs, those who play a passive role in terms of decision-making and the elderly are often at the receiving end. While your networth could have attracted banks, you need to shield the same by doing your homework and not making wrong money choices.

Fresh graduates or MBAs are recruited to become RMs and are often given sky-high sales targets and may often sell financial products without fully understanding them. Since customers, even the rich ones, lack proper financial knowledge, the chances of mis-selling are high. The YES Bank case where perpetual bonds were sold to HNI customers is a classic example. Your RM must advise keeping your best interests in mind. On your part, spend time to understand the product well and weigh every investment decision carefully.

Be it taxation, investment, financial planning or even succession planning, it is important to choose a professional whose interests are aligned with yours. In an atmosphere of surplus liquidity and low interest rates, banks may no longer be excited with your deposits alone. They may want to lend to get interest income, see you trade or invest regularly to get a sustainable flow of non-interest income. You can also hire a SEBI-registered investment advisor to guide you.

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