27 th India Fellowship Seminar Cyber risk and
27 th India Fellowship Seminar Cyber risk and Terrorism risk - Increasing insurance Challenges in pricing penetration through POS - challenges and solutions Supervisor: P. A. Balasubramanian, FIAI Presenter: Richa Mathur Guide : Bikash Choudhary 1 st June 2017 Mumbai Indian Actuarial Profession Serving the Cause of Public Interest
Agenda Cyber risk and Terrorism risk Challenges in pricing q Current Scenario of Indian Insurance Industry q Regulatory Framework and Timelines o Non Life and Health o Life Supervisor: P. A. Balasubramanian, FIAI q What is a POS Product o Non Life and Health o Life q POS Persons q POS – an Opportunity q Challenges and Solutions 1
Cyber risk and Terrorism risk - Insurance Penetration & Density Challenges in pricing Supervisor: P. A. Balasubramanian, FIAI 2
Regulatory Framework – Non Life & Health To increase insurance penetration in the country IRDAI introduced ‘Point Of Sales (POS)’ regulations Non Life & Health Guidelines Oct 26, 2015 Cyber risk and Terrorism risk Challenges in pricing § Guidelines on POS Person - Non Life and Health : 26 Oct 2015 IRDA/l. NT/GDL/ORD/183/10/2015 Circular on Guidelines on POS Person : 11 March 2016 Supervisor: IRDA/INT/GDL/ORD/047/03/2016 P. A. Balasubramanian, FIAI § Govt. approved Crop Insurance Scheme through POS : 24 Jun 2016 Circular on POSP: Nov 7, 2016 § IRDA/INT/CIR/PSP/123/06/2016 § Addition of Products for Sale through POS Circular : 13 July 2016 IRDA/INT/CIR/PSP/139/07/2016 § Revision in Guidelines on POS Person : 16 Mar 2017 IRDA/ l. NT/ GDL/ PSP/058/03/2017 Govt. approved Crop Insurance Scheme through POS Jun 24, 2016 Addition of Products of Sale through POS –July 13 , 2016 3
Regulatory Framework – Life § Guidelines on POS Product– Life Products : 7 Nov 2016 IRDA/ LIFE/GDL/222/11/2016 § Guidelines on POS Person– Life Products : 7 Nov 2016 IRDA/ LIFE/ORD/GLD/223/11/2016 § Supervisor: Modifications Guidelines on POS Person : 7 Feb 2017 P. A. Balasubramanian, FIAI Regulations on POS Products and Persons: Nov 7, 2016 Modifications to Guidelines Feb 7, 2017 § Circular on POS Database : 13 Apr 2017 IRDA/ l. NT/ POS/ GDL/ PSP/084/04/2017 Circular on POS Database Feb 7, 2017 4
POS Product – Non Life and Health q The POSP can only sell the following pre-underwritten products : - Cyber risk and Terrorism risk § Motor Comprehensive Insurance Package Policy for Two-wheeler, private car and commercial vehicles § Third Party Liability (Act only) Policy for Two-wheeler, private car and commercial vehicles Challenges in pricing q § Personal Accident Policy § Travel Insurance Policy § Home Insurance Policy § Any other policy specifically approved by the Authority Following additional products were included: - § Crop Insurance – Government insurance schemes such as o Pradhan Mantri Fasal Bima Yojna (PMFBY) o Weather Based Crop Insurance Scheme (WBCIS) o Coconut Palm Insurance Scheme (CPIS) § Hospital Cash Policy – fixed benefit in form of cash for everyday of hospitalization with a limit of Rs. 1 lakh per individual § Critical Illness Policy which covers 8 -9 CI with the maximum sum insured limit of Rs. 3 lakhs per individual § Cattle/ Livestock § Agricultural Pump set Insurance § Fire & Allied Peril Dwelling Insurance 5
POS Life Product q These are Over the Counter, simple plain vanilla products in which each benefit is: § Simple to understand § Stated upfront clearly § Fixed/ Pre-defined q Only non-linked and individual insurance products q Product names to be pre fixed with the word. POS(POS- Product Name) q Inbuilt ADB rider allowed q Certificate of compliance from the CEO and AA to be submitted along with product filing Pure Term Insurance Product with or without return of premium Non-linked Nonparticipating endowment (money back feature allowed) Immediate Annuity with Return of Purchase Price on Death “Any other product category” if permitted by the Authority q Existing products can be sold after suitable modification and approval by the Authority 6
Additional Features of POS Life Products Key Features Document (KFD) cum Proposal Form for POS Life Products Cyber risk and Terrorism risk - q Proposal form to consist of two parts§ Key Feature Document § Proposal form Challenges in pricing Contents of KFD Design • Both the parts to be joined by perforation for the ease of separation • KFD cum Proposal Form to carry Unique Reference Number on both parts • Cover all key benefits including but not limited to: • • • Sum Assured on death Maturity benefit Surrender value Paid up value(if any) Exclusions Registered name and address of the life insurer with logo 7
Entities Authorized To Sell POS Life Products POS Person Life Insurance Individual Agents POS-Person-Life Insurance Intermediaries authorized to solicit Life Insurance products Insurers directly 8
Point of Sale Person (POSP) Cyber risk and Terrorism risk Appointment Appointed by insurers and authorized insurance intermediaries Identification of POSP by Aadhar card no. or PAN card no. Challenges in pricing Eligibility Criteria 18 years of age 10 th standard pass Supervisor: P. A. Balasubramanian, FIAI In-house training of 15 hours for the POSP Training & Certification Commission Conduct an examination on completion of training Written agreement with passed POS-persons for sale of POS-products Maintain a record of the training and examination for at least 5 years For POSPs engaged by intermediaries no commission is payable by the insurer For POSPs engaged directly by the insurer, commission as proposed in the product F&U and approved by Authority as applicable to individual agents is payable 9
Point of Sale Person – Life Tagging of Proposal Form & Insurance Policy to POSP § All proposal forms (physical or e-form) and policies to carry provision to record Aadhar card or PAN card number of sourcing POS-Person § In case of sale through insurance intermediary, Aadhar/ PAN card number to be captured in Proposal Form and Insurer to capture the same with the policy § Authority may consider the conduct of POS-Person as one of the factors while renewing the certificate of registration of the insurance intermediary Compliance § Life Insurers & Insurance Intermediaries shall make suitable provision in their Policy Administration System to capture Aadhar card or PAN card number of POS Person – Life Insurance § Authority shall specify the format and manner of maintaining the records and filing returns which the insurer and the intermediary shall maintain in electronic form which can be accessed by the Authority on a remote location basis § Formats shall give the number of policies sold and the premium collected by POSP on a monthly basis 10
POS – An Opportunity! Facilitate the risk growth ofand insurance. Terrorism business to increase insurance Cyber risk -penetration and density Challenges in process pricing Simplified certification for agents enables easy sales and policy acquisition Helps to create brand in rural areas / small cities in the long term Relaxed qualification for POS-persons Instant issuance will be appreciated by the policyholder Help reduce per policy cost and making products competitive Waiting period up to maximum 90 days from the date of acceptance of risk 11
Challenges No medical underwriting will lead to adverse selection against the company TAT for issuance of the policy/acceptance of risk and communication of acceptance: § Not more than 2 working days (excluding holidays)from the date of collection of proposal at the point of sale § In case of rejection of proposal for any reason, the refund of payment to be done to the proposer/life assured within 7 days from the date of decision 12
Challenges Risk of Mis-selling due to relaxed eligibility requirement New market with no experience Lapses would be uncertain Decision to make modifications to existing products or file new products Changes required in Policy Administration System 13
Solutions Waiting period up to maximum 90 days from the date of acceptance of risk Stringent non medical underwriting Monitor experience Product Experience POSP - Authority may consider the conduct of POS-Person as one of the factors while renewing the certificate of registration of the insurance intermediary Supervisor: Tracking of POS through centralized databased on IRDAI circular dated 13 P. A. Balasubramanian, FIAI th April ‘ 17 Identify products in current portfolio which could be modified Cost effective Ease in obtaining regulatory approval Develop systems and build robust framework and controls to meet TAT and minimize operational errors Cost vs Benefit Analysis 14
Thank You! Supervisor: P. A. Balasubramanian, FIAI
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