Insurance cover a must for fintechs participating in RBI sandbox

MUMBAI: The start-ups taking part in Reserve Bank of India’s proposed regulatory sandbox would be required to take an insurance cover based on the risk of operation and potential customer liability before entering the program, the central bank said in its final framework document released on Tuesday.

Sandbox entities shall be required to take liability/indemnity insurance of an adequate amount and period to safeguard the interest of the customers,” as per the document. The regulator had earlier placed a draft regulation inviting stakeholder comments on the public domain in April.


The cover of the policy would be based on factors such as exposure to customers, the number of claims that may arise of a single event and number of claims expected during the operating period of sandbox.

The policy cover shall begin with the start of the testing stage and end three months after the exit of the sandbox entity from the RS.”


The framework document also doesn’t provide any legal waiver to the companies operating in the sandbox. Furthermore, any loss incurred by the customer would have to be borne by the sandbox entity, the central bank said.


The Regulatory Sandbox is a special environment to enable time-bound testing of innovations under a regulator’s oversight. It allows for the testing of new financial products, technologies, and business models under a set of rules and supervisory requirements, with appropriate safeguards.




Hiring activity picks up with more demand for sales and marketing, IT sector professionals

Hiring activity picks up with more demand for sales and marketing, IT sector professionals

In Delhi and Mumbai, IT sector hiring trend grew by 27%

Hiring in production and maintenance, and banking saw a dip of 10% and 21% respectively

New Delhi: Hiring activity picked up in July across India with sales and marketing, and IT sector recording good growth and banking sector witnessing a sizeable dip, a fresh survey has found.


As per the survey, hiring for professional sales and business development grew by 11%. Other functional areas which observed a rise in demand were Accounts (11%), HR (10%), Marketing (10%) and IT Hardware (7%), as per survey.


However, hiring in production and maintenance, and banking saw a dip of 10% and 21% respectively.


While for the entry and mid-executive level (0-7 years of experience), the hiring trend saw 16% growth, it was 10% for mid-management roles with 8-12 years of experience. Hiring for senior management roles with 13-16 years of experience were up by 6% and Leadership roles grew by 4% in the hiring activity.


Among cities, in the national capital region of Delhi, the hiring activity grew by 10%, in Mumbai it saw a 6% growth and Chennai it was 10%. Bangalore and Hyderabad recorded 20% and 24% growth in July 2019 as against July 2018.

In Delhi and Mumbai, IT sector hiring trend grew by 27%. However, FMCG sector recoded a 7% dip in the national capital. There was an increase in demand for entry-level professionals with experience of 0-3 years by 14% and 9% in Delhi and Mumbai respectively.


In Pune, the rise in hiring for IT-Software and BPO were 29% and 7% respectively, while hiring in the auto sector witnessed 2% dip, the survey said.




Country-wide floods may spike up insurance losses

Country-wide floods may spike up insurance losses

This could push up insured losses from natural disasters from 2014-2019 to Rs 30,000 crore

Floods have ravaged parts of Assam, Kerala, Karnataka, Maharashtra, Madhya Pradesh and Odisha over the past few months. Almost 60-70 people are said to have lost their lives across the country in various flood-related incidents, apart from massive loss to property and vehicles. It is expected that this will lead to a rise in insured losses.

Initial estimates suggest that insurance claims could touch Rs 50-60 crore in the next few weeks. If the monsoon rains intensify, the situation could worsen. This could push up insured losses from natural disasters from 2014-2019 to Rs 30,000 crore.

Cyclone Fani that hit Odisha in April/May led to insurance losses of almost Rs 2,000 crore which causing a rise in underwriting losses for general insurance companies. This means the claims paid exceeded the premium collected. Similarly, the Kerala floods led to claims of Rs 1,400 crore for life and general insurers.


“We have already faced a hit in Q1. If the rain situation continues, the combined ratio will also suffer,” said the head of underwriting at a private general insurer.

Claims from global natural catastrophes in 2018 were pegged at $76 billion, according to the Swiss Re sigma report. The combined insurance losses from natural disasters in 2017 and 2018 were $219 billion, the highest-ever for a two-year period.

In India, the Mumbai floods of 2005 were one of the largest cases of insurance loss events. A Swiss Re sigma report said that in the event of torrential rainfall, rapid urbanisation reduces avenues for water discharge and can lead to heavy flooding. Such was the case in Mumbai in 2005, when flooding after heavy rains resulted in one of the largest insurance loss events ever experienced in India ($0.9 billion, according to sigma data).

In the last five years, losses due to catastrophes have led to insured losses of almost Rs 25,000 crore. This includes losses due to the Uttarakhand floods, cyclones Hudhud, Fani and Phailin, the Chennai and Kerala floods.


The share of uninsured catastrophe losses varies by region. A Swiss Re report said it was typically higher in developing countries where infrastructure construction and implementation of catastrophe risk mitigation measures did not keep pace with economic growth. However, there are areas of under-insurance in advanced countries too, even in those with known medium to high exposure to certain hazards.

Insurance companies have a natural catastrophe clause that covers damage to property or vehicles for these incidents. For death due to such an incident, a term insurance cover will provide the life insurance claim.

The centre fully funding this initiative is not a feasible idea. Having a catastrophe bond to fund the claims from such incidents has been a model followed in other markets, but not yet allowed in India. A natural catastrophe pool to fund major incidents was under discussion about three years back, but it hasn’t yet been implemented.

With the rise in the number of natural catastrophes in the country, Insurance Regulatory and Development Authority of India (IRDAI) chairman Subhash C Khuntia said they are looking into the possibility of having a few pilot projects in vulnerable areas to offer property insurance.