Insurance Institute of India G Block, Plot No. C - 46, Bandra Kurla Complex, Bandra (East), Mumbai – 400 051. www.insuranceinstituteofindia.com

19th – 25th April 2013

Insunews

INSIDE THIS ISSUE: Gujarat, Madhya Pradesh, Tripura Nagaland, Assam, Mizoram, Meghalaya, and Orissa,” he said. News Categories Page

Insurance Industry 1 Source –

IRDA Regulation 1 http://www.thehindubusinessline.com/news/increasing-fdi-in- insurance-is-a-priority-for-upa- Life Insurance 2 chidambaram/article4636418.ece Health Insurance 3

General Insurance 4 'Size of insurance firm vital to fix exposure cap' - IRDA Circular 5

Global News 5 Insurance Regulatory and Development Authority (Irda) Chairman T S Vijayan today said while dealing with individual insurance companies on issues such as fixing the cap on Insurance Industry investing in a single entity, the size of assets would be considered. Increasing FDI in insurance is a priority for UPA: Chidambaram - Business Line "The regulator is here to provide a level playing field for all companies. But that doesn't mean a Rs 1,000-crore company Increasing foreign direct investment in the insurance sector is has to be treated on a par with a company with a Rs 2.5-lakh- a top priority for the ruling UPA, Finance Minister P. crore asset base, on every issue," Vijayan said, responding to a Chidambaram said today, hoping that a Bill to address the question on the 'differential treatment' to Life Insurance issue will be passed in the upcoming Parliament session. Corporation of India (LIC), which he headed earlier. Last year,

the Union finance ministry had allowed LIC equity exposure of Responding to questions at the Peterson Institute, up to 30 per cent in a single company. Vijayan's predecessor at Chidambaram appreciated the efforts of the insurance Irda, J Hari Narayan, had questioned the move. industry in reaching out to the Opposition parties and hoped that this would help the political parties understand issues Vijayan said before he had assumed office on February 21, and thus help in the passage of the Bill. Hari Narayan had already addressed the issue by allowing

different threshold limits to insurers, based on their asset “Parliament opens on April 22. It (Insurance FDI) is right there bases. He said he favoured a thorough debate on the Indian at the top of the agenda. We are stuck on one clause, FDI cap, Financial Code, which proposed a unified regulatory whether it should be 26 or raised to 49. If the principle mechanism, instead of seven different regulators for different opposition party comes around, the Bill will be passed,” segments of the financial sector. He added the proposed Chidambaram said. financial code would eliminate the grey areas that existed in

the Indian financial sector. “I am keeping my fingers crossed. I sincerely hope that the efforts of the insurance industry in speaking to the Opposition Earlier, at a seminar on the recommendations of the Financial are helpful and I can pass the Bill,” Chidambaram said. Noting Sector Legislative Reforms Commission, Vijayan said efforts that without growth there will be neither inclusiveness nor should be made to bring in the proposed financial code within development, he said, “As long as the Congress is at the helm a meaningful time frame. of affairs, I believe that they will accept growth is necessary in order to lead to inclusive development.“ Source –

http://www.business-standard.com/article/finance/size-of- “Once you accept that paradigm, you have to accept fiscal insurance-firm-vital-to-fix-exposure-cap-113042000605_1.html deficit, you have to contain inflation, you have to contain expenditure, you have to balance your books to a large extent,” Chidambaram said. Responding to questions, IRDA Regulation

Chidambaram said most State Governments have now realised that implementation of the programmes is the key. More debate needed on financial code, says IRDA chief - The Hindu Business Line “Until about 10 years ago, most State Governments were not re-elected. If you were in office for five years, you were more There is a need for a debate on the Indian Financial Code or less certain to be defeated in the next election. That seems (IFC), according to T. S. Vijayan, Chairman, Insurance to have changed in India in the last 10 years,” he said. Regulatory and Development Authority (IRDA).

“Incumbent Governments are getting re-elected. The Speaking at a seminar on IFC organised by the Institute of Government at the Centre got re-elected in 2009 with a larger Company Secretaries of India (ICSI) here on Saturday, Vijayan number. Since then Governments have been re-elected in

Insurance Institute of India said a standardisation of intermediation should be brought in by the proposed financial code. Life Insurance

IFC is a draft bill recommended by the Financial Sector Legislative Reforms Commission (FSLRC) in its report to the Life insurers gang up against phony investment Government. It has recommended that the existing regulators schemes - Financial Chronicle — SEBI, FMC, IRDA and PFRDA — should be merged into a new unified agency. Amid a continuing Sebi probe into a phony investment syndicate active in the national capital region, six private life “If the financial code comes into force, Hyderabad will lose its insurers have joined hands to fight the menace of misselling of only regulator and IRDA would not be there,” Vijayan, who insurance products through spurious calls made by fraudulent recently took over IRDA chief, said. agents.

Vijayan said there should be no ambiguity in various Capital markets regulator Sebi earlier this month unearthed a recommendations of the FSLRC, such as principle-based syndicate of fraudulent agents operating in the national regulation and modalities on capital flows. C. K. G. Nair, capital, wherein a large number of people could have been Secretary, FSLRC said the proposed code is for ‘tomorrow’s defrauded in the name of mutual fund and insurance products India’ as the economy is expected to touch $15 trillion by 2030 purchased by their deceased family members. Sebi widened from the current $2 trillion. its probe after preliminary investigations, conducted with the assistance of the economic offences wing of Delhi Police, S. N. Ananthasubramanian, President, ICSI said the seminar indicated an organised attempt by several people to defraud was the first initiative of its kind to debate the financial code. the gullible investors.

Source – As Sebi is continuing its probe, six private insurers – Reliance http://www.thehindubusinessline.com/industry-and- Life Insurance, ICICI Pru, HDFC Life, Birla Sun Life, SBI Life and Aegon Religare – have formally filed a complaint with the economy/banking/more-debate-needed-on-financial-code-says- economic offences wing (EOW), seeking its help to act against irda-chief/article4637267.ece the spurious callers, sources said. In their complaints with the EOW, the private life insurance companies have sought action Money-laundering probe: IRDA report likely in a week - against offenders who make spurious calls to customers with The Hindu Business Line false promises on loans or other investment products to dupe

The Insurance Regulatory and Development Authority (IRDA) them. is likely to complete investigation into the alleged money- laundering transactions of insurers within a week. Their modus operandi typically involves the customers being asked to surrender their existing insurance policies and shift “Our inspections teams have been deputed to some insurance to some new products for better returns. The agents, in the companies and the process is on. We may have a report ready process, earn hefty commissions or at times dupe the within a week on the issue,” T. S. Vijayan, Chairman, IRDA, told investors of their entire investment values. When contacted, newspersons on the sidelines of a seminar held here. Reliance Life Insurance confirmed the development and said that the insurance companies have given presentations to It may be recalled that online magazine Cobrapost.com caught EOW about the modus operandi of fake callers. As per their some officials of ICICI Bank, HDFC Bank and Axis Bank on presentations, these fraudsters are operating from make-shift camera allegedly offering to convert black money into call centres in the Delhi-NCR. legitimate money. The had initiated an enquiry into the matter. The IRDA had also taken up the The preliminary investigations by the insurers also found that matter and major insurers, HDFC Life, ICCI Prudential and some of these persons were previously associated with Max Life, have come under its scanner. insurance companies, directly or indirectly. Typically, these persons use prepaid mobile numbers or calling cards to Last month, it asked the CEOs of these insurance firms to contact gullible investors, while some people operate as field submit relevant data for initiating appropriate action. When staff to collect documents and cheques. Sensing a large-scale asked whether there would be any review of investment fraud, insurers and their regulator Irda have also begun norms of insurers in a single entity, including the Life sensitising the public on the matter though emails and SMSes Insurance Corporation of India, Vijayan, who headed LIC on a regular basis. earlier, said “there should be level-playing field.” According to Reliance Life Insurance CEO Anup Rau, there are The variations in the assets should be taken into consideration strict compliance policy and processes to help identify and act while fixing the caps, he said, adding that the regulator had against spurious callers trying to mislead customers. “We have revised the investment norms upwards in February this year. been regularly alerting our customers through SMS and emails According to the new norms, life insurers can invest up to 15 against falling prey to any person or entity making superficial per cent in a single entity. On the performance of life insurers offers of high returns, loans, bonus or gains,” he said. In a during the financial year ended March 31, 2013, Vijayan said recent public notice, Irda also warned customers against fake the new premium income had come down slightly. IRDA is yet entities calling on behalf of insurers. The country’s biggest to release the business figures for 2012-13. insurer, LIC has also warned its customers and the general public about fraudulent agents, through newspapers and Source – other channels. http://www.thehindubusinessline.com/industry-and- economy/banking/moneylaundering-probe-irda-report-likely- Source – in-a-week/article4640319.ece http://www.mydigitalfc.com/personal-finance/life-insurers- gang-against-phony-investment-schemes-624

Issue No. 2013/17 Page 2

Insurance Institute of India information sheet and even standard agreement between third-party administrators (TPA), insurers, provider and the Health Insurance insurer.

Healthy dose of regulation - The Financial Express A common industry wide pre-authorisation and claim form will significantly streamline processes at all stages and will Irda has issued a slew of instructions to make health enhance the ability of providers to obtain a timely prior insurance standardised authorisation. Moreover, the data will have to be presented in

an optical character format, which will go directly into the IT In a bid to streamline health insurance in the country, the system and reduce data-entry issues for TPAs and the Insurance Regulatory and Development Authority (Irda) has insurers. issued a slew of instructions through a gazette notification.

Health insurance companies can no longer load an individual All procedure related to claim processing will be handled by policy claim. Also, discounts on premiums will not be at the the TPA regional offices and any intimation of claim and discretion of the insurer. Discounts will have to be disclosed receipt of claim papers by the respective underwriting office up front in the prospectus and the policy document, along of the insurance company will be forwarded to the regional with the objective criteria, which has to be approved by Irda processing office of the TPA. On its part, the TPA will process under the file-and-use procedure. the claim and facilitate the insurer to take decision on claim

settlement or rejection. Insurers will only have the right to Also, the cost of any pre-insurance medical examination will settle or repudiate a claim and the TPA can only convey the have to be factored in at the time of calculating the premium. repudiation of a claim to the insured. As a norm, if the TPA However, in case of products with a term of one year or less sends the letter of repudiation to the claimant, it will have to and where such a cost is to be incurred by the insured, not less be clearly indicated that “the claim has been repudiated as than 50% of the cost will have to be borne by the insurer once advised by the insurer” and specific reasons will have to be the proposal is accepted. In travel insurance, however, such mentioned. The repudiation letter will also clearly mention costs will not be reimbursed by the insurer. that the insured may approach the grievance cell of the

insurer. The Irda notification underlines that insurers can offer cumulative bonuses on indemnity-based health insurance The TPA will process all claim applications within two policies, which will be stated explicitly in the prospectus and working days after receipt of the complete set of claim the policy document. If the insured makes a claim in a documents. The TPA will provide management information particular year, the cumulative bonus accrued may be reduced system reports and the insurer will be provided the at the same rate at which it is accrued. However, cumulative information regarding the enrolment, pre- bonus will not be allowed on benefit-based policies. authorisation/reauthorisation and claims processed.

Irda has also mandated that all health insurance policies will In case of emergency cases, which result in symptoms that have entry age of at least up to 65 years and once a policy has occur suddenly and unexpectedly and require immediate care been issued, it will have to be renewed periodically without by a medical practitioner to prevent death or serious long- any break. Insurers cannot deny renewal on ground of age. term impairment, the provider should initiate the procedure Irda has said that a health policy will ordinarily be renewable for preauthorisation using the format provided and the except on grounds of fraud and misrepresentation by the insurer will discuss with the doctor the eligibility of coverage. insured. For any life, limb or sight saving procedure, the provider

cannot withhold or delay emergency medical attention on the Also, insurers cannot deny the renewal of a health insurance pretext of waiting for preauthorisation. policy on the ground that the insured had made claim/s previously, except for benefit-based policies. Like all other The provider may treat the insured by taking a token deposit policies, health insurance plans will also have a 15-day free- and once the pre-authorisation is issued, the provider will look period. If the insured has not made any claim during the have to refund the deposit. Once the patient is medically free-look period, a refund of the premium paid, less any stable, he must be transferred to the room he is eligible for as expenses incurred by the insurer on medical examination of per the health plan. If the TPA is not satisfied with the medical the insured person and the stamp duty charges, will be made. details, it may call for all relevant details immediately. The If the risk has already commenced and the policyholder wants TPA will have to verify from the network service provider the to cancel the policy under the free-look period, a deduction nature of ailment and if the policyholder is found to be eligible towards the proportionate risk premium for the period under under the terms of the policy, the TPA will convey the cover will be deducted. guarantee of payment letter to the network service provider.

While portability has been allowed in health insurance, The discharge card will have to mention the duration of insurers offering health cover specific to age groups, such as ailment. The signature or thumb impression of the maternity covers, will offer an option to migrate to a suitable policyholder must be obtained on the final provider bill. The policy at the end of the specified exit age or at the renewal of provider will submit all original medical bills, discharge the policy by providing suitable credits for all the previous summary and investigation reports with the final policy years, provided the policy has been maintained without preauthorisation request. All payments to the insured will a break. have to made by direct electronic fund transfer within 24

hours of submission of the claim documents. If payments are The regulator has also defined standard definitions of not made within 24 hours of such submission, the insurer will terminology, procedures for critical illness, pre-authorisation have to make payment of all eligible bills within the 21 days of and claims form and even standard excluded expenses in receipt of such submission. hospitalisation indemnity policies. There will be a standard file-and-use application form, database sheet and customer

Issue No. 2013/17 Page 3

Insurance Institute of India what’s new * Health insurance companies can no longer load an individual policy claim General Insurance * Discounts on premiums will not be at the discretion of the insurer. It will have to be disclosed upfront in the prospectus P Chidambaram wants greater penetration in the non- and the policy document, along with the objective criteria, life insurance sector - The Economic Times which has to be approved by Irda under the file-and-use As India remains amongst the most underinsured countries in procedure the world,Finance Minister P Chidambaram today said there is * The cost of any pre-insurance medical examination will have a need to increase penetration and coverage of non-life to be factored in at the time of calculating the premium insurance in the country. * Insurers can offer cumulative bonuses on indemnity-based health insurance policies, which will be stated in prospectus & "There is a need to take immediate action by the non- policy document life insurance sector to increase penetration and coverage of * If the insured makes a claim in a particular year, the the non-life insurance in the country...there is a need to cumulative bonus accrued may be reduced at the same rate at increase insurance density in the country as well," which it is accrued Chidambaram said. * All health insurance policies will have entry age of at least up to 65 years and once a policy has been issued, it will have to He was speaking at a function here to launch mediclaim be renewed periodically without any break facility for the farmers holding Kisan Credit Cards (KCC)

issued by Dena BankBSE 0.26 % under a tie-up with UIIC. Source – http://www.financialexpress.com/news/healthy-dose-of- While complimenting Dena Bank and United India Insurance regulation/1104473/0 Company for introducing innovative schemes for the benefits of farmers, the Finance Minister expressed concern over lower J-K govt to bring BPL families under health insurance penetration of non-life insurance sector. cover - The Economic Times

The BPL families living in 10 districts of Jammu and "India is one of the most under-insured country in the world Kashmir will be brought under health insurance cover, astate as non-life insurance sector has a penetration of only 0.7 per Minister said today. cent in the country," Chidambaram said.

"Health insurance cover to BPL families in 10 districts of the The insurance density for general insurance in India is less state is being introduced under Rashtriya Swasthya Bima than USD 9, while it is USD 53 in China. Gross underwritten Yojna," Minister of State for Health, Shabir Ahmad Khansaid in premium (GWP) of the sector was Rs 69,000 crore in 2012- Rajouri district. Srinagar and Jammu districts have already 13. been covered under the scheme, he said. The process for purchase of 200 ambulances is in process, the Minister said. The Minister said on successful implementation of the mediclaim scheme, it can be considered for implementation Several steps have been taken to reverse the trend of on a larger scale. declining child sex ratio and the Health department has dedicated 2013 to "save the girl child", Khan said. Chidambaram handed over mediclaim policies and ID cards to six farmers of different States holding KCC of Dena Bank. The Minister said all such areas having difficult topography Speaking on the occasion, Dena Bank CMD Ashwani Kumar would be provided health centre facilities. said this mediclaim facility will be available to KCC holder of Dena Bank and his spouse and two children under a tie up Khan said that under the flagship programme of National with UIIC. This will be under Group Health insurance cover. Rural Health Mission, a whooping amount of Rs 333.65 crore have been provided for construction and up-gradation of Source – various health institutions against which over Rs 274 crore http://economictimes.indiatimes.com/news/news-by- have been incurred for the purpose. industry/banking/finance/finance/p-chidambaram-wants- greater-penetration-in-the-non-life-insurance- He said holding of Panchayat elections, enactment of Right to sector/articleshow/19709992.cms Information Act and Public Service Guarantee Act are among the important steps taken by the state government Tinted glasses on vehicles? You may lose insurance - The Hindu Business Line Source – http://articles.economictimes.indiatimes.com/2013-04- Vehicle owners who have put tinted glasses beyond the permissible levels may lose their insurance policy, if a 19/news/38674265_1_bpl-families-health-insurance-cover- proposal in this regard were to go through. rashtriya-swasthya-bima-yojna

The Highway Ministry has written to the Insurance Regulatory

and Development Authority (IRDA) “to include use of tinted

glasses and solar films as violation of conditions of warranty

in insurance policies.”

This was a part of the steps taken by the Ministry to prevent

crimes against women in vehicles, most of which had tinted

glasses.

Issue No. 2013/17 Page 4

Insurance Institute of India The Ministry had also requested various State Governments to insurance becoming out of reach for flood-affected families strictly enforce special drive to impose maximum penalty, or with obvious consequences for property values and suspend registration of vehicles with tinted glasses. mortgageability.

In fact, Highway Minister C.P. Joshi said his Ministry had “Although the industry has come up with different proposals, already written to IRDA on this issue. Incidentally, the Motor the government is reluctant to underwrite them and that will Vehicles Amendment Bill, 2012, which proposes stricter be vital if there is a major flood catastrophe soon after an penalties for violation of vehicles’ conditions, is pending agreement is reached. approval in the . “I see no option but to extend the Statement of Principles for Source – the time being but it’s not a satisfactory way forward – it was http://www.thehindubusinessline.com/industry-and- only ever seen as a temporary measure.” economy/logistics/tinted-glasses-on-vehicles-you-may-lose- insurance/article4651124.ece Douglas added that home premiums could rise again if insurers become nervous about the increasing frequency and severity of extreme weather. IRDA Circular Source – IRDA Issued a circular to Chairman / CEOs of Insurance http://www.insurancetimes.co.uk/car-and-home-premiums- companies vide Ref No RDA/SDD/GDL/CIR/79/04/2013 still-falling-says-aa/1402199.article regarding the submission of data relevant from the perspectives of AML/CFT guidelines as per the prescribed China: CIRC mulls lifting ceiling on payouts for life forms to the authority on quarterly basis. policies

Source - Beijing plans to allow life insurers to pay higher returns on some policies, according to an insider. http://www.irda.gov.in/ADMINCMS/cms/whatsNew_Layout.as px?page=PageNo1963&flag=1 That may make the products more attractive to investors frustrated with government limits on bank deposit rates. Global News The China Insurance Regulatory Commission might scrap the Car and home premiums still falling, says AA 2.5 per cent maximum rate on fixed-return policies in a trial starting as early as next month, the source said, speaking Car and home insurance premiums fell in the first quarter of anonymously. The new rules might prompt insurers to 2013, according to the latest research by the AA British increase their reserves for payouts by about 20 billion yuan Insurance Premium Index. (HK$24.9 billion), the person said.

The average quoted motor premium for the period was Premium growth has slowed as mainland savers, seeking £746.75, a drop of 1.4% since Q4 2012. Over the past year, higher returns, turn to riskier investments such as wealth premiums have fallen 4.1%. management products.

AA Insurance director Simon Douglas said that consumers Removing the limit on returns may revitalise revenue growth would welcome the trend. while also channelling savings away from less-regulated The AA also found that premiums for home buildings, contents investments in the shadow banking sector. and combined policies also fell over the first three months of 2013. One concern was that allowing higher returns might cause more clients to end their existing policies, the person said. The research found that buildings insurance was down 2.6% over the quarter, and down 1.7% over the past 12 months. The forecast for higher reserve needs comes from the The AA found that the price of contents cover fell 1.7% in Q1 regulator's base-case scenario, which predicts redemptions 2013, and dropped 2.4% over the past year. The firm also will increase by less than half by value from the present level, discovered that the cost of a combined buildings and contents according to the person. policy fell 1.8% during the first quarter of this year, and fell 1.4% over the past 12 months. That scenario estimates that returns on policies will rise to close to the five-year bank deposit rate of 4.75 per cent. Douglas said the downward trend were hiding wide regional variations, particularly where homes were flooded. Offering higher returns may also crimp profits in the industry. China Life Insurance, the country's biggest insurer, reported a He said: “Flood-affected homes will have seen big premium 40 per cent slump in profit last year as it recognised losses on increases, especially if they have suffered two or three flood investments in shares. claims.” China Life raised 38 billion yuan in subordinated bonds last He added that the end of the Statement of Principles on flood year, boosting its solvency ratio, a regulatory indicator that insurance in June left about 200,000 homes at risk of flooding, gauges capital adequacy and the ability to settle claims, to 236 and more than one million at risk generally. per cent at year's end. Ping An Insurance, the second-biggest insurer, plans to sell 26 billion yuan of convertible bonds, He said: “Homeowners will be exasperated and worried at this raising enough capital to support two to three years of impasse. People need flood affordable cover and, at present, expansion. To prevent insurers from offering excessive we are on the brink of an open market that could see returns, regulators would keep a rule stating that companies

Issue No. 2013/17 Page 5

Insurance Institute of India might forecast a maximum 3.5 per cent gain on their levy, but also new policies issued in the period covered by the investments when calculating the level of reserves they guidelines to 31 December 2014. needed, the person said. “If insurance companies collect more fire services levy in total Life policies with fixed benefits and premiums accounted for this financial year (2012–13) than their liability, they will be about 15 per cent of outstanding contracts, the person said. required to refund this excess.”

The trials also included a new kind of life policy that involved The Monitor will be using the guidelines to assess the investments in infrastructure and real estate, which would compliance with Fire Services Levy Monitor Act 2012. also be exempt from the limit on returns, the person said. Breaching the Act can attract substantial penalties of up to $10 million in fines for a company and $500,000 for an To offer the product, insurers must have solvency ratios of at individual. least 150 per cent, the person said. Key requirements are that: The CIRC has also drafted rules that remove limits on how • the FSL should not form any part of premiums after 1 July much agents can get in commissions, according to the person. 2013, and • insurance companies, their agents and brokers must not Source – falsely represent or engage in misleading or deceptive conduct http://www.scmp.com/business/china- in relation to the fire insurance levy reforms. business/article/1221677/circ-mulls-lifting-ceiling-payouts-life- policies The draft guidelines have been informed by the legislative provisions as well as the information obtained by the Monitor

Australia : Tough new guidelines for insurance from a detailed notice sent to all relevant insurers in March companies this year.

The Fire Services Levy Monitor is issuing tough new The guidelines issued by the Monitor in draft form are guidelines to prevent price exploitation and misleading or consistent with the provisions of the Fire Services Levy deceptive conduct in relation to the removal of Fire Services Monitor Act 2012 and provide clear direction to the industry. Levy (FSL) by insurance companies. Source – A draft of the guidelines is being issued for a brief consultation http://www.firelevymonitor.vic.gov.au/home/about+us/news/ period before final guidelines are issued next month. news+item+guidelines+for+industry

Insurance companies have historically charged their fire Iran: Insurance firms want higher premiums on natural insurance policy holders a levy to meet their liability to help disasters fund the fire services in Victoria. This liability will be removed from 1 July 2013 when it will be replaced by a property-based Insurance companies have embarked on re-pricing of levy scheme administered by Local Councils and the State insurance premium policies on natural disasters in the wake Revenue Office. of earthquakes that hit Iran last week. Some factories in specific areas are vulnerable to damage if such quakes occur The Fire Services Levy Monitor Professor Allan Fels said in the future, according to local media reports. policy holders were looking for reassurance that their Experts said some insurance companies are reluctant to offer premiums would come down by the amount of the removed coverage on natural disasters in certain areas due to their levy. vulnerability to quakes and the proximity to a big fault line in the Red Sea. Under the guidelines, insurance companies would be expected to provide policy holders with detailed information about the Musa Al-Ruba’an, an insurance expert, said factories in the amount of FSL paid in the current financial year, and what northern and western part of the Kingdom are exposed to their premium would look like without the FSL. quakes to a greater extent unlike the eastern region. Earlier, natural disasters were covered at no charge. However, Professor Fels said there was potential for confusion with the following heavy rains and floods that hit Riyadh a few years change, and consumers needed more information from their ago, insurance companies have started insisting on separate insurance companies. insurance coverage for natural disasters, expert said. Mahir Al-Jia’iri, another expert, said natural disasters exist “So far the level and quality of information provided to policy within the insurance companies’ covered items such as fire, holders by insurers about the impact of the fire insurance levy lightning and other additional risks due to rains, floods and reforms has been less than satisfactory,” Professor Fels said. quakes. The guidelines stress that individual policy holders should expect to see the full amount of any FSL paid by them this But insurance premiums have changed in the aftermath of the financial year removed from premiums entirely from 1 July disastrous Jeddah floods when some insurance companies this year. expressed reservations over the geographical location of properties, he said. “If insurance companies claim that higher costs offset any part of the benefit of the reduced FSL, they will be expected to Insurance premiums on properties were low earlier, but justify in detail these cost increases.” skyrocketed after the rains and floods in Jeddah and Tabuk. In some cases, premiums were raised more than 100 percent, he Professor Fels has also indicated that it is not just existing said. policies that should benefit from removal of the fire services

Issue No. 2013/17 Page 6

Insurance Institute of India Majid Sultan, a former insurance committee member at the Jeddah Chamber of Commerce and Industry, stressed the Disclaimer: importance of coverage of natural disasters and the spread of ‘Newsletter’ is for Private Circulation only intended to bring weekly insurance awareness, which will ease the burden on the updates of insurance related information published in various media government. like newspapers, magazines, e-journals etc. to the attention of Members of Insurance Institute of India registered for its various He proposed the creation of a database on regions most examinations. Sources of all Cited Information (CI) are duly vulnerable to earthquake in a bid to determine appropriated acknowledged and Members are advised to read, refer, research and quote content from the original source only, even if the actual insurance premiums on risks related to these regions. content is reproduced. Insurance on natural disasters represents 20 percent of total insurance premiums in the Kingdom and the figure is CI selection does not reflect quality judgment, prejudice or bias by considered modest compared to damage that factories and ‘III Library’ or Insurance Institute of India. Selection is based on vital business facilities would incur if disaster were to strike relevance of content to Members, readability/ brevity/ space them, he said. constraints/ availability of CI solely in the opinion of ‘III Library’.

‘Newsletter’ is a free email service from ‘III Library’ to III Members Source – and does not contain any advertisement, promotional material or http://www.arabnews.com/news/448868 content having any specific commercial value.

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Issue No. 2013/17 Page 7