Ushering in Subsidised Health Care in USA

The title itself would have been a contradictory one in the real sense and definition of capitalism. USA now is poised for a change in health care and health insurances. This would bring in an overbearing government control over what is essentially a private enterprise of health care. Nevertheless it has come to stay and would bring succour to millions of Americans. It would in a way, touch each and every American.

Some of the beneficiaries/benefits are:

1. Uninsured persons - who will hereafter benefit from the health care safety net
2. Dependent children upto 18 or 19 are covered under the health care of the parents so far. Now the age limit goes upto 26 years
3. Persons who did not have health insurance benefits for reasons of pre existing diseases condition would become eligible for subsidised coverage through a new high risk insurance program
4. No life time limits under policies for medical coverage for persons
5. No cancellation of policies of people who fall ill.
6. Self employed who hitherto did not have leveraged premiums for health care and paying more for individual insurances would have a more beneficial regime

Another new happening as a consequence would be the insurance exchanges from where one could buy insurance with subsidies. These exchanges would be run by the state.

President Barack Obama is expected to sign this bill on Tuesday next enacting it into Law.

Third Party Insurance Premium of Commercial Vehicles poised to increase

General Insurance Council has reportedly proposed a raise of 80% on the current rates for all commercial vehicle third party insurance premiums. Third Party premium is still a regulated area and approvals from government is required before the increase comes into effect. The premiums and claims are administered by The Indian Motor Third Party Insurance Pool. The need for the increase comes in view of the high claims on this segment. In the year 2008-09 the claims incurred were about Rs.3258 Crores as against a premium collection of only Rs.2822 Crores. The losses of the Third Party Pool are shared by all the general insurance companies in proportion of their overall market share.

Another blog comes up

After blogging for a while now, i have been able to ideate the creation of another blog. This time my colleague in my company has created a training blog for the employees of our company. This blog is designed to give interesting information related to insurance industry in a language easy enough for the first line sales persons and yet not have mundane topics like fire insurance etc. I give below the link to the new blog titled "Gurukul".

I am sure the new blog is going to have topics of great interest.

Finally CAT Bonds in India

The annual Economic Survey has suggested introduction of Catastrophe bonds or simply Cat Bonds.

The survey noted that such bonds are available in western countries and focus is needed for such capital market solutions in the area of catastophe loss management.

The newspapers carried report on the same.

ART

ART

Who insured the last football world cup? Which insurer is large enough to provide for losses arising out of huge hurricanes like Katrina?

Well the answer lies in the caption of this post which is ART.The ART that Insurers know of has no relevance to the ART of common Knowledge. ART expanded to as Alternative Risk Transfer.

ART came into being as Insurers neither had solutions nor capital capacities to provide risk transfer solutions for all risks. Reinsurers then thought of Alternative Risk Transfer Mechanisms which would provide a near inexhaustible supply of capacities (Capacity in simple terms means ability to provide for losses)

ART is a multi billion dollar industry and draws support from capital markets worldwide. Today it totals to about 35% to 40% of the total traditional insurance market. The previous football world cup was not insured and the risk was handled by ART techniques. The infamous Hurricane Katrina was also one of the events that drew ART into protection mode.

What are the common forms of ART – The most common one is the Bonds also called as Cat Bonds (Catastrophe Bonds). These bonds in simple terms are like any other bonds which the buyer buys and in the event of the catastrophe the proceeds from sales of bonds are used to pay the losses. If there are no losses, the bond buyer gains from interest on bond proceeds as well as the insurance premium which the buyer of protection pays.


Another common ART form is the Weather derivatives. The Weather Derivatives are not strictly in terms of insurance as they are linked to index and not indemnity driven. The derivatives on a macro plane could also be like trading off of Hurricanes of USA to the Cyclones of Indian Peninsula etc – that is the funds collected from Hurricane Protection in USA could be used for Cyclone losses of Indian Peninsula and vice versa assuming that both may not occur together. Thereby the capacity to serve the losses of risk is much more

The above paragraphs are meant to give you an introduction to the concept of ART and I shall feel justified if they have generated interest in the reader to look for more.

Medical Insurance - The Portability in the offing

Portability is a relatively new term used in connection with insurance. What is portability? Portability is taking from one place to another. So portability of insurance would be to take insurance from a new insurer without any change to the benefits enjoyed under the earlier insurance.

We do that in Motor Insurance without actually understanding it to be portability. The benefits of No Claim Bonus would accrue under a new insurer as if renewed with the present insurer.

Then what is new in portability. It is the Portability of Health Insurances that is being talked now. Today Insurers do not provide protection of benefits if the medical insurance is transferred from one insurer to another. This causes difficulty to the insuring public who are at a disadvantage even if they do not receive satisfactory service from the existing insurer.

With the objective of putting customer first, IRDA had requested General Insurance Council to come up with a proposal for offering Portable Health Insurance covers to the public. Accordingly General Insurance Council has come up with a recommendation. The salient features are:

· Sum Insured upto Rs.1 Lakh
· Basic Cover Benefits
· Premium to be determined by the companies within the band suggested
· Offered to those in the age band of 18 to 40.

This change when adopted gives more choice to the customer in choosing his health insurance service provider without compromising on the benefits earned till now. This change also puts it in perspective the importance of customer comfort and also portends more such changes to come in future.

Some news reports on the above caption

Business Standard

Business Line

Financial Express

Happenings in Sri Lanka - on Insurance front

The latest news in Insurance domain in Sri Lanka has learnings for us.

The third largest Non Life Insurance Company in Sri Lanka – Janashakthi Insurance has had its Licence Suspended by the Insurance Board of Sri Lanka. http://www.ibsl.gov.lk/IBSL.htm. The news reports of Sri Lanka say that the reason for the same is complaints from customers that claims are not being honoured.

Janashakthi has responded and has pasted a public notice in its website asking for the confidence and continued patronage of its customers. http://www.janashakthi.com/publicnotice.htm


Customer is the king and don’t get on his wrong side.

Insurance Act - The accelarated passage

It is on the news again. Business Line today reported that the Insurance Laws may be put on fast track (see report). There is also a report on similar lines in The Economic Times of Today

What is in it for us as Insurance People and also as common public.

1. It is estimated that over Rs.10,000 crores would come in as FDI which is great news for the economy. (ET report of today)
2. There is a greater scope of techonology transfer in as much it pertains to insurance with the foreign insurers like Lloyds allowed to set up branches here
3. An insurance company would have the right to rely on the statements in proposal only for the first 5 years. That means after 5 years if there is an incidence of claim, the insurers would have no right of refusal of the claim citing some statement or mis statement in proposal. This is applicable to the Life Insurance companies. This would give us all a sense of security that the contract that we entered into for the sake of our loved ones would be honoured. Pl check out this article of Economic times which throws more light on the subject

For me the third one is the one that makes this amendment most exciting though all of us would enjoy the positive fallouts of the FDI of Rs.10,000 Crores when it happens.