Page 6 - Insurance Times August 2019

100% FDI in insurance in- Oil shipment insurance cost increases after Middle East
termediaries tanker attacks
The government has proposed a 100% The rapid increase of insuring cost of West Asian oil shipments after Middle
foreign direct East Tanker attacks has become a major concern on
inve s tmen t a region responsible for about a third of all seaborne
(FDI) in the in- petroleum. According to the experts, war risk premi-
surance inter- ums for a standard oil cargo from the Persian Gulf and
mediaries, i.e., the tanker hauling it can now cost as much as
broking farms from the present level $500,000. However, previously this year, the same premiums would cost own-
of 49% in the Budget. Meanwhile, the ers less than a tenth of that.
government has also decided to sepa- The vulnerability of maritime traffic came into light when US President Donald
rate the National Pension System Trump said other nations are required to provide more support to protect navi-
(NPS) from pension regulator Pension gation from West Asian in the wake of six attacks on tankers since early May.
Fund Regulatory and Development The incidents prompted an advisor to insurers to determine the entire Persian
Authority (PFRDA) to resolve the issues Gulf as a riskier area for shipping and giving underwriters chance to impose
over conflict of interest. bigger premiums. Sandy Fielden, an analyst, said, “This will get passed on the
While declaring the FDI hike in the customers.” He added, “Refiners are paying more for crude and they will pass
Budget, Finance Minister said that on the cost to customers if they can. If refiners choose not pass that along, their
the government was also looking margins would get squeezed.”
into possibilities of increasing the The insurance prices being lifted fall into two categories: one is for the vessels
FDI limit in the insurance companies themselves, the other for their cargoes. While the cost of covering the tankers
from the current level of 49%. On surged as soon as the most recent attacks happened, the surge in prices for
the other hand, insurance sources the cargoes only happened over the past week.
said the FDI cap is likely to be in-
creased to 74% soon. In order to cover a cargo valuing $130 million, underwriters are now planning
to charge anywhere from $150,000 to $325,000, according to the experts. De-
Sumit Rai, MD & CEO, Edelweiss Tokio spite the surge in insurance premiums, the extra cost is still a small part of a
Life Insurance, said, “The proposed barrel of crude. Based on standard supertanker cargo, $500,000 would equate
100% FDI in insurance intermediaries to 25 cents per barrel. Brent futures traded at about $64.40 in London.
will have a positive impact on cus-
tomers, intermediaries and the sec-
tor.” He added, “Insurance distribu- Reliance Gen Insurance's digital campaign brings back
tion is an upfront-capital intensive childhood cricket memories
business with a long gestation period, Reliance General Insurance has recently rolled out its digital marketing cam-
and given low insurance penetration paign #CoveredHai, which takes customers on a nostalgic experience with a
in India, there is a significant need to video that integrates insurance expectations with unforgettable memories of
strengthen existent distribution net- childhood cricket situations.
works. The proposed 100 per cent
FDI, coupled with a strong India The primary aim of the company is to connect with customers emotionally by
growth story, will enable intermediar- conveying the message that unforeseen situations like losing the only ball, bad
ies to expand faster in non-urban weather, or even parents ending a child’s game, etc. may not be covered, but
markets, deepening insurance pen- the broken windshield of vehicle is.
etration in the country.” #CoveredHai campaign reinforces the brand’s mission in order to satisfy the
Adopting cautious approach, Tapan customer’s need for insurance cover during crucial times. The video has been
Singhel, MD & CEO, Bajaj Allianz created in collaboration with AGENCY09, and it is live over digital media as well
General Insurance, said, “When it as social media platforms.
comes to opening up of 100 per cent Rakesh Jain, CEO, Reliance General Insurance, said, “Cricket happens to be
FDI in intermediation in insurance, India’s most loved and celebrated sport and #CoveredHai connects with fans
we will have to wait and watch on across the country during this season to strengthen our existing relationship as
how this develops further.” well as build new ones.”

6 The Insurance Times, August 2019