Tag: irdai

HDFC Life acquires Exide’s insurance arm for Rs 6,687 crore, BFSI News, ET BFSI

Banking & Finance

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MUMBAI: HDFC Life has agreed to buy Exide Life Insurance for Rs 6,687 crore, of which Rs 726 crore would be paid in cash. The rest would be paid by issuing 8.7 crore shares of HDFC Life to the target company’s parent. This makes it the biggest insurance M&A deal in India.

Announcing the acquisition, HDFC Life Insurance CEO Vibha Padalkar said that the core reason behind the deal was its decision to grow its proprietary distribution channel. HDFC Life has developed scale largely on the back of the distribution strength of HDFC Bank. While initially banks were allowed to sell policies of only one company, Irdai has relaxed the rule in recent years.

“Adding 40% to our agency force would have taken 2-3 years. Today, our propriety channel is 15% of our business and we want to increase that to 30-35%. If you look at other parts of Asia, the proprietary channels dominate. Over a period of time, the reliance on bancassurance has gone down and companies have built their tied agency model. That is the core of this deal… to grow our own proprietary channel,” said Padalkar.

The acquisition will add 10% to HDFC Life’s embedded value (EV) — a measure for the worth of a life company that takes into account future earnings from policies that the company has issued. The acquisition price is less than 2.5 times the EV of Exide Life. Also, given that Exide Life has a sound solvency position of 225%, it will add to HDFC Life’s solvency. However, the cash payout, when it happens, will have a 15% impact on solvency margins.

“There is an advantage if one is trading at expensive valuations. Acquiring a company using your stock becomes less onerous and less of a drag…so, HDFC Life, trading at about 6x trailing EV, used largely its stock, resulting in just 4% dilution and got Exide life which added 10% to EV,” said Macquarie Capital research analyst Suresh Ganapathy.

According to Padalkar, the company has a good deal as the average valuation of listed and proxy listed companies (excluding HDFC Life) is 3.5 times their EV, while the deal values Exide Life at less than 2.5. She said that the business would complement that of HDFC Life in terms of geographical distribution as well, since Exide Life is present in tier-3 cities where the acquirer is yet to make inroads.

She said that the company was open to more acquisitions as long as it had a credible distribution, a decent sized EV and strong risk management in its DNA. Padalkar said that the first stage of the transaction — turning Exide Life into a wholly owned subsidiary — would take place by December-January. Thereafter, she expected consolidation to take 8-9 months.

Exide Life Insurance has its origins as ING Vysya Life Insurance. The company lost both its original promoters — ING, which decided to exit a few years after the global financial crisis in 2013, and Vysya Bank which was acquired by ING and later by Kotak Mahindra Bank. After ING’s exit, the Rajan Raheja-owned auto battery-maker Exide became the owner of Exide Life Insurance. The company was seen to be an acquisition target for several years as it had not managed to achieve scale. Exide on Friday informed the stock exchanges that the total investment of the company in the life subsidiary was Rs 1,679 crore.



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Finance Ministry exploring insurance bonds as alternative to bank guarantees, BFSI News, ET BFSI

Personal Finance

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The government is considering introducing insurance bonds as an alternative to bank guarantees, Finance Secretary T V Somanathan said here on Tuesday. Somanathan made the announcement during a meeting between industry captains and Finance Minister Nirmala Sitharaman, who is on a two-day visit to the financial capital.

“Government is exploring the possibility of instituting insurance bonds as alternatives to bank guarantees,” an official statement said.

Bank guarantees are usually asked for while extending a loan and typically require a collateral. An insurance bond is also a surety but it does not require any collateral.

As per reports last year, insurance regulator Irdai was also looking at the option of insurers offering surety bonds in the context of road projects.

(With inputs from PTI)

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Finance Ministry exploring insurance bonds as alternative to bank guarantees, BFSI News, ET BFSI

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The government is considering to introduce insurance bonds as an alternative to bank guarantees, Finance Secretary T V Somanathan said here on Tuesday. Somanathan made the announcement during a meeting between industry captains and Finance Minister Nirmala Sitharaman, who is on a two-day visit to the financial capital.

“Government is exploring on instituting insurance bonds as alternatives to bank guarantees,” an official statement said.

Bank guarantees are usually asked for while extending a loan and typically require a collateral. An insurance bond is also a surety but it does not require any collateral.

As per reports last year, insurance regulator Irdai was also looking at the option of insurers offering surety bonds in the context of road projects.

Sitharaman, who met the industry captains in the evening, said the government is committed to working towards ensuring policy certainty, adding that the regulators also have a key role in ensuring the same.

She said the government is working with the regulators on this “important issue”, as per the statement.

The finance minister emphasised the importance of ‘India’s own equity capital’ while addressing the industry and assured government facilitation for sunrise sectors and startups.

Revenue Secretary Tarun Bajaj said his department was working on tax-related issues of startups and sought industry inputs on the same.

Sitharaman also assured the industry of addressing issues related to competitiveness, including high power tariffs, and matters related to cumbersome regulatory compliances, the statement said.

The economy is moving gradually from a bank-led lending model to a more market-based finance model and the operationalisation of the Development Finance Institution (DFI) will ensure long-term lending for projects, Sitharaman said.

The DFI will increase competition for banks and also improve their efficiency, the statement quoted her as saying.

In the meeting, which comes in the wake of a controversy caused by her cabinet colleague Piyush Goyal’s reported remarks about disenchantment with the industry for not keeping the nation’s interest in mind, Sitharaman said, “This government believes in listening, working and responding and would extend all possible support.”

Tata Steel’s T V Narendran said for growth to take deep roots, sustained demand is critical, and the immediate source of demand has to be government expenditure.

Narendran also recommended frontloading of the committed capital expenditure, especially on infrastructure, adding that the first quarter’s handsome revenues create a room for the same, as per the statement.

On the issue of arbitration awards being appealed, Somanathan said there is a need for a behaviourial change and added that the government trusts wealth creators.

The constraint on vaccination is on the supply side and the same is likely to be addressed soon, he further said.

Sitharaman met officials from income tax, Goods and Services Tax (GST) and customs departments in two separate meetings in what is her maiden visit to the financial capital since the second wave of COVID-19.

She is scheduled to address chiefs of state-run banks at a meeting on Wednesday.



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3 add-on health insurance covers to consider

Personal Finance

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A health insurance policy plays a significant role in providing financial stability for an individual and his/her family at the time of medical emergencies. Typically, a health policy offers to cover hospitalisation expenses along with pre- and post-hospitalisation expenses, day care treatments (treatment procedures that require hospitalisation for less than 24-hours), and accidental injuries, among others. While it is important to have sufficient coverage amount at all times, sometimes a base policy may still not be enough to cover other expenses. You can then consider going for one or two riders/optional covers, depending on the need. Keep in mind that these add-ons involve payment of additional premium. Here are a few riders worth considering.

Hospital cash benefit

While a health policy takes care of hospitalisation expenses, you may still end up paying for certain charges while are still hospitalised. These expenses are usually inadmissible at the time of filing a claim, and include the cost of hospital gowns, gauzes, adhesive bandages and maintenance and housekeeping charges and conveyance charges. This is where the hospital cash or daily cash benefit comes in handy. It means, if the policyholder gets hospitalised, your health insurer will pay you a lump sum amount for every day of hospitalisation up to a certain number of days up to a maximum limit (varies with insurers). For instance, in ICICI Lombard’s Complete Health Insurance plan, the hospital daily cash made available is ₹3,000 per day for up to a maximum of 10 days of consecutive hospitalisation (minimum 3 days) for sum insured (SI) of ₹15 lakh and above. The daily cash limit is ₹2,000 per day if the SI is less than ₹7 lakh.

Most insurers including Tata AIG, ICICI Lombard, HDFC Ergo Health, Max Bupa, Bajaj Allianz, Star Health and Digit, offer hospital cash benefit as an optional cover for additional premium, while some insurers offer this as an in-built cover.

Tata AIG’s Medicare, for instance pays 0.25 per cent of SI up to a maximum of ₹2,000 per day of hospitalisation for shared room accommodation.

Critical illness

A critical illness (CI) cover is offered as a rider or as an optional cover by many health insurers. Under this, the insurer will make a lumpsum payment at the time of diagnosis, after which this cover terminates. Remember that, there is no restriction on the usage of the amount received. Primary breadwinners of their families, who don’t want to take chances on their health can consider this rider. Do note that the insurer will make payment only for certain diseases mentioned in the policy document and the payment varies across insurers and diseases. For instance, HDFC Ergo’s Optima Secure plan offers critical illness cover with SI of ₹10 lakh to ₹2 crore CI. Similarly, 100 per cent of the SI opted is paid out in case of Manipal Cigna’s ProHealth plan. Both policies also offer expert opinion if the insured requires it for the CI.

OPD benefit

Another rider cover to consider is OPD (outpatient department) where it covers expenses such as doctor’s consultation fees, pharmacy bills, dental treatment expenses and non-allopathic treatment. Most of the health policies offer OPD in-built in the policy but there are a few that offer this as an optional or add-on cover. Policies including ICICI Lombard’s Complete Health Insurance plan and Max Bupa’s Go Active offer in-built OPD cover while policies such as Activ Health from Aditya Birla Health and Care’s Care Freedom offer it as optional cover. Ideally those who go to the pharmacy or consult doctors often can go for an OPD cover.

But, if your plan already has OPD in-built there are other optional covers to consider. One is a maternity cover, offered by many insurers, which can be considered if a couple plans to have a baby.

Alternatively, reduction in waiting period cover can be opted. This comes in handy for those who are already suffering from pre-existing conditions such as asthma or diabetics. Generally, the pre-existing disease waiting period ranges from 2-4 years across insurers. With this rider cover, upon payment of additional premium, your waiting period of say, four years, will come down to say 1-2 years. You can also use the cover to reduce the maternity waiting period (usually 4 years), if the insurer offers it.

Hospital cash can pay for inadmissible medical expenses

Critical illness cover offers lumpsum payment

OPD benefit is useful to pay for doctor’s consultation fees, non-allopathic treatment

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Debasish Panda, BFSI News, ET BFSI

Banking & Finance

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The pandemic underscored India’s disruptive progress on the touchstone of financial inclusion, with federal welfare payouts directly reaching the intended beneficiaries in a largely fraud-proof ecosystem undergirded by legacy lenders, nimble fintech firms and pertinent digital regulations. “Financial inclusion was actually tried and tested in terms of scale and volume during the pandemic,” financial services secretary Debasish Panda said at the ET Financial Inclusion Summit. Reliance on the digital infrastructure largely cut out the scope of pilferage in the distribution of federal welfare packages, Panda said.

“This is thanks to the vision of our PM, who thought so in 2015,” Panda said. “Today, it’s a reality and during the pandemic, we used it to the full extent.” Panda said that the government has been asking banks to partner with fintechs, as these new-age firms operate in different ecosystems and geographies, carving out innovative solutions.

“What we are doing now is bringing more, new-to-credit micro enterprises in the formal banking channel. We are taking help from fintechs, carving out innovative solutions for segments and geographies,” he said, adding that fintech firms are trying to connect alternative data points. “I don’t have a credit history but I have a spending history; so they collect those sets of data, do an analysis, use technology and then build a dossier for that individual which then becomes comfortable for the bank to lend,” he said, adding that banks and insurance companies also see value here. Panda said that the regulatory arrangement is already there for fintech firms to operate. “The RBI and IRDAI have provided a sandbox kind of an arrangement where fintech or insurance tech can try and test it on the ground and once the proof of concept is established, they can straightway get the licence and carry the work forward,” he said.

The financial services secretary noted that the basic tenets of the financial inclusion plan are banking the unbanked, securing the unsecured and funding the unfunded. “The three pillars have then created a digital pipeline of Jan Dhan accounts, Aadhaar and the Mobile (JAM), which have built a regular flow of benefits and services,” he said. The number of Jan Dhan accounts stand at 420 million, and more than 55% of these belong to women beneficiaries. Panda said that through opening bank accounts, the initial target was to saturate every household.

“The next target was to saturate every adult and that has also happened to a large extent; there are certain pockets where there is a little shortfall and work is in progress,” he said. The government is now identifying districts not matching with the national-level average. The government further aims to ensure availability of a banking touchpoint for any habitat within a radius of 5 kilometres.

Panda noted that micro finance institutions have the connect with the last-mile borrower. “Banks are tying up with MFIs under the co-lending arrangement of the RBI, where the interest gets blended so it comes down also to the end borrower and the credit is flowing,” he said.

Panda said that the transition toward New India is gathering pace. “We are trying to power India toward a $5-trillion economy; so unless we take this population above that threshold, we will be left behind. So efforts are on,” he said.



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HDFC Bank to buy stake worth over Rs 1,906 crore in group’s general insurer from parent, BFSI News, ET BFSI

Banking & Finance

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HDFC Bank on Saturday said its board has given its approval to buy more than 3.55 crore shares in group firm HDFC ERGO General Insurance Company for over Rs 1,906 crore from the parent company Housing Development Finance Corporation (HDFC). “The board of directors of HDFC Bank at its meeting held on June 18, 2021 has approved the purchase of 3,55,67,724 equity shares of Rs 10 each, representing 4.99 per cent of the outstanding issued and paid-up capital of HDFC ERGO General Insurance Company Ltd from HDFC Ltd,” HDFC Bank said in the filing.

HDFC is the promoter and related party of the bank.

The purchase is to happen at a price determined on an independent evaluation report, subject to receipt of necessary approvals including regulatory approvals and approval from shareholders of the bank, it said.

“The aggregate consideration for purchase of 3,55,67,724 shares of HDFC ERGO is Rs 1,906.43 crore, i.e. Rs 536 per share,” it said further.

HDFC ERGO General Insurance had a gross written premium of Rs 12,444 crore for the year ended March 2021. The company’s net worth stood at Rs 2,927 crore.

The private sector general insurer is one of the fastest growing companies among the peers with its gross written premium growing at a 35 per cent compounded annual growth rate (CAGR) over the last 13 years.

“The proposed transaction enables the bank to participate in the growth opportunity of HDFC ERGO and augment HDFC ERGO’s growth prospects leading to long-term value creation by HDFC ERGO to its shareholders,” it said.

The bank has been a distribution partner of the insurer since 2009.

The transaction, indicative to be closed by September this year, will require approval from insurance sector regulator Irdai and banking regulator RBI. Any other necessary regulatory or government approval will be evaluated prior to the share purchase agreement, HDFC Bank said.



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Policybazaar gets insurance broking licence from IRDAI

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Web-aggregator Policybazaar on Friday said it has got approval from regulator IRDAI to undertake insurance broking, a development that will help the company augment business and expand bouquet of services.

With this development, the company will surrender its web-aggregator licence to Insurance Regulatory and Development Authority of India (IRDAI) and undertake business including insurance aggregation under the broking umbrella.

“We received our licence to be a broker for which we have been in touch with the regulator for the last three years,” PolicyBazaar.com CEO Yashish Dahiya told PTI.

Venturing into new segments

The broking licence will allow the company to venture into segments which it could not do in the past like claims assistance, offline services, and establish Points of Presence network.

From a revenue perspective, he said, “as a web aggregator we were not paid for life insurance renewals.” As a broker, he said, the company will be entitled for commission as well as fee for web aggregation.

Also read: Serum Institute of India picks up stake in PolicyBazaar

With the help of broking licence, he said, “we will be able to do claims settlement and many other things and we will use this opportunity very wisely.” Policybazaar has a market share of 25 per cent in the life insurance segment while 10 per cent in health insurance.

The parent company PB Fintech also promotes Paisabazaar.com, which is an online credit comparison portal.

PB Fintech had attained the status of a unicorn in 2018 when it raised $200 million in a Series-F round led by Japan’s SoftBank. A company valued at over $1 billion is called a unicorn.

Other investors include the likes of Info Edge, Premji Invest, Temasek, Ribbit Capital, Chiratae, Inventus Capital Partners, True North, Tiger Global, Wellington and Steadview.

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Punjab National Bank to divest stake in Canara HSBC OBC Life Insurance, BFSI News, ET BFSI

Banking & Finance

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Punjab National Bank (PNB) will divest its stake in Canara HSBC OBC Life Insurance Co, the lender said on Saturday.

The city-headquartered state-owned bank had acquired a stake in the life insurer post amalgamation of the erstwhile Oriental Bank of Commerce (OBC) into itself last fiscal year.

“The bank intends to divest its stake in Canara HSBC OBC Life Insurance Co. Ltd, an associate of the bank, at an appropriate time depending upon market conditions and available options,” PNB said in a regulatory filing.

The erstwhile OBC held 23 per cent stake in the life insurer, which by virtue of amalgamation has come to PNB.

Canara Bank owns 51 per cent stake, while HSBC Insurance (Asia Pacific) Holdings Ltd as a foreign partner owns 26 per cent.

PNB, however, has not disclosed how much stake it will dilute in Canara HSBC OBC Life Insurance.

It is also a promoter of another insurer PNB Metlife Insurance, owning the highest stake of 30 per cent. The company was set up in 2001, in which other shareholders include US-based Metlife with 26 per cent, Elpro (21 per cent) and M Pallonji & Company (18 per cent).

As per extant insurance guidelines of Insurance Regulatory and Development Authority of India (Irdai), one promoter cannot hold more than 10 per cent stake in two insurance ventures.



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Recovered from Covid? It may be difficult to get insurance cover now

Personal Finance

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As India grapples with the second wave of Covid-19, many have understood the importance of insurance, both life and health, and are actively signing up for new policies in recent times. However, if you are among those who were unfortunately infected with Covid , and have subsequently recovered, you may find it difficult to sign up for a new policy, particularly a term life policy. This is because insurers are cautious and have tightened underwriting norms, as the after-effects of Covid remain to be seen.

Cooling-off period

In life insurance, while policyholders who had not been infected with Covid and are otherwise found to meet all conditions for coverage are accepted in the usual manner, those who had recovered from the same are evaluated based on factors such as nature of infection, treatment offered and current status.Accordingly, insurers make room for a recovery period. Life insurers including SBI Life and Kotak Life, for instance, have a cooling-off period of 30 to 90 days post which the policy is issued.

According to Sunil Sharma, Appointed Actuary and Chief Risk Officer (CRO), Kotak Mahindra Life, “If the life to be assured has a Covid history, the insurance cover can usually be considered three months post complete recovery, subject to underwriting. Additionally, specific medical tests may be requested on a case-by-case basis based on the information provided, to evaluate the risk”.

At present, post the said recovery period, policyholders are accepted without any need for restrictive clause or increase in premium. Sajja Praveen Chowdary, Head, Term Insurance, policybazaar.com, says, “There is no differential premium as of now between an individual who has recovered from Covid and a healthy person.”

Further, according to industry sources, in the future, if it is proven that there is a lasting health impact due to Covid, then the underwriter may charge additional premium for those who have recovered. This is similar to differential premium charged for a smoker and a non-smoker.

Additional scrutiny

In life insurance, post recovery from Covid infection, policyholders may be asked to submit a Covid negative report in addition to other medical records. Similarly, policyholders may be subject to additional scrutiny if one of the family members tested positive and later recovered or passed away (if they had been living under the same roof).

Also, given that life insurance is a long-term contract with policyholders, there could be a stringent on-boarding process of new policyholders irrespective of whether he/she contracted Covid. For one, almost all the life insurers including LIC and SBI Life have introduced Covid questionnaires where the prospective policyholders have to provide details such as whether they have travelled abroad in the past six months to one year, whether they plan to travel abroad, date of discharge in case of a Covid-19 diagnosis and whether full recovery has been achieved. This questionnaire is to be submitted along with the proposal form while buying the policy.

Delay in health policies too

In health insurance, while there is no cooling-off period or postponement of policy issuance to new policyholders in many cases, the health/general insurers are cautious when on-boarding customers, particularly those who had recovered from Covid. A few insurers including ICICI Lombard, Max Bupa and Manipal Cigna do have a cooling-off period (in the range of 15-90 days) when on-boarding a customer.

Priya Deshmukh Gilbile, Chief Operating Officer, Manipal Cigna Health, says “While the vaccine is a preventive measure, members who have had a Covid infection may have a possibility of future complications. From that perspective, a person who has been Covid-positive but who is getting vaccinated will still undergo the cooling-off period, and it does not have a bearing on premiums.”

Those who have recovered from Covid, in addition to providing details regarding current health condition, may be required to submit medical records, details of treatment undertaken, the severity of infections and past medical conditions and corresponding records, to the insurer. Some insurers require additional medical tests but it differs on a case-to-case basis. “A medical check-up requirement for those recovered from Covid will depend on the extent of the hospital treatment or the level of damage to the lungs and other vital organs,” says Gurdeep Singh Batra, Head – Retail Underwriting, Bajaj Allianz General Insurance.

Many insurers require that if an individual with pre-existing condition such as diabetes, asthma or hypertension has recovered from Covid, he/she may have to undergo further medical tests in addition to submitting a Covid-negative report. However, this is not a universal requirement.

Do note that health policies generally come with an initial waiting period of 30 days..

If you have any pre-existing conditions, there is a waiting period of 2-4 years and there are disease-specific waiting periods as well that vary with insurers. Even if you consider Covid-specific insurance policies like Corona Kavach or Corona Rakshak, there is a waiting period of 15 days.

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Insurance claims for loss of loved ones now made easy

Personal Finance

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The loss of a loved one is irreplaceable and is difficult for the family to cope with, but life insurance helps soften the financial blow. In the unfortunate event of the death of a policyholder, the nomineeis required to carry out certain procedures to receive the claim amount. Here is how one needs to go about the process.

Making death claims

Every claim from a life policy starts with claim initiation, then processing and settlement. Considering the restrictions on movement due to Covid-19, many insurers, including SBI Life, Tata AIA Life, ICICI Pru Life and Exide Life, have made the entire process online.

If you are a nominee, then you can raise the claim request to the respective insurer through any one of the modes — email, Whatsapp or Chatbot. You can call the customer service or your agent for the same. Insurers like PNB Met Life and SBI Life have set up dedicated helpdesks to handle Covid-19 death claims requests.

Once you have notified the insurer, the next step is to submit the documents.

There are a few basic documents that are to be submitted irrespective of the type of claims — maturity, accidental or death. These include original policy document, bank account statement or cancelled cheque leaf, nominee’s or life assured’s ( in case of maturity or accident claim) identification proof such as PAN card or Aadhaar.

In case of death claim, in addition to the documents mentioned, the claim form (available with the insurer online), death certificate from competent authority (usually Government officials), doctor’s certificate, medical records or test results should be signed and submitted.

Given the current pandemic situation, many insurers like SBI Life and ICICI Pru Life have made this process digital. Policyholders/nominees can upload claim-related documents through WhatsApp, Mobile App, Chatbots (LiGo in case of ICICI Pru Life) and company website.

Ease of documentation

A few insurers have eased the documentation requirements due to restrictions in place across the country on account of Covid. For instance where death has occurred in a hospital, instead of requiring death certificate mandatorily from municipal authority, LIC has allowed alternate proofs of death such as death summary containing clear date and time of death issued by Government/ESI/Armed Forces/Corporate Hospitals and counter-signed by LIC’s class I officers or Development Officers along with Cremation/Burial certificate.

Similarly, SBI Life and Tata AIA have also waived the requirement of submission of a death certificate from civic authorities in cases where death has happened in a hospital, and the hospital issued (medical cause) death certificate or death discharge summary can be provided as proof of death.

Claim settlement

As per insurance regulator IRDAI, life insurers must settle death claims within 30 days of claim intimation. But if a claim warrants an investigation, then the insurer should conduct such investigation within 90 days from the date of receipt of the claim intimation and the claim should be settled within 30 days thereafter. That said, many insurers settle claims within seven working days or less.

For instance, Tata AIA Life and Exide Life settle the claim within two days (48 hours) upon receipt of the mandatory documents, while ICICI Pru Life claims to settle death claims within a day. PNB Met Life has a three-hour turnaround time for approval of death claims upon receipt of required documents.

Other claims

Norms have been eased up for other claims with life insurers too.

In the case of pension policies (annuities), the insured or the annuitant has to produce life certificate.

Normally, it would require their physical presence as proof of life. Given the current Covid situation, many insurers accept digital life certificate. LIC, for instance, has waived of production of life certificate for annuities with return of capital options due up to October 31, 2021.

Besides accepting life certificates sent through email, in other cases, LIC has also introduced life certificate procurement through video call process.

Private insurers such as SBI Life and Bajaj Allianz Life too, have started accepting digital life certificate and have made the entire process online.

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