{"id":5925,"date":"2017-12-27T06:26:17","date_gmt":"2017-12-27T06:26:17","guid":{"rendered":"https:\/\/securenow.in\/blog\/?p=5925"},"modified":"2026-01-13T11:46:32","modified_gmt":"2026-01-13T11:46:32","slug":"insurance-hits-misses-ipos-commissions","status":"publish","type":"post","link":"https:\/\/securenow.in\/insuropedia\/insurance-hits-misses-ipos-commissions\/","title":{"rendered":"Insurance hits and misses: IPOs and Commissions"},"content":{"rendered":"
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Published in Mint on 26th December 2017.<\/p>\n

The three big events of 2017 that will define the year for the insurance sector are: listing of insurance companies, new commission rules for sellers and consumer protection regulations. Here are the details on what happened in this space and what it means for you.<\/p>\n

Benefits of listing<\/b>
\nICICI Prudential Life Insurance Co. Ltd went public last year, leading the line of firms that went to the stock market this year. Year 2017 saw insurers, both in life and non-life sectors, tapping the markets. Two life insurance companies\u2014SBI Life Insurance Co. Ltd and HDFC Standard Life Insurance Co. Ltd\u2014and three non-life companies\u2014ICICI Lombard General Insurance Company of India, The New India Assurance Co. Ltd and reinsurer General Insurance Corporation of India\u2014went public this year. Reliance General Insurance Co. Ltd is expected to go public within this financial year.
\nBut how does all this impact you, as a customer of these companies?
\n\u201cListing puts greater focus on disclosures and a company is evaluated on all these disclosures,\u201d said K.G. Krishnamoorthy Rao, managing director and chief executive officer, Future Genarali India Insurance Co. Ltd.<\/p>\n

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\"Premium<\/p>\n<\/div>\n

\u201cIn the case of non-life insurers, so far they have made profits mainly on the back of investment returns and not because of underwriting profits. This gets reflected in the combined ratio that needs to be below 100% for the core insurance business to be profitable. So, insurers will have to focus on strengthening their underwriting because it\u2019s not possible to continue making profits from investment returns alone,\u201d Rao added.
\nFocus on underwriting would mean focus on pricing the right products, having better operational efficiencies and claims management, Rao said.
\nSimilarly, in the life insurance<\/a> sector, listing of companies has brought about greater focus on achieving efficiencies. \u201cIPOs give the industry a lot of visibility. Listing demands a greater level of transparency, governance and compliance which is good for the industry,\u201d said Vighnesh Shahane, chief executive officer and whole time director, IDBI Federal Life Insurance Co. Ltd.
\nGreater transparency and accountability due to listing are long-term positives for policyholders in India.
\nCommissions<\/b>
\nAnother big and much-awaited event for the insurance sector was the overhaul of distribution incentives. But contrary to expectations of drastic measures to bring down the already-high commissions, the new regulations increased the overall level by increasing the renewal commissions and allowing for rewards that could be paid over and above the commissions.
\nReacting to this move, Kapil Mehta, co-founder of SecureNow.in, said that this will lead to a push for protection plans. \u201cBeing low ticket-size plans, an increase in commissions will make it more viable for the distributors to sell pure protection plans and focus on renewals. Also, being high-margin products, insurers will not have to increase the price. However, in the case of bundled plans, it\u2019s not the renewal commission but revamp of product structure that will encourage persistency,\u201d Mehta said.
\nIn the non-life space, the new regulations haven\u2019t altered commissions for health insurance<\/a>, but there has been an impact on motor insurance. Commissions on the own-damage portion of the motor insurance cover have gone up from 10% to 15%. Additionally, the insurers can now reward distributors.
\nSome industry experts believe that increasing commissions in motor insurance<\/a> will ensure better renewals but according to Mehta, given the mandatory nature of motor insurance renewals<\/a> are not such a concern here.
\nIt needs to be noted here that third-party insurance of motor vehicles is mandatory, while own damage portion of the insurance cover is optional. However, most of the insurers bundle the own-damage and third-party insurance policies and sell them as a comprehensive policy<\/a>; and most vehicle owners end up buying such comprehensive motor insurance policies<\/a>.
\nChange in auto insurance<\/b>
\nHowever, the big change in the motor insurance space is in the guidelines on motor insurance service providers.
\nThese guidelines recognise car dealers as insurance intermediaries. Till now, while auto dealers were able to distribute motor insurance policies, they were not recognised as licensed distributors.
\nWith the new guidelines in place, effectively, the car dealers have been under regulatory purview; by defining their roles, licence requirements and the incentive structure.
\nThis is expected to bring the price of auto insurance policies<\/a> down, as the insurers will be discouraged from overpaying these dealers. \u201cPayments to car dealers were in the range of 50-75% of the premium. But now regulations have defined the caps on commissions that apply to car dealers, and the General Insurance Council has assumed a watchdog role to make sure that the dealers don\u2019t bargain for higher payouts,\u201d said Mehta. For the insurers, this means a huge saving in costs \u201cbut whether these cost (savings) will be passed on to customers remains to be seen,\u201d Mehta added.
\nConsumer protection<\/b>
\nNew rules to protect policyholder\u2019s interest were another key highlight of the year. These new rules aim to ensure that the insurers settle the claims on time and that there are well-defined penalties in case of delays.
\n\u201cThe guidelines clearly mention the turnaround time for policy purchases and claim settlement, clear documentation on products coverage and simple policy wordings that will minimise misselling. These guidelines have also given clarity in claims procedures,\u201d added Rao of Future Genarali Insurance.
\nAll these measures will go a long way in winning the trust of consumers, said Shahane of IDBI Federal Life Insurance . \u201cThe biggest challenge for the industry is not GDP growth or inflation but winning customers\u2019 trust back and to bridge the trust deficit. The rules for protection of policyholders\u2019 interests are a step in the right direction,\u201d Shahane added.
\nThe regulations, however, failed to address the issue of transparency as they did not clearly specify the kind of information that insurers are needed to share with their customers. But this seems to be on the agenda for the next year.
\nThe report of the committee set up in January 2017, to review the product regulations, is finally in the public domain and better disclosures are on the menu of its recommendations.
\nListing of insurance companies will put focus on controlling costs, improving persistency and increasing productivity of the distributors to a large extent. This is good for the customers. Also, with the report of the committee set up to review product regulations, the discourse in the life insurance sector should move towards increasing transparency and reducing exit loads in traditional plans.<\/p>\n","protected":false},"excerpt":{"rendered":"

Published in Mint on 26th December 2017. The three big events of 2017 that will define the year for the insurance sector are: listing of insurance companies, new commission rules for sellers and consumer protection regulations. Here are the details on what happened in this space and what it means for you. Benefits of listing […]<\/p>\n","protected":false},"author":4,"featured_media":4133,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"_lmt_disableupdate":"no","_lmt_disable":"no","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[410,319],"tags":[42,150],"class_list":["post-5925","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-media-coverage","category-media","tag-life-insurance","tag-motor-insurance"],"acf":[],"modified_by":"SecureNow","_links":{"self":[{"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/posts\/5925","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/comments?post=5925"}],"version-history":[{"count":9,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/posts\/5925\/revisions"}],"predecessor-version":[{"id":34717,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/posts\/5925\/revisions\/34717"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/media?parent=5925"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/categories?post=5925"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/tags?post=5925"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}