Damien Marmion believes that while banks choose insurance partners with multi-line products, they should be allowed to tie up with more than one insurer so customers have a choice
Dr Damien Marmion, chief executive officer, Max Bupa Health Insurance, says his company's approach on in-house cashless service gives it an edge. He aims to ensure that growth does not come at the cost of customer service. In an interview to Moneylife, he discussed the progress the company has made in a year since it was launched, his experiences and plans, and the way forward for the industry.
Mediclaim customers have major issues getting cashless approval. How do you handle it?
It starts with the education of customers, agents and hospital staff. The handbook has simple diagrams on the steps a customer must take. Hospitals have a regular turnover of staff, so it may entail retraining. There is a system in place whereby the customer is updated on the different stages by SMS. Our sales manager made an anonymous attempt to get cashless approval and managed to get it within 45 minutes. Our approach on in-house cashless approval gives us an edge. It is a 24-hour service.
How is your direct approach better than the TPA (third party administrator) service that is associated mostly with PSU insurers?
The main complaint of mediclaim customers is the TPA service. We wanted to avoid that route. Our cashless is restricted to only 860 hospitals, but corporate hospitals in major cities are covered. Moreover, we have done quality inspection at 540 hospitals to ensure proper medical standards. This is usually not done by insurance companies.
Do you find inflated bills when customers go for cashless treatment? Unnecessary diagnostics tests, procedures?
We have agreed on the tariff rates at all the hospitals where we have negotiated for cashless treatment. Apart from that, we have relationship doctors in 11 cities that are in touch with the hospital when a customer is admitted. We also analyse reimbursement claims. Some people think most of the claims are fraudulent. It's not the case. Corporate hospitals want to protect their brand and attract customers.
But you have a presence mostly in bigger cities.
We want to walk before we can run; expand one city at a time. Many insurers start off with trying to get customers from everywhere, only to end up with customer service being affected. Telesales and the online channel helps us to reach out to customers in numerous cities (where the agency force may be absent).
Have you explored the bancassurance channel?
As of today, bancassurance is restricted to a tie-up with one insurer. Banks go with insurers offering multi-line products so that they can sell motor insurance and other products too. The Insurance Regulatory and Development Authority (IRDA) should open it to multiple insurers. If customers want choice, then give it.
Have you started getting claims now that your company is over a year old? Have you had the experience of a policyholder going to the insurance ombudsman due to rejection of claims?
We have started getting quite a few claims. There is only one case with the insurance ombudsman. It is more to do with disclosure problems while taking a policy (which led to the claims rejection).
Based on your interaction with IRDA and GIC, how is the progress on health insurance portability that is to be implemented from 1st October? Do you think all insurers and IRDA will be ready by the 1st October deadline?
The details are still being worked through. So, we cannot conclude the date until we have the details sorted out.
How has policy renewal been after one year of business?
It has been in line with our expectations. 70% to 80% of existing customers have renewed their policies. We should have new business of Rs70 crore this year.
You offer an incentive of 10% renewal premium for health services and products.
This is in line with our initiative of 'Your Health First' for healthier living. Preventive healthcare is the best approach.
You do not offer alternative medical treatments like homeopathy, ayurveda, etc.
Not, at this time. Eventually, we will get to it.
Linking the implementation of norms and safeguards to availability of priority sector lending can minimise the risk of failure while improving the protection of the interests of clients and investors
While we are on the topic of the microfinance bill, I would like to bring up the aspect of incentives which are very crucial in any regulatory/supervisory framework. Indeed, incentives are very necessary in a nascent industry like microfinance and their impact is likely to be phenomenal, provided they are well structured and appropriately implemented. Accordingly, I suggest some incentives for the proposed microfinance bill and hope that the Reserve Bank of India (RBI), as the regulatory/supervisory authority, would try and implement this on the ground.
For microfinance institutions (MFIs)
Dividend and bonus share issue capi
The bill and its regulatory framework would have to specify a permanent specified cap on dividends (it could be 10%-15% on shareholder equity and decided through consensus among industry stakeholders) and issue of bonus shares for any MFI that wants to be registered with the proposed authority as per provisions in the bill.
Registration, in turn, will provide such MFIs with access to priority sector loan funds from banks, the complete freedom to act as banking correspondentsii and immunity from state level usury laws. Additionally, the MFI will be required to meet certain minimum standards with regard to governance, systems (human resources, portfolio management, MIS, finance and accounting, internal audits, internal controls, and so on), client protection/literacy and other aspects as per the suggested framework that have been outlined in an earlier Moneylife article.
It also goes without saying, that the framework will utilise various means (on-site and off-site supervision, etc) to ensure that these non-negotiable minimum standards are indeed met in a dynamically changing microfinance environment, quarter-on-quarter, year-on-year.
All stakeholders (from senior management, right up to field level staff and directors/board members, if appropriate) at registered MFIs, would have to adhere to compensation caps as per the suggested framework. At any cost, the compensation should not exceed that of similar positions in public/private sector banks, whichever is higher. Further, for salaries/compensation above a certain limit (to be fixed in the suggested framework) and certain key positions (like managing director, CEO, CFO, etc), the registered MFI would have to take necessary approvals from the authority.
Disclosure by promoters/directors/senior management of their personal assets and shareholding in MFI
Promoters, directors and senior management at all registered MFIs would have to provide yearly statements of their assets and liabilities, as also transparently list their and their family/friends' investment in the MFIs. This would be mandatory as part of the suggested framework.
If any MFI does not want to accept the dividend cap, bonus share issue cap, compensation cap and disclosure norms, then they would be free to raise funds from banks and/or other sources at commercial rates to carry on business. In such a case, the loan will not be from a bank's priority sector quota. So, a bank can lend to an MFI at a higher interest rate after factoring in the appropriate risks for the sector. Thus, such MFIs that are not eligible to register under the legal framework offered by the proposed microfinance bill, will not (a) gain access to priority sector funds, (b) be able to act as banking correspondents, and (c) enjoy the benefits and/or immunity provided by this framework against state level usury laws.
Focus on all kinds of MFIs
Encourage banks to lend to large and small MFIs (with different models) so that overall risk for the banking sector is minimised. Also, no MFI becomes too big to fail. Thus, it will also minimise the material impact on a bank's balance sheet in case a large MFI fails. This is a very important lesson from the present crisis.
Meeting the standards
Loans made to MFIs that have a dividend, bonus share issue and compensation cap in place, that have agreed to certain minimum standards with regard to governance, systems and client protection and provide the mandatory disclosures as per the proposed framework, will come under priority sector targets. That these loans have to be reasonably priced follows naturally. As noted earlier, banks would be free to set a true risk-based price for loans made to MFIs that do not have a dividend, bonus share issue and compensation cap in place, reflecting the level of operational and other risks (including political risks).
If we get these incentives right, here is what I foresee for each of the players.
I hope that I have been sufficiently clear in outlining my incentive proposals. I strongly believe that a crisis should never be wasted, but rather converted into a learning opportunity instead. I also believe that microfinance will not die, irrespective of whatever happens now with regard to the on-going crisis. It is my optimism that makes me seek a proper regulatory/supervisory framework, one that can enable MFIs to grow and flower, one that can protect clients and one that can safeguard public and people's money (loans which are public deposits). All three are important and there can be no compromise on that. I hope the powers that be understand this and attempt to help the microfinance industry with such a clear enabling regulatory/supervisory framework as part of the proposed microfinance bill. It is not too late even now.
iReturn on Assets and Return on Equity caps are possible but there will be workarounds to that by bundling products along with the loan. Thus, the MFIs will be able to show that their revenues are now coming from other income streams. If these caps are in place, then the existing caps on interest rates and margins can be done away with.
iiDividend capped NBFC MFIs, with their primary social orientation, should be allowed to become banking correspondents since there is minimised conflict of interest. Further, they should be encouraged to open savings bank accounts with banks and eventually the loan size to the borrower by the MFI should be linked to the savings of the borrower with the bank (perhaps the supervisory authority can come out with prudential guidelines for ratio of loan to savings). This, in essence, will: (a) Encourage savings for clients; (b) Simplify regulation: One will be able to allow savings to clients without creating deposit taking MFIs in the short and medium term; and (c) Reduce chances of over indebtedness by linking loan size to savings amount.
(The writer has over two decades of grassroots and institutional experience in rural finance, MSME development, agriculture and rural livelihood systems, rural/urban development and urban poverty alleviation/governance. He has worked extensively in Asia, Africa, North America and Europe with a wide range of stakeholders, from the private sector and academia to governments.)
Nifty should find support at 4,785 and then at 4,700. The resistance would be at 5,000
The domestic markets fell by nearly 2% on Friday, closing the week with a loss—the fourth consecutive weekly loss—on global fears that the US could slide into a recession. The intra-day lows on both the Sensex and the Nifty today were the lowest since 26 May 2010.
We expect the Nifty to find support at 4,785 and then at 4,700. After a loss of a day or two, we can expect a bounce back on the bourses. Today’s decline on the market was on a volume of 69.81 crore shares on the National Stock Exchange (NSE).
The market opened lower, tracking weak global markets on the back of weak economic data from the US and the continuing debt issues in Europe. The Nifty opened 85 points down at 4,859 and the Sensex began the day at 16,238, a loss of 232 points from its previous close. Heavy selling was witnessed in IT and banking stocks, with blue-chips like Infosys, ICICI Bank, TCS and HDFC Bank falling sharply.
The decline attracted bargain-hunting and investors lapped up stocks at lower prices. The market touched the day’s high in mid-morning trade, though the indices were in the negative. At the highs, the Nifty rose to 4,894 and the Sensex touched 16,288.
However, the continuing decline in Asian indices through the session pulled the market down again. Signs of a sharp slowdown in global growth and institutional selling saw the indices drift further southwards.
European stocks edging towards two-year lows on worries over the ongoing debt crisis in Eurozone countries added to the woes and the indices dropped to intra-day lows in the post-noon session. At the day’s lows, the Nifty fell 148 points to 4,796 and the Sensex plummeted 482 points to 15,988.
However, the indices staged a pullback to close above those lows. The Nifty closed at 4,846, a loss of 99 points, and the Sensex finished trade at 16,142, down 328 points from its previous close.
The advance-decline ratio on the NSE was 336:1096.
Among the broader markets, the BSE Mid-cap index declined 1.36% and the BSE Small-cap index lost 2.01%.
Barring the BSE Realty index (up 0.77%), all other sectoral gauges settled lower. The top laggards were BSE IT (down 4.41%), BSE Capital Goods (down 4.17%), BSE TECk (down 3.70%), BSE Bankex (down 1.90%) and BSE Consumer Durables (down 1.68%).
Jaiprakash Associates (up 2.50%), DLF (up 2.47%), Hero MotoCorp (up 2.19%), Hindalco Industries (up 1.13%) and Tata Power (up 1.03%) were the top Sensex gainers. Infosys (down 5.79%), Tata Motors (down 5.28%), Larsen & Toubro (down 4.95%), BHEL (down 4.63%) and ICICI Bank (down 3.65%) finished at the bottom of the index.
The main gainers on the Nifty were JP Associates (up 3%), DLF (up 2.85%), Hero MotoCorp (up 2.17%), Hindalco (up 2%) and Reliance Infrastructure (up 1.20%). The key losers on the Nifty were Tata Motors (down 5.58%), Infosys (down 5.48%), L&T (down 4.98%), BHEL (down 4.71%) and Dr Reddy’s (down 3.53%).
Markets in Asia also closed the week on a dismal note. The Seoul Composite plunged over 6% on fears that the global slowdown would lead to another recession. Poor economic data from the US and concerns about the health of banks in Europe also weighed on the markets in the region.
The Shanghai Composite declined 0.98%, the Hang Seng tumbled 3.08%, the Jakarta Composite dived 4.43%, the KLSE Composite fell 1.29%, the Nikkei 225 tanked 2.51%, the Straits Times slipped 3.23% and the Taiwan Weighted plunged 3.57%.
On Thursday, foreign institutional investors were net sellers of stocks worth Rs488.67 crore. On the other hand, domestic institutional investors were net buyers of stocks worth Rs330.42 crore.
Today, state-run ONGC pipped corporate giant Reliance Industries (RIL) in late morning trade to emerge as the country’s second-most valued company, behind Coal India, with a slightly higher market valuation. Around 1145 hours today, ONGC commanded a market valuation of Rs2,38,528 crore on the BSE, which was a little more than RIL’s market value of Rs2,37,882 crore at that time. ONGC ended 0.45% lower at Rs275 on the NSE, while RIL settled at Rs731, down 1.38%.
Tata Consultancy Services (TCS), the IT leader, today announced the launch of iON—the first-of-its-kind fully integrated information technology solution for small and medium businesses (SMB) in the national capital region. iON provides best-in-class, on-demand business solutions using the very latest in scalable cloud computing technology. Using a pay-per-use business model, iON helps SMBs leverage world-class technology solutions as a key business differentiator. The stock settled 2.74% lower at Rs936 on the NSE.
Jindal Cotex has received an approval to raise funds/capital up to Rs200 crore by way of issue of equity shares/securities, including GDRs and/or ADRs convertible into equity shares, FCCBs, QIP or any instrument or securities representing convertible securities such as convertible debentures, bonds, warrants, etc, convertible into equity shares, in one or more tranches, in domestic or foreign markets. The stock fell by 2.11% to Rs90.25 on the NSE.