Health insurance: Well covered?

It's unheard of for insurers to cancel and renegotiate corporate group health insurance packages mid-way through the financial year. But that's exactly what the Indian general insurance sector is resorting to. "Some corporates had tailor-made group policies with features additional to the basic policies," says an Oriental Insurance Co. official. "These policies have clauses which allowed for cancellation or loading of premium if the policies start bleeding us," he adds.

The trigger for this burst of renegotiation is the impending detariffed regime in the general insurance sector, come January 1, 2007. So far the health insurance business is being subsidised by the fat premia from the fire insurance covers. In pursuit of topline growth, insurance companies had aggressively bundled group health insurance as part of comprehensive insurance plans for companies over the last few years. Now all this is poised to change. "Many of the current health covers on a standalone basis are simply unsustainable," says Rahul Aggarwal, Director with insurance broking firm Optima Risk Management Services.

In detarrifed times, risk-related underwriting rises, which means that in the short term, insurers have two options: Either higher premium or reduced cover. The insurance industry expects a bit of both. Agarwal believes the premium will increase by at least 100 per cent though he does not expect a concomitant decline in existing benefits.

Insurance industry officials expect more segmentation in the kind of covers being extended. Cheaper covers restricted to critical illness of major body parts could be extended to the entire employee force, with add-on benefits being given selectively depending on additional cost and perceived benefits. Bare-bones health policies or the introduction of sub-limits on room rents and medicine costs could also keep insurance costs down. "Corporates could also review covers for dependents, pre-existing illnesses and maternity," says Kartik Jain, Head (Marketing), ICICI Lombard. These categories often lead to high claim ratios.

"Health portfolios need to be considered in totality for the employees only. In case there are additions outside the corporate group, requisite underwriting rules and scales will get applied," says Ajit Narayan, MD & CEO, iffco-tokio General Insurance. Simply put, these additional covers may come at additional cost. A natural corollary, according to Wockhardt Hospitals CEO Vishal Bali, is a grading of hospitals on the basis of infrastructure, technology and expertise that would lead to more standard pricing practices in the medium term. "Detariffing would provide an impetus for a more structured healthcare system." An unintended benefit, but a worthwhile one.

-Shalini S. Dagar

Fossilised State
Full-fledged reforms in the coal sector are needed fast.

Coal sector: Just dig up reforms

If there's one infrastructure sector that is begging for reforms, it's coal. Plagued by controlled pricing, near monopoly public sector operations and, worse, serious entry barriers to private sector participation, the lack of progress has ensured penetration of expensive fuels, like LNG, in the country. The government, constrained by its Left allies' opposition to complete deregulation, is in the process of infusing policy initiatives to enhance the efficiency of mining operations, given that the public sector Coal India is inefficient to the extent of 20-30 per cent.

At present, private sector participation is allowed to the extent of captive mining for the power, fertiliser and steel sectors. This end-use based restriction is itself a sub-optimal choice since mining is a specialised activity and a non-mining end-user (a power or steel company) is forced to pump capital and maintain a minimum 26 per cent stake in a (mining) business where it has simply no expertise. Further, since the prices of power grade coal, accounting for 80 per cent of the current production, are controlled, mining companies are not particularly attracted to the domestic market.

Against this backdrop, the government is planning to allow leasing of mines entirely to mining companies on the condition that the latter have contracts with a power company or a fertiliser company or a steel company. "We have sought the legal opinion on this matter from the Law Ministry and they are agreeable to the proposal. We are in the process of taking a decision," says a top coal ministry official.

So, will this lead to an explosion of foreign mining companies entering the sector? Not really, argue analysts. For, the key to attracting private sector mining in droves lies in offering large mines to the private sector, so that they reap the benefit of scale. However, since the miner will require to link up with a particular power developer, this objective is defeated given the fragile state of the power sector today, where private developers are at best comfortable developing projects that generate 500 mw, no more.

The only company that is right now into large-scale mining is National Thermal Power Corporation (NTPC). The power major is developing a 15-million-tonne mine, enough to fuel 3,000 mw of power. Rather than adopting the joint venture route, NTPC has decided to keep a 100 per cent stake in the mining company.

-Balaji Chandramouli

12k Revisited
Despite a more cheery outlook, the upside looks limited.

When global investing gurus start talking about oil prices coming back into the $40 (Rs 1,880) per barrel range-from recent highs of $78.40 (Rs 3,685)-it's time for even the most sceptical of investors to feel bullish. What makes the picture even prettier in India is a revision in GDP growth by Citigroup from 7.6 per cent to 8.3 per cent. Result? The 30-share benchmark index, the Sensex, breaches the 12,000 barrier, a mark it had first crossed in April 20, 2006, before the markets tanked in mid-May. The subsequent rise from 8,800 to 12,000 has been on the back of low volumes and feeble participation by foreign institutional investors (FIIs).

"In the short term, the market is like a weighing scale, whose swings are controlled by stocks and cash," says Nilesh Shah, CIO, Prudential ICICI Mutual Fund, who agrees the recovery has been fast as well as on low volumes. "The market has recovered on buying (delivery volumes) worth Rs 6,000-7,000 crore, as against the earlier Rs 30,000 crore when the index rose between 9,000-12,000 levels," says Shah.

At the Sensex's lifetime peak of 12,671.11 registered on May 11, 2006, there were huge leveraged positions, which eventually resulted in the sharp correction that followed. What's more at that time, oil prices were hovering at $75 (Rs 3,525) per barrel, and interest rates suddenly spiked in key global market. The scenario on both those fronts has improved, yet market men aren't convinced that the market will hold on at the current levels. Says Amit Rathi, Director, Anand Rathi Securities, "There is no conviction in the market. In the short-term the markets have rallied following the fall in crude oil prices. Still, there isn't a clear picture in the global market. Shah says the Sensex's valuation based on current year's earnings is a bit stretched. 12k is fine, as long as it lasts.

-Mahesh Nayak

Kolkata Without Chaos?
The eastern metro may just get a much-needed facelift.

Kolkata traffic: Red signal

Can you imagine Kolkata without its traffic snarls? If the plans of the Kolkata Municipal Corporation (KMC) do pan out, the 316-year-old city might just get the facelift it so badly needs. Under mounting pressure from international funding agencies, including UK's Department for International Development (DFID), KMC is now reassessing the existing urban fabric of the city and land-use pattern in various zones, from roads and sewerage to parks and buildings. The city will soon have its first comprehensive integrated town plan, which is expected to trigger urban renewal even as it controls haphazard growth. The city civic body has commissioned the town planning department of Bengal Engineering and Science University (BESU) to draw up a plan for development of areas under KMC's jurisdiction. The aim is to harmonise development initiatives in different parts of the city with a set of new rules for emerging urban growth areas, says Sibabrata Halder, who heads the eight-member BESU team of town planners. The main objective of this initiative is to cut chaos and correct existing disorder by chalking out a development roadmap for the city. Kolkata without chaos may be unimaginable but doubtless welcome.

-Ritwik Mukherjee