Are insurance companies fair?

As long as the government is disinclined to act responsibly, nothing can be done. So, you should do some research and compare the services provided by the various insurers and the products they offer, as suggested in the following paragraphs..

SINCE THE dawn of time, some type of insurance or the other has been offered; health, disability, auto, life and home insurance are just a few that can be named. The concept of protecting the policyholder against losses is revolutionary. However noble it may be in thought, today, insurance itself has become a risk factor.

Although insurance is required in most cases, the government does not regulate the insurance industry adequately. It results in policyholders answering questions such as, “Will the insurance company pay for treatment, replacement, rebuilding or even my death?” I am sorry to tell you this but buying any type of insurance policy today is like playing the Russian roulette. It is a potentially lethal form of risk-taking, where the policyholder is, in effect, gambling with his / her life. What is even more disturbing is the fact that the policyholders are forced to play the game while the government and the insurance companies bet on the outcome.

Modern insurance companies are money-making businesses which have little interest in the policyholders other than their credit history. Your credit history does not show that you have made your insurance payments on time and have been with the same company for 20 years. Why do they use your credit history? To drive the tariff up so the insurance company makes more money. Who pays more? The poor and the middle class… YOU DO!!! You can argue it’s not right until you’re blue in the face and you would be right in doing so. However, as long as the government stands on the sidelines indicating its unwillingness to hold itself officially responsible for directing the policies and the organisation of insurance, nothing can be done. So, what can you do? You should do some research and compare the products the various insurance companies offer.

For example,

• When a natural disaster struck, did they compensate the policyholders in most cases?
• How many times they raised the tariff in the past five years?
• Do they attach too many exclusion clauses?
• When you call the company, are you required to deal with a call centre where a staff-member reads from the script or an agent who can answer your questions?
• Do you demand that the insurance company hold itself responsible for directing the policies and the organisation of insurance?

Tata-AIG policy holders need not worry

Trouble at American Insurance Group in US will have a bearing on its business in India, particularly its insurance business, which it is running in collaboration with Tata.

However, sources in the industry say that the policy holders need not worry as the financial conditions of insurance subsidiaries of AIG in India is stable, and they can meet all the liabilities arising out of the claims from the policy holders.

Insurance watchdog, the Insurance Regulatory and Development Authority has also expressed concern over the recent developments in the US Financial Markets. AIG, which is a leading insurance group of US, has sought financial support from the Federal Reserve.

AIG is operating in both life and non-life insurance sector. In both the companies, Tata owns 74% stake each and AIG holds the rest 26%. With AIG facing the heat in US, IRDA has asked for a report from both Tata AIG Life Insurance Company and Tata AIG General Insurance Company on the development regarding one of its promoters AIG in the US.

Choosing motor insurance for your car?

When it comes to choosing any insurance, say health, travel, student, home etc, you compare the various policies in the market. As each company offers innovative covers, it becomes easier for you to make a decision based on the coverage as well as the premium offered . However, it is not the same case of Motor Insurance.

Motor Insurance in India is governed by the Indian Motor Tariff. The coverage for your vehicle would be the same no matter which company you would buy it from. Moreover, motor insurance is mandatory and needs to be renewed every year. So, how do you choose the right plan and where do you buy it from?

Here are a few pointers that shall help you to make a more sound decision.

Check out the premium
Even if the coverage offered would be the same, the premium charged by various companies would still be competitive. Study the cost involved with various companies and choose the one which gives you the best rate. However, don't let premium be the only deciding factor.

Name/ goodwill of the company
Try and buy insurance from an insurance company which has a good name and reputation. It always helps to go with the number one in the country!

Consider the garage tie-ups
All insurance companies tie up with various garages across the country for cashless settlement of claims. When you get your vehicle serviced at any of these garages, the claims are directly settled by the insurer. Always check the number of cashless garages the company has a tie up with. Also, consider the quality and the location of these garages.

Payment options
What are the various payment options available? Does the company offer you various options from which you can choose the one which is most convenient? Does it have an EMI option so that you do not have to pay in lumpsum? Do get this valuable information.

Buy online, it has many benefits
When you buy online, a digitally signed policy is generated. This is a valid legal document. The soft copy of your insurance policy is available online and can be accessed anywhere and at anytime. Now you don't have to worry about being extra careful about your hard documents. Also, buying online is most convenient and hardly takes a few minutes.

Make the sound choice for our car insurance based on the parameters above and avail complete peace of mind.

Do check the comprehensive Car Insurance policy by ICICI Lombard, GIC. Offering the most competitive rates in the country, ICICI Lombard gives you multiple payment options along with a 0% EMI facility. The number one general insurance company (in India) has one of the largest cashless garage network of more than 2,500 garages. Click here to buy or renew your car insurance online instantly.

Insurance firms to up micro sector presence

Insurance companies across the board are exploring options to branch out into rural areas and enhance their presence in the micro-insurance sector in the country.

Among the major players, LIC, ICICI Lombard, Agriculture Insurance Corporation, IFFCO-Tokio and Tata AIG are seeking ways to consolidate their presence in the sector. Also, MaxLife has launched Max Vijay to tap the micro-insurance potential.

Incidentally, the Indian insurance industry is expected to witness a 500% growth and reach $60 billion in next four years. Insurance firms are keen to exploit this potential; in keeping, ING is planning its entry in India.

The fact that these companies are focusing on micro insurance is crucial as traditionally insurance has never really expanded beyond urban geographies. This has been attributed to poor insurance literacy and awareness, high transaction costs, inadequate regulations, and inadequate understanding of client needs and expectations. According to the Centre for Insurance and Risk Management (CIRM)--which operates under IFMR Foundation-- the Centre and Insurance Regulatory & Development Authority (Irda) need make administrative and regulatory changes to enable penetration of micro insurance, especially in rural areas.

However, Rupalee Ruchismita, coordinator of CIRM, told FE, “The perception that entering rural markets is expensive has been replaced by the possibility of making rural insurance not only commercially viable and sustainable but also profitable. This is provided questions about product design and models of delivering risk hedging products are innovatively addressed.”

She admitted that India is the only country with micro insurance regulation. However, she noted that IRDA should allow more players in the sector. Ruchismita was speaking on the sidelines of a seminar on “Indian Microinsurance: What Works?” organised by Microfinance Insights, IFMR Foundation and CIRM.

She said that while the Micro Insurance Act stipulates an upfront payment of premium for micro insurance policies, people in rural areas have low incomes and are incapable of paying a lumpsum amount upfront. Therefore, allowing them to pay the premium in monthly installments will help in stimulating demand for insurance products, she added.

Ruchismita urged the centre to take administrative measures for promotion of micro insurance. She said that data must be made available to insurance companies so that they can expand their activities in rural areas.

Travel insurance: The good, the bad and the ugly

On a family holiday in Switzerland in May, a father's worst nightmare came true.

On a Friday afternoon my son had acute pain in his abdomen, the general practitioner whom we consulted advised us to rush to a hospital. At the hospital he was advised to undergo an emergency appendicitis removal operation. We were apprehensive as we were in a strange country and even communication with some of the doctors was a little challenging as some of them could not speak English fluently. In the late evening after considering the risks of not operating we gave our consent for the operation.

We could afford to pay for the operation on our own but at the back of my mind was a question whether the insurance company (my travel insurance policy was taken from a public sector insurance company) would actually pay up. The policy was part of a package taken through the tour operator who had made the travel arrangements for us. He in turn had used the services of an insurance broker to buy the package policy.

Here is my experience described in greater detail:

Friday, May 23: My son got operated at around 10 pm. He was admitted and operated without us having to fill in an admission form or making any deposit. They did not even know whether we had insurance to cover the costs.

Late at night I sent an email to the international TPA, the Indian TPA and the Indian insurance broker informing them of our impending claim.

Saturday, May 24: My son was fine and so started to try and call for activating the claim process. The initial call to the Paris toll-free number was not very fruitful with the male consultant on the other end of the line not giving any satisfactory response. But when I checked my email I had received a response from them indicating a file number for my claim and laying down the documents needed to process the claim.

I also reached a very helpful gentleman called Prakash who was the claims executive with the insurance broker in India. He made several calls to me and also spoke to the TPA in Paris and generally guided me. The hospital was also helpful and provided the necessary facility for faxing the papers to the Paris TPA. However a confirmation from the TPA to the hospital got stuck because they wanted a medical report from the hospital before providing a coverage confirmation (which would have enabled me to avail of cashless facility from the hospital).

The hospital informed me that this was not a usual request and it took a couple of hours before I could get the report and fax it to the Paris TPA. Meanwhile since it was a Saturday I was forced to make a deposit (around Rs. 125,000) to the hospital by using my credit card. While we received no final confirmation from the Paris TPA the Indian TPA had not responded at all.

Sunday, May 25: My son was discharged from the hospital.

The hospital said the deposit was enough to cover the bill and they would refund the balance in due course by crediting the balance to my credit card account. No final confirmations from the Paris TPA, though I must say that by then a very competent lady from the Paris TPA kept calling me to update me on what was happening. She also informed me that she had sent a confirmatory fax to the hospital (this was after the discharge) and as the hospital office was closed we could not confirm the receipt of the fax by them.

Monday, May 26: The hospital confirmed that they had received the fax confirmation from the Paris TPA and would refund the entire deposit amount to my credit card in a few days time after they actually receive the payment from the insurance company. Prakash had been in touch with me through out.

Tuesday, May 27: We return to India.

First week of June: Submitted a claim for expenses paid for the general practitioner in Switzerland, the ambulance charges, and the medicines purchased amounting to about Rs 25,000. This was submitted to the Indian TPA through Prakash.

Second week of June: Got the Switzerland hospital deposit amount refunded in my credit card account. Was shocked to discover that even though in Swiss franc terms I had received the full refund, there was a difference of around Rs. 13,000 in the rupee amount that I had paid and the rupee amount credited to my credit card account. On closer inspection it proved to be because of the huge 3.5 per cent each way commission that the credit card company charges (making it 7 per cent in all) as well as the significant differential in the buying and selling rate of the foreign exchange.

Meanwhile Prakash informed me that my other claim had been approved on June 13 and I could expect the payment cheque in 15 days time.

July 2008: No cheque despite vigorous follow up. Finally in the last week of July sent an e-mail notice to the insurance company that I would complain to the Insurance Ombudsman if I did not receive the payment.

August 4, 2008: Finally I receive the cheque by courier.

My learnings from the whole episode:

1. Never pay by credit card overseas. Only the card issuer goes laughing all the way to the bank.

2. The Indian insurance companies have specific requirements that make the process of pre-approval that much more difficult overseas as it is not in line with local practices.

3. The moment you submit claims to the Indian TPA brace yourself for delays.

4. Use the two magic words 'Insurance Ombudsman' in your letters and e-mails. That's the one thing that makes the wheels move.

5. The insurance broker is worth his weight in gold if they have people like Prakash working for them.

6. While the delays were annoying and the amount retained by the credit card company was scandalous, I don't think I will ever venture outside Indian shores without a proper travel insurance policy.

7. If you have to fall ill do so in a country like Switzerland, where even the general ward is better than the luxury suites of Indian hospitals. The nursing staff actually helped us in booking a hotel for the night and summoned a taxi for us. A level of service that I cannot even imagine in India.

Protections for AIG Policyholders

People with an annuity or a life-insurance, auto or homeowners policy through American International Group are no doubt mighty worried right now as they watch that company struggling.

But policyholders don't need to panic, experts say. For one thing, while the holding company is in financial distress, AIG's insurance subsidiaries are separate entities that are financially sound, regulators and others say.

AIG's insurance subsidiaries "did not receive a bailout; they are financially solvent," Sandy Praeger, president of the National Association of Insurance Commissioners, said in a statement last week. She added in an interview that "state insurance laws regulate the AIG subsidiaries to assure that the assets are preserved to protect the interests of policyholders."

Further, if an insurance company were to fail, each state runs an insurance guaranty association to protect policyholders. Insurers ante up fees to ensure customers of failed firms are protected. Still, those state guarantees are limited -- and that potentially could mean problems for some policyholders if an insurer becomes insolvent.

Your best bet now is to take a measured approach. Find out whether you're fully protected by state guarantees. Contact your state insurance department, or look up your state's rules at www.nolhga.com.

If you're not, weigh your options. Talk to your insurance broker about possible surrender charges or other penalties for exiting your policy or annuity, and determine the cost of purchasing similar products elsewhere. Remember that even consumers with policies worth more than their state's guaranteed limit may have nothing to worry about given that these insurers are solvent.

Life-Insurance Protections

State guaranty associations protect life-insurance policyholders for at least $100,000 in cash surrender or withdrawal value and at least $300,000 ($250,000 in California) in death benefits, says Peter Gallanis, president of the National Organization of Life and Health Insurance Guaranty Associations in Herndon, Va. Some states provide protection up to $500,000.

For policyholders within their state's limits, if a company fails, "there is a very good chance that your policy will be transferred [to a different insurer] and you'll never miss a beat," Mr. Gallanis says.

For fixed annuities, states generally cover up to $100,000, though some guarantee $300,000 or more.

Variable annuities are investment products. Generally your money is invested through a subaccount that is separate from the insurer's assets and not covered by state associations. However, the portion of the contract that promises a payout from the insurer usually is covered.

Usually a failed insurer's business is taken over by another company in what can be a seamless transition for policyholders, Mr. Gallanis says.

"Typically the new insurer will provide all of the protection that would have been provided under the old policy," he says.

But it is possible in some situations that people with life-insurance policies worth more than the state limits may find they're on the hook for a higher premium or a reduced death benefit, Mr. Gallanis says.

Similarly, it's possible an annuity contract might be modified by an acquiring company; for instance, if the promised interest rate is deemed too high. But that's a rare event, requires approval by regulators, and is much likelier when an insurance company's failure is rooted in its policy-writing practices.

Auto, Home Policies

There are similar state guaranty associations protecting consumers with homeowners and auto-insurance policies. If you have a claim filed with a company that then fails, "the guaranty fund steps into the shoes of the insurance company from a claims-paying perspective," says Roger Schmelzer, chief executive of the National Conference of Insurance Guaranty Funds in Indianapolis. Most state guaranty associations cover homeowners- and auto-policy claims up to $300,000, he says.

If you've prepaid a premium, that is also usually recoverable through the guaranty association, says Barb Cox, the group's vice president of legal and regulatory affairs, though the limit may be $10,000 or $25,000.

Meanwhile, if you're simply holding a policy, with no claims in process, then consider shopping around, Mr. Schmelzer says.

Read more at marketwatch.com

Why some insurance claims are not payable

Last week a friend called to say that his Ford Ikon had been stolen and he didn’t have theft coverage for his car. A few hours later he called back. The car had been found! But the thief had crashed it. “Thank God” he told me, “I am now going to claim for the repair from the insurer”. But he was disappointed when I explained to him that “theft” being the proximate cause of the loss and an excluded peril, the claim will not be paid by the insurance company.

When life insurance emulates the mutual fund sales pitch

While paying claims, Insurance companies look at “what exactly caused” the event leading to a loss. In my friend’s case, it was the theft of the car. It was the thief who wrecked it. Theft was the ‘proximate cause’. My friend didn’t have coverage for theft, so the insurance company would not honour the claim.

Life insurance agents are in demand

What causes a loss? On its face, this seems to be a simple question. But real life is rarely that simple. Many events and circumstances combine to produce a particular result. So, confusion prevails when there are multiple events that lead to the loss. This is where the doctrine of proximate cause helps.

Insurance reforms close to reality

‘Proximate cause’ is defined as “The active, efficient cause that sets in motion a chain of events, which brings about a result, without the intervention of any new or independent force.”

Mediclaim: Ten questions you should ask your TPA

As one is aware, every policy has a set of perils that are covered and another longer list of perils that are excluded. In fact, while deciding to opt for an insurance policy, what you actually decide is to protect yourself against is the financial losses you may suffer due to a set of certain perils.

Insurers get innovative on renewal payments

Take, for example, a home owner choosing a Fire policy and skipping a Machinery Breakdown policy (which would have covered his electrical equipment). He has chosen to take cover for Fire and allied perils and ignore Breakdown-related perils.

'Health insurance premium reduced'

There happens to be a fire in his building, following which there are frequent electrical fluctuations and his refrigerator breaks down after a few days. He would naturally expect that the claim will be paid through the fire policy! Alas! He would be in for a disappointment.

The fire policy does not include “breakdown-related” perils and since the proximate cause was ascertained to be “breakdown” and not the “fire” directly! If you get selective in coverage (innocently or otherwise!), well, the insurer gets selective in paying claims too!

The following two cases illustrate whether a remote cause can be considered as the proximate cause of a loss:

Case I: Lightning damaged a building and weakened a wall. A day later, the weakened wall was blown down by high winds. Lightning was considered to be the proximate cause.

Case II: Fire damaged a wall and weakened it. Several days later, a gale blew down the weakened wall. It was held that fire was not the proximate cause.

The point to note here is the length of time that passed before the remote cause occurred which made the difference between the two cases.

In the second case, there has been a break in the chain of causation because of which the initial event will not be treated as the proximate cause for a loss.

Consider this too: Firemen remove undamaged stock from a burning building to protect it from fire. It is stacked in the open yard and subsequently damaged by rain. Was the proximate cause of the damage — the fire or the rain?

If the rain damage occurred before the Insured had an opportunity to protect it, then the proximate cause of the damage would be fire, which is covered under the fire insurance policy. However, if the stocks were left unprotected for an unreasonably long period, the rain would be a new and independent cause of damage that is normally not covered under the policy.

There are many examples of such claims, which at first sight suggest that the proximate cause is obvious, but on more detailed enquiry, different conclusions are reached.

Understanding proximate cause in the context of a loss can be a daunting task. The facts of insurance claims are usually complicated — given the different potential causes of loss involved and exclusions in play.

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Some jurisdictions may view the exclusion ambiguous and in favour of the insured and other jurisdictions may view it as being clearly in the insurer’s favour.

In the end, a claim on an insurance policy is an exercise in patience.