Following Insurance Regulatory Development Authority's move to allow insurance companies to offer “Health plus Life” products, Future Generali India Life Insurance, the insurance joint business enterprise between Future Group and Generali of Italy, is planning to launch a combo plan in the next 2 months.
“We are looking to launch a health plus term life insurance product, perhaps in the next 2 months. I see this type of product to progressively build over the next 3 to 5 years. It can lead to some other combinations, and set the ball systematic for more complex products,” said Deepak Sood, chief executive officer, Future Generali Life Insurance, on the sidelines of a press meet here today.
In December, the regulator permitted companies to offer “Health plus Life Combo Product” — a policy that will offer life cover along with health insurance. For this, life and non-life insurance companies need to enter into agreements to offer the health-cum-life cover.
At present, about 70(%) per cent of the company's businesses approach from unit linked products. This year, the company is hoping to achieve a new business premium of Rs 1,200 crore, from Rs 486 crore previous years.
The company on Monday launched Future Generali NAV Assure, a unit linked insurance plan, a NAV guarantee unit-linked Insurance plan.
Tuesday, June 29, 2010
Monday, June 28, 2010
Domestic ULIPs with limit on yearly fees
Last week, there was a rise in of stories in the media about how IRDA is about to unleash a wave of reforms upon ULIPs. It seems the insurance regulator has swiftly discovered a number of basic problems in ULIPs and it has decided to attach them. Of course, these intentions have only been expressed off-the-record to choose journalists.
The thrust of these ‘reforms’ seems to be to prevent ULIP investors from exiting early. Instead of 3 years, they’ll have to stay for at least 5 years to exit partially, and up to 10 years to exit completely. It seems that 7 or 8 years after ULIPs became a major product category; IRDA has exposed that when investors exit early they lose a huge chunk of their money.
I can only wonder how the regulator missed something that was common knowledge to everyone else in the financial group of people for so long.
Interestingly, some reports last week mentioned another improvement that could transform ULIPs into a truly beneficial type of investment. This would be the application of all charges and expenses uniformly through the life of the investment. If an insurance company is allowed to charge 3(%) per cent total expenses over a 10-year ULIP, it must stay within that limit every year, instead of averaging the amount over the full term.
Such an improvement would likely align the sellers’ interest with the buyers’. At one stroke, it would clear away almost all the negatives in ULIPs. I fully expect that this particular reform won’t actually happen. But if it does, no investment analyst would be uncertain to recommend ULIPs.
Of course, any of these reforms, if and when they happen, will only pertain to fresh investments in ULIPs launched after the rules are changed. Existing ULIP investors will continue to pay a heavy price because IRDA has only woken up now. Of course, it has actually not woken up yet — it has only told a few journalists (off the record) that it’s planning to wake up real soon now.
The thrust of these ‘reforms’ seems to be to prevent ULIP investors from exiting early. Instead of 3 years, they’ll have to stay for at least 5 years to exit partially, and up to 10 years to exit completely. It seems that 7 or 8 years after ULIPs became a major product category; IRDA has exposed that when investors exit early they lose a huge chunk of their money.
I can only wonder how the regulator missed something that was common knowledge to everyone else in the financial group of people for so long.
Interestingly, some reports last week mentioned another improvement that could transform ULIPs into a truly beneficial type of investment. This would be the application of all charges and expenses uniformly through the life of the investment. If an insurance company is allowed to charge 3(%) per cent total expenses over a 10-year ULIP, it must stay within that limit every year, instead of averaging the amount over the full term.
Such an improvement would likely align the sellers’ interest with the buyers’. At one stroke, it would clear away almost all the negatives in ULIPs. I fully expect that this particular reform won’t actually happen. But if it does, no investment analyst would be uncertain to recommend ULIPs.
Of course, any of these reforms, if and when they happen, will only pertain to fresh investments in ULIPs launched after the rules are changed. Existing ULIP investors will continue to pay a heavy price because IRDA has only woken up now. Of course, it has actually not woken up yet — it has only told a few journalists (off the record) that it’s planning to wake up real soon now.
Friday, June 25, 2010
LIC, Vijaya Bank ink MoU for share out insurance products
LIC on Thursday inked a MoU with Bangalore-based Vijaya Bank for sharing of its life insurance products on an appointment basis.
Vijaya Bank has become the 9th public sector bank to have inked a MoU of the kind with the Life Insurance Corporation (LIC).
Vijaya Bank CMD Albert Tauro said that the union would help Vijaya Bank become a 'one-stop' solution for its clients, offering a range of financial services and products.
With more than 7.5 million customers and a pan-India attendance through 1,163 branches, Vijaya Bank hopes to add to the incremental business of LIC.
A K Dasgutpa, LIC (India) MD, said that the insurance major has a customer support of over 30 crore and banc assurance forms a major component of its business strategy for the future. Partnering with Vijaya Bank would help both the entities match synergies and provide insurance solutions in a method that would be helpful for all.
LIC had collected total first premium to the tune of Rs 42,960.44 crore, and had paid up total claims amounting to Rs 50,535 crore in 2009-10.
The total income generated was Rs 2, 47,310 crore while the total investment had crossed 11 lakh crore.
Vijaya Bank has become the 9th public sector bank to have inked a MoU of the kind with the Life Insurance Corporation (LIC).
Vijaya Bank CMD Albert Tauro said that the union would help Vijaya Bank become a 'one-stop' solution for its clients, offering a range of financial services and products.
With more than 7.5 million customers and a pan-India attendance through 1,163 branches, Vijaya Bank hopes to add to the incremental business of LIC.
A K Dasgutpa, LIC (India) MD, said that the insurance major has a customer support of over 30 crore and banc assurance forms a major component of its business strategy for the future. Partnering with Vijaya Bank would help both the entities match synergies and provide insurance solutions in a method that would be helpful for all.
LIC had collected total first premium to the tune of Rs 42,960.44 crore, and had paid up total claims amounting to Rs 50,535 crore in 2009-10.
The total income generated was Rs 2, 47,310 crore while the total investment had crossed 11 lakh crore.
Thursday, June 24, 2010
PNB to choose up partners' 58% stake in life venture
Punjab National Bank will buy out the 58% stake held by two of its partners in a planned life insurance joint venture, which is still pending regulatory approval. PNB holds a 30% stake in the planned life insurance venture, called Principal PNB Life Insurance Company, in partnership with Mauritius-based Principal Financial Group (26% stake), domestic firm UK Paints (32%) and Vijaya Bank (12%).
The company never got narrow approval from IRDA due to differences between the partners. PNB will buy the entire 26% stake held by Mauritius-based Principal Financial Group in the life insurance company, as well as domestic firm UK Paints’ 32% participating interest, the bank learned the Bombay Stock Exchange. However, the other home partner Vijaya Bank would remain with the joint venture. Following the change in partnership, the name of the planned joint venture would also be changed, sources said. Post regulatory approval, the stake of PNB in the venture would go up to about 88% per cent.
The stake sale was formalised under a communication of Understanding inked between the JV partners for reform their existing joint ventures.
PNB and Vijaya Bank will settle on the future course of action in the insurance company after receiving regulatory approvals and finalisation of the deals, it said. At the same time, the Delhi-based public sector lender will also buy out Principal and Berger Paints stake of 26% per cent and 25% per cent respectively in a proposed insurance broking company, which also did not get off the position.
However, in the asset management joint venture with Principal, both PNB and Vijaya Bank will remain as partners for a period of 3 years. As part of the joint venture restructuring, it was also decided that PNB and Vijaya Bank will sell their 30% per cent and 5% per cent stake respectively in a projected joint venture distribution firm to Principal.
The company never got narrow approval from IRDA due to differences between the partners. PNB will buy the entire 26% stake held by Mauritius-based Principal Financial Group in the life insurance company, as well as domestic firm UK Paints’ 32% participating interest, the bank learned the Bombay Stock Exchange. However, the other home partner Vijaya Bank would remain with the joint venture. Following the change in partnership, the name of the planned joint venture would also be changed, sources said. Post regulatory approval, the stake of PNB in the venture would go up to about 88% per cent.
The stake sale was formalised under a communication of Understanding inked between the JV partners for reform their existing joint ventures.
PNB and Vijaya Bank will settle on the future course of action in the insurance company after receiving regulatory approvals and finalisation of the deals, it said. At the same time, the Delhi-based public sector lender will also buy out Principal and Berger Paints stake of 26% per cent and 25% per cent respectively in a proposed insurance broking company, which also did not get off the position.
However, in the asset management joint venture with Principal, both PNB and Vijaya Bank will remain as partners for a period of 3 years. As part of the joint venture restructuring, it was also decided that PNB and Vijaya Bank will sell their 30% per cent and 5% per cent stake respectively in a projected joint venture distribution firm to Principal.
Wednesday, June 23, 2010
Life insurers’ premium up 63% among Ulip chain
Despite the controversy nearby the regulation of unit-linked insurance policies (Ulips), new business premium of life insurance companies grew 63(%) per cent to Rs 8,218 crore in May 2010, compared with Rs 5,050 crore in the same month last year.
Public sector insurer Life Insurance Corporation (LIC) registered 82(%) per cent jump in new business premium, growing from Rs 3,241 crore in May 2009 to Rs 5,907 crore in 2010.
Private life insurers saw new premium grow from Rs 1,809 crore in May 2009 to Rs 2,311 crore in 2010, a growth of 28(%) per cent.
The controversy over the regulation of Ulips happening after the Securities and Exchange Board of India (Sebi) in April barred 14 life insurance companies from selling Ulips, calling them investment products and asking insurers to seek approval from it before introduction such products.
Following the controversy, most companies kept the launch of new unit-linked products on hold.
However, now that the government has complete it clear that Ulips will continue to be keeping pace by the Insurance Regulatory and Development Authority (Irda), the industry hopes to launch new Ulips soon.
Among private life insurers, ICICI Prudential collected new premium of Rs 460 crore in May 2010 compared with Rs 346 crore a year ago, a jump of 36(%) per cent.
SBI Life garnered Rs 442 crore new business premiums during the same month, posting a 37(%) per cent increase over last year’s.
Meanwhile, gross premium underwritten by general insurance companies grow 20(%) per cent to Rs 2,994 crore in May 2010 compared with Rs 2,490 crore in the earlier year.
Four nationalized general insurance companies accounted for Rs 1,796 crore of the total gross premiums, while private non-life insurers collected Rs 1,197 crore during the month.
Public sector insurer Life Insurance Corporation (LIC) registered 82(%) per cent jump in new business premium, growing from Rs 3,241 crore in May 2009 to Rs 5,907 crore in 2010.
Private life insurers saw new premium grow from Rs 1,809 crore in May 2009 to Rs 2,311 crore in 2010, a growth of 28(%) per cent.
The controversy over the regulation of Ulips happening after the Securities and Exchange Board of India (Sebi) in April barred 14 life insurance companies from selling Ulips, calling them investment products and asking insurers to seek approval from it before introduction such products.
Following the controversy, most companies kept the launch of new unit-linked products on hold.
However, now that the government has complete it clear that Ulips will continue to be keeping pace by the Insurance Regulatory and Development Authority (Irda), the industry hopes to launch new Ulips soon.
Among private life insurers, ICICI Prudential collected new premium of Rs 460 crore in May 2010 compared with Rs 346 crore a year ago, a jump of 36(%) per cent.
SBI Life garnered Rs 442 crore new business premiums during the same month, posting a 37(%) per cent increase over last year’s.
Meanwhile, gross premium underwritten by general insurance companies grow 20(%) per cent to Rs 2,994 crore in May 2010 compared with Rs 2,490 crore in the earlier year.
Four nationalized general insurance companies accounted for Rs 1,796 crore of the total gross premiums, while private non-life insurers collected Rs 1,197 crore during the month.
Tuesday, June 22, 2010
Bajaj Allianz bets large on child-focused policy
It’s catch ‘em young for Bajaj Allianz Life Insurance, a part of the Bajaj Allianz group, one of the most important private sector life and general insurance companies in India. The company is locating to thrive on children's plans in the days to approach.
The company has four children-focused policies — Bajaj Allianz Child Gain, Bajaj Allianz Young Care II, New UnitGain-II and UnitGain Protection Plus-II.
“But there are many more in the pipeline and we are already working on quite a few child-focused plans which will be rolled out in the days to approach,” Akshay Mehrotra, head of marketing at Bajaj Allianz Life Insurance told FC on Monday.
Mehrotra said while the present input of children plans is only 6-8(%) per cent of the company’s total portfolio, it will go up significantly in the days to come for more reasons than one.
“Our experience and regular feedback from customers suggests that people are more and more opting for need-based products, policies and, therefore, we see enormous potential to grow in this area,” he said.
The key features of Bajaj Allianz Child Gain include insurance cover for parents — with counter life insurance, waiver of premiums, family income benefit and an option to purchase additional insurance at maturity.
Bajaj Allianz Young Care II offers good-looking investment options, loyalty units, flexibility to decrease premiums and tax benefits. Two other policies (New UnitGain and UnitGain Protection Plus) come with new UL Term Rider and are, therefore, attractive for parents.
Significantly, there is amazing for those who cannot afford a policy for their children as well — a unique initiative called ‘Two Bright Futures’. Under this initiative, the company will set aside Rs 100 for every plan sold towards funding the education of under-privileged children. The mopped up corpus will be handed over to select NGOs across the country, which are working for a similar cause.
“There are many children who cannot pursue basic education due to various limitations. Through this initiative we are ensuring a bright future for a child who needs our support the most,” Mehrotra said. The company has teamed up with Mumbai-based Aseema Trust and as the fund grows it will get associated with more NGOs.
The company has four children-focused policies — Bajaj Allianz Child Gain, Bajaj Allianz Young Care II, New UnitGain-II and UnitGain Protection Plus-II.
“But there are many more in the pipeline and we are already working on quite a few child-focused plans which will be rolled out in the days to approach,” Akshay Mehrotra, head of marketing at Bajaj Allianz Life Insurance told FC on Monday.
Mehrotra said while the present input of children plans is only 6-8(%) per cent of the company’s total portfolio, it will go up significantly in the days to come for more reasons than one.
“Our experience and regular feedback from customers suggests that people are more and more opting for need-based products, policies and, therefore, we see enormous potential to grow in this area,” he said.
The key features of Bajaj Allianz Child Gain include insurance cover for parents — with counter life insurance, waiver of premiums, family income benefit and an option to purchase additional insurance at maturity.
Bajaj Allianz Young Care II offers good-looking investment options, loyalty units, flexibility to decrease premiums and tax benefits. Two other policies (New UnitGain and UnitGain Protection Plus) come with new UL Term Rider and are, therefore, attractive for parents.
Significantly, there is amazing for those who cannot afford a policy for their children as well — a unique initiative called ‘Two Bright Futures’. Under this initiative, the company will set aside Rs 100 for every plan sold towards funding the education of under-privileged children. The mopped up corpus will be handed over to select NGOs across the country, which are working for a similar cause.
“There are many children who cannot pursue basic education due to various limitations. Through this initiative we are ensuring a bright future for a child who needs our support the most,” Mehrotra said. The company has teamed up with Mumbai-based Aseema Trust and as the fund grows it will get associated with more NGOs.
Monday, June 21, 2010
Heat up on insurance agents
Life insurance agents are probable to face difficult times.
The regulator has planned to make the norms for selling policies more stringent, while insurers are planning to update their tied agent force to increase productivity as their limits have come under pressure following rule changes over the past 12 months.
The insurance regulator has projected to amend the IRDA Regulations for Protection of Policyholders’ Interests so that the policies are sold based only on the need of the buyer.
The IRDA wants to make it compulsory for agents to prepare a “need analysis document” before selling a policy. “There should be a proper monitoring of implementation of the need analysis by insurers of all the intermediaries they deal through,” the regulator said.
It also said the training set of courses for agents should give high priority to the need analysis. “The regulatory changes will shake out the 30-lakh plus agency force in the life insurance industry,” said Shekhar Bhandari, business head (tied agency), Kotak Mahindra Old Mutual Life Insurance Company. “Not all of them will find it simple to stay in the business.”
According to Bhandari, insurers are feeling the heat of the changes in Ulip charges and others. “In 2008-09, insurers have rationalised their administrative and operating costs and expenses. We’ll have to focus on increasing the productivity of distribution channels,” he said.
Tied agents — entities selling products of one company — is the costliest sharing channel for an insurer. “Agents should now understand that they need to pull up their socks and get double the business to earn the same level of commission they had been earning so far,” Bhandari said.
Birla Sun Life Insurance Company’s chief financial officer Mayank Bathwal spoke along parallel lines. “Agency productivity has to be increased. Besides, an insurer also should look for innovative distribution channels which cost lower.”
The pending Insurance Bill also does away with Section 40A of the Insurance Act that prescribes commission. At present, an insurance company, which is yet to complete 10 years, can pay a maximum of 40(%) per cent commission on the first year premium income, 7.5(%) per cent on the renewal premium income for the second and third years and 5(%) per cent thereafter.
Insurers who have finished 10 years can pay a maximum 35(%) per cent as commission on the first year premium income, 7.5(%) per cent for the second and third years and 5(%) per cent thereafter.
For single premium policies, the commission is 2(%) per cent and it is 7.5(%) per cent for pension plans.
After the insurance regulator has put a cap on Ulip charges, the commissions in an Ulip become less than in a traditional plan.
The regulator has planned to make the norms for selling policies more stringent, while insurers are planning to update their tied agent force to increase productivity as their limits have come under pressure following rule changes over the past 12 months.
The insurance regulator has projected to amend the IRDA Regulations for Protection of Policyholders’ Interests so that the policies are sold based only on the need of the buyer.
The IRDA wants to make it compulsory for agents to prepare a “need analysis document” before selling a policy. “There should be a proper monitoring of implementation of the need analysis by insurers of all the intermediaries they deal through,” the regulator said.
It also said the training set of courses for agents should give high priority to the need analysis. “The regulatory changes will shake out the 30-lakh plus agency force in the life insurance industry,” said Shekhar Bhandari, business head (tied agency), Kotak Mahindra Old Mutual Life Insurance Company. “Not all of them will find it simple to stay in the business.”
According to Bhandari, insurers are feeling the heat of the changes in Ulip charges and others. “In 2008-09, insurers have rationalised their administrative and operating costs and expenses. We’ll have to focus on increasing the productivity of distribution channels,” he said.
Tied agents — entities selling products of one company — is the costliest sharing channel for an insurer. “Agents should now understand that they need to pull up their socks and get double the business to earn the same level of commission they had been earning so far,” Bhandari said.
Birla Sun Life Insurance Company’s chief financial officer Mayank Bathwal spoke along parallel lines. “Agency productivity has to be increased. Besides, an insurer also should look for innovative distribution channels which cost lower.”
The pending Insurance Bill also does away with Section 40A of the Insurance Act that prescribes commission. At present, an insurance company, which is yet to complete 10 years, can pay a maximum of 40(%) per cent commission on the first year premium income, 7.5(%) per cent on the renewal premium income for the second and third years and 5(%) per cent thereafter.
Insurers who have finished 10 years can pay a maximum 35(%) per cent as commission on the first year premium income, 7.5(%) per cent for the second and third years and 5(%) per cent thereafter.
For single premium policies, the commission is 2(%) per cent and it is 7.5(%) per cent for pension plans.
After the insurance regulator has put a cap on Ulip charges, the commissions in an Ulip become less than in a traditional plan.
Friday, June 18, 2010
Health insurance, Life mooted for school teachers
The government is planning life and health insurance cover and a group housing scheme at a subsidized price for 60 lakh primary and secondary school teachers.
While the two insurance schemes will need financial contribution by the Centre, the States and the teachers, the group housing scheme will be sprint at the Central level but will not require financial contribution from the Centre or the States, Union Human Resource Development Minister Kapil Sibal said on Friday. He was addressing a gathering of the National Foundation for Teachers Welfare here.
Thanks to their huge range, the health and life insurance schemes would premium-wise cost much less than individual schemes or even schemes run at the State level. The economics of scale would drive individual premiums down. The life insurance cover would guarantee a minimum of about Rs. 5 lakh on retirement and Rs. 2 lakh on death during service. The health cover, limited to hospitalization of the teacher, the spouse, two children and parents, was being worked on two options — either on a maximum cover of Rs. 1.25 lakh which would signify a lesser premium or a cover of Rs. 3 lakh this would mean a higher premium.
The group housing scheme is being envisaged to be Centrally-administered through a portal, with construction done by the National Building Construction Corporation (NBCC), ground bought at institutional rates and group housing societies formed by teachers. Thus, while there will be no cost to the government, the teachers will get excellence housing at lesser rates without much struggle or fear of being cheated.
To begin with, the Delhi Education Minister announced land for the housing scheme in the capital. Mr. Sibal said the proposals were to show that the country looked after, cared for and appreciated its teachers. He clarified that he too was yet to seek Finance Ministry support.
While the two insurance schemes will need financial contribution by the Centre, the States and the teachers, the group housing scheme will be sprint at the Central level but will not require financial contribution from the Centre or the States, Union Human Resource Development Minister Kapil Sibal said on Friday. He was addressing a gathering of the National Foundation for Teachers Welfare here.
Thanks to their huge range, the health and life insurance schemes would premium-wise cost much less than individual schemes or even schemes run at the State level. The economics of scale would drive individual premiums down. The life insurance cover would guarantee a minimum of about Rs. 5 lakh on retirement and Rs. 2 lakh on death during service. The health cover, limited to hospitalization of the teacher, the spouse, two children and parents, was being worked on two options — either on a maximum cover of Rs. 1.25 lakh which would signify a lesser premium or a cover of Rs. 3 lakh this would mean a higher premium.
The group housing scheme is being envisaged to be Centrally-administered through a portal, with construction done by the National Building Construction Corporation (NBCC), ground bought at institutional rates and group housing societies formed by teachers. Thus, while there will be no cost to the government, the teachers will get excellence housing at lesser rates without much struggle or fear of being cheated.
To begin with, the Delhi Education Minister announced land for the housing scheme in the capital. Mr. Sibal said the proposals were to show that the country looked after, cared for and appreciated its teachers. He clarified that he too was yet to seek Finance Ministry support.
To be taxed Ulips investment products
The Finance Ministry has said the unit-linked insurance products (Ulips) are investment products and are therefore possible to be taxed after performance of the Direct Taxes Code (DTC). "Ulips are basically investment products and wanted to be taxed.
The final sight, however, will be taken at the time of the formulation of the code", the finance ministry sources said here today. At present, no tax is levy on the returns on Ulips, an equity-linked insurance implement, the regulation of which has become a bone of contention between the insurance regulator Irda and market watchdog Sebi.
Ulips are hybrid investment-cum-insurance products and report for over 50(%) per cent of the total insurance business in the country. When contacted, Life Insurance Council secretary General SB Mathur said, "We have maintained that Ulips are not pure investment products.
But calling them pure investment product is not right. We will approach the income department in due course.
“As per the revised DTC, which will replace the 50-year-old Income Tax Act, only six particular instruments will qualify for the EEE (exempt-exempt-exempt) taxation. Under the EEE mode, tax exemption is provided at all the levels of the instrument-- at the time of investment, at accumulation and at the time of withdrawal.
The DTC is expected to be ready from next April. The six instruments which will qualify for exemption are government provident fund, public provident fund, recognized provident fund, pension funds regulated by Pension Fund Regulatory and Development Authority (PFRDA), pure life insurance products and annuity plan.
As Ulips are investment products, the Finance Ministry official said, it could not be classify as pure life insurance product. The insurance watchdog Irda is locked in a turf war with Sebi over regulation of Ulips.
The difficulty came to the fore after Irda advised 14 life insurance companies to ignore the April 9 Sebi''s order banning Ulip schemes. The row impelled the Finance Ministry to interfere in the matter and mediate an agreement under which both the regulators agreed to seek a legally compulsory order on Ulip jurisdiction.
Following this, Sebi moved the Supreme Court to transfer all cases pertaining to the Ulip issue to the apex court following which notices were sent to the Centre, Irda and 14 insurers. The top court will hear the matter on July 8.
The final sight, however, will be taken at the time of the formulation of the code", the finance ministry sources said here today. At present, no tax is levy on the returns on Ulips, an equity-linked insurance implement, the regulation of which has become a bone of contention between the insurance regulator Irda and market watchdog Sebi.
Ulips are hybrid investment-cum-insurance products and report for over 50(%) per cent of the total insurance business in the country. When contacted, Life Insurance Council secretary General SB Mathur said, "We have maintained that Ulips are not pure investment products.
But calling them pure investment product is not right. We will approach the income department in due course.
“As per the revised DTC, which will replace the 50-year-old Income Tax Act, only six particular instruments will qualify for the EEE (exempt-exempt-exempt) taxation. Under the EEE mode, tax exemption is provided at all the levels of the instrument-- at the time of investment, at accumulation and at the time of withdrawal.
The DTC is expected to be ready from next April. The six instruments which will qualify for exemption are government provident fund, public provident fund, recognized provident fund, pension funds regulated by Pension Fund Regulatory and Development Authority (PFRDA), pure life insurance products and annuity plan.
As Ulips are investment products, the Finance Ministry official said, it could not be classify as pure life insurance product. The insurance watchdog Irda is locked in a turf war with Sebi over regulation of Ulips.
The difficulty came to the fore after Irda advised 14 life insurance companies to ignore the April 9 Sebi''s order banning Ulip schemes. The row impelled the Finance Ministry to interfere in the matter and mediate an agreement under which both the regulators agreed to seek a legally compulsory order on Ulip jurisdiction.
Following this, Sebi moved the Supreme Court to transfer all cases pertaining to the Ulip issue to the apex court following which notices were sent to the Centre, Irda and 14 insurers. The top court will hear the matter on July 8.
Thursday, June 17, 2010
Life insurers deployed Rs 3,941 cr in FY10
The life insurance industry deployed Rs 3,941 crore into the business in financial year 2009-10. According to data from Life Insurance Council, around 98(%) per cent of the capital was infused by private sector life insurers, while LIC, the behemoth public sector life insurer, saw mixture of Rs 5 crore during the previous financial year.
Reliance Life, HDFC Standard Life, Metlife Insurance, Aviva Life Insurance, Bharti Axa Life Insurance and Future Generali Life Insurance were along with the firms that infused capital in 2009-10.
“We infused close to Rs 231 crore in the previous financial year,” a senior official at Reliance Life said. According to him, the company will instill an equal amount of money in this financial year to uphold solvency requirements.
HDFC Standard Life infused Rs 172 crore to take its paid-up capital base to Rs 1,978 crore.
Companies such as ICICI Prudential Life, Bajaj Allianz Life and Kotak Mahindra Old Mutual Life did not infuse any capital in the previous financial year. “We did not infuse anything in the previous financial year as we were relaxed on solvency and profits were retained too,” said Kamesh Goyal, chief executive of Bajaj Allianz Life. According to him, the company will not infuse any capital in this financial year as well.
While the total capital deployed up to FY10 was Rs 28,929 crore (Rs 24,988 crore up to FY09 and Rs 16,692 crore up to FY08), management operating cost too have fallen considerably. Commission as a percentage of premiums has declined by 30 basis points to 6.71(%) per cent in FY10.
A release from the industry council said renewal premium of the industry grew 13(%) per cent to Rs 151,812 crore. Payouts to policyholders (claim settlements, bonus and money back) increased 42.82(%) per cent to Rs 83,327 crore in FY10 compared with Rs 58,343 crore in the parallel period last year.
“Life insurance companies have sold more than 2.8 crore policies in rural areas in FY09 and FY10. India also has the difference of having the largest number of in-force policies in the world,” said SB Mathur, secretary general of Life Insurance Council.
The total assets held by the industry stood at about Rs 1,290,000 crore as of March 31, 2010.
Reliance Life, HDFC Standard Life, Metlife Insurance, Aviva Life Insurance, Bharti Axa Life Insurance and Future Generali Life Insurance were along with the firms that infused capital in 2009-10.
“We infused close to Rs 231 crore in the previous financial year,” a senior official at Reliance Life said. According to him, the company will instill an equal amount of money in this financial year to uphold solvency requirements.
HDFC Standard Life infused Rs 172 crore to take its paid-up capital base to Rs 1,978 crore.
Companies such as ICICI Prudential Life, Bajaj Allianz Life and Kotak Mahindra Old Mutual Life did not infuse any capital in the previous financial year. “We did not infuse anything in the previous financial year as we were relaxed on solvency and profits were retained too,” said Kamesh Goyal, chief executive of Bajaj Allianz Life. According to him, the company will not infuse any capital in this financial year as well.
While the total capital deployed up to FY10 was Rs 28,929 crore (Rs 24,988 crore up to FY09 and Rs 16,692 crore up to FY08), management operating cost too have fallen considerably. Commission as a percentage of premiums has declined by 30 basis points to 6.71(%) per cent in FY10.
A release from the industry council said renewal premium of the industry grew 13(%) per cent to Rs 151,812 crore. Payouts to policyholders (claim settlements, bonus and money back) increased 42.82(%) per cent to Rs 83,327 crore in FY10 compared with Rs 58,343 crore in the parallel period last year.
“Life insurance companies have sold more than 2.8 crore policies in rural areas in FY09 and FY10. India also has the difference of having the largest number of in-force policies in the world,” said SB Mathur, secretary general of Life Insurance Council.
The total assets held by the industry stood at about Rs 1,290,000 crore as of March 31, 2010.
Shriram Group to get bigger insurance biz overseas
Shriram Group plans to take its general insurance overseas by location up operations in countries such as Thailand, Indonesia and Vietnam. Shriram General Insurance is mulling a tie up with private equity or local partners for this function.
“We will take the general insurance business outside India. Now, we are piloting the business in the Philippines. By the finish of this year, we will have a incidence in Indonesia. We might soon have a company in Malaysia, Vietnam and Thailand,” said Shriram group founder R Thyagarajan.
The group operates life and general insurance businesses from side to side a partnership with Sanlam of South Africa. The company will be infusing about Rs 100 crore as capital for the growth. The group will also instill Rs 100 crore in its life insurance business.
This is part of the company’s plan to get bigger business in the north-east region. Shriram Life Insurance will also aggressively use a distribution channel called ‘NEW’ (north east west), that seeks to target the “well to do” sector of the population.
The group announced annual results for its insurance businesses. Shriram Life Insurance recorded an increase of 48% per cent in annual premium equivalent (APE) during 2009-10. The company is targeting APE of Rs 1,500 crore within the next 5 years from the current Rs 284 crore. At the same time, Shriram General Insurance wrote gross premium of Rs 416.93 crore in its first full year of commercial operations. During the year the company made an underwriting profit of Rs 5.45 crore.
“We will take the general insurance business outside India. Now, we are piloting the business in the Philippines. By the finish of this year, we will have a incidence in Indonesia. We might soon have a company in Malaysia, Vietnam and Thailand,” said Shriram group founder R Thyagarajan.
The group operates life and general insurance businesses from side to side a partnership with Sanlam of South Africa. The company will be infusing about Rs 100 crore as capital for the growth. The group will also instill Rs 100 crore in its life insurance business.
This is part of the company’s plan to get bigger business in the north-east region. Shriram Life Insurance will also aggressively use a distribution channel called ‘NEW’ (north east west), that seeks to target the “well to do” sector of the population.
The group announced annual results for its insurance businesses. Shriram Life Insurance recorded an increase of 48% per cent in annual premium equivalent (APE) during 2009-10. The company is targeting APE of Rs 1,500 crore within the next 5 years from the current Rs 284 crore. At the same time, Shriram General Insurance wrote gross premium of Rs 416.93 crore in its first full year of commercial operations. During the year the company made an underwriting profit of Rs 5.45 crore.
Wednesday, June 16, 2010
ULIPs may misplace flavour without spice of tax advantage
Unit-linked insurance policies (ULIPs), which constitute the bulk of the business for insurance companies, may end to be a popular investment product if the revised conversation paper on the Direct Taxes Code (DTC) is implemented in its present form.
This is because the revised conversation paper has recommended that only approved pure life insurance products and annuity schemes are subject to EEE (Exempt Exempt Exempt) technique of tax treatment.
“Approved pure life insurance products and annuity schemes will also be topic to EEE method of tax treatment”, the revised paper said.
This implies that the final pay-out from unit-linked plans could be taxed, said officials from the insurance industry.
The DTC had proposed tax deduction on the final pay-out of insurance policies, while exempting the policy premium at the time of role and the interest on it. Life insurance companies had asked that the present system of tax exemption for maturity proceeds be continued. They had made a representation to the Government that the EEE method of addition should continue as against the Exempt Exempt Tax (EET) method proposed.
It seems that while the government has decided on exempting term and whole life policies, it has decided to keep unit-inked products under the EET category.
Insurers fear that this move will spoil ULIP sales. ULIPs comprise almost 80-90(%) per cent of the private life insurers' business and around 65(%) per cent for Life Insurance Corporation of India.
“It is a relief that at least death claim benefits have now been exempted from tax. But it seems that ULIPs have been retained under the EET rule. We will have to go back to the government again with our representation”, said Mr Kamalji Sahay, Chief Executive Officer, Star Union Dai-ichi Life Insurance Company.
The Life Insurance Council is expected to make a representation to the Government for counting ULIPs under the EEE category.
Insurers are also happy that annuities, which were taxed under the existing system, have been exempt from tax.
Currently, up to one-third of the maturity amount when withdrawn is treated as tax-free. However, the remaining two-third amount was taxed as per the individual's tax slab.
This is because the revised conversation paper has recommended that only approved pure life insurance products and annuity schemes are subject to EEE (Exempt Exempt Exempt) technique of tax treatment.
“Approved pure life insurance products and annuity schemes will also be topic to EEE method of tax treatment”, the revised paper said.
This implies that the final pay-out from unit-linked plans could be taxed, said officials from the insurance industry.
The DTC had proposed tax deduction on the final pay-out of insurance policies, while exempting the policy premium at the time of role and the interest on it. Life insurance companies had asked that the present system of tax exemption for maturity proceeds be continued. They had made a representation to the Government that the EEE method of addition should continue as against the Exempt Exempt Tax (EET) method proposed.
It seems that while the government has decided on exempting term and whole life policies, it has decided to keep unit-inked products under the EET category.
Insurers fear that this move will spoil ULIP sales. ULIPs comprise almost 80-90(%) per cent of the private life insurers' business and around 65(%) per cent for Life Insurance Corporation of India.
“It is a relief that at least death claim benefits have now been exempted from tax. But it seems that ULIPs have been retained under the EET rule. We will have to go back to the government again with our representation”, said Mr Kamalji Sahay, Chief Executive Officer, Star Union Dai-ichi Life Insurance Company.
The Life Insurance Council is expected to make a representation to the Government for counting ULIPs under the EEE category.
Insurers are also happy that annuities, which were taxed under the existing system, have been exempt from tax.
Currently, up to one-third of the maturity amount when withdrawn is treated as tax-free. However, the remaining two-third amount was taxed as per the individual's tax slab.
Tuesday, June 15, 2010
Reliance Life Insurance introduces mobile phone-based services
Reliance Life Insurance Company Ltd (RLIC) on Monday announced the launch of a mobile-based insurance proposal - ‘Mobinsure’ - a mobile portal present a comprehensive range of insurance related services on mobile phones.
This service would make it easier for its policyholders to path their policies and premiums, do fund switches, pay insurance premium and determine policy-related queries instantly using their web-enabled mobile handsets. It would be available on both CDMA and GSM platforms.
This was announced by Malay Ghosh, president, Reliance Life Insurance, on Monday. “With Mobinsure, most features of internet insurance will now be available on mobile phones, providing a breakthrough improvement in insurance services. Besides easy access and anytime anywhere insurance, the new application offers whole services and security to customers transacting on their mobile phones,” said Mr Ghosh.
Customers can log on to their Reliance Life Insurance accounts on their cell phone handsets and get important information on policies, applications, funds, profile, advisors and also make active online transactions, including premium payments, future allocations and change of address, free of cost.
“All online transactions are real-time transactions. There is no time wait between a transaction done by the customer and its effect on the system. We will offer this service free of charge to our customers,” he added.
Mobinsure application has been developed to ensure complete safety and protection to a customer while doing financial transactions. This is ensured by the high-end encryption used in the application. Unlike a lot of other applications, Mobinsure does not require a customer to download and install any application. Customers can easily use the mobile browser for their transaction.
Customers are required to register for the first time and key in their policy and personal details which will be validated against customer details submitted at the time of new business for protection reasons.
This service would make it easier for its policyholders to path their policies and premiums, do fund switches, pay insurance premium and determine policy-related queries instantly using their web-enabled mobile handsets. It would be available on both CDMA and GSM platforms.
This was announced by Malay Ghosh, president, Reliance Life Insurance, on Monday. “With Mobinsure, most features of internet insurance will now be available on mobile phones, providing a breakthrough improvement in insurance services. Besides easy access and anytime anywhere insurance, the new application offers whole services and security to customers transacting on their mobile phones,” said Mr Ghosh.
Customers can log on to their Reliance Life Insurance accounts on their cell phone handsets and get important information on policies, applications, funds, profile, advisors and also make active online transactions, including premium payments, future allocations and change of address, free of cost.
“All online transactions are real-time transactions. There is no time wait between a transaction done by the customer and its effect on the system. We will offer this service free of charge to our customers,” he added.
Mobinsure application has been developed to ensure complete safety and protection to a customer while doing financial transactions. This is ensured by the high-end encryption used in the application. Unlike a lot of other applications, Mobinsure does not require a customer to download and install any application. Customers can easily use the mobile browser for their transaction.
Customers are required to register for the first time and key in their policy and personal details which will be validated against customer details submitted at the time of new business for protection reasons.
Monday, June 14, 2010
Foreign firms can have to cut venture in insurance JVs
Foreign partners may have to reduce their stake in insurance joint ventures (JVs) on listing to abide by the government command that all listed companies must have 25(%) per cent public shareholding.
“We want Indian promoters to have a minimum 51(%) per cent stake in insurance companies. It is for the government to choose on disinvestment and take a call on raising the foreign direct investment (FDI) limit to 49(%) per cent. Foreign partners will have to reduce their stake if the government sticks to the 25(%) per cent public shareholding standard,” said a senior official with the Insurance Regulatory and Development Authority (Irda).
The government had last week implicit that it was open to a review of the 25(%) per cent public shareholding norm, but as of now, the rules stay in force.
Indian partners own 74(%) per cent in insurance JVs, while foreign partners own the relax. FDI would be raised to 49(%) per cent after the Insurance Amendment Bill, cleared by a parliamentary Standing Committee and pending before the Parliament, comes into force.
According to the Insurance Act, companies can valve the public market after they complete 10 years of operations. The insurance regulator is working out the modalities of the first public offer (IPO). The regulator has optional to the standing committee that both partners reduce stake proportionally after they go public.
As life insurance is a capital thorough business, insurers have been trying to beat the public market. The government had earlier thought of bringing down the minimum term for listing from 10 years to 5 years. However, it later decided to delete that section from the Act and allow insurers to go public at any stage. This is also a part of the Insurance Amendment Bill.
HDFC Standard Life and ICICI Prudential will complete their 10 year of operations in the next few months. Irda is waiting for amendment to the Act before it comes out with the IPO norms. There is an inter-regulatory subcommittee about this, including members of the market regulator, Securities and Exchange Board of India (Sebi), and Irda.
Reliance Life Insurance was the first insurance company to explain interest in listing to raise resource. The company is totally owned by Anil Dhirubhai Ambani Group.
Industry experts said some companies such as Tata AIG Life Insurance, Reliance Life, Shriram Life and ING Vysya Life Insurance would greeting the government’s move on 25(%) per cent public shareholding, as their foreign partners were either looking to dilute stakes in their Indian joint ventures or they were 100(%) per cent owned by an Indian advertiser.
Most foreign partners had expressed their motivation to increase their shareholding in their joint ventures as and when the regulations allowed. Insurers like Bajaj Allianz had even fixed the price at which it would increase its stake.
“We want Indian promoters to have a minimum 51(%) per cent stake in insurance companies. It is for the government to choose on disinvestment and take a call on raising the foreign direct investment (FDI) limit to 49(%) per cent. Foreign partners will have to reduce their stake if the government sticks to the 25(%) per cent public shareholding standard,” said a senior official with the Insurance Regulatory and Development Authority (Irda).
The government had last week implicit that it was open to a review of the 25(%) per cent public shareholding norm, but as of now, the rules stay in force.
Indian partners own 74(%) per cent in insurance JVs, while foreign partners own the relax. FDI would be raised to 49(%) per cent after the Insurance Amendment Bill, cleared by a parliamentary Standing Committee and pending before the Parliament, comes into force.
According to the Insurance Act, companies can valve the public market after they complete 10 years of operations. The insurance regulator is working out the modalities of the first public offer (IPO). The regulator has optional to the standing committee that both partners reduce stake proportionally after they go public.
As life insurance is a capital thorough business, insurers have been trying to beat the public market. The government had earlier thought of bringing down the minimum term for listing from 10 years to 5 years. However, it later decided to delete that section from the Act and allow insurers to go public at any stage. This is also a part of the Insurance Amendment Bill.
HDFC Standard Life and ICICI Prudential will complete their 10 year of operations in the next few months. Irda is waiting for amendment to the Act before it comes out with the IPO norms. There is an inter-regulatory subcommittee about this, including members of the market regulator, Securities and Exchange Board of India (Sebi), and Irda.
Reliance Life Insurance was the first insurance company to explain interest in listing to raise resource. The company is totally owned by Anil Dhirubhai Ambani Group.
Industry experts said some companies such as Tata AIG Life Insurance, Reliance Life, Shriram Life and ING Vysya Life Insurance would greeting the government’s move on 25(%) per cent public shareholding, as their foreign partners were either looking to dilute stakes in their Indian joint ventures or they were 100(%) per cent owned by an Indian advertiser.
Most foreign partners had expressed their motivation to increase their shareholding in their joint ventures as and when the regulations allowed. Insurers like Bajaj Allianz had even fixed the price at which it would increase its stake.
Saturday, June 12, 2010
LIC expects nod shortly to start biz in Singapore
The country's largest insurer, Life Insurance Corporation, on Friday said it is expecting a favourable choice from the Singapore authorities to enter the insurance business in the island state.
"LIC had asked for authorization to set up a supplementary. The process is going on (regulatory clearance)," LIC Managing Director A K Dasgupta said.
"We are expecting to obtain favourable decision from the Singapore authorities and expectantly it should come in due course of time," he said.
The Singapore regulatory authorities have been speedy and their processing has been fast, he added.
Along with a rating from an international agency, the company has submitted other related documents for approval, he said.
However, he said the regulator has asked for various clarifications regarding capital and other details.
The query generated by the Singapore authorities is part of a custom exercise and LIC is in the process of transfer feedback, he said.
LIC set up a representative office in Singapore about two years ago. It has done a lot of market surveys and practicality studies for setting up a subsidiary in the country, he said.
LIC already has an overseas being there in countries like the UK, Mauritius, Kenya, Nepal and Sri Lanka. In the Middle East, LIC is present in Saudi Arabia, Kuwait, Dubai, Abu Dhabi, Oman and Qatar.
During 2009-10, LIC collected a premium of Rs 70,891 crore compared to Rs 52,954 crore in 2008-09, thereby growing by around 34(%) per cent during the year.
The market share of LIC increased to 65 per cent in 2009-10 compared to around 61(%) per cent in the previous year.
For More Information about LIC plans.
LIC Pension Plan
"LIC had asked for authorization to set up a supplementary. The process is going on (regulatory clearance)," LIC Managing Director A K Dasgupta said.
"We are expecting to obtain favourable decision from the Singapore authorities and expectantly it should come in due course of time," he said.
The Singapore regulatory authorities have been speedy and their processing has been fast, he added.
Along with a rating from an international agency, the company has submitted other related documents for approval, he said.
However, he said the regulator has asked for various clarifications regarding capital and other details.
The query generated by the Singapore authorities is part of a custom exercise and LIC is in the process of transfer feedback, he said.
LIC set up a representative office in Singapore about two years ago. It has done a lot of market surveys and practicality studies for setting up a subsidiary in the country, he said.
LIC already has an overseas being there in countries like the UK, Mauritius, Kenya, Nepal and Sri Lanka. In the Middle East, LIC is present in Saudi Arabia, Kuwait, Dubai, Abu Dhabi, Oman and Qatar.
During 2009-10, LIC collected a premium of Rs 70,891 crore compared to Rs 52,954 crore in 2008-09, thereby growing by around 34(%) per cent during the year.
The market share of LIC increased to 65 per cent in 2009-10 compared to around 61(%) per cent in the previous year.
For More Information about LIC plans.
LIC Pension Plan
Friday, June 11, 2010
Insurance take wrath on corporate agents
The Insurance and Regulatory Development Authority (IRDA) has cancelled the licences of 4,261 corporate agents, including Housing Development Finance Corporation, HDFC Bank, Development Credit Bank, Standard Chartered Bank, after them unsuccessful to renovate their licences by March 31 this year.
The regulator has asked the people not to do any business with these entities.
IRDA chairman J. Hari Narayan said the licences would not be changed with presentation effect. There are 7,000 agents in the country selling life and non-life insurance policies.
However, Hari Narayan said the policies bought from these entities would stay valid. The insurer concerned will allocate another agent so that the policies can be converted.
Among the 4,261 agents, a famous entity is HDFC, which was selling policies of its general insurance supplementary HDFC Ergo.
The licence of HDFC Bank, which sold policies of HDFC Ergo and Bajaj Allianz General Insurance Company, has also been withdrawn.
The licences of Corporation Bank and Standard Chartered Bank for selling products of Life Insurance Corporation and Bajaj Allianz Life, respectively, have also been revoked.
Others in the list comprise Bajaj Capital Financial Services (Bajaj Allianz General Insurance and ICICI Prudential Life Insurance), Way2Wealth Consulting (Bajaj Allianz General Insurance and HDFC Standard Life), India Bulls Insurance Advisors (Birla Sun Life), India Infoline and Aditya Birla Money (ICICI Prudential Life Insurance policies).
However, Way2Wealth is planning to apply for an insurance brokering licence.
“In a corporate agency representation, one cannot sell products of more than one life and one non-life insurer. But with a brokering licence, products of different insurers can be sold,” an official said.
The regulator has asked the people not to do any business with these entities.
IRDA chairman J. Hari Narayan said the licences would not be changed with presentation effect. There are 7,000 agents in the country selling life and non-life insurance policies.
However, Hari Narayan said the policies bought from these entities would stay valid. The insurer concerned will allocate another agent so that the policies can be converted.
Among the 4,261 agents, a famous entity is HDFC, which was selling policies of its general insurance supplementary HDFC Ergo.
The licence of HDFC Bank, which sold policies of HDFC Ergo and Bajaj Allianz General Insurance Company, has also been withdrawn.
The licences of Corporation Bank and Standard Chartered Bank for selling products of Life Insurance Corporation and Bajaj Allianz Life, respectively, have also been revoked.
Others in the list comprise Bajaj Capital Financial Services (Bajaj Allianz General Insurance and ICICI Prudential Life Insurance), Way2Wealth Consulting (Bajaj Allianz General Insurance and HDFC Standard Life), India Bulls Insurance Advisors (Birla Sun Life), India Infoline and Aditya Birla Money (ICICI Prudential Life Insurance policies).
However, Way2Wealth is planning to apply for an insurance brokering licence.
“In a corporate agency representation, one cannot sell products of more than one life and one non-life insurer. But with a brokering licence, products of different insurers can be sold,” an official said.
Thursday, June 10, 2010
Low returns, but secure
Buyers of traditional insurance products — endowment and money-back policies — might soon be inundated with options.
Insurance companies, which have been incapable to launch latest investment-cum-insurance plans, better known as unit-linked insurance plans, following the turf war between the Securities and Exchange Board of India and the Insurance Regulatory Development Authority, are introduction a number of traditional products to attract customers.
Some new launches are Bajaj Allianz (BA) Invest plus Premier, Birla Sun Life Insurance (BSLI) Bachat Endowment Plan, Reliance Life (RL) Traditional Investment Insurance Policy and Reliance Life Traditional Golden Years Plan.
The RL Traditional Investment Insurance Policy is the third addition to the traditional crop portfolio of Reliance Life Insurance. Malay Ghosh, executive director and president, RL Insurance, said, “The visible cost structure of the policy is an attractive feature for customers.”
The unique characteristic of the product is that it offers a fixed rate of return – a number which will stay changing every year. This year the rate of return will be 7.75(%) per cent. The next year, a new rate will be announced depending on market circumstances and the interest rate scenario. The only assurance: The return will not fall below the savings deposit rate, which is 3.5(%) per cent at present.
In addition to guaranteed returns, the sum assured in case of RL Traditional will be 7.5 times the premium paid in the 1st year. There will also be riders that one can add by paying extra.
The sum assured, however, will be inconsequential once the accumulation account amount touches the sum assured — a common feature of all traditional insurance products.
The costs include an allocation fee of 30(%) per cent in the 1st year and 5(%) per cent in following years, which is deducted from the premium paid.
Besides the allocation fee, mortality rate (charged per Rs 1,000 of sum assured), policy administration fee (Rs 40 per month) and account administration fee at the rate of 1.25(%) per cent per annum will be charged.
Therefore, if an individual plans to invest the minimum regular base premium of Rs 10,000 this year, Rs 3,500 will be deducted as allocation and policy administration fees.
The rate of return offered is not very competitive compared to other instruments such as the Public Provident Fund, which gives 8(%) per cent and has negligible costs.
Does it make sense to invest in this or similar policies? Financial planners would most probably say no. That’s because the rate of return is quite low. Also, the sum assured is not very high. In comparison, a 30-year-old can buy a 20-year term plan with a sum assured of Rs 20 lakh for a premium of Rs 4,700.
Govind Pathak, director, Acorn Wealth, said, “For sufficient insurance, a simple term plan can be sufficient and a more cost-effective option. And for investment, one can always look for multiple options which will assure higher returns, such as the PPF on the debt side.
On the equities side, there are many more options like mutual funds and stocks. This combination would possibly give higher returns as well as a larger life cover than the Reliance traditional policy.
Insurance companies, which have been incapable to launch latest investment-cum-insurance plans, better known as unit-linked insurance plans, following the turf war between the Securities and Exchange Board of India and the Insurance Regulatory Development Authority, are introduction a number of traditional products to attract customers.
Some new launches are Bajaj Allianz (BA) Invest plus Premier, Birla Sun Life Insurance (BSLI) Bachat Endowment Plan, Reliance Life (RL) Traditional Investment Insurance Policy and Reliance Life Traditional Golden Years Plan.
The RL Traditional Investment Insurance Policy is the third addition to the traditional crop portfolio of Reliance Life Insurance. Malay Ghosh, executive director and president, RL Insurance, said, “The visible cost structure of the policy is an attractive feature for customers.”
The unique characteristic of the product is that it offers a fixed rate of return – a number which will stay changing every year. This year the rate of return will be 7.75(%) per cent. The next year, a new rate will be announced depending on market circumstances and the interest rate scenario. The only assurance: The return will not fall below the savings deposit rate, which is 3.5(%) per cent at present.
In addition to guaranteed returns, the sum assured in case of RL Traditional will be 7.5 times the premium paid in the 1st year. There will also be riders that one can add by paying extra.
The sum assured, however, will be inconsequential once the accumulation account amount touches the sum assured — a common feature of all traditional insurance products.
The costs include an allocation fee of 30(%) per cent in the 1st year and 5(%) per cent in following years, which is deducted from the premium paid.
Besides the allocation fee, mortality rate (charged per Rs 1,000 of sum assured), policy administration fee (Rs 40 per month) and account administration fee at the rate of 1.25(%) per cent per annum will be charged.
Therefore, if an individual plans to invest the minimum regular base premium of Rs 10,000 this year, Rs 3,500 will be deducted as allocation and policy administration fees.
The rate of return offered is not very competitive compared to other instruments such as the Public Provident Fund, which gives 8(%) per cent and has negligible costs.
Does it make sense to invest in this or similar policies? Financial planners would most probably say no. That’s because the rate of return is quite low. Also, the sum assured is not very high. In comparison, a 30-year-old can buy a 20-year term plan with a sum assured of Rs 20 lakh for a premium of Rs 4,700.
Govind Pathak, director, Acorn Wealth, said, “For sufficient insurance, a simple term plan can be sufficient and a more cost-effective option. And for investment, one can always look for multiple options which will assure higher returns, such as the PPF on the debt side.
On the equities side, there are many more options like mutual funds and stocks. This combination would possibly give higher returns as well as a larger life cover than the Reliance traditional policy.
Wednesday, June 9, 2010
Bajaj Finserv Shares proceed on Report Buffett May Buy venture
Bajaj Finserv Ltd. raised as much as 10 (%) per cent after VCCircle reports that Warren Buffett’s Berkshire Hathaway Inc. may invest in the Indian financial services company.
Bajaj Finserv, which denied it is in talks, jumped 8.1(%) per cent to 484.25 rupees as of 10:29 a.m. in Mumbai trading.
“We are neither in contact with anybody from Berkshire Hathaway nor are we alert of their interest in Bajaj Finserv,” Managing Director Sanjiv Bajaj said in an e-mail today.
Berkshire may buy a 5(%) per cent to 10(%) per cent stake in Bajaj Finserv from the stock market, VCCircle reported, without say where it obtained the information. Bajaj Finserv is the holding company of Bajaj Allianz Life Insurance Co. and Bajaj Allianz General Insurance Co.
For More Information about Insurance click here Insurance Policy.
Bajaj Finserv, which denied it is in talks, jumped 8.1(%) per cent to 484.25 rupees as of 10:29 a.m. in Mumbai trading.
“We are neither in contact with anybody from Berkshire Hathaway nor are we alert of their interest in Bajaj Finserv,” Managing Director Sanjiv Bajaj said in an e-mail today.
Berkshire may buy a 5(%) per cent to 10(%) per cent stake in Bajaj Finserv from the stock market, VCCircle reported, without say where it obtained the information. Bajaj Finserv is the holding company of Bajaj Allianz Life Insurance Co. and Bajaj Allianz General Insurance Co.
For More Information about Insurance click here Insurance Policy.
ULIP row will be resolved shortly: FM
Finance minister Pranab Mukherjee on Tuesday said the row between insurance regulator IRDA and stock market regulator Sebi about unit-linked insurance products (ULIPs) will be resolve very shortly.
Mukherjee added that even as the life insurance industry has made some development to arrive at out to semi-urban and rural areas, ''the general insurance still requirements to work harder.''
On ULIP, FM said he was alert of the recent issues in the life insurance industry, particularly these products.
He said. ''We will resolve this subject soon. I understand the IRDA has taken some very positive steps in respect of regulations of ULIPs which are in the importance of both the insurance industry as also the policyholders,''
Mukherjee added that even as the life insurance industry has made some development to arrive at out to semi-urban and rural areas, ''the general insurance still requirements to work harder.''
On ULIP, FM said he was alert of the recent issues in the life insurance industry, particularly these products.
He said. ''We will resolve this subject soon. I understand the IRDA has taken some very positive steps in respect of regulations of ULIPs which are in the importance of both the insurance industry as also the policyholders,''
Tuesday, June 8, 2010
Irda to control telemarketing of insurance
The Insurance Regulatory and Development Authority (Irda) has now planned to streamline the promotion of insurance products during distance sales channels, such as the telephone and the internet.
It has said it will subject rules in this regard and these will cover selling by ‘voice mode’, which includes telephone calls, ‘electronic mode’ (e-mails, internet and interactive television) and as well the ‘physical mode’, though postal mail and newspapers.
Web-based selling of insurance products is at an emerging stage in India. Although the volumes here are low, the regulator said the rule would cover distance marketing behavior of insurers, brokers at the stages of offer, negotiation and conclusion of sale. It has asked insurers to ensure every telecaller is trained either in-house or at an institute accredited for pre-license training of agents.
Moreover, insurers or brokers will have to get ready standardized scripts for presentation of benefits, features and disclosures under each of the products planned to be sold under telephonic mode. Irda wants the name of the insurer, name of the caller the language options available and the point of approach to be clearly highlighted.
The telecaller will have to ask if the customer is interested in continuing with the subject, and the process of solicitation should proceed further only if he gives his consent in explicit terms. There should be an exit option.
In case of life insurance, pension plan and other products with savings and investment components, the regulator says wherever the investment risk in the solicited product is to be borne by the client, this should be highly highlighted in the communication. The exact nature of the guarantee such as NAV guarantee, capital protection, etc and their implications will have to be clearly explained.
In addition, insurance brokers will be given the freedom to solicit insurance over distance mode. Brokers will, however, have to avoid promoting the products of any particular insurer or a few insurers exclusively, by symptomatic of a product that fits the client’s requirements.
The regulator said price comparison charts should be up to date. Brokers will not be paid any payment other than brokerage towards policies procured over distance mode.
Insurers will have to check the quality of sales through telephonic confirmation, post-sales, under all modes of marketing, including in-person and distance modes, by calling up not less than 20(%) per cent of all the policyholders every month.
It has said it will subject rules in this regard and these will cover selling by ‘voice mode’, which includes telephone calls, ‘electronic mode’ (e-mails, internet and interactive television) and as well the ‘physical mode’, though postal mail and newspapers.
Web-based selling of insurance products is at an emerging stage in India. Although the volumes here are low, the regulator said the rule would cover distance marketing behavior of insurers, brokers at the stages of offer, negotiation and conclusion of sale. It has asked insurers to ensure every telecaller is trained either in-house or at an institute accredited for pre-license training of agents.
Moreover, insurers or brokers will have to get ready standardized scripts for presentation of benefits, features and disclosures under each of the products planned to be sold under telephonic mode. Irda wants the name of the insurer, name of the caller the language options available and the point of approach to be clearly highlighted.
The telecaller will have to ask if the customer is interested in continuing with the subject, and the process of solicitation should proceed further only if he gives his consent in explicit terms. There should be an exit option.
In case of life insurance, pension plan and other products with savings and investment components, the regulator says wherever the investment risk in the solicited product is to be borne by the client, this should be highly highlighted in the communication. The exact nature of the guarantee such as NAV guarantee, capital protection, etc and their implications will have to be clearly explained.
In addition, insurance brokers will be given the freedom to solicit insurance over distance mode. Brokers will, however, have to avoid promoting the products of any particular insurer or a few insurers exclusively, by symptomatic of a product that fits the client’s requirements.
The regulator said price comparison charts should be up to date. Brokers will not be paid any payment other than brokerage towards policies procured over distance mode.
Insurers will have to check the quality of sales through telephonic confirmation, post-sales, under all modes of marketing, including in-person and distance modes, by calling up not less than 20(%) per cent of all the policyholders every month.
United India eyes 15% premium increase in FY10
Public sector general insurer United India Insurance Company is confident of achieving 15(%) per cent growth in its premium income to Rs 6,000 crore this financial year on the back of sound growth from all verticals of the company.
“With tangible improvement in overall economy, we hope to achieve 15(%) per cent growth in premium income this fiscal,” G Srinivasan, CMD of United India Insurance Company said.
United India had posted a net profit of Rs 707 crore in FY10 — a 48(%) per cent rise over the related period last year. Premium income of the company stood at Rs 5,239 crore throughout the same period with an underwriting loss of around Rs 900 crore.
Referring to underwriting losses, he said, “Health and motor insurance are two areas where underwriting losses are higher for the company. While no one is making money from the health insurance section, third-party motor insurance are making losses due to low premium.”
Insurance industry in general is facing edge force in the health insurance section due to group mediclaim policies, rising cost of health expenses and general inflation. Also, the government decision to allow life insurer to sell health insurance products, margins have been additional squeezed.
Srinivasan also said the premium for third-party motor insurance claims should be increased to lessen the underwriting losses.
“With tangible improvement in overall economy, we hope to achieve 15(%) per cent growth in premium income this fiscal,” G Srinivasan, CMD of United India Insurance Company said.
United India had posted a net profit of Rs 707 crore in FY10 — a 48(%) per cent rise over the related period last year. Premium income of the company stood at Rs 5,239 crore throughout the same period with an underwriting loss of around Rs 900 crore.
Referring to underwriting losses, he said, “Health and motor insurance are two areas where underwriting losses are higher for the company. While no one is making money from the health insurance section, third-party motor insurance are making losses due to low premium.”
Insurance industry in general is facing edge force in the health insurance section due to group mediclaim policies, rising cost of health expenses and general inflation. Also, the government decision to allow life insurer to sell health insurance products, margins have been additional squeezed.
Srinivasan also said the premium for third-party motor insurance claims should be increased to lessen the underwriting losses.
Monday, June 7, 2010
Reliance Life launches retirement plan with guaranteed income
Reliance Life Insurance Company (RLIC) on Monday announces the launch of Reliance Life Traditional Golden Years Plan, a non-linked pension plan joined with guaranteed returns.
The launch was announced by Malay Ghosh, executive director and president, Reliance Life Insurance, in Mumbai on Monday.
“The Reliance Life Traditional Golden Years Plan is the first traditional retirement plan that offer advance guaranteed returns on investments, time-on-time, as a key differentiator in the pension market. It helps policyholders keep systematically and make the much-needed corpus to make a worry-free retirement life,” said Mr.Ghosh, adding, “This is the only traditional pension plan in the market which caters to the require for guaranteed returns at retirement. With Reliance Life Traditional Golden Years Plan, we are providing an easy yet successful gateway for customers to make their retirement fund for a financially-secured retired life.”
Reliance Life Traditional Golden Years Plan is a regular premium Retirement plan that provides guaranteed return, which is confirmed at the commencement of every financial year during the product term. The buildup rate for financial year 2010-11 is 7.75(%) per cent per annum. “The minimum guaranteed growth rate will not be less than the savings bank deposit interest rate, as confirmed by the Reserve Bank of India,” he said.
The Reliance Life Traditional Golden Years Plan is one of the little pension products, which offers a separate account - Accumulation Account - for each policyholder to keep their guaranteed investment returns for every year and release all charges made by the insurer. “The rationale behind maintaining the separate account is to show intelligibility,’’ said Mr Ghosh.
The new retirement plan is available for people across different age groups starting from 18 years till 75 years with all payment options available -- monthly, quarterly, half-yearly and yearly. However, the vesting age varies between 45 and 85 years.
Apart from the maturity and tax benefits, Reliance Life Traditional Golden Years Plan also offers tax-free commutation up to one third of fund value at the vesting age and the customer can purchase an annuity with the balance amount from RLIC or any service contributor.
Now you can calculate your retirement corpus Click Here
Retirement Calculator
The launch was announced by Malay Ghosh, executive director and president, Reliance Life Insurance, in Mumbai on Monday.
“The Reliance Life Traditional Golden Years Plan is the first traditional retirement plan that offer advance guaranteed returns on investments, time-on-time, as a key differentiator in the pension market. It helps policyholders keep systematically and make the much-needed corpus to make a worry-free retirement life,” said Mr.Ghosh, adding, “This is the only traditional pension plan in the market which caters to the require for guaranteed returns at retirement. With Reliance Life Traditional Golden Years Plan, we are providing an easy yet successful gateway for customers to make their retirement fund for a financially-secured retired life.”
Reliance Life Traditional Golden Years Plan is a regular premium Retirement plan that provides guaranteed return, which is confirmed at the commencement of every financial year during the product term. The buildup rate for financial year 2010-11 is 7.75(%) per cent per annum. “The minimum guaranteed growth rate will not be less than the savings bank deposit interest rate, as confirmed by the Reserve Bank of India,” he said.
The Reliance Life Traditional Golden Years Plan is one of the little pension products, which offers a separate account - Accumulation Account - for each policyholder to keep their guaranteed investment returns for every year and release all charges made by the insurer. “The rationale behind maintaining the separate account is to show intelligibility,’’ said Mr Ghosh.
The new retirement plan is available for people across different age groups starting from 18 years till 75 years with all payment options available -- monthly, quarterly, half-yearly and yearly. However, the vesting age varies between 45 and 85 years.
Apart from the maturity and tax benefits, Reliance Life Traditional Golden Years Plan also offers tax-free commutation up to one third of fund value at the vesting age and the customer can purchase an annuity with the balance amount from RLIC or any service contributor.
Now you can calculate your retirement corpus Click Here
Retirement Calculator
Bajaj Allianz Life launches ‘Two Bright Futures’ plan
Bajaj Allianz has launched a single proposal called ‘Two Bright Futures’. Under this plan, the company will set away Rs.100 for every child insurance plan sold towards financial support the education of under-privileged children.
This plan has been implemented from 20th May onwards. The funding corpus would be handed over to select NGO’s crossways the countries, which are working for a related cause.
This amount will be set aside exclusively by Bajaj Allianz and no amount will be deducted from the customer who purchases a child insurance plan from Bajaj Allianz Life Insurance.
In the first phase of the plan, Bajaj Allianz has tied-up with Aseema Trust, a Mumbai-based organization working towards providing holistic education to children living on the streets or in slum communities. Aseema works in partnership with the Municipal Corporation of better Mumbai to impart value-based and quality education to children from pre-primary to Standard 10.
Bajaj Allianz handed more than the first contribution cheque of Rs.4.24 lakh to Aseema Trust last week. This amount will be used to purchase books, uniforms, bags, stationery and support classes.
Akshay Mehrotra, Head – Marketing, Bajaj Allianz Life Insurance said “Through this insurance plan we are ensuring a brilliant future for a child who needs our support the most. We feel that the ‘Two Bright Futures’ program would be a small step in shaping their futures.”
For More Information about Child Plan. Click Here
Latest Children Plan
This plan has been implemented from 20th May onwards. The funding corpus would be handed over to select NGO’s crossways the countries, which are working for a related cause.
This amount will be set aside exclusively by Bajaj Allianz and no amount will be deducted from the customer who purchases a child insurance plan from Bajaj Allianz Life Insurance.
In the first phase of the plan, Bajaj Allianz has tied-up with Aseema Trust, a Mumbai-based organization working towards providing holistic education to children living on the streets or in slum communities. Aseema works in partnership with the Municipal Corporation of better Mumbai to impart value-based and quality education to children from pre-primary to Standard 10.
Bajaj Allianz handed more than the first contribution cheque of Rs.4.24 lakh to Aseema Trust last week. This amount will be used to purchase books, uniforms, bags, stationery and support classes.
Akshay Mehrotra, Head – Marketing, Bajaj Allianz Life Insurance said “Through this insurance plan we are ensuring a brilliant future for a child who needs our support the most. We feel that the ‘Two Bright Futures’ program would be a small step in shaping their futures.”
For More Information about Child Plan. Click Here
Latest Children Plan
Friday, June 4, 2010
Birla’s financial division Forecasts business to Grow 20% in India
India’s financial services industry may grow 20(%) percent over the next few years, ambitious by the world’s second-fastest pace of economic growth, the Aditya Birla Group said.
Financial planning, wealth management, infrastructure financing and services for Indians investing overseas may lead the growth, said Mumbai-based Ajay Srinivasan, chief executive officer of the company’s financial services division.
“The economy will double over the next 8 to 9 years if it grows between 8 and 9 percent yearly,” he said. Savings, which account for about 30(%) percent of India’s $1 trillion economy, will increase at a related pace, he forecast. “The pie is huge and we are casting our net.”
About 60(%) percent of the India’s population doesn’t have a bank account and nearly 90(%) percent don’t get loans, K.C. Chakra arty, deputy governor of the central bank, said last month. Equity-related investments form 10(%) percent of savings, compared to 22(%) percent in China and about 40(%) percent in developed nations, according to Vikram Kotak, chief investment officer at Birla Sun Life Insurance.
India’s finance, insurance and real estate sectors expanded 7.9(%) percent in the quarter ended March 31, according to the Central Statistics Office. The nation plans to spend $1.7 trillion on infrastructure over 10 years, Trade Minister Anand Sharma said yesterday.
Retail Broking
Srinivasan, who joined the company in 2007 from Prudential Plc, said he will focus on building the group’s non-banking- financial-services business and might look at areas including microfinance, institutional broking, investment banking and infrastructure financing.
Srinivasan’s unit, which generates $1.3 billion in revenue, has added retail broking and private equity to the obtainable asset management, insurance and distribution businesses. It is currently raising money for a domestic real estate fund and has invested about 800 million rupees from its 8.8 billion rupee private equity fund, Srinivasan said
Financial planning, wealth management, infrastructure financing and services for Indians investing overseas may lead the growth, said Mumbai-based Ajay Srinivasan, chief executive officer of the company’s financial services division.
“The economy will double over the next 8 to 9 years if it grows between 8 and 9 percent yearly,” he said. Savings, which account for about 30(%) percent of India’s $1 trillion economy, will increase at a related pace, he forecast. “The pie is huge and we are casting our net.”
About 60(%) percent of the India’s population doesn’t have a bank account and nearly 90(%) percent don’t get loans, K.C. Chakra arty, deputy governor of the central bank, said last month. Equity-related investments form 10(%) percent of savings, compared to 22(%) percent in China and about 40(%) percent in developed nations, according to Vikram Kotak, chief investment officer at Birla Sun Life Insurance.
India’s finance, insurance and real estate sectors expanded 7.9(%) percent in the quarter ended March 31, according to the Central Statistics Office. The nation plans to spend $1.7 trillion on infrastructure over 10 years, Trade Minister Anand Sharma said yesterday.
Retail Broking
Srinivasan, who joined the company in 2007 from Prudential Plc, said he will focus on building the group’s non-banking- financial-services business and might look at areas including microfinance, institutional broking, investment banking and infrastructure financing.
Srinivasan’s unit, which generates $1.3 billion in revenue, has added retail broking and private equity to the obtainable asset management, insurance and distribution businesses. It is currently raising money for a domestic real estate fund and has invested about 800 million rupees from its 8.8 billion rupee private equity fund, Srinivasan said
Tweak commission configuration: Irda
In what may lead to lesser front-loading of insurance policies, the Insurance Regulatory and Development Authority (Irda) plans to increase the commission over the tenure of the policy.
“We are going to ask insurers to propose ways to increase persistency levels. This will happen only after they tweak the commission structure,” said a senior Irda official.
Most insurance policy is extremely front-loaded. For instance, insurance agents earn over 40(%) per cent as commission in most unit-linked insurance plans (Ulips) in the first year. Even commissions for term plan and endowment plans are 20-35(%) per cent in the first year.
The commissions refuse considerably, particularly for term and endowment policies, after the first year. The agent, as a result, loses interest in pursuing the policyholder.
In case of mutual funds, the distributor earns a commission of 1.25(%) per cent in the first year (upfront fees plus trail commission). After that, there is an annualized trail commission of 50-75 basis points every year. This, the mutual fund industry said, keeps the point interested in the investor.
By proposing to extend the commission over the tenure of the plan, Irda thinks agents will continue to follow the policyholders.
Recently, Irda had extended the minimum term of an Ulip from 3 to 5 years. It had also made other proposals, including capping the first year surrender charge at 15(%) per cent for a policy over 10 years. This surrender charge would continue declining and go away in the 6th year.
However, experts said persistence levels were already on the rise.
“Persistency levels are already improving because of the events taken by Irda in the last two years. Tenure of products has left up as the lock-in has increased to five years,” said S B Mathur, secretary general, Life Insurance Council.
The insurance industry reported 80(%) per cent persistency in 2008-09, an increase of 7(%) per cent over the previous year.
“We are going to ask insurers to propose ways to increase persistency levels. This will happen only after they tweak the commission structure,” said a senior Irda official.
Most insurance policy is extremely front-loaded. For instance, insurance agents earn over 40(%) per cent as commission in most unit-linked insurance plans (Ulips) in the first year. Even commissions for term plan and endowment plans are 20-35(%) per cent in the first year.
The commissions refuse considerably, particularly for term and endowment policies, after the first year. The agent, as a result, loses interest in pursuing the policyholder.
In case of mutual funds, the distributor earns a commission of 1.25(%) per cent in the first year (upfront fees plus trail commission). After that, there is an annualized trail commission of 50-75 basis points every year. This, the mutual fund industry said, keeps the point interested in the investor.
By proposing to extend the commission over the tenure of the plan, Irda thinks agents will continue to follow the policyholders.
Recently, Irda had extended the minimum term of an Ulip from 3 to 5 years. It had also made other proposals, including capping the first year surrender charge at 15(%) per cent for a policy over 10 years. This surrender charge would continue declining and go away in the 6th year.
However, experts said persistence levels were already on the rise.
“Persistency levels are already improving because of the events taken by Irda in the last two years. Tenure of products has left up as the lock-in has increased to five years,” said S B Mathur, secretary general, Life Insurance Council.
The insurance industry reported 80(%) per cent persistency in 2008-09, an increase of 7(%) per cent over the previous year.
Thursday, June 3, 2010
SC listen to ULIP case in July; may not fix on jurisdiction problem
The Supreme Court will hear the case pertaining to the line over manage of ULIPs between market regulator SEBI and insurance regulator IRDA next month but may not choose on the controversy over who would regulate these market-linked insurance products.
"The Supreme Court is in vacation. The transfer appeal is likely to be taken up in July," IRDA chairman J Hari Narayan told PTI today when asked about the growth on resolving its dispute with SEBI over controlling unit-linked insurance products (ULIPs).
Significantly, the IRDA chief is not sure whether the apex court will decide on the issue of control of ULIPs as it is not directly raised in the transfer appeal filed by SEBI before the apex court.
"The issue of jurisdiction is not directly mentioned in the petitions. It is only indirectly mentioned," said Narayan, who was in the Capital and met finance secretary Ashok Chawla.
Earlier, SEBI had filed a petition in the Supreme Court in quest of transferring all the ULIP-related cases from various high courts to the apex court. In this regard, the apex court had issued notices to the Centre, IRDA and 14 life insurers.
SEBI and IRDA have been locking horns over who has the power to control ULIPs, which are equity and bond-linked insurance products. The dispute snowballed into a major controversy after SEBI on April 9 banned 14 life insurers, as well as those belonging to SBI Life and Reliance Life of the Anil Ambani Group, from raising any fresh money from ULIPs unless they are registered with the market watchdog.
Responding to the SEBI directive, IRDA asked insurance companies to ignore the order of the market regulator and continue with business as usual.
Amid conflicting orders, the finance ministry brokered peace between the two regulators and asked them to equally seek a legally binding order from an appropriate court. It also asked the regulators to maintain status quo till a binging judicial order is secured.
Following the government directive of status quo, SEBI allowed insurers to raise money from existing ULIPs, but prevented them from issuing fresh ULIPs after April 9.
On jointly seeking a legally compulsory mandate with SEBI, Narayan said, "we are all for it, but the SEBI counsel told them that it is not a civil matter, civil procedure does not apply."
According to sources, IRDA wanted a joint application under Section 90 of the civil procedure code, but SEBI did not agree. Under Section 90 if any person agrees in writing to state a case for the opinion of the court, then the court shall try and determine the same in the manner agreed.
"The Supreme Court is in vacation. The transfer appeal is likely to be taken up in July," IRDA chairman J Hari Narayan told PTI today when asked about the growth on resolving its dispute with SEBI over controlling unit-linked insurance products (ULIPs).
Significantly, the IRDA chief is not sure whether the apex court will decide on the issue of control of ULIPs as it is not directly raised in the transfer appeal filed by SEBI before the apex court.
"The issue of jurisdiction is not directly mentioned in the petitions. It is only indirectly mentioned," said Narayan, who was in the Capital and met finance secretary Ashok Chawla.
Earlier, SEBI had filed a petition in the Supreme Court in quest of transferring all the ULIP-related cases from various high courts to the apex court. In this regard, the apex court had issued notices to the Centre, IRDA and 14 life insurers.
SEBI and IRDA have been locking horns over who has the power to control ULIPs, which are equity and bond-linked insurance products. The dispute snowballed into a major controversy after SEBI on April 9 banned 14 life insurers, as well as those belonging to SBI Life and Reliance Life of the Anil Ambani Group, from raising any fresh money from ULIPs unless they are registered with the market watchdog.
Responding to the SEBI directive, IRDA asked insurance companies to ignore the order of the market regulator and continue with business as usual.
Amid conflicting orders, the finance ministry brokered peace between the two regulators and asked them to equally seek a legally binding order from an appropriate court. It also asked the regulators to maintain status quo till a binging judicial order is secured.
Following the government directive of status quo, SEBI allowed insurers to raise money from existing ULIPs, but prevented them from issuing fresh ULIPs after April 9.
On jointly seeking a legally compulsory mandate with SEBI, Narayan said, "we are all for it, but the SEBI counsel told them that it is not a civil matter, civil procedure does not apply."
According to sources, IRDA wanted a joint application under Section 90 of the civil procedure code, but SEBI did not agree. Under Section 90 if any person agrees in writing to state a case for the opinion of the court, then the court shall try and determine the same in the manner agreed.
Insurers drive pension products this month...
Anticipating a drop in sales of pension products after new guidelines boot in from July, life insurance companies are creation a strong ground to sell these this month.
For the country’s biggest insurer, Life Insurance Corporation (LIC), Market Plus, a unit linked pension plan, contributed 42(%) per cent to the new business premium income in 2009-10. It garnered Rs 18,155 crore for the corporation.
We have asked our agents to sell Market Plus during the after that one month. It is one of our best-selling products. It will lose its magic after the new guideline comes into force and the product is simplified,” said LIC Managing Director D K Mehrotra.
“We would like pension to account for at least 10(%) per cent of our total business in this financial year. Last year, 50(%) per cent of our new business premium came from pension. Since the products will be efficient, we are pushing sales now. Also, the first two months have been lean. We want to realize the target in June,” said K Sahay, CEO, Star Union Daiichi Life Insurance.
The chief executive of a large insurance company said now it would be hard to write pension plans for senior citizens. “We have policies for people up to 65 years. It will not be sustainable to offer pension to these people if life cover is bundled with pension. We have asked agents to raise sales in June in the senior citizen category,” he said.
The regulator is contemplating creation either a life cover, a health cover or a minimum guarantee compulsory with pension plans. This will be helpful for senior citizens as insurers hesitate to write health or life cover for them. The products will also become costly.
In its latest circular, Irda mandated life cover with unit-linked pension products. It also banned partial withdrawals during the policy term. Moreover, policyholders have to compulsorily buy annuity at the time of maturity or surrender, with two-third of the fund accumulated. The rest can be withdrawn.
Insurers like Aviva Life Insurance say the changes will make the product more gorgeous. “Our target segment for pension is not 50-55 years but 20-30 years. This will lead to medical underwriting, which will be helpful for both longevity and annuity risk,” said Aviva Life MD and CEO T R Ramachandran.
For the country’s biggest insurer, Life Insurance Corporation (LIC), Market Plus, a unit linked pension plan, contributed 42(%) per cent to the new business premium income in 2009-10. It garnered Rs 18,155 crore for the corporation.
We have asked our agents to sell Market Plus during the after that one month. It is one of our best-selling products. It will lose its magic after the new guideline comes into force and the product is simplified,” said LIC Managing Director D K Mehrotra.
“We would like pension to account for at least 10(%) per cent of our total business in this financial year. Last year, 50(%) per cent of our new business premium came from pension. Since the products will be efficient, we are pushing sales now. Also, the first two months have been lean. We want to realize the target in June,” said K Sahay, CEO, Star Union Daiichi Life Insurance.
The chief executive of a large insurance company said now it would be hard to write pension plans for senior citizens. “We have policies for people up to 65 years. It will not be sustainable to offer pension to these people if life cover is bundled with pension. We have asked agents to raise sales in June in the senior citizen category,” he said.
The regulator is contemplating creation either a life cover, a health cover or a minimum guarantee compulsory with pension plans. This will be helpful for senior citizens as insurers hesitate to write health or life cover for them. The products will also become costly.
In its latest circular, Irda mandated life cover with unit-linked pension products. It also banned partial withdrawals during the policy term. Moreover, policyholders have to compulsorily buy annuity at the time of maturity or surrender, with two-third of the fund accumulated. The rest can be withdrawn.
Insurers like Aviva Life Insurance say the changes will make the product more gorgeous. “Our target segment for pension is not 50-55 years but 20-30 years. This will lead to medical underwriting, which will be helpful for both longevity and annuity risk,” said Aviva Life MD and CEO T R Ramachandran.
Wednesday, June 2, 2010
Hurry to sell Ulips in front of July 1
Insurance companies are in a hurry to sell as a lot of unit-linked plans as possible before the new strategy force them to package a life or health cover with these popular instruments that account for nearly half of their business.
Insurance executives think selling these policies will be difficult once the new guidelines planned by insurance regulator IRDA are introduced from July 1. Once the new norms are in force, agents will have to convince the customer to buy a health or insurance cover along with pension plans.
“It was an easy product to sell since you don’t have to ask the customer too lots of questions,” said the sales head at a leading insurance firm.
Some of the insurance companies and banks have revised sales targets and initiated incentive schemes such as foreign trips, easy loans and discounts to make sales. Unit linked plans constitute 46% per cent of the total business of insurance companies.
Pension products have been the favourite unit-linked products, as insurance cover was not compulsory with the policy. These were sold as an investment product wherein customer was currently given the option to surrender his policy after a 5-year lock in.
“Given this flexibility, it was easy for a customer as old as 70-years to invest in such plans. Besides the commission from selling a pension plan was more than that of other products,” said a relationship manager with a leading private sector bank.
Traditionally, all unit-linked plans are front loaded and an agent can earn a commission up to 20% per cent by selling such policies.
“This (the new norms) will need more documentation and if the amount is high then an income proof will also be necessary, which will deter customers,” said a sales head at an insurance firm.
As per existing laws, the insurance cover should be 5 times more than the premium paid.
Further, the new law will also limit the customer from surrendering their pension plans, as they will not get the full amount on surrendering their policy. The customers will only get one-third of the invested corpus and the rest amount through annuity or monthly/yearly payments.
Ashish Kapur, CEO of Invest Shopee, feels the new laws will aid the investor from needless buying an insurance product. “There was a lot of mis-selling earlier,” he said.
Of the Rs 2, 00,000 crore-plus life insurance premium collected in the first 11 months of 2009-10, more than Rs 91,000 crore came from Ulips, according to the Life Insurance Council of India, an industry body representing 23 life insurers
For More information about unit linked plan.
ICICI Pension Plan
LIC Pension Plan
Insurance executives think selling these policies will be difficult once the new guidelines planned by insurance regulator IRDA are introduced from July 1. Once the new norms are in force, agents will have to convince the customer to buy a health or insurance cover along with pension plans.
“It was an easy product to sell since you don’t have to ask the customer too lots of questions,” said the sales head at a leading insurance firm.
Some of the insurance companies and banks have revised sales targets and initiated incentive schemes such as foreign trips, easy loans and discounts to make sales. Unit linked plans constitute 46% per cent of the total business of insurance companies.
Pension products have been the favourite unit-linked products, as insurance cover was not compulsory with the policy. These were sold as an investment product wherein customer was currently given the option to surrender his policy after a 5-year lock in.
“Given this flexibility, it was easy for a customer as old as 70-years to invest in such plans. Besides the commission from selling a pension plan was more than that of other products,” said a relationship manager with a leading private sector bank.
Traditionally, all unit-linked plans are front loaded and an agent can earn a commission up to 20% per cent by selling such policies.
“This (the new norms) will need more documentation and if the amount is high then an income proof will also be necessary, which will deter customers,” said a sales head at an insurance firm.
As per existing laws, the insurance cover should be 5 times more than the premium paid.
Further, the new law will also limit the customer from surrendering their pension plans, as they will not get the full amount on surrendering their policy. The customers will only get one-third of the invested corpus and the rest amount through annuity or monthly/yearly payments.
Ashish Kapur, CEO of Invest Shopee, feels the new laws will aid the investor from needless buying an insurance product. “There was a lot of mis-selling earlier,” he said.
Of the Rs 2, 00,000 crore-plus life insurance premium collected in the first 11 months of 2009-10, more than Rs 91,000 crore came from Ulips, according to the Life Insurance Council of India, an industry body representing 23 life insurers
For More information about unit linked plan.
ICICI Pension Plan
LIC Pension Plan
Tuesday, June 1, 2010
Reliance Life launches Traditional Investment Insurance Plan
Reliance Life Insurance, an ADAG group company, has launched a savings cum protection plan. It’s a traditional investment plan that provides life protection and regular savings with yearly guaranteed investment income. The new scheme is a regular premium plan offer guaranteed investment returns. The guaranteed return module would be confirmed at the beginning of every financial year during the product term, the Life insurance company said in a statement.
The growth rate for the 2010-11 financial years is 7.75% per cent. At any point of time, the minimum guaranteed growth rate will not be less than the savings bank deposit interest rate as confirmed by the Reserve Bank, the company added. The insurance plan is available to children aged less than 30 days and senior citizens aged up to 70 years, with monthly, quarterly, half-yearly and yearly payment option. The fixed sum assured under the plan is 7.5 times of the annualized premium. The minimum term of the policy is 10 years and the maximum is 30 years. Besides the maturity and tax benefits, it offers health-connected cover which will pay a lump sum to the customer for as many as 33 specific surgeries, including open heart, kidney transplant, and 25 critical conditions. These riders can be added by paying an additional premium.
The growth rate for the 2010-11 financial years is 7.75% per cent. At any point of time, the minimum guaranteed growth rate will not be less than the savings bank deposit interest rate as confirmed by the Reserve Bank, the company added. The insurance plan is available to children aged less than 30 days and senior citizens aged up to 70 years, with monthly, quarterly, half-yearly and yearly payment option. The fixed sum assured under the plan is 7.5 times of the annualized premium. The minimum term of the policy is 10 years and the maximum is 30 years. Besides the maturity and tax benefits, it offers health-connected cover which will pay a lump sum to the customer for as many as 33 specific surgeries, including open heart, kidney transplant, and 25 critical conditions. These riders can be added by paying an additional premium.
Insurance cos will require to protect capital
Indian insurance companies will need to save capital even with the growth potential since tools for conserving capital are not available to them, says prefessional servives firm Ernst & Young.
Speaking to ET, Ernst & Young partner Rohan Sachdev said different in the West, Indian insurance companies do not have any capital pull reduction tools such as securitisation or reinsurance of their collection. This would mean that companies have to every time provided more capital.
Mr Sachdeva said some mid-sized companies are using up nearly Rs 40 crore to Rs 60 crore a month as a few of their business models are not sustainable under the new regulatory rule and would need to be reworked. He pointed out that in capital efficiency; life insurers promoted by banks have done very well by increasing their operations with minimal staff. For new companies without their own sharing network, it was important that they have a variable distribution cost to keep expenses under check, he said.
In the last decade since the industry was opened up, promoters of life insurance companies have invested in surplus of Rs 27,000 crore into life insurance businesses. The force to get more efficient on capital will also come from new revelation norms that come into effect from July 2010.
Until now, insurance companies have been able to explain their high capital spending saying the funds require to meet the solvency norms. Insurers will be required to provide economic capital, which will provide a break-up of the capital that is required for different business and the extent of capital that they will lose under various scenarios.
According to Mr Sachdev, there are several stress points for the existing business plans of life insurance companies. “Most of the profit drivers for companies will not be there. Some companies have made important lapsation profits which cannot continue once surrender charges are capped.”
Earlier, the insurance regulator had capped all charges, including fund management charges that could be forced by insurance companies on their policyholder’s funds.
Mr Sachdev said he expects life insurance companies to continue to issue unit linked insurance plans but the share of Ulips would decline. He pointed out that the life insurance industry had centred their entire business around Ulips although the Indian markets were not older enough. At present, the life insurance penetration in India is close to 4%.
“The level of maturity can be gauged from the level of diffusion of other personal lines of insurance such as health and householder insurance, which is quite low in India,” he said.
Speaking to ET, Ernst & Young partner Rohan Sachdev said different in the West, Indian insurance companies do not have any capital pull reduction tools such as securitisation or reinsurance of their collection. This would mean that companies have to every time provided more capital.
Mr Sachdeva said some mid-sized companies are using up nearly Rs 40 crore to Rs 60 crore a month as a few of their business models are not sustainable under the new regulatory rule and would need to be reworked. He pointed out that in capital efficiency; life insurers promoted by banks have done very well by increasing their operations with minimal staff. For new companies without their own sharing network, it was important that they have a variable distribution cost to keep expenses under check, he said.
In the last decade since the industry was opened up, promoters of life insurance companies have invested in surplus of Rs 27,000 crore into life insurance businesses. The force to get more efficient on capital will also come from new revelation norms that come into effect from July 2010.
Until now, insurance companies have been able to explain their high capital spending saying the funds require to meet the solvency norms. Insurers will be required to provide economic capital, which will provide a break-up of the capital that is required for different business and the extent of capital that they will lose under various scenarios.
According to Mr Sachdev, there are several stress points for the existing business plans of life insurance companies. “Most of the profit drivers for companies will not be there. Some companies have made important lapsation profits which cannot continue once surrender charges are capped.”
Earlier, the insurance regulator had capped all charges, including fund management charges that could be forced by insurance companies on their policyholder’s funds.
Mr Sachdev said he expects life insurance companies to continue to issue unit linked insurance plans but the share of Ulips would decline. He pointed out that the life insurance industry had centred their entire business around Ulips although the Indian markets were not older enough. At present, the life insurance penetration in India is close to 4%.
“The level of maturity can be gauged from the level of diffusion of other personal lines of insurance such as health and householder insurance, which is quite low in India,” he said.
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