Major relief to Fintech startups with the introduction of new video based KYC

On 9th January 2020, the Reserve Bank of India (RBI) has announced the video based Know Your Customer (KYC) guidelines which is a very effortless option to establish the identity of the customers. As per the new guidelines, the fintech startups and digital Non-banking Financial Companies (NBFCs) can remotely vet the customers through the online mode. Also, this step is like a big relief for these lending companies as it would be a huge cost cut in several ways owing to the avoidance of meeting the customers in person for the verification process.

The Reserve Bank of India has placed certain rules for regulated entities involved in the verification process.Also, the process can be done only by an authorized officer of the Reporting Entity (RE) who is specifically trained for this purpose. This audio visual interaction will be the finest way to carry out the customer identification process. Here, the officials shall take the photograph of the customer along with the video recorded and obtain the identification information.

In order to prevent the act of money laundering, the RBI has recommended to the authorized officers to store the recorded videos in an extremely safe and secure manner. Also, these videos must include the geo-tagging i.e. the video should consist the location, time and the date where it was recorded. This high-level of verification incorporates the use of the most up-to-date technologies, artificial intelligence and face matching algorithms to ensure the integrity of the customer information and process.

After the judgment passed by the Supreme Court in the year 2018 regarding the disallowance of usage of Aadhar card by private companies, there have been several requests made to the authorities to bring in an alternate plan in the Know Your Customer guidelines in order to make the onboarding process of the customers easier. Later in May 2019, the RBI released new offline KYC rules which allowed the banks to carry out authentication or offline-verification through Aadhar card for individuals who were voluntarily allowing the use of their Aadhaar number. This new move was welcomed by the fintech industry and now the new guidelines have been a brownie point not only for the expansion of the businesses of the startups but also a healthy sign for the enhancement of the financial ecosystem altogether.

This new guideline is not only a positive progress but also a pragmatic approach and a much deeper dive into the digital verification process. It is also a constructive step towards an effortless, paperless and most cost-effective efforts for the KYC process.

Irdai gives final nod for merger of HDFC ERGO Health with HDFC ERGO General Insurance

New Delhi, Nov 12 (PTI) Mortgage lender HDFC Ltd on Thursday said insurance regulator Irdai has given the final nod for merger of HDFC ERGO Health Insurance with HDFC ERGO General Insurance.

In late September, the National Company Law Tribunal, Mumbai had okayed the scheme of amalgamation between HDFC ERGO Health Insurance (formerly Apollo Munich Health Insurance Co Ltd) and HDFC ERGO General Insurance Co Ltd (HDFC ERGO).

“In this connection, we wish to inform that the Insurance Regulatory and Development Authority of India (Irdai) vide its letter dated November 11, 2020, has given its final approval for merger of HDFC ERGO Health with and into HDFC ERGO,” HDFC said in a regulatory filing.

The general and health insurance companies are the subsidiaries of country”s largest mortgage lender HDFC Ltd.

As per the scheme of amalgamation through a share swap deal, there will be dissolution of HDFC ERGO Health without winding up.

Under this, share exchange ratio of 100:385 has been okayed by the board of the subsidiary companies which would mean allocation of 385 shares in HDFC ERGO Health for 100 shares in HDFC ERGO.

Post completion of the merger, HDFC will hold 50.58 per cent stake in HDFC ERGO.

“The board of directors of HDFC ERGO and HDFC ERGO Health…approved the share exchange ratio of 100:385 that is for every 385 shares of Rs 10 each held in HDFC ERGO Health as on the record date, 100 shares of Rs 10 each of HDFC ERGO would be allocated,” HDFC said in January this year.

Before this, HDFC ERGO acquired a majority shareholding in Apollo Munich Health Insurance Co Ltd.

HDFC scrip traded 0.31 per cent up at Rs 2331.50 apiece on BSE. PTI KPM MKJ

Will ‘Modicare’ improve healthcare woes in India??

Government
of India is likely to undertake one of the worlds largest health protection
scheme in this financial year. Finance Minister, Mr Arun Jaitley had in its
budget speech announced  the launch of flagship National Health Protection
Scheme (NHPS) intended to cover 10 crore poor and vulnerable families and 50 crore
beneficiaries. Under the scheme, 10 crore families will be provided Rs 5 lakh
cover per family annually for treatment. 

Even
after so many years of independence, most part of the rural India and some
portion of urban India does not have access to any form of employer-provided or
state-funded insurance. Our country’s  poverty burden results from
out-of-pocket health expenditure, which also deters the poor from seeking
treatment. A flawed healthcare system makes treatment so much more complicated.
The space created by subsidized but impaired state government hospitals is
being filled by efficient but often expensive private sector hospitals.
Affordable healthcare, it would seem, is beyond the reach of most Indians.

Past
attempts to implement large healthcare schemes have not received thunderous
response. The Rashtriya Swasthya Bima Yojana (RSBY), launched by the central
government in 2008 with mirror schemes in the states, offered an insurance
coverage of Rs 30,000 for below poverty line families. But with announcement of
this new scheme people in India will get higher insurance coverage with low
premiums. 

The
Centre hopes that it will pay up to 60% of the total costs and the states can
spend the remaining 40%. The government believes that several states can
subsume their current health schemes and this scheme will then become more
cost-efficient. However we have to wait for final details of the scheme,
whether government plans to cover people at one go or, will it be in a phase
wise manner. Media reports suggests that, government will spend anywhere
between Rs 10,000-12,000 crore in the scheme, but final details are yet to come
out. 

From
the insurance companies perspective, would want to underwrite health policies
only if they are priced realistically. The cost could differ, depending on the
quality of hospital infrastructure, competition and governance in each state.
Strengthening primary and secondary care will reduce the burden. 

The
other problem which could be faced (NHPS) is that several states like Tamil
Nadu, Andhra Pradesh, Kerala, Madhya Pradesh, Telangana, Chhattisgarh and
Rajasthan already have their own health insurance schemes. Many other states
provide health insurance to below poverty line families through the RSBY, while
some states currently do not provide any public health insurance. States that
already provide public health insurance will have to figure out how to
integrate the NHPS with the existing schemes.

A
prosperous public health system will modify state governments bargaining position
to buy services from the private sector. But it would be irresponsible not to
leverage capacities created in the private sector like technology and data must
be used, even research and development should be encouraged. However the real
challenge lies in the availability of health infrastructure such as hospital
beds, doctors (mostly specialists), healthcare staff, diagnostic facilities and
other things. Equally important is the administration of hospitals. There are
many other gaps to be filled before we finally witness a successful health
program in India.

Why it is important to have an event insurance in India

Strap: Insurance companies cover religious festivals and marriage functions

Just last week people of Maharashtra-especially from Mumbai and Pune bid adieu to 11 days Ganesh festival. Within next few days, we will witness Navratri Durga Puja being celebrated across India and particularly in Gujarat and West Bengal respectively. Not only the religious functions but coming months will witness grand marriages in the entire country.

If we look at the Ganesh festival which is celebrated with enthusiasm across the state, but only a handful of mandals take insurance cover. Yes, you heard it right barring big Ganesh mandals like GSB Seva Mandal and Lalbaugcha Raja take insurance cover which includes public liability, terrorism insurance, fire insurance and personal accident cover among other covers. Industry participants say that this year GSB Seva Mandal had an insurance cover of around Rs 250-260 crore, while for Lalbaugcha Raja it was under Rs 100 crore.

However, there are hundreds and thousands of mandals which don’t have to take insurance or have very little insurance. Event insurance covers against event cancellation, public liability or even personal accident. Rakesh Goyal, Director at Probus Insurance say, “If people buy vehicle insurance or travel insurance or even best health insurance to cover their risks, why don’t they buy event insurance. Though precautions are taken by everyone so that, no untoward activity take place during any event, but one people should or societies should understand the importance of insurance. It will cover public liability, which arises by an accident where an event is held or even personal accident cover which gives  protection against injury resulting in death or disability during the event.”

One must be aware of real ornaments of gold and silver that adorn the idol Lalbaugcha Raja and GSB Seva Mandal and gold and silver ornaments are also covered in the policy. Premiums range from 2,500-4,000 for 1 lakh sum insured which varies from an insurance company and what is included in the policy.

Event insurance also covers fire, terror, theft of volunteer insurance among other factors. In the past few years, there is a rise in policies sold for the event insurance in India. But as said earlier, many still do not buy or have very less sum insured. Apart from festivals, people can buy event insurance even for marriage functions. Nowadays marriages are done on a mammoth scale and crores are spent on sets, decorations, and jewelry. “If someone is spending 5-10 crores in the marriage function, he can certainly pay few lakhs in premium and have a proper insurance cover. Where everything is covered and parents need not worry about any sudden incident,” added Goyal.

Marriage insurance will insure wedding against postponement or cancellation for certain reasons. Cancellation can be due to the accident of a bride or groom or even their blood relations which are also covered by the policy. So like people have adequate cover for their medical insurance, vehicle insurance or life insurance, event insurance is also important and must have during the event. If there is a wedding at your home in the months to come, don’t forget to but the cover which will cover risks with very low premiums.

Ulips 2.0 have turned more attractive than mutual funds post Union Budget 2018-19

In its new avatar, Ulips are tax efficient coupled with low in cost and policyholder can freely move from debt to equity or vice-versa depending on their risk profile.

Unit Lined Insurance Plans (Ulips) which has received its share of negative promotion in the past few years, have suddenly got new lease of life after Finance Minister announced 10% long term capital gains (LTCG) on equity. Ulips were once considered to be be ‘costly’, but reduction in various charges in the past few years have turned them more attractive than ever before.

Now even equity oriented mutual funds falling into the tax bracket of 10%, Ulips are likely to become first choice of investors going forward. Typically, investors used to invest in equity linked saving scheme (ELSS) to save tax as there were tax exemptions right from investment to maturity and even withdrawal stage. But now the post-tax return from equity mutual funds will be hit and for the common investors, as they have to pay tax on capital gains after holding for one year.

But with Ulips, policyholders can have more dependable wealth creation solution over the long term, having twin advantage of getting equity returns and getting protection. One of the big advantage of having Ulips is that, policyholder can invest in mix of debt, equity or balanced category depending on their investment profile. Even inter-fund transfers through switches are allowed (depending on insurance companies) with no tax liability. For example, if today investors wants to switch the money from equity to debt-they have to pay exit loads and short term capital gains. But with Ulips, if he transfers amount from debt to equity there will be no tax liability.

As said there was a time, Ulips were considered too costly compared with mutual funds, but now with charges coming down, one can have certainly look at this product. In the new package overall charges in Ulips have come down to 2.5-4% depending on the tenure of the policy. On the other hand, average expense ratio of mutual funds is in the range of 2-2.5%-without insurance cover.

Ulips also have a minimum lock-in period of five years. However after five years, policyholder can make partial withdrawals, which cannot exceed 20% of the fund value of the policy and this amount is also tax free for policyholders. This feature allows policyholder to use Ulips for goal-centric planning, like child education, international holiday or daughters marriage.

Ulips, also offers tax savings on withdrawals that are unavailable to mutual fund investors. Death benefit paid under the ULIP is completely tax free. Upon maturity of the Ulips, the policy holder will receive the assured benefit or the value of the unit-linked investments whichever is higher. This payout is exempt u/s 10(10D) of the Income Tax Act. This is a significant difference between Ulips and mutual funds as the income earned from the latter is taxable.

Ulips were once most bought financial products in India, with the recent tax policy on equity its likely that Ulips are all set to once again become primary investment vehicle for investors.

Transformational trends in Insurance Industry for the year 2017

Today, insurance industry is in a major transformational phase. Customer demographics are changing and so are the modes of distribution. The shift is happening from traditional distribution channels towards mobile based and web based models of distribution, driven by fintech companies. In fact today, customised products and transparent servicing is the new hygiene standard.

Listed are few trends to be seen in the year 2017

1. Usage Based Insurance – Pay as You Drive and Pay as You Use
2. Big Data revolution 
3. Internet of Things 
4. Financial technology companies in insurance distribution
5. Emergence of the shared economy 
6. M health apps 
7. Peer to peer Insurance
8. Gamification
9. Cyber Insurance

Lets discuss the first aspect which will bring in a strategic shift in the way the insurance industry works.

Usage Based Insurance

Usage-based insurance (UBI) also known as pay as you drive (PAYD) and pay how you drive (PHYD) and mile-based auto insurance is a type of vehicle insurance whereby the costs are dependent upon type of vehicle used, measured against time, distance, behaviour and place.

How does it operate?

There are two ways by which a customer can enrol for usage based insurance policy. There is something called telematics device which is installed in vehicles or the telematics application loaded on to smart phones, connected with the insurers systems. It tracks customers driving behaviour and usage pattern on a real time basis.

The smart phone app or plugin device provides information like location, mileage, speed, sudden acceleration or braking, including external factors like traffic speed, weather , time of the day. Infact the smartphone app also detects whether the driver is texting while behind the wheel. All this information helps in defining real time premiums on a monthly basis.

Why will it be a game changer for the motor insurance industry?

Usage based insurance will change the way the industry works. Till now the insurance premiums were calculated based on the make, model and year of purchase. This led to insurance premiums of regular risky drivers being compensated by the chunk of people who rarely used their cars or used their cars only during weekends or were very cautious drivers.

Usage analysis of the customers driving skills will help companies in cost effective allocation of premium slabs and accordingly tailor insurance products based on the specific driving behaviours and usage pattern.

Two things that will change -Claim handling capability and Customer segmentation

Internationally, UBI has the capability to reduce claims by around 40% , reduce policy administration by 50% and substantially reduce acquisition cost.

Further, with many new age vehicles having built-in telematics capability at the manufacturing stage, it provides growth opportunities to ‘pay as you use’ and ‘pay per use’ models of premium payment.

Globally, the UBI market across Europe, Asia and America is expected to be 15% by 2020 .

Going forward

In todays dynamic scenario, the existing books of polices are no more cost effective for insurers. Due to cost restrictions even risk management is being relooked at. Two areas that may be key to profitable growth for insurers will be harvesting data in new ways and being more nimble and proactive in launching new products, services, and distribution options.

And those, who will fine tune their offerings based on user behaviours and feedback will end up making it to the next level.

Third Party Vehicle Insurance cover must from September 1, 2018

Strap: This move could address the issue of vehicles plying without insurance after one year of buying the vehicle.

Supreme Court of India in its order passed on July 20, 2018 has directed all the general insurance companies to issue a three year third party insurance cover for new cars and five years third party insurance cover for two wheelers from September 1, 2018. This move could give much needed relief to insurers as well as to the policyholders as many of them don’t renew the policy after it gets expired in one year.

Hon’ble Supreme Court in its order has mentioned that, “In a meeting held by the Supreme Court Committee on Road Safety held on 26th March, 2018, it is recorded that there are about 18 crore vehicles plying on the road and only about 6 crore vehicles have the mandatory third party cover. In other words, 66% vehicles are running on the road without any third party insurance cover and the victims of accidents including those who have died and their legal representatives are not getting compensation because the vehicles are not insured.”

However court has made it very clear that, this rule will be applicable only for third party insurance covers and only for new vehicle insurance. A comprehensive Auto Insurance policy have two components, the own damage (OD) and third party (TP). While SC has mentioned that new rules apply only to TP, insurers can deal with comprehensive policy and give option to the owner of the vehicle to decide which policy should be taken except that the third party insurance which is mandatory. Learned counsel for the General Insurance Council says that Insurance Regulatory and Development Authority of India (Irdai) may be directed to clear and finalize the product immediately.

Even now several General Insurers were selling three year long term two wheeler vehicle insurance  policy. But now with this order, General Insurance companies can issue two policies, one being TP for long term and another OD which can be renewed every year. This move will bring in higher premiums for the Insurance Companies, but from the policyholder’s point of view they would be also be paying higher premiums upfront for three to five years. Third Party premium rates are decided by the the regulator for every year, now they will have to give the rates for the three and five years for four wheelers and two wheeler vehicles very soon.

However one should check the premiums before buying comprehensive cover from the dealers. They usually charge higher premiums, one can always look at the web aggregators selling such policies, which can be bought within minutes and also are cheap compared to the policy sold by dealers. Now with this order coming in, we hope that insurance penetration for vehicles improve in the country which can give benefits to the policyholder in case there is a claim.

The Effects on Insurance Agents post the Supreme Court Order

Starting from first of next month, all the general insurance companies are directed to issue a three-year third party insurance cover for new cars and five-year third party insurance cover for two-wheelers, after an order from Supreme Court in the month of July. This move could bring relief to many policyholders who didn’t renew their insurance after one year. But with many advantages, the fallout of this issue would be lakhs and lakhs of foot soldiers of non-life industry-retail agents.

General Insurance industry in India is witnessing change after successful implementation of crop insurance and positive impact due to the Ayushman Bharat-National Health Protection Mission (AB-NHPM). But when Industry is all set to fly to newer heights, retail agents might be forced to leave this industry. The irony is that, on one side government talks of creating jobs and giving Mudra loans individuals for their business, but here in the Insurance industry when an agent has his existing and established small business and wants to expand it, he will most probably leave it for lack of earnings

While Hon’ble Supreme Court in its order has mentioned that, “In a meeting held by the Supreme Court Committee on Road Safety held on 26th March 2018, it is recorded that there are about 18 crore vehicles plying on the road and only about 6 crore vehicles have the mandatory third party cover. In other words, 66% vehicles are running on the road without any third party insurance cover and the victims of accidents including those who have died and their legal representatives are not getting compensation because the vehicles are not insured.”

It is likely that insurers will join hand with top brokers in the country and run the show. For example, a leading car manufacturer in India who has an alliance with top general insurance companies would get more competitive rates compared to other players. So once someone buys four-wheeler they will have to compulsorily buy insurance for three years. Now a policyholder buys one-year insurance and his renewal is taken care of by brokers or individual agent. Now with this move, no one will go to brokers or individual agents, which will significantly impact his or her business.

This game would turn into who give the ‘best price’ and private insurers with deep pockets will be benefited more rather than public sector insurers. The motor business continued to be the largest general insurance segment with a share of around 40% and incurred claims ratio for the segment is one of the highest in the industry.

Even after the order of this magnitude which will overall change the face of the motor insurance in India, there have been no particular murmurs from either the regulators or from the broker’s community. Even general Insurance Council which includes all the general and health insurance as their members haven’t come out with how this move will be implemented.

However, the court has made it very clear that this rule will be applicable only for third party insurance covers and only for new vehicle insurance. A comprehensive auto insurance policy has two components, the own damage (OD) and third party (TP). While SC has mentioned that new rules apply only to TP, insurers can deal with comprehensive policy and give an option to the owner of the vehicle to decide which policy should be taken except that the third party insurance which is mandatory. Counsel for the General Insurance Council says that Insurance Regulatory and Development Authority of India (IRDAI) may be directed to clear and finalize the product immediately.

The Effect of Regulatory Sandbox on the Insurance Industry

In the past few decades, the Insurance Industry has regulated more than almost any other industry.

In addition to this, the incorporation of the Insurtech movement has brought along innovation from upcoming technologies which were not a major part of the Insurance Industry earlier. It’s indeed an exciting time for all, but this comes at its own set of risks.

One of the ways insurers are trying to overcome this risks is through the regulatory sandbox, a concept which is fresh yet highly prominent in other ways.

 The concept of a regulatory sandbox makes it more possible for the regulator and Insurtech startup or technology firm (and in some cases the incumbent) to work on an initiative in an enclosed environment before the product or service hits the masses.  

For an industry like Insurance which is highly regulated, the Regulatory Sandbox seems like a good idea.

But a sandbox can only hold many businesses within it. Furthermore, it’s not the only way to drive an innovation initiative to get regulators happy.

Prasun Sikdar, The Managing Director and Chief Executive Officer of Cigna TTK Health Insurance Company Ltd. Said that “ The Sandbox method will encourage insurers to create more comprehensive, innovative, personalized and affordable suite of healthcare solutions.”

Talking about the First Launch

 The insurance regulator allowed the launch of the first insurance plan under a sandboxapproach. This policy lets the insurers launch eccentric products on a pilot basis before seeking its approval.

In India, the IndiaFirst Life Insurance Company Ltd. was the first company to launch this plan on 12th April 2017 and the plan got the approval of Insurance Regulatory and Development Authority for a launch on 27th November. The micro-insurance plan by IndiaFirst aimed at those with seasonal incomes, working in the unorganized sector or belonging to underserved sections. Also called as “Insurance Khata”, it lets buyers pool multiple single-insurance plans in one account and let them pay single premiums as and when feasible.

Countries that have adopted Regulatory Sandbox Approach

 Presently, the Sandbox approach is into implementation in most global region’s financial hubs including Abu Dhabi, Australia, Canada, Hong Kong, Malaysia, Singapore, Switzerland and the UK. A notable component is the growing number of countries that have proposed Sandbox type legislation to ensure they remain competitive with those already on board. These include countries such as Indonesia, Israel, Russia, Taiwan and the USA. The list keeps on changing so fast there may well be more countries in either group.

 The current state of the Insurance industry is an exciting time to be in. There are all types of distinct new technologies and modernizations stepping into the value chain to enhance and disrupt the way businesses used to process earlier.

 “Regulation” is the key to the insurance industry. The main reason behind this is that the insurance industry provides a clear purpose and protection to the society that other business might probably not provide at such intensity.

 The insurers must be in such a state that gives their customer the complete protection and peace of mind that they assure through the innovative and enhanced efforts, and with the utility of advanced technologies.

Personal accident insurance plans cover a gap in your insurance portfolio

The latest report on Road Accidents in India 2016, published by Transport Research wing under Ministry of Road Transport & Highways, Government of India, has revealed that, India has recorded at least 4.8 lakh accidents in 2016 leading to over 1.5 lakh deaths. So, if we further slice the data, number indicates that around 413 people have died every day in accident across the country.

With rise in population and people aspirations, two-wheeler as well as four-wheeler numbers will continue to go up and road accidents will become ‘routine’. So, what are the options available in front of people to insure their family in case of some accident, which might lead to death of permanent disability. To shield against any such eventuality, people should buy personal accident cover.

Everyone knows, life insurance policy will pay only when the policy holder dies or on maturity. Health insurance will pay policy holder’s hospital bill in case of hospitalization. Both these personal accident insurance policies will not give you financial benefits. But personal accident insurance, covers the hospitalization expenses in case of road-mishap. While in the event of permanent disability, it provides cash allowance and compensation is provided to their family members in case of death of policyholder. 

Also, buying personal accident insurance is a seamless process and one can go through our website or through direct insurance companies to buy the policy. For example, a 10-lakh personal accident policy would cost anywhere between Rs 2,000-2,500 (varies from one insurance companies to another), while for 15 lakh cover it would be around Rs 3,000-3,5000 per annum.

What is covered in the policy

Typically, policy covers accidental death, where in the unfortunate event of death of the Insured person, the entire Sum Insured will be paid to the Insured person’s nominee. Even in case of permanent total disablement, the entire Sum Insured will be paid to the policyholder. While certain percentage of the Sum insured will be paid to the insured person for permanent partial disablement. The payments are made by the extent of the loss (certain percentage of sum insured), and one should always read exact terms and condition before buying the policy. For temporary total disablement, insurers pay for weekly benefits and in the unfortunate event of accidental death, insurers will pay the nominee a certain amount towards transportation of the mortal remains to residence.

Should policyholder go for standalone cover or buy it from life insurance companies

Usually, personal accident covers are provided by the general insurance companies or non-life insurers, but many life insurance companies also provide personal accident insurance policy as rider to term plan. It’s a good idea to have life insurance, but most of these policies are not comprehensive to give you full protection. However one of the drawback of plan provided by the life insurers is that, riders covers only permanent total disability and not partial permanent disability.

It’s always advisable to have a standalone personal accident policy and include all those benefits that you are required to have in it. Even say someone buys term plan for Rs 1 crore, the rider amount would be less than total sum insured and might be expensive at certain time. Policyholder should ensure that, if they get gets permanent total disability amount should be enough to maintain family lifestyle and meet all the financial goals.

Conclusion                                                                                         

So if the primary motive of the policyholder is to cover comprehensive cover, standalone accidental policy is the answer. However before buying the policy, one must read the policy wordings thoroughly to understand the policy features and exclusions before exercising any specific option. It is ample clear that personal accident insurance plans cover a gap in your insurance portfolio. Cover of health and life insurance won’t be able to keep you financially secure in case of partial or total disability. So, one must purchase a personal accident cover for the right amount too. At the time of buying a plan, make sure one compares various insurance plans so that they can opt for the best one. Finally, go for a plan that fulfills your insurance expectations and is capable of compensating for your absence when you are gone.