Challenges and Solutions in Cyber Risk and Terrorism Risk Seminar

27th India Fellowship Seminar Cyber risk and Terrorism risk - Challenges in pricing POS - challenges and solutions Increasing insurance penetration through Supervisor: P.A. Balasubramanian, FIAI Presenter: Richa Mathur Guide : Bikash Choudhary 1st June 2017 Mumbai Indian Actuarial Profession Serving the Cause of Public Interest

Agenda Cyber risk and Terrorism risk - Challenges in pricing Regulatory Framework and Timelines o Non Life and Health o Life Current Scenario of Indian Insurance Industry Supervisor: P.A. Balasubramanian, FIAI What is a POS Product o Non Life and Health o Life POS Persons POS an Opportunity Challenges and Solutions 1

Cyber risk and Terrorism risk - Challenges in pricing Insurance Penetration & Density Supervisor: P.A. Balasubramanian, FIAI 2

Regulatory Framework Non Life & Health Non Life & Health Guidelines Oct 26, 2015 To increase insurance penetration in the country IRDAI introduced Point Of Sales (POS) regulations Cyber risk and Terrorism risk - Challenges in pricing Guidelines on POS Person - Non Life and Health : 26 Oct 2015 IRDA/lNT/GDL/ORD/183/10/2015 Circular on POSP: Nov 7, 2016 Supervisor: P.A. Balasubramanian, FIAI Govt. approved Crop Insurance Scheme through POS : 24 Jun 2016 IRDA/INT/CIR/PSP/123/06/2016 Circular on Guidelines on POS Person : 11 March 2016 IRDA/INT/GDL/ORD/047/03/2016 Govt. approved Crop Insurance Scheme through POS Jun 24, 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/ lNT/ GDL/ PSP/058/03/2017 Addition of Products of Sale through POS July 13 ,2016 3

Regulatory Framework Life Regulations on POS Products and Persons: Nov 7, 2016 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: P.A. Balasubramanian, FIAI Modifications to Guidelines Feb 7, 2017 ModificationsGuidelines on POS Person : 7 Feb 2017 Circular on POS Database : 13 Apr 2017 IRDA/ lNT/ POS/ GDL/ PSP/084/04/2017 Circular on POS Database Feb 7, 2017 4

POS Product Non Life and Health The POSP can only sell the following pre-underwritten products :- Cyber risk and Terrorism risk - Challenges in pricing Travel Insurance Policy 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 Personal Accident Policy Home Insurance Policy Any other policy specifically approved by the Authority Following additionalproducts 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 5 Fire & Allied Peril Dwelling Insurance

POS Life Product These are Over the Counter, simple plain vanilla products in which each benefit is:- Simple to understand Stated upfront clearly Fixed/ Pre-defined Non-linked Non- participating endowment (money back feature allowed) Only non-linked and individual insurance products Pure Term Insurance Product with or without return of premium Product names to be pre fixed with the word- POS(POS- Product Name) Immediate Annuity with Return of Purchase Price on Death Any other product category if permitted by the Authority Inbuilt ADB rider allowed Certificate of compliance from the CEO and AA to be submitted along with product filing 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 - Challenges in pricing Proposal form to consist of two parts- Key Feature Document Proposal form Contents of KFD Design Cover all key benefits including but not limited to: Both the parts to be joined by perforation for the ease of separation Sum Assured on death Maturity benefit Surrender value Paid up value(if any) Exclusions Registered name and address of the life insurer with logo KFD cum Proposal Form to carry Unique Reference Number on both parts 7

Entities Authorized To Sell POS Life Products POS Person Life Insurance POS-Person-Life Insurance Individual Agents Intermediaries authorized to solicit Life Insurance products Insurers directly 8

Point of Sale Person (POSP) Cyber risk and Terrorism risk - Challenges in pricing Appointed by insurers and authorized insurance intermediaries Identification of POSP by Aadhar card no. or PAN card no. Appointment 18 years of age 10th standard pass Eligibility Criteria Supervisor: P.A. Balasubramanian, FIAI In-house training of 15 hours for the POSP 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 Training & Certification 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 Commission 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! Cyber risk and Terrorism risk - Challenges in pricing Simplified certification process for agents enables easy sales and policy acquisition Facilitate the growth of insurance business to increase insurance penetration and density 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: P.A. Balasubramanian, FIAI Identify products in current portfolio which could be modified Cost effective Ease in obtaining regulatory approval Tracking of POS through centralized database based on IRDAI circular dated 13thApril 17 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