QUOTE OF THE WEEK

“The reward for work well done is

the opportunity to do more.“

Jonas Salk

INSIDE THE ISSUE

Insurance Industry 2 Insurance Regulation 6 Life Insurance 10 General Insurance 14 Health Insurance 16 Motor Insurance 21 Survey 22 Pension 26 IRDAI Circular 27 Global News 27

INSUNEWS Weekly e-Newsletter

30th Jan – 5th Feb 2021

Issue No. 2021/05

2

INSURANCE TERM FOR THE WEEK

Statutory accounting principles (SAP)

Rules for insurance accounting codified by the National Association of Insurance Commissioners (NAIC) or as promulgated by a domicile as rules to be used in reporting an insurer’s results to regulators. These rules focus on the balance sheet and solvency analysis, and differ from the generally accepted accounting principles (GAAP) used for other types of businesses. For example, statutory accounting rules do not allow the inclusion of certain nonadmitted assets on the balance sheet; require that certain loss reserves be set by conservative formulas instead of the insurer’s estimates; require the insurer to immediately recognize the expenses associated with writing new business instead of amortizing them over the policy period; and do not allow premiums for reinsurance placed with unauthorized reinsurers to be recognized as an asset.

INSURANCE INDUSTRY

FM proposes increase in FDI cap in insurance sector to 74% - The Economic Times – 1st February 2021

The government on Monday proposed to increase foreign direct investment (FDI) limit in the insurance sector to 74 per cent, a move aimed at attracting greater overseas capital inflows to help enhance insurance penetration in the country. In the first paperless Union Budget, Finance Minister Nirmala Sitharaman said under the new structure, the majority of directors on the board and key management persons would be resident Indians, with at least 50 per cent of directors being independent directors, and specified percentage of profits being retained as a general reserve.

"I propose to amend the Insurance Act, 1938 to increase the permissible FDI limit from 49 per cent to 74 per cent in insurance companies and allow foreign ownership and control with safeguards," she said while presenting the Budget 2021-22.

She also said that for investor protection, an investor charter would be introduced as a right of all financial investors across all financial products. It was in 2015 when the government hiked the FDI cap in the insurance sector from 26 per cent to 49 per cent. Life insurance penetration in the country is 3.6 per cent of the GDP, way below the global average of 7.13 per cent, and in case of general insurance, it is even worse at 0.94 per cent of GDP, as against the world average of 2.88 per cent.

The government has earlier allowed 100 per cent foreign direct investment in insurance intermediaries. Intermediary services include insurance brokers, reinsurance brokers, insurance consultants, corporate agents, third party administrators, surveyors and loss assessors.

Commenting on the proposal to hike FDI to 74 per cent, Russell Gaitonde, Partner, Deloitte India, said the decision will help attract greater foreign investment and strengthen the sector. Aatur Thakkar co-founder and Director at Alliance Insurance said an additional infusion of capital will enable growth and help insurance reach the last mile at the grass-root level.

"This one move will help create more jobs for youth which is the need of the hour," Thakkar added. Further, Shailaja Lall, Partner, Shardul Amarchand Mangaldas & Co, said that a more liberal FDI policy

3

will certainly attract higher amounts of foreign capital, which will aid in increasing insurance penetration in India. "It will also provide an impetus to the insurance industry to scale up and build more digital and infrastructure capabilities in the post-pandemic era," Lall added.

TOP

Make insurance more affordable, attractive proposition for customers - First Post – 31st January 2021

The healthcare sector must be supported and encouraged to expand and thrive so that it can make a real difference to the country’s economy and employment. COVID-19 has been a rude wake-up call with regard to health insurance—many understood the need to have one as the pandemic struck. In the wake of COVID-19 pandemic, the insurance sector is hopeful that the finance minister will announce measures that may assist enhance the variety of life and medical insurance policyholders within the nation.

Considering the low penetration rate, there is more to be done, and insurers have their wish list for the

upcoming Budget which they shared with First post:

Ashish Kumar Srivastava, MD and CEO, PNB MetLife Most Indians (75 percent) do not have any form of life insurance, and those that do are vastly underinsured, covering less than 8 percent of what’s required to protect their family from financial shock if they die unexpectedly. In the upcoming Budget, we expect the finance minister to allocate a separate tax exemption segment for term plans under 80C. We also believe that the existing exemption limit of Rs 1.5 lakhs for 80C should be raised further, thus attracting more taxpayers to opt for insurance plans basis their life stage needs, while also keeping the burden of income tax at bay. Another encouraging factor for the customers to opt for insurance plans would be to reduce 18 percent GST on the insurance premiums.

Gopal Balachandran, Chief Financial Officer and Chief Risk Officer, ICICI Lombard General Insurance The need for health insurance has gone up with people increasingly perceiving health insurance as a necessary investment to be made. Whilst the insurance premium payments constitute admissible deductions from income for tax payers, enhancing the extent of eligible deduction by at least 50 percent vis-à-vis the current levels, would go a long way in further improving the penetration of health insurance in the country. The global pandemic necessitates a health insurance cover being made mandatory for employees in order to protect them.

Accordingly, we believe that it would a great fillip from a health insurance penetration standpoint, to allow the input tax credit to be claimed with respect to the GST charged on health insurance premiums paid by corporates whilst purchasing Group Health Insurance Covers, which is presently unavailable as per the current GST laws in force.

G Murlidhar, MD and CEO, Kotak Mahindra Life Insurance Company The finance ministry is expected to prioritise job-driven growth recovery and infrastructure building. Given the government’s weak fiscal position, some innovative means to finance budget deficit may be introduced as well. Based on our learning of the last few months, we expect the government to encourage people to be prepared for life’s uncertainties by incentivising them to invest in various insurance products. More investment in insurance products will in turn help finance fiscal deficit as well as support infrastructure lending.

4

Prasun Sikdar, MD and CEO, ManipalCigna Health Insurance Company Due to the COVID-19 pandemic situation, the consumer mindset has undergone a tectonic shift from looking at health insurance as a priority to seeing it as a necessity. Whether it is the government, bureaucracy, industry, media or common man, we are all now discussing protecting lives and financing for the same in the form of health insurance. Thus, in the upcoming Union Budget 2021, we expect the government to come up with several changes in the regulatory framework to ensure the majority of the population comes under the ambit of insurance. COVID-19 pandemic has revealed the serious gap between supply-demand imbalances. This is a lingering issue that needs to be addressed with a structural course of action. We hope that the upcoming Budget comes up with a series of measures to boost this sector.

The health insurance has become an essential commodity and needs to be slotted in the 5 percent GST tax slab along with commodities such as food items to make it more affordable for people to get access to quality healthcare care. Also, the increase in the limit of tax deduction in Section 80D of the Income Tax Act can help better penetration of health insurance.

Neeraj Prakash, Managing Director, Shriram General Insurance Purchasing any kind of Insurance is still looked at as a cost rather than a protection from the adverse financial situation. To increase the penetration of non-life insurance, the government could look at offering more tax benefits, include more products under mandatory insurance cover and roll out more mass Insurance schemes. Standardization of policy documents across various Insurance products like health/home insurance could help in better understanding of insurance products.

Currently, all the life and health insurance policies are exempted from section 80C of the Income Tax Act. The government may consider a separate deduction section or enhance the limit under Section 80C of the Income Tax Act, 1961, since the current limit of Rs 150,000 is too low to cater to all the contributions it covers. 80D should introduce new scheme(s) to encourage a self-securing environment in India. The government may also try to reduce 18 percent GST to 12 percent or probably lower. This will help increase the penetration of life insurance.

Parag Raja, MD and CEO, Bharti AXA Life Insurance A large part of the population in the country still remains underinsured or uninsured. We expect this Budget to spur penetration of insurance with a lower tax regime and higher tax-free slabs in a crammed 80C and 80D limit where life insurance comes across to be grappling for space. Undoubtedly, the insurance industry needs a much-needed boost from the government in terms of policy incentives and relevant tax relaxations. This will also enhance insurance penetration and financial inclusion in the country.

Tarun Chugh, MD and CEO, Bajaj Allianz Life With the increased risk perception amongst customers converting to more people buying term plans, it would be an ideal time for the government to consider increasing the tax exemption limit for life insurance or have a separate section for deduction of life insurance premiums. The deduction for life insurance premiums should be available to all taxpayers, irrespective of the taxation regime opted by them. The next critical item for the government to consider would be on how to incentivise individuals to save better for their post-retirement financial needs. Finally, a financial product as critical as life insurance should have a reduced GST, and get exemption on Stamp Duty for mandated products, so that the costs are not increased for the end-customer.

Vighnesh Shahane, MD and CEO, IDBI Federal Life Section 80C of the Income Tax Act provides for tax deduction of up to Rs. 1,50,000/- on various investments such as insurance policies, PPF, principal amount paid towards home loan, ELSS, NSC, NPS amongst others. With so many investment options available, this section is too low and too cluttered. Our recommendation would be to either keep a separate deduction section for insurance policies or there should be an increase in the limit under Section 80C. This would allow customers to consider insurance not just as a tax-saving tool, but as a long-term means of fulfilling their financial goals.

5

We also suggest that the current exemption limit for TDS on insurance commission is Rs. 15,000 under section 194 D of the Income Tax Act. Raising this exemption limit would provide a greater impetus to insurance agents. Further tax laws could be aligned to the regulatory minimum of 7 times the cover for individuals above the age of 45 years.

TOP

New insurance rules may prompt better access to modern therapies and technologies - CNBCTV18 – 29th January 2021

Often, the availability of effective treatment options is shaped by a complex set of economic, clinical and social factors. A proven treatment or technology could be in wide use across the globe, but only be in a relatively early stage of its adoption curve in an individual country. Moving up this curve takes time - adoption by hospitals and healthcare practitioners is a gradual process, and in parallel, patients need to gain an awareness of their healthcare options while paying out of pocket.

However, the inclusion into healthcare insurance plans can play an important role in enhancing

treatment options; better manage the overall disease burden through improving access to modern tools and treatments; getting patients back to their lives sooner; as well as providing doctors and hospitals with new capabilities.

How do we overcome these barriers to expand access to better treatment options for patients in India? Insurance coverage and public policy play an essential role in the adoption of modern and innovative healthcare technology.

As in many countries, one important catalyst is health insurance coverage, which can benefit from supportive government policy. In addition to increasing accessibility for patients, insurance coverage sends a strong signal to the healthcare system that technology or therapy has the potential to be meaningful and impactful, with broader value to society. This prompts a virtuous cycle driven by better patient outcomes, leading to broader adoption among healthcare professionals and increased access across geographies.

In October, we saw this process in action, as private health insurers implemented new guidelines issued by the Insurance Regulatory and Development Authority (IRDAI) intended to standardize and update private insurance plans. There has been much discussion about how the various changes will take shape, evolve and affect individual policyholders. The key aspect, in particular, that has larger implications for the country is that certain modern therapies and technologies will now be covered in the new and existing plans. This should bring lasting benefits to the broader Indian healthcare system and its patients.

Robotic-assisted surgery (RAS), a relatively new modern surgical modality that is widely used globally, provides an instructive example. It has a robust evidence base, with over 21,000 peer-reviewed publications that broadly support its benefits which, compared to more traditional methods, can include faster recovery for patients as well as fewer complications, lower rates of conversion to open surgery, shorter hospital stays and fewer readmissions.

To date, more than 7.2 million patients have received RAS globally in specialty areas such as Urology, Gynaecology and various oncological procedures. Yet, its adoption curve in individual countries varies throughout the globe – India is in a relatively nascent stage, with a strong foundation of passionate surgeons with high patient volume, but also part of a broader global trend towards greater access and reimbursement.

6

Japanese health and welfare officials, for example, have approved public reimbursement for procedures performed by RAS incrementally over the last ten years, first extending coverage to prostatectomy in 2012 and subsequently including 20 procedures types in the ensuing years, including several that can help manage various forms of cancer. This was made possible, in large part, through the gradual adoption by Japanese surgeons and hospitals, who demonstrated the value and potential of RAS over time. As insurance coverage expanded, Japan quickly moves up the adoption curve to become a regional leader in RAS, where patients enjoy wider access relative to other countries in Asia.

The IRDAI’s new rules may help put India on a similar course through its stated intention of providing wider coverage for a selected group of modern treatment methods in private plans.

The list includes a variety of important procedures and technologies that are accepted and used globally, such as balloon sinuplasty for sinus surgeries - which has been used in over 375,000 procedures worldwide - and intravitreal injections, which have been delivered over 12 million times worldwide to treat certain retinal conditions. Various types of innovative cancer treatments are also covered along with RAS, which is used by surgical oncologists in India.

In the near term, these changes will only directly benefit a relatively small group of patients - private insurance penetration in India is relatively low at roughly 9 percent, with retail insurers impacted by the IRDAI’s changes representing less than half of the total.

However, we should not lose sight of the larger picture. The insurance penetration will continue to increase. Importantly, the government’s support for these therapies and technologies and the resulting insurance coverage sends a signal that they are meaningful and impactful – prompting greater adoption, access and awareness, which will ultimately help extend their reach beyond policyholders to the broader patient population.

This will help ensure that in the coming months and years, modern healthcare and treatment methods can reach their full potential in India, resulting in a and more innovative healthcare system, and the country's population in better health.

TOP

INSURANCE REGULATION

Mashak Rakshak: IRDAI issues guidelines on Standard Vector-Borne Disease health policy – Live Mint – 3rd February 2021

In order to convince public for getting health insurance coverage to specified Vector-Borne Diseases, the Insurance Regulatory and Development Authority of India (Irdai) has encouraged all general and health insurers to offer Standard Vector-Borne Disease health policy. This health policy can preferably be available by 1 April 2021.

Vector-borne diseases generally happen from an infection transmitted to humans and other animals by blood-feeding insects like mosquitoes, ticks, etc. For instance, vector-borne diseases can include Dengue fever, Malaria, etc.

Gurdeep Singh Batra, Head – Retail Underwriting, Bajaj Allianz General Insurance said, “This is a good product introduced well in time considering the upcoming monsoon as that’s when people suffer the most from vector-borne diseases and with the fear of Covid-19 still around, I believe it will be a good offering for all."

7

According to the Irdai guidelines issued on 3 February 2021, "The Standard health policy shall have coverage as specified in these Guidelines which shall be uniform across all General and Health Insurers. The policy shall be offered both on individual and floater sum insured basis." Also, the tenure of the policy will be one year. You will be required to pay premium via single premium mode only.

Policy framework The minimum sum insured under Standard Product shall be ₹10,000 wherein the amount can be increased in the multiples of ₹10,0000 and maximum limit can go up to ₹2 lakh. Besides, the minimum entry age shall be 18 years for principal insured and maximum age at entry shall not be less than 65 years for all the insured members including principal insured.

As per the release, the nomenclature of the product shall be the name of the insurance company followed by “Mashak Rakshak". No other name is allowed in any of the documents. The insurer shall also endeavour to mention the meaning of “Mashak" in vernacular i.e Mashak (Meaning in vernacular) depending on the region where policy is sold. Wherever English is used for promoting the product, the name of the product shall be “Mashak (Mosquito) Rakshak".

Policy coverage The Standard Product shall offer the following: 1. Hospitalization Benefit: Lump sum benefit equal to 100% of the Sum Insured (excluding the amount paid under-diagnosis cover) shall be payable on a positive diagnosis of any of the following vector-borne disease (s) requiring hospitalization for a minimum continuous period of 72 hours. The diseases include Dengue fever, Malaria, Filaria (Lymphatic Filariasis), Chikungunya, Japanese Encephalitis and Zika Virus.

2. Diagnosis Cover: 2% of the sum insured shall be payable on positive diagnosis (through laboratory examination and confirmed by the medical practitioner) of every covered vector-borne disease on the first diagnosis during the Cover Period, subject to policy terms and conditions. The Policyholder is entitled to payments under “diagnosis cover" payment for each disease only once in the policy year, the Irdai guidelines said.

On payment of 100% of sum insured the policy shall be terminated. In case where a policy is issued to a family with an individual sum insured for each member, the policy will continue for the rest of the members, the Irdai guidelines said.

TOP

IRDAI to introduce standard pension plan: Should you invest? - Times Now – 31st January 2021

Insurance Regulatory and Development Authority of India (Irdai) has directed all life insurance companies to mandatorily offer a standard individual immediate annuity product by 1 April 2021. This will be a single premium, non-linked non-participating immediate annuity plan.

It is the latest in the string of policies with uniform features across insurers that the IRDAI has mandated. “Such a standard product will make it easier for the customers to make an informed choice, enhance the trust between Insurers and the insured, and reduce mis-selling as well as potential disputes,” the insurance regulator said.

In its simplest form, annuity means that you pay a

8

lump sum as purchase price and get a fixed payment at regular intervals for the rest of your life. For example, you might pay Rs 1 lakh upfront and receive Rs 3,000 per year as income for life. There are many variants of annuity and Irdai has adopted two of them in the Saral Pension as noted below.

This will be a standard immediate annuity plan for individuals; it will provide a minimum annuity of Rs 1,000 per month, Rs 3,000 per quarter, Rs 6,000 per half year and Rs 12,000 per annum. There is no limit for taking the maximum annuity, as this will depend on the maximum purchase price.

Annuity Plans Immediately annuity plans are primarily targeted at retirees looking to invest their accumulated corpus. To buy such plans, you have to invest a lump-sum – termed purchase price – from the life insurer who will, in turn, offer regular pension payouts throughout your lifetime.

Life annuity with 100% return of purchase price: Under this option, the annuity is paid for the life of the annuitant. Besides, 100% purchase price will be returned to the nominee/legal heirs on the annuitant’s death.

Joint life annuity with a certain provision: As per the plan, a joint-life annuity can be provided by the insurer with a provision of 100% annuity to the secondary annuitant on the death of the primary annuitant and return of 100% purchase price on death of the last survivor.

Mode of Annuity payment: Monthly, Quarterly, Half-Yearly and Yearly. Payments shall be in arrears only, which means that the first annuity payment will start after the modal duration; for example after three months in case of quarterly mode.

Loan: Loan can be availed any time after six months from the date of commencement of the policy. Maximum amount of loan that can be granted under the policy shall be such that the effective annual interest amount payable on loan does not exceed 50% of the annual annuity amount payable under the policy. Under joint-life option, the loan can be availed by the primary annuitant and on death of the primary annuitant; it can be availed by the secondary annuitant.

The interest on loan shall be at 10-year G-Sec rate per annum as at 1st April, of the relevant financial year, as published by FBIL, plus not more than 200 bps and shall be applicable for all loans granted during the period of twelve months, beginning 1st May of the relevant financial year.

The loan interest will be recovered from the annuity amount payable under the policy. The loan interest will accrue as per the frequency of annuity payment under the policy and it will be due on the date of annuity. The loan outstanding shall be recovered from the claim proceeds under the policy. However, the annuitant has the flexibility to repay the loan principal at any time during the currency of the annuity payments.

Whenever the purchase price is paid through cheque, the Insurer shall ensure that before commencing payment of annuity or allowing loan or surrender payment, the cheque is realized.

Should you invest? The insurance regulator has been announcing standard plans for the last few months. Earlier we have seen standard plans for term life, health, and travel.

Rakesh Goyal, Director, Probus Insurance, Insurtech Broking Company said: "Saral Pension-which is an immediate annuity plan. This is best suited for people who are nearing retirement and need steady flows of income. There are only two variants in this plan and I think this is a very good move by the regulators as there will be no confusion in the mind of policyholders."

"The difference between these new pension plans and the current one is that policyholders can take loans against the plan and high surrender value. This can also attract many younger people to invest in these plans," he added.

TOP

9

Give priority to risk prevention over insurance claim settlement: IRDAI Chairman - Financial Express - 30th January 2021

Insurance Regulatory and Development Authority of India (IRDAI) Chairman Dr. Subhash Chandra Khuntia, while addressing the 17th Annual Insurance Brokers’ Summit on Friday, asked the insurance intermediaries to give priority to risk prevention to minimise the losses suffered by the insurance policy holders.

During the summit held virtually, Dr. Khuntia released the 5th edition of the ‘IBAI General Insurance Claim Insights for Policyholders Handbook’ that covers the claims related ratios pertaining to Fire, Marine, Motor, Health and Miscellaneous lines of business in addition to the overall claims by all non-life insurance

companies in India with the exception of a few specialised insurers.

According to the Handbook, as per the analysis for the financial year ended March 31, 2020, the claims settlement ratio for the entire industry remained stagnant at 85.18 per cent; however the claim repudiation ratio has improved from 7.47 per cent to 4.09 per cent. While talking about the claim settlement ratio, Dr. Khuntia said, “Be with the policyholders throughout the policy lifecycle, including the claim settlement, which is most important.”

Emphasising on risk prevention, the IRDAI Chairman told insurance companies and distribution channel members, “Another very important activity that I would like you to undertake is to be in constant touch with policyholders, to provide them information about how to prevent risks, because that is most important. Though you have got your policyholders insured, the first preference is not how to get the claim settled, but how to prevent a claim.”

“The risks against they are insured – whether it is a fire for the buildings, for health risks…I would suggest you to devote more energy in training the policyholders on how to prevent a fire accident, what kind of precautions to be taken. Similarly, how to lead a healthy life, what are the wellnesses programmes they (policyholders) should be part of, so that they don’t fall ill. Because the primary objective of the policyholder is not to get claims settled, but to ensure that the risk doesn’t arise at all. Then they will also feel that whatever premium they have paid – that value for money they get in getting advice on risk prevention or risk mitigation,” he added.

TOP

Exploring indexing annuity rates to inflation or G-secs: Irdai Chairman - Business Standard – 30th January 2021

The Insurance Regulatory and Development Authority (Irdai) of India is exploring the possibility of indexing annuity rates to government securities or the inflation rate so that they reflect the cost of living of consumers. Essentially, there may be a change to floating rates for annuity products from the fixed rate regime, which generally gives lower returns to customers.

Subash Chandar Khuntia, Irdai chairman, said, “We are actively looking into this because we feel if the annuity rate is indexed to something which reflects the cost of living, it will be good for both the insurers and the policyholders”. “So, we are exploring the possibility of indexing the annuity rates with Gsec or inflation rate”, Khuntia said.

10

A group has been constituted to look into this issue and once they submit the report, the regulator will think of introducing such a system but it needs to be explained to the customers so that the norm for having a fixed rate forever can be changed.

Annuity plans enable customers to receive payments regularly for a lifetime after investing a lump sum. The insurance industry has seen a huge surge in demand for annuity products due to increasing life expectancy and rapidly declining interest rates. Experts have said, the recent fall in bank interest rates has made annuity products more attractive and the demand for such products will continue to soar in the coming years with a huge section of the Indian population working for the unorganized sector where there is no pension provision.

Meanwhile, the regulator has recently launched a standard individual immediate annuity product “Saral Pension” which all life insurers have to start offering to consumers by April 1, 2021. The regulator has also introduced a host of standard products in the past few months starting from standard health product, covid product, term product, and others. It is also planning to introduce a few other standard products also as these products make it easier for the customer to adopt insurance policies.

Speaking at the annual summit of the Insurance Brokers Association of India (IBAI), Khuntia said, around 4.2 million lives have been protected uder Corona Kavach policy and approximately 536,000 lives have been covered under Corona Rakshak. These were the two standard covid products the regulator had launched in June 2020 as the pandemic necessitated the introduction of these products because they were cheaper than the comprehensive health policies. Overall around 12.8 million lives have been covered under all the covid specific products in the market with a premium of more than Rs 1,000 crore and a total sum insured is more than Rs 12 trillion.

Furthermore, the chairman has said, the insurance companies have been asked to have agreements with network providers (hospitals) on the cost of disposables and covid treatment. In the initial days of the pandemic the health insurance industry saw costs rising due to disposables as there was no standard cost of such products and ultimately the customers had to bear the cost. But he emphasized that it was a onetime phenomenon and the costs have come down. “As we go forward, we would like to develop such agreements between the health providers and the insurers so that there is some certainty and policyholders are not asked to pay anything extra. Now, things are under control and we are keeping a watch on the situation”, he said.

Addressing the insurance brokers, the chairman urged them to persuade MSME units to go for group health insurance policies and group life insurance policies for all their employees and workers. This, he said, will help as many as 11 crore people. The employers can afford it and pay the premium because in group insurance the premium per person will not be very high. Also, annuity products as well as simple pension products can be sold to these employees. “We must now move from supply driven products to innovative products that are need based and the brokers can create a bridge between the insurers and the insured’s to develop these products”, he added. So far, the insurance industry has 482 brokers and they contribute 26 per cent to the general insurance business. While brokers contribution in health business is 23 per cent, with 36 per cent contribution in group health.

TOP

LIFE INSURANCE

Taxability of some insurance policies remains ambiguous – Live Mint – 4th February 2021

For many years now, unit-linked insurance plans were taxed where the cover was less than 10 times the premium. Suppose you paid an annual premium of ₹1 lakh. But the sum assured on the policy was less than ₹10 lakh. The policyholder had to pay tax on the gains. Until now, it was not clear whether such gains would be taxed as capital gains or income from other sources. The recent Budget settles this issue partially and brings clarity on the taxation of such Ulips. According to the Budget proposal, the gains in policies where the sum assured is less than 10 times the premium will be taxed as capital gains.

11

CLASSIFICATION CONUNDRUM There have been different views on the issue based on the rationale used. Some tax experts believed that gains from policies where the sum assured is less than 10 times the annual premium should be offered to tax under the head 'income from other sources'. Typically, an individual's income is classified under five heads – salary, business income, income from house property, gains from capital assets, and other sources.

For a person to pay capital gains tax, the asset from which he earned the income should be classified as a capital asset. However, many believed that an insurance policy is not a capital asset. That's why the gains made should be under the head 'income from other sources'. Some referred to multiple income-tax cases where judgments talked about what constitutes capital asset where the definition is not clear.

For example, in one case, (CIT vs. Tata Services Ltd. [1980] 122 ITR 594), the ruling said: "The word 'property', used in section 2(14) of the Act, is a word of the widest amplitude and the definition has re-emphasized this by use of the words 'of any kind'. Thus, any right which can be called property will be included in the definition of capital assets".

Many other judgments reinstate the same view. Tax experts point out that going by such ruling, gains from insurance policies where the sum assured is less than 10 times the premium, should be offered to tax as capital gains.

TAX LIABILITY DIFFERS WITH CHANGE IN DEFINITION The classification is essential as the tax that a policyholder must pay changes depending on whether the income is classified as capital gains or income from other sources. For example, long term capital gains from equity are taxed at 10% if they are over ₹1 lakh in a financial year. Below ₹1 lakh is tax-free. Long term capital gains for equity investments are those where the investor holds the investment a year or more.

Tax liability under the head income from other sources depends on the marginal tax rate. If an individual is in the 30% tax bracket, he will need to pay 30% tax. As the tax liability changes, there are always divergent views.

The proposed changes in the recent Budget make Ulips a capital asset. Therefore, if the sum assured is less than 10 times the premium, the gains will be taxed as capital gains. The jury is still out on how the gains would be taxed if the policy is not a Ulip, and the sum assured is less than 10 times the annual premium.

TOP

Stand-alone Cancer Cover Vs Critical Illness Cover – Which is better for you? - Financial Express - 4th February 2021

According to industry reports, after heart disease, cancer is the second leading cause of death in India. It is mostly because of the fast-paced and unhealthy lifestyles that most people nowadays lead, and hence, the incidence of this disease is set to increase.

Thankfully, this dreaded disease is treatable if diagnosed early. Even though there is no absolute prevention against cancer, industry experts say, following a healthy lifestyle may help. Having said that, with the increase in its incidence, the expenses for the treatment of this disease are also skyrocketing. In case the disease

strikes, experts suggest, a proper cancer policy can soften the financial blow.

12

There are various types of cancer policies available in the market. For instance, standalone covers and critical-illness policies.

Standalone cancer covers Standalone cancer covers from insurance companies include HDFC Life Cancer Care Plan, LIC Cancer Cover Plan, Future Generali Cancer protect, Max Life Cancer Plan, ICICI PRU Heart+Cancer plan, and AEGON life iCancer.

These insurance covers are disease-specific policies that offer assured sum of a higher range. Experts say unline normal health insurance plans, these standalone covers come with higher sum insured amount which is one of the main reason for opting for these plans.

Standalone cancer covers offer payouts at various stages of cancer. For instance, if the policyholder is diagnosed with cancer at a minor or early stage, the payout will be around 20-25 per cent of the sum assured, depending on the insurer. If the disease reaches a critical stage, the balance amount is then paid. Additionally, on diagnosed some of the insurers also waive off future premium payments under these policies.

Standalone cancer covers also offer income benefit option. Under that, on the diagnosis of cancer at a major stage the insurer pays a monthly income equivalent to 1 per cent of the chosen sum assured for a period of 3 to 5 years. This benefit is also paid over and above the chosen sum assured by some insurers.

Critical Illness covers One can also opt for Critical Illness plans as an alternative for cancer covers. Unlike a standalone policy, these plans cover around 10-35 major ailments. The ailments, however, vary from insurer to insurer.

With critical illness cover, the insurance company pays the policyholder the amount for which they are insured, on a diagnosis of any disease on the policy list.

Under this policy, stage-based payouts are not made, unlike cancer policies. Experts say with such lump sum amount, the patient can use it to take care of various expenses such as hospitalization, loss of income and expensive medicines, supplemental care/ nursing, which start from the first day of diagnosis and not at a later stage.

Premium The premium of disease-specific standalone policies is lower than that of critical-illness covers, even with a similar sum assured. It is so because the disease-specific policies provide cover for only 1 disease.

Industry experts say people depending on their employer’s group health policy should note that their policy comes with a lot of limitations. Group policies also tend to have a low sum insured as they are planned for a large group of individuals. Hence, having a supplement with an employer’s cover with a personal health cover or/and a critical illness policy or a disease-specific policy gives a comprehensive cover.

TOP

World Cancer Day: Know why to consider life insurance policy with cancer cover - Financial Express - 4th February 2021

Recognized as a key international awareness day on the global health agenda, ‘World Cancer Day’ is observed across the globe on the 4th of February every year. Founded to unite the world in its fight against Cancer, the day aims to help save millions of preventable deaths by raising education and awareness while encouraging individuals, communities, and governments far and wide to take necessary action.

With COVID-19 impacting every aspect of life and resulting in widespread health deterioration, there is a sense of urgency when it comes to medical care and ensuring physical wellbeing. It is, therefore, crucial to remain aware of the disease, the primary possible causes of Cancer, and the perceived threat to make necessary alterations.

13

Understand what triggers Cancer Often described as a “battle” that one has to “fight” to survive, the threat of Cancer looms large in our lives. However, do we even know what triggers Cancer? With changes in socio-economic patterns across the globe, lifestyle and dietary habits have undergone significant change. Smoking, high-fat diet, and engaging with toxic chemicals are some examples that may be risk factors for some adult cancers.

While a risk factor is not necessarily responsible for the disease, it may make the body less resistant to it. It is, therefore, crucial to familiarize oneself with the risks and triggers and take appropriate action in line with that.

A healthy lifestyle and regular medical care can go a long way The most common kinds of Cancers i.e. oral, lung, and colorectal, are primarily caused by high tobacco consumption and poor overall bodily health making it even more important to make conscious lifestyle changes that ensure prevention on time. Maintaining a healthy weight can lower the risk of various types of Cancer, including Cancer of the breast, prostate, lung, colon, and kidney.

It is therefore important to include certain food types especially cruciferous vegetables in the diet while also steering clear of tobacco consumption and remaining conscious of maintaining good health by indulging in Yoga and regular exercise. A collective combination of these has been proven to break clusters of mutated cells down into biologically active compounds reducing the risk of Cancer to a larger extent.

Furthermore, one must also make regular medical screenings a priority that aid in early detection of the disease, helping increase the chances of treatment and recovery.

Ensure appropriate financial protection Ensuring financial protection in the face of Cancer is critical because depending on the type, stage, and complexity, Cancer treatment costs can easily run into a few lakhs rendering the patient and his/her family financially drained.

As per a recent survey, it was found that in the backdrop of Covid-19, 25% urban Indian respondents, as opposed to earlier 19% respondents (pre-pandemic), thought about critical illness preying on them. In comparison to 18% (pre-pandemic), a higher 25% had the realization of death and thought about the financial stability of the family in case of the untimely death of the breadwinner. The same points towards evolving financial prudence of the population.

Consider a robust life insurance policy with Cancer cover A life insurance policy with a Cancer cover is one of the best ways to ensure one’s family is protected from the financial burden of this disease and that the eventual life goals are safeguarded.

One must be cognizant of the fact that good Cancer treatment in the best hospitals comes at a cost. While a typical health insurance policy is merely limited to hospitalization expenses and reimbursements, here is where, a standalone Cancer life insurance policy helps with a lump-sum amount to cover medication, post-treatment, etc. providing the affected family with much-needed financial stability.

Offering a new lease of life, a standalone Cancer life insurance plan serves to reduce the financial trauma that one may experience in the shortage of adequate funds for recuperation and post-hospitalization care, which could typically last 3-5 years.

14

Keeping these points in mind, and aligned to the World Cancer Day theme of ‘I Am and I Will’, let us resolve to take meaningful action by recognizing what we can do to safeguard ourselves against the disease and take prudent steps in that direction.

TOP

ULIPs to lose competitive advantage over mutual funds? – Live Mint – 1st February 2021

Insurance experts show mixed feelings as the Finance Minister, Nirmala Sitharaman announced a slew of measures for the insurance industry in her budget speech on Monday. While the industry veterans were happy about the increase in FDI limit announced, they were discouraged of the proposal to tax the maturity proceeds of unit linked insurance plans (ULIPs) with an annual premium above ₹2.5 lakh.

The Budget says, "Under the existing provisions of the Income Tax Act, there is no cap on the amount of annual premium being paid by any person during the term of the policy. Instances

have come to the notice where high net worth individuals are claiming exemption under this clause by investing in Ulips with a huge premium. Allowing such exemption in policy/policies with huge premium defeats the legislative intent of this clause."

"The government has announced an increase in FDI for insurance sector from 49% to 74%, which is a positive move and will help in the growth of the sector. However, the move on taxation change for ULIPs (of higher ticket size; annual premium of more than 2.5 lakhs) would have an impact on such investments. This tends to reduce the competitive advantage that ULIPs enjoyed as compared to other short term investment vehicles," says Tarun Chugh, MD & CEO, Bajaj Allianz Life.

Tax benefits still remain in the event of death of the life assured or in the case of ULIP policies where annual premium is ₹2.5 lakh or below.

"The budget endeavours to selectively bring in taxation parity between Life Insurance companies and Mutual Funds, says Rushabh Gandhi, Deputy CEO, IndiaFirst Life.

Listing of Life Insurance Corporation (LIC) and disinvestment of 2 PSU Banks and one public sector General Insurance Company is a welcome move, Gandhi

TOP

GENERAL INSURANCE

Nirmala Sitharaman announces amendments to Deposit Insurance and Credit Guarantee Corporation Act - The Telegraph – 2nd February 2021

In what should come as a relief to depositors of stressed or weak banks facing Reserve Bank of India (RBI) action, finance minister Nirmala Sitharaman announced amendments to the Deposit Insurance and Credit Guarantee Corporation Act (DICGC), 1961.

The key feature of the proposed amendment is that depositors will not have to wait for the bank to be liquidated to claim their deposits with the lender up to Rs 5 lakh. They can do so, even if the Reserve Bank of India (RBI) imposes certain curbs on these banks.

15

In the last Budget, the finance minister had raised the bank deposit insurance limit to Rs 5 lakh from Rs 1 lakh per depositor. The deposit insurance premium paid by the banks to the DICGC is borne entirely by the insured lender.

The DICGC insures all bank deposits that include savings, fixed, current and recurring deposits. Earlier, if a bank went into liquidation, the DICGC was liable to pay to each depositor through the liquidator up to the insured amount within two months from the date of receipt of the claim list from the liquidator.

However, this will now change.

“I shall be moving amendments to the DICGC Act, 1961 in this session itself to streamline the provisions, so that if a bank is temporarily unable to fulfil its obligations, the depositors of such a bank can get easy and time-bound access to their deposits to the extent of the deposit insurance cover,” Sitharaman said.

TOP

Feel at home with a standardised fire cover – The Hindu – 31st January 2021

Cookie-cutter houses are often decried for lack of aesthetics and character. Cookie-cutter home insurance, on the other hand, may just be a good thing. Have you been all set for that long holiday and felt the pangs of fear about your home not being insured? In that last moment flurry to get a policy done, you will find that your jewellery has to be valued by an authorised valuer, you need the original invoices of your appliances to list their values and age, plus other mystifying and irritating requirements. A home insurance policy is basically a fire and allied perils insurance policy. Apart from covering natural catastrophes, it packages a burglary

cover for contents, appliances breakdown and even household staff medical and accident covers and public liability.

In the last decade or so, simplified home insurance policies have been introduced with self-declarations and good options. Now, a reference point is being created by the Insurance Regulatory and Development Authority of India (IRDAI), to make things even simpler. From April 1, all general insurers have to mandatorily offer a standardised fire policy for homes — Bharat Griha Raksha — designed by the IRDAI. This replaces the Standard Fire and Special Perils Policy based on All India Fire Tariff, 2001, which is being de-notified for dwellings and micro-level and small-level enterprises. This will complete the detariffing of fire insurance that began in 2006-07 and 2007-08, at which time companies were given freedom to charge their own premium rates while policy clauses, terms, conditions and wordings remained.

There are actually three standardised policies that will be mandatory for insurers to offer. They are, Bharat Griha Raksha for home building and home contents, Bharat Sookshma Udyam Suraksha for enterprises with SI up to ₹5 crore and the Bharat Laghu Udyam Suraksha for enterprises with SI between ₹5-₹50 crore. The details are not yet out but promise policyholder-friendly features and simple language. Bharat Griha Raksha offers coverage for fire, natural catastrophes (storm, cyclone, typhoon, tempest, hurricane, tornado, tsunami, flood, inundation, earthquake, subsidence, landslide, rockslide), forest, jungle and bush fires, impact damage of any kind, riot, strike, malicious damages, acts of terrorism, bursting and overflowing of water tanks, apparatus and pipes and leakage from automatic sprinkler installations, and theft, within seven days of the occurrence.

Apart from covering the building, there is a general home contents cover for 20 percent of the sum insured (SI) subject to a maximum of ₹10 lakh. This is automatic and does not need declaration of details. This soothes a pain point partially addressed by some simplified policies recently. You can also opt for a

16

higher SI with declaration. Two new covers are available for valuable contents such as jewellery and curios and personal accident cover for the insured and spouse due to an insured peril. Significantly, Bharat Griha Raksha gives complete waiver of under insurance. That is, if the SI you declare does not fully cover the property value — usually because of ignorance or poor advice — your claim will be settled up to the declared SI, and not proportionately as currently done. This is a common error that has trapped individual homeowners and is hence a nice bonus.

TOP

Non-life insurance: Budget should help increase penetration - The Hindu Business Line - 29th January 2021

Insurance is an important social security tool that plays a crucial role in mitigating uncertain risks by providing financial support in case of any loss/ damage. However, the importance of this tool is not realised by many. It’s only when some unfortunate event occurs that people understand its significance. Hence, a few steps by the Government will help in making insurance a pull product and increase its penetration in the country. GST rate reduction Since non-life insurance is considered a dead investment by many as there are no returns, there is no motivation for people to opt for it. Also, most people look at premium rather than the coverage while buying a policy. Hence, GST rate of 18 percent acts as an additional dampener as the cost of insurance goes up drastically. The reduction in GST rates on insurance premium will encourage more people to opt for it.

With increase in the frequency of natural calamities, there is a dire need for people to realise the importance of having home insurance, the penetration of which is less than 1 percent in the country. Today, there are many people who are not even aware that such a cover even exists, and some opt for it only because of loan requirements. Hence, a tax exemption can be provided to those opting for home insurance, wherein the limit for deduction under section 80C can be increased to Rs. 1,75,000, with a separate deduction made available for home insurance up to Rs. 25,000. In order to further bridge the gap between economic loss and insured loss due to natural calamities, the Government should introduce an index-based insurance scheme (Parametric Insurance) throughout the country that can cover property losses due to natural calamities.

Few States have implemented it so far, but there is a need to further institutionalise it and structure it for a better success rate. Under this scheme, compensation can be given for the damage caused due to the catastrophic event as per the pre-defined triggers for such events. The premium for the same can be collected along with the property tax and once the claim is triggered, the amount can be directly transferred to the beneficiary’s Jan Dhan Account linked to the home insurance policy. Large scale collaboration between the Government and insurers can lead to increased awareness and penetration of insurance in our country. For instance, PMFBY has helped us support the backbone of our economy i.e. the farmers through crop insurance. Similarly, PMJAY scheme is evolving and looking at how PMJAY-SEHAT covers all citizens of J&K UT, this scheme should further enhance its coverage by not limiting it to specific strata of people, but should provide health insurance to all citizens of our country. Such an association would not only lead to the growth of our economy, but also of our society as a whole.

TOP

HEALTH INSURANCE

What you need to know before buying cancer cover - Live Mint – 5th February 2021

World Cancer Day is observed on 4 February every year. The disease is the second-biggest cause of death in India after cardiovascular conditions, and according to the Lancet Oncology Journal, by 2035, 1.7 million patients will be diagnosed with cancer along with 1.2 million deaths per year. Given the rising incidence of people suffering from cancer, a policy cover for this has become increasingly relevant. While most health insurance policies cover major critical illnesses such as diabetes, cardiovascular conditions as well as cancer, the coverage may not be sufficient. “Health insurance policies generally pay only for in-

17

patient hospitalization and for treatment at hospitals in India. They do not cover the entire cost of treatment. Also, the policy amount may not be enough as the common man generally does not go for a health policy of more than ₹5 lakh," said Naval Goel, chief executive officer and founder, PolicyX.com, an online insurance marketplace. The cost of cancer treatment can go up to ₹20 lakh in some cases. A critical insurance plan protects against many terminal diseases, while a dedicated cancer policy covers expenses for cancer treatment only.

“It is worth considering a critical illness policy or disease-specific product if one has a family history of cancer," said Shashank Chaphekar, chief distribution officer, Manipal Cigna Health Insurance. In a critical illness policy, the lump-sum benefit is paid when diagnosed with the disease. Not only this, the premium is waived post-diagnosis and a monthly income benefit is provided for a fixed number of years. “As a thumb rule, ensure that you take the protection of around 10 times your annual income as your sum insured for critical illness," Chaphekar added. However, a critical illness benefit may restrict coverage only to an advanced stage of cancer. “In contrast, a standalone cancer plan specifically offers cover against various types and stages of cancer.

A cancer-specific policy pays the claim amount right at the time of diagnosis itself, ensuring the individual has sufficient financial bandwidth to cover up for hospitalization, surgeries and other costly yet life-sustaining treatments," said B. Srinivas, products head, ICICI Prudential Life Insurance. Remember that while both these plans provide financial security in the form of lump-sum payout, the main difference is that a cancer plan is disease-specific whereas a critical illness insurance plan covers a large number of specified critical illnesses, including cancer. “A super top-up plan at a very economical premium can be a wise thing to do, to keep you covered for a high sum insured, as the plan provides financial protection against not just specific diseases but also for all infections, diseases and accidents," said Chaphekar. Also, a disease-specific product cannot substitute for a basic or a comprehensive health insurance policy.

TOP

How much critical health insurance cover do you need? – Live Mint – 31st January 2021

With the rising number of cases of cancer, heart ailments, kidney ailments and other life-threatening diseases, today having critical health insurance is essential as a regular health insurance cover. But, often we make two mistakes regarding critical health insurance.

First is, since critical health insurance comes as a rider with term insurance we feel buying critical health insurance separately is not essential. And the second mistake is we do not buy adequate cover.

Now, coming back to the first part - why should we buy critical health insurance separately. The critical health insurance rider that comes with

term insurance will only cover specific diseases mentioned in the policy papers and that number is usually not very large. Also, the cover amount is ₹5 to ₹10 lakh for a ₹1 crore term cover which is far too low if there is a need.

Now, treatment for any critical illnesses is high (think cancer) and the cost can go up to ₹25 - ₹30 lakh. And there might be also loss of income and other additional expenses. So in comparison to the need, a ₹5 - 10 lakh cover isn't sufficient enough.

So, how much critical insurance cover do you need and how do you calculate that? Like calculating term life cover, the most effective way to calculate critical health insurance is through expense estimator measure, i.e. considering all expenses that might incur to calculate the amount needed.

18

Now, let's calculate the amount one would need in few steps considering a timeline of five years.

Let's assume that your monthly expenses and liabilities (like home loan, car loan etc) that are completely unavoidable is ₹80,000. So in the next five years, the future household expenses would be around ₹48 lakh to ₹50 lakh.

Treatment cost for critical illnesses can go up to ₹30 lakh Let's consider there is a second earning member in the family who can contribute up to ₹50,000 per month, i.e. ₹30 lakh in five years.

Also there is a readily available emergency corpus of ₹10 lakh which can be used under such circumstance.

So that way, you add the expenses together and then deduct the income and the emergency corpus from the total amount to calculate the amount that you would need as critical health cover.

As per the assumptions above, one would need ₹40 lakh critical health

insurance. In the same manner, you can easily calculate the amount you would require considering three important factors - your income, expenses and liabilities.

It should be remembered, expense estimator measure is not an exact science since we make many assumptions into the future. However, it is one of the best methods to calculate insurance requirements. But keep a check every five years whether there is a need to change or upgrade the amount needed.

TOP

How health insurance policyholders can enjoy telemedicine benefit - The Hindu Business Line – 30th January 2021

The Economic Survey 2020-21 has highlighted the adoption of telemedicine in India since the outbreak of Covid-19 pandemic in March last year. To enable access to healthcare services, when the lockdown was imposed in March to contain the spread of the virus, the Ministry of Health and Family Welfare (MoHFW) issued telemedicine practice and guidelines 2020 on March 25, 2020. In this regard, IRDAI, the insurance regulator, too had advised insurers to allow coverage for telemedicine consultation with a medical practitioner within the terms and conditions of policy contract. Since then, telemedicine has reported strong traction from across the States. According to the survey, eSanjeevaniOPD, a web-based National Teleconsultation Service mobile application (developed by the Government), has recorded almost a million consultations since its launch in April 2020.

Similarly, Practo, another Teleconsultation application, mentioned a 500 percent increase in online consultations (varying from 200 to 700 percent across different specialties) in three months. In simple words, telemedicine is delivery of health care services by all healthcare professionals using technology for the exchange of health related information, diagnosis, treatment and prevention of diseases and research and evaluation. A registered medical practitioner is to provide telemedicine consultation to patients from any part of the country, according to the Ministry’s guidelines. Taking a cue, IRDAI had mandated all health insurers to provide telemedicine consultation as part of their health policy, including Arogya Sanjeevani, the standard health policy. Insurers now not only offer online consultation with doctors but also on-board new customers through telemedicine.

Telemedicine facilities are mostly considered as an alternative, for regular health check-ups at hospitals or for OPD (out-patient department) cover. If your health policy has an in-built OPD cover or opted as rider, you can avail telemedicine services and claim it under OPD. OPD over usually covers expenses

19

including diagnostic and preventive tests, prosthetics, physiotherapy, pharmacy expenses and dental treatments. OPD also cover consultation expenses including Ayurveda, yoga, naturopathy, Siddha and homeopathy. Health policies of insurers including Max Bupa, Manipal Cigna and ICICI Lombard offer OPD as in-built cover. As per the IRDAI’s circular, the norms of sub-limits, monthly or annual limits, which are specific to a policy, will apply to telemedicine claims.

Telemedicine services can also be availed for pre- and a post-hospitalisation consultation, as it is covered by almost all the health policies. These services can be availed through the mobile app of the insurer or on a reimbursement basis. For instance, policyholders of HDFC Ergo and Max Bupa can avail telemedicine services from the list of empanelled doctors available with the insurers through the respective mobile application. On the other hand, in Manipal Cigna’s proHealth policy with in-built OPD, policyholders can avail telemedicine services from any online provider such as Practo and Portea. OPD can either be on a cashless basis or on a reimbursement basis.

TOP

1.28 cr people covered under corona insurance policies: Irdai chief Subhash Chandra Khuntia - Financial Express – 29th January 2021

As many as 1.28 crore lives have been covered under corona-specific insurance products in the country so far with a premium collection of over Rs 1,000 crore, Irdai Chairman Subhash Chandra Khuntia said on Friday.

During the pandemic, two corona-specific products — Corona Kavach and Corona Rakshak — were launched by insurers under the guidance of the Insurance Regulatory and Development Authority of India (Irdai). Besides, the insurers also introduced coverage against COVID-19.

“Under Corona Kavach, which is the standard product (introduced during the pandemic), 42 lakh lives have been protected; while 5.36 lakh

lives have been protected through Corona Rakshak. “And, from all kinds of corona-specific products, a total of 1.28 crore lives have been covered with a total premium of more than Rs 1,000 crore,” Khuntia said.

He was addressing a virtual conference during the annual summit of the Insurance Brokers Association of India (IBAI). Addressing the insurance brokers under the fold of IBAI, the Irdai chief said there is a huge opportunity for the brokers and insurers in the country after the pandemic and it has made people realise the need to get insured.

Khuntia said there should be more focus on tier-II, -III and -IV cities now as the growth will come from these areas. “I have suggested them (brokers) that they should look at tier-II, -III, -IV towns and possibly the rural areas, because the higher economic growth will come from those areas now.

“We are happy now that with constant efforts by the government to control the pandemic, things are now appearing better,” he said. Hopeful for an economic revival with the falling cases of coronavirus in the country and that people are getting vaccinated, he said huge opportunities lie in terms of insuring the small business units, properties and dwelling units, among others. Also, presenting statistics related to reach of the insurance brokers in soliciting policies, he said the focus more is on the non-life segment by them and it has to be enhanced in life segment also.

The number of active brokers right now is 482 in the country and their contribution to general insurance business is 26 per cent. It has gone up from 22 per cent in 2017-18 to 26 per cent now. In health insurance their contribution is 23 per cent. They have better contribution in the group health insurance

20

business at 36 per cent; and in individual health business, it is only 4.3 per cent. “So, there is opportunity for improvement. In case of life insurance their contribution is only 1.1 per cent, so they are mostly concentrated in the non life sector,” he added. The Irdai chairman also urged the brokers to focus on small business units that present huge growth opportunity.

IBAI President Sumit Bohra said, “In the past decade, the Indian non-life insurance industry has really come into its own with over Rs 1.89 lakh crore placed in premium during 2019-20, registering a growth of 10.58 per cent on a year-on-year basis.” He added that for the industry to further thrive and get to the next level of growth, it is imperative that insurance penetration grows to a level comparable to the more developed insurance markets.

TOP

Senior citizens expect increase in tax benefit on health insurance - Financial Express – 29th January 2021

Senior citizens will be looking forward to the announcements of Budget 2021 to be presented by the Finance Minister Nirmala Sitharaman with keen interest. Medical inflation is supposed to be more than general inflation and has always put the senior citizens at a back foot. Health insurance plans and exclusive health plans for senior citizens have been a saviour to them to some extent but still higher premium in such plans keeps many seniors buy inadequate coverage.

In these times, when COVID-19 pandemic has brought the focus on health care costs, the

importance of keeping a health insurance plan has increased manifold. “If there is a change in the personal income tax slab, increasing the basic exemption limit will be helpful for a senior citizen as well. With medical expenses surging every year, the need for higher health insurance cover for senior citizen is very crucial. Higher exemption limit under Sec 80D for the health insurance premium will bring relief on tax as well as health cover front,” says Harshad Chetanwala, Co-Founder- MyWealthGrowth.com

Currently, for those who are below age 60, the tax benefit on the premium paid is up to Rs 25,000. This includes self, spouse and children and the health cover could be a Mediclaim, Family Floater, Critical Illness etc. the premium paid towards any of these schemes gets deducted from the gross income under section 80D. For those who are above age 60, the maximum limit for tax benefit is Rs 50,000.

“Senior citizens incur heavy medical expenses in addition to a high medical insurance premium. On this front, the ceiling for Health Insurance premium along with the deduction for medical expenses for senior citizens as per the provisions of section 80D might be increased to Rs 1 Lakh,” says Raghunathan Parthasarathy, Associate Partner – Tax & Regulatory Services, BDO India.

TOP

More deductions expected on health insurance front - The Week - 29th January 2021

The work from home (WFH) culture and increase in healthcare costs in the backdrop of COVID-19 have led to a scare among salaried employees. They are worried about potential health issues, both physical and mental, as a lot have happened during the lockdown and the ongoing pandemic. Health insurance, preventive health check-ups and outpatient consultation have become more important for employees. Hence, a lot more deductions are expected on the health insurance front in this budget.

“The budget could do well to offer deductions or tax relief towards expenses on medical insurance, costs for treatment which do not require hospitalisation, counselling and diagnostic tests. This will push the

21

demand for the healthcare industry and help our economy,” remarked Aditya Mishra, director and the founder of CIEL HR Services.

Life and health insurance assumes all the more significance during times like the current pandemic. However, the penetration of health insurance is still very low in India compared to other countries and measures are expected to increase this. “We expect measures, including an increase in the 80C and 80D limits, and a reduction in the GST rates on insurance premiums to improve social protection,” pointed out Dr. Arun Singh, global chief economist at Dun and Bradstreet.

Furthermore, with health taking precedence over other aspects, it is expected that the government may reconsider tax slabs towards health insurance, and this would improve the income of employees. “Reducing the GST on insurance premium and increasing the tax exemption cap limit under 80D will encourage more people to opt for health insurance. These measures will not only help people access quality medical treatment, but also better their lifestyle, thereby increasing the life expectancy of people in our country even further.” said Tapan Singhel, MD and CEO, Bajaj Allianz General Insurance.

Experts observe that employees working from home require further clarification on the tax front. There is still no clarity on certain allowances, and reimbursements such as conveyance have become taxable. These need to be done away with in order to help the employees already coping with stress and uncertainty in the WFH.

There are expectations that the ESIC India's largest health insurance programme may be modernised. “ESI has been missing in COVID because of governance that is too large, old, and unrepresentative. The budget should announce modernisation of ESI governance in parallel with a June 1, 2021, deadline so that employees have the freedom to opt the service provider for their payroll deducted health insurance contributions,” remarked Rituparna Chakraborty, co-founder and executive vice president, Team Lease Services.

TOP

MOTOR INSURANCE

When you should consider switching motor vehicle insurer – Live Mint – 29th January 2021

Renewing your motor insurance policy with the same insurer for a very long time can be a costly mistake. Therefore, it is important to monitor the offerings in the market and compare policies between insurers when buying/renewing a motor insurance policy.

"Whenever your existing motor insurance policy ends, you can switch the insurer without any loss. However, you need to ensure that you have applied your No Claim Bonus (NCB) in your new insurer's policy," said Animesh Das, Head of Product Strategy, and ACKO Insurance. Here are 6 reasons that should prompt you to switch insurers.

1. To save money on premiums “Even if you found the cheapest rate when you first signed up for motor insurance, the formulas insurers use to set insurance premiums change frequently, so the insurer that gave you the lowest price 1-2 years ago might not be the best option now," said Col. (retd) Sanjeev Govila, a Sebi-registered investment adviser.

22

Basically, your insurer might increase your policy premium rates for different reasons such as car modifications, claim made in the last year, etc., during the renewal period. Under such a case, one can look for options (insurers) that can offer you a better deal by comparing the policies of the different insurers. It could be possible that you get a policy that would offer you the same or enhanced benefits at better rates than your current policy. Researching and comparing are the key elements to get the best options.

2. Paying more premium for fewer features If you realise that you are paying more premium for fewer features compared to what the competition is offering, then it is time to change the insurer. All additional coverages, or add-ons as they are popularly called, are not necessarily available with all insurers. Add-ons like roadside assistance, zero depreciation, engine protect, etc., can be of use for a car owner.

Rakesh Goyal Director Probus Insurance said that add-on covers help to boost the coverage and maximize the benefits offered by a basic comprehensive motor insurance policy. “You can find the right sort of coverage for your vehicle through these add-on covers when needed. However, if your insurer doesn't offer you sufficient add-on covers, then you must think of looking for an option that offers you adequate add-on covers," Goyal added.

3. Cashless garage If your current insurer doesn't offer this benefit, you should explore other available options as this is an attractive feature owing to its offerings. The cashless garage option ensures cashless claim settlements wherein you can get your vehicle (at a network garage) repaired without paying for it except the compulsory deductible/ file processing charges.

4. Unpleasant customer service Customer service is the primary element to magnify customer trust. If your current insurer's customer service is not offering you the desired support, you can consider switching your policy to some other insurer that has better customer services. You can go through the reviews or feedbacks of the other insurers (where you are planning to switch) to get an idea of their customer service offerings.

“One should be free of worry with respect to motor insurance when one has chosen a good insurer. The overall quality of service will help you decide if you want to switch an insurance company," said Govila.

5. Denial of a claim for no justifiable reason If your claim gets denied or severely curtailed for no justifiable reason, you can look for another insurer. “A claim denial can cause you to feel financially insecure, especially if you cannot afford to repair or replace your car. Take a look at the current coverage of your car insurance policy. Do you have to pay more money than the insurance coverage you are receiving in case of a claim? If yes then look for a new insurer," explained Govila.

6. Confusing web user interface Nowadays, most insurers have an online presence. A poorly designed website or mobile app could lead to a bad or an outright worst experience while buying a policy, availing a service, or even while filing a claim. If this is the case with you, then consider changing the insurer.

TOP

SURVEY & REPORTS

Senior citizens highly under-insured even after Covid-19 pandemic: Survey – Live Mint – 3rd February 2021

Health policies bought by the senior citizen category (60-80 years) stood at only 15 percent of the overall policies sold during the April-December period, while the share for the younger age groups of 18-40 years was found to be 45 percent, the buying pattern of customers on insurance aggregator Policybazaar.com showed. This is despite the fact that senior citizens are most at risk from Covid-19. The

23

data also showed that the sum insured of ₹5 lakh was the most bought cover with a share of 41 percent, while the second-most preferred choice was the sum insured of ₹5-10 lakh with a share of 24 percent, followed by ₹10-20 lakh and ₹20 lakh to ₹1 crore at 9 percent and 14 percent, respectively. On average, the share of health policies bought by kids for their parents was only 12.2 percent from April to December. “This clearly shows that the penetration level and the awareness of health insurance for senior citizens is extremely low and is a matter of huge concern," the company said.

According to the data, around 20 percent of the claims made by senior citizens were for eye and adnexa treatment, while 15 percent was for circulatory and heart disease and 8 percent were of malignant neoplasms. The average claim amount made for cardiovascular disease was around ₹75,000 and for musculoskeletal disorder around ₹1.06 lakh, which accounted for 8 percent of the claims made by senior citizens. “Senior citizens are still very under-insured in India, which puts them at grave financial risk. Senior citizens must be adequately covered — sum insured of at least ₹10 lakh per person — and ideally should buy comprehensive plans with no limitations such as co-pay or sub-limits. However, if a cheaper option is needed, then they could look at senior citizen-specific plans, which come with some limitations such as co-pay," said Amit Chhabra, head, health insurance, Policybazaar.com.

Co-payment or co-pay means a cost-sharing requirement that provides that the policyholder will bear a specified percentage of the amount of the admissible claims. Moreover, if your policy has sub-limits such as a cap on room rent and if you opt for a room with a higher tariff, the insurer will apply proportionate deduction on other expenses too, as typically, most expenses are related to the room rent. When buying a policy, a senior citizen must look at coverage for pre and post-hospitalization, day-care treatment and pre-existing diseases as well as the waiting period and other exclusions. According to experts, having health insurance at an elderly age is imperative because of the high medical costs and high morbidity rate. For senior citizens, a premium of the policy is mostly on a higher-end as the premiums increase with age and medical conditions. Therefore, it is advisable to not go only for lower premiums but look for a policy that provides maximum benefits and comprehensive coverage.

TOP

Your health insurance doesn’t cover treatment costs fully? That’s perfect says Survey - The Economic Times – 29th January 2021

While most of us want medical insurance to cover full cost of any treatment, the Economic Survey says that incomplete or partial medical insurance is optimal. The Survey says that if medical insurance reimbursed the full cost of every treatment then people would stop making the effort to remain healthy as they would not have to bear any part of the monetary cost of unhealthy habits/living.

Interestingly, more and more insurance companies are trying to offer wider medical insurance coverage via riders which can be bought at additional cost/premium. In fact, people do extensive research to add all the possible features

and riders to get maximum protection against any possible health emergency and also pay a substantial premium for that.

The Economic Survey 2021 has brought this unique dichotomy as it says “Because health insurance covers (some of) the financial costs that would be caused by poor health behaviour, individuals may have less incentive to avoid them; this phenomenon is labelled ex ante moral hazard.” Being conscious of the fact that a good health insurance plan is there to take care of health related problem, people often lack motivation for desisting from unhealthy behaviour. “The role of ex-post moral hazard in health insurance,

24

which stems from the fact that the cost of an individual’s excess usage of healthcare is spread over all other purchasers of insurance. This free-rider problem causes the individual to not restrain his usage of care” says the survey.

In such a situation having some sense of insecurity may help people in restraining their unhealthy behaviour. “Given the ex-ante and ex-post moral hazard, incomplete insurance in healthcare is optimal. This prediction is consistent with the idea advocated by Holmstrom (1979) that optimal insurance contracts should be incomplete to strike a balance between reducing risk and maintaining incentives for the individual” suggests the survey.

On the other hand of the spectrum there are a person who do not care at all about their health and do things which puts them at high health risk. “People tend to indulge in risky behaviour that may not be in their self-interest. Examples include smoking, eating unhealthy food, delay in seeking care, not wearing masks or keeping social distancing in the context of the pandemic” states the survey.

Typically, consumers tend to demand primary care less than the economically optimal levels as the price elasticity for this product/service is very high. As per the survey India has very low rate of screening for cancers among women in the age bracket of 15-49 years at 22 per cent for cervical cancer, 10 per cent for breast cancer and 12 per cent for oral cancer when compared to 62 per cent, 59 per cent and 16 per cent respectively in OECD Countries (NFHS 4 and OECD 2015). Individuals also under-estimate health risks and May, therefore, not purchase adequate health insurance.

The survey goes to the extent of suggesting such people be paid to go for adequate primary healthcare at the right time.

TOP

Economic Survey: Assets under NPS jump 33% YoY till September – Live Mint - 29th January 2021

Combined assets under management (AUM) of the National Pension System (NPS) and Atal Pension Yojana surged 33 percent year-on-year to touch ₹4.94 trillion as of 30 September, 2020. On the same day in 2019, the combined AUM of both the schemes stood at ₹3.71 trillion Total subscriber base as of end of September was at 3.74 crore, up 22.2 percent from the year-ago period. According to the Economic Survey for fiscal 2020-21, released today, "The overall contribution under NPS grew by more than 30 percent. Maximum growth was registered by all-citizen model (52.3 percent) followed by Atal Pension Yojana (APY) (46.1 percent), Corporate Sector (34.8 percent) and State Govt.

TOP

India's insurance penetration "extremely low" compared to Asian rivals such as China, Malaysia and Thailand: Economic Survey - The Economic Times – 29th January 2021

India’s insurance penetration at just 3.76% of the GDP is “extremely low” against comparable Asian countries such as China, Malaysia and Thailand as well as the global average, according to the central government’s Economic Survey of 2020-21 released on Friday. Even as India’s insurance penetration grew from 2.71% in 2001 to 3.76% in 2019, when compared with the penetration recorded in comparable Asian economies such as Malaysia, Thailand and China at 4.72, 4.99 and 4.30 % respectively, was found to be much lower, the survey stated.

Both, India's life and non-life insurance penetration in 2019 at 2.82% and 0.94% respectively are also significantly lower than the global average of 3.35% and 3.88%, respectively. Calculated as the percentage of total insurance premium to Gross Domestic Product (GDP), insurance penetration is an indicator to assess the performance and potential of the insurance sector in a country.

25

“India has extremely low insurance penetration as compared to global average and other comparable countries,” stated the annual Economic Survey ahead of the crucial Union Budget on Monday. “Although the penetration is lower in India for both, it is particularly low for non-life insurance as compared to

other countries,” it added. Non-life insurance includes segments such as health, motor, farm and fire insurance among other such categories.

Similarly, insurance density, which is calculated as the ratio of insurance premium to population as an indicator of insurance sector performance, at just $78 in 2019 has been noted as dismal for India against comparable Asian countries and the global average, the survey said as well.

For Malaysia, Thailand and China in 2019 insurance density were much higher at US$ 536, US$ 389 and US$ 430 respectively.

“Density for life insurance is US$ 58 and non-life insurance is much lower at US$ 19 in 2019 in

India. Globally insurance density was US$ 379 for the life segment and US$ 439 for the non-life segment respectively in 2019,” according to the survey.

During FY20, the gross direct premium (GDPI) of non-life insurers in India grew by 11.45% to Rs 1.89 lakh crore, as against Rs 1.69 lakh crore in 2018-19. Meanwhile, in this period the GDPI of life insurance sector grew by 12.75% to Rs 5.73 lakh crore in 2019-20, as against Rs 5.08 lakh crore in FY19.

The low penetration and density of insurance in India has brought to stark notice the need to improve coverage for better access to healthcare and financial security for Indians. The matter has assumed even more urgency since the onset of the coronavirus pandemic which has infected over 1 crore Indians and led to 1.5 lakh deaths.

The pandemic-stricken year, however, saw key regulatory changes in India’s insurance landscape such as introduction of paperless KYC for digital on boarding of policyholders, new standard terms for life and health insurance, and the regulator IRDAI allowing insurers to sell short-term coronavirus-specific health indemnity covers.

TOP

Health outcomes of states that adopted PM-JAY improved compared to those who didn't: Economic Survey - The Economic Times – 29th January 2021

The states that opted for Pradhan Mantri Jan Aarogya Yojana have seen a strong positive impact on their health outcomes compared to the states that did not adopt the programme, the Economic Survey 2020-21 said.

So far 32 states and UTs have implemented the scheme launched in March 2018 to provide secondary and tertiary healthcare services to the most vulnerable sections in the country. Under the scheme, which covers 50 crore individuals, health cover of up to Rs 5 lakh per family per year is provided to each household.

Citing the findings of comparison between West Bengal and its neighbouring states of Bihar, Assam and Sikkim, the Economic Survey said the proportion of households that had health insurance increased in Bihar, Assam and Sikkim from 2015-16 to 2019-20 by 89% while it decreased by 12% over the same period in West Bengal.

26

Further, infant mortality rates during the period declined by 20% for West Bengal while it fell by 28% for the three neighbouring states. Similarly, while Bengal saw a dip of 20% in its under-5 mortality rate, the neighbours witnessed a 27% reduction.

“The comparison between states that implemented PMJAY versus the states that did not shows that the states that adopted it experienced greater penetration of health insurance, reduction in infant and child mortality rates, improved access and utilization of family planning services, and greater awareness about HIV/AIDS,” the Survey said.

“While some of these effects stemmed directly from enhanced care enabled by insurance coverage, others represent spill over effects due to the same,” the Survey said, adding the effects that are identified by the Survey underscores the potential of the program to significantly alter the health landscape in the country, especially for the vulnerable sections.

According to the Survey, services such as dialysis under PMJAY continued to be utilised without disruption even during the Covid pandemic and the lockdown prompting the Survey to suggest that that the National Dialysis Mission could be merged with PMJAY.

“General medicine exhibited a V-shaped recovery after falling during the lockdown and reached pre-Covid levels in December 2020. In view of the fact that the number of dialysis claims has only been growing,” the Survey added.

TOP

PENSION

Exemption to annuity income could be gamechanger for pensioners - The Economic Times – 30th January 2021

Pension funds and taxpayers are hopeful that the budget will change the way annuity income is taxed. If the retirement corpus is invested in a fixed deposit, post office scheme or even a mutual fund, the individual is taxed only on the gain or income from the investment. On the other hand, even though the pension from an annuity plan is a mix of the principal and investment returns, the entire amount gets taxed at the normal rate applicable to the individual.

Experts say if the anomaly in the tax treatment of annuity is fixed, it could encourage more people to opt for pension. In an earlier interview to Economic Times, Supratim Bandyopadhyay, chairman of the Pension Fund Regulatory and

Development Authority (PFRDA) said, “If annuity income is made tax free, it will be a game changer for the pension sector in India.”

However, the government might not offer tax benefits this year due to an estimated 25% decline in direct tax collections. Instead, some industry experts have suggested that the tax exemption to commuted pension should be withdrawn while annuity should be made tax free. Under existing rules, up to 60% of the NPS corpus withdrawn on maturity is tax free, but the remaining 40% has to be compulsorily put in an annuity to earn a monthly pension that is taxed as income.

27

“If this equation is reversed where the amount withdrawn is made taxable while annuity income is tax free, it would be a massive push towards a pensioned society which is a stated goal of the government,” says Raj Khosla, Managing Director of MyMoneyMantra.com.

The insurance industry also wants the Budget to extend the tax benefits enjoyed by the government-promoted NPS to pension plans offered by life insurance companies. Contributions of up to Rs 50,000 in the NPS are eligible for tax deduction under Sec 80CCD(1b). This is over and above the Rs 1.5 lakh deduction under Sec 80C. “Pension plans from life insurance companies should also be eligible for this additional deduction. This will make them tax friendly in line with the NPS and boost long-term savings for retirement,” says Rushabh Gandhi, Deputy CEO, India First Life Insurance Company.

TOP

IRDAI CIRCULARS

Topic Reference For the benefit of regulated entities, all the regulations pertaining to the respective subjects (e.g. Health, TPA, Advt etc.) have been consolidated and made available on website.

https://www.irdai.gov.in/ADMINCMS/cms/whats

New_Layout.aspx?page=PageNo4133&flag=1

Guidelines on Standard Vector Borne Disease Health Policy

https://www.irdai.gov.in/ADMINCMS/cms/whats

New_Layout.aspx?page=PageNo4360&flag=1

Terms and Conditions of Life Products for F.Y. 2020-21

https://www.irdai.gov.in/ADMINCMS/cms/whats

New_Layout.aspx?page=PageNo4190&flag=1

List of Products/add-on noted during the FY-2020-21

https://www.irdai.gov.in/ADMINCMS/cms/whats

New_Layout.aspx?page=PageNo4231&flag=1

TOP

GLOBAL NEWS

Indonesia: COVID-19 life insurance claim payouts exceed US$45m – Asia Insurance Review

The life insurance industry has paid claims totalling IDR642.9bn ($45.9m) due to COVID-19 as of October 2020, according to data from the Indonesian Life Insurance Association (AAJI). "The claim figure relates to 8,800 policyholders," AAJI executive director Togar Pasaribu told the news website Kontan.

Vaccination Separately, state-owned company Reasuransi Indonesia Utama (Indonesia Re) says that the mass COVID-19 vaccination drive that the government is undertaking is considered to be the key to national economic recovery this year.

"With the vaccine, there will be confidence in business actors that everyone is protected from COVID-19," said Indonesia Re's president director Mr Kocu Andre Hutagalung in a statement.

28

COVID-19 vaccinations are scheduled to be carried out in stages with the first two stages taking place from January to April 2021. Two more stages will take place from April 2021 to March 2022.

Health insurance Mr Togar says that the public will still seek health insurance even though the government provides vaccines for free. The reason is that they need additional protection because the coronavirus is unlikely to totally disappear even though there are vaccines.

TOP

Disclaimer:

‘Newsletter’ is for Private Circulation only intended to bring weekly updates of insurance related information published in various media like newspapers, magazines, e-journals etc. to the attention of Members of Insurance Institute of India registered for its various examinations.

Sources of all Cited Information (CI) are duly acknowledged and Members are advised to read, refer, research and quote content from the original source only, even if the actual content is reproduced. CI selection does not reflect quality judgment, prejudice or bias by ‘III Library’ or Insurance Institute of India. Selection is based on relevance of content to Members, readability/ brevity/ space constraints/ availability of CI solely in the opinion of ‘III Library’.

‘Newsletter’ is a free email service from ‘III Library’ to III Members and does not contain any advertisement, promotional material or content having any specific commercial value.

In case of any complaint whatsoever relating ‘Newsletter’, please send an email to newsletter@iii.org.in.

To stop receiving this newsletter, please send email to newsletter@iii.org.in