New Ulip norms starting 1st Sept, policyholders to advantage

Starting Wednesday, policyholders will get a much fairer deal if they invest in unit-linked insurance plans (Ulips).

The new rules of the Insurance Regulatory and Development Authority (Irda) take result from September 1. Ulips, which contributed 80(%) per cent of the total premium collected by private companies, will see an impressive change. Irda has capped the difference between net and gross yields during the policy term. Insurers will have to offer a minimum approved return even if a policyholder withdraws from the fund before maturity. For the 5^th year, the cap is fixed at 4(%) per cent.

WHAT’S IN STORE?
Move: The difference between net and gross yields capped during the policy term.	Effect: The policyholders will get higher returns on their Ulip investments.
Move: The lock-in period will increase from three years to five years.	Effect: If anyone withdraws in the first year, he will get back the amount after deduction of charges only after the 5th year.
Move: Surrender charges have been capped at a level much lower than what exists at present	Effect: It will ensure that only acquisition expenses are recovered in the event of the discontinuance of the policy.

From tomorrow, the lock-in period will increase from 3 years to 5 years. If a policyholder wants to remove in the 1^st year, he will get back the amount invested after deduction of various charges only after the 5^th year.

To ensure only gaining expenses are recovered in the event of the discontinuance of the policy, surrender charges have been capped at a level much lower than what exists at present. The industry had been benefiting from higher lapses. Funds collected from policyholders under lapsed policies are sent to a part fund and the money is given the the policholder after the company deducts all charges. The charges are as high as 100(%) per cent in some companies.

“We have always maintained that insurance is a long-term contract. Any pre-termination of policy is not good for all stakeholders,” said S B Mathur, secretary general, Life Insurance Council.

“Products are going to be more gorgeous now. We expect greater customer interest, as charges will be uniform as well as lower,” said G V Nageswara Rao, managing director and chief executive officer, IDBI Federal Life Insurance.

Rao added the customer could now expect higher returns, as the amount of funds invested was likely to go up.

Along with these changes, the regulator has set minimum disclosure guidelines for insurers.

“Now agents cannot take policyholders for a ride. They (policyholders) can now see the financial position of the company over the website and do not need to depend on agents,” added Mathur.

On the flip side, though overcharging and misspelling will come down, insurers say product innovation and customisation will be affected. Also, traditional plans will suit those in the lower ticket size segment.

Reliance Life tops in policy sales along with pvt insurers in July

Anil Dhirubhai Ambani Group Company Reliance Life Insurance has emerged as the leading private sector insurer in conditions of the number of policies sold in the month of July.

Reliance Life Insurance sold 2, 81,810 policies throughout the month, according to IRDA data.

However, in terms of total premium collections in July, ICICI Prudential was the top private player, mopping up Rs 584 crore, while SBI Life garnered Rs 563 crore and Reliance Life Insurance Rs 296 crore.

Meanwhile, state-owned LIC collected a total premium of Rs 5,690 crore in the same month.

During the first quarter of the current fiscal, Reliance Life sold 4, 93,899 policies as next to 4, 06,699 policies in the parallel period last year.

Among the private life insurance players, ICICI Prudential saw its premium collections from new business grow by 73(%) per cent to Rs 1,987 crore throughout the April-July period, while Reliance Life witnessed a growth of 23(%) per cent in new premium collections to Rs 901 crore for the 4 months ended July, 2010.

SBI Life's premium collections from new business grew to Rs 1,539 crore in April--July, 2010, from Rs 1,398 crore throughout the same period last year.

LIC recorded an over 70(%) per cent increase in new premium collections to Rs 24,430 crore during April--July this year from Rs 14,265 crore a year ago, according to the data.

Overall, the 23 life insurers in the country collectively mopped up Rs 34,249 crore as new first-year premium during the period, a 55(%) per cent increase from Rs 21,996 crore in the year-ago period.

The private sector, comprising 22 life insurers, together accounted for Rs 9,818 crore worth of new business in the April--July period, compared to Rs 7,730 crore a year earlier, a growth of 27(%) per cent.

ING Life banking on traditional products vis-a-vis ULIPs

Private life insurer ING Life India today said it would continue to focus on selling traditional products vis-a-vis Unit Linked Insurance Plans (Ulips).
“Traditional life insurance plans are helpful to all the stake holders, including the insured, insurer and the financial advisor,” ING Life India, executive vice-president (central and east), Syed Sarfaraz told the media here.
He informed the company already maintained a ‘healthy’ product mix with the traditional life insurance accounting for 60(%) per cent of the portfolio, while the balance coming under Ulips.
Ulips provides for life insurance, where the policy value varies according to the value of the primary assets at that time. It offers life insurance as well as an investment like mutual fund. While, the part of premium goes towards the sum assured, the balance is invested in instruments such as equity.
Recently, sector watchdog Insurance Regulatory and Development Authority (Irda) had tightened the norms for Ulips by raising lock-in-period from 3 to 5 years to provide risk safety. This has made Ulips long term financial instruments.
These guidelines followed the public spat between Irda and Securities and Exchange Board of India (Sebi) for jurisdiction over Ulips, which Sebi had claimed were equity products.
Based on traditional platform, the product guarantees the maturity value as decided by the parent, additional guarantee of death benefit to policyholder, guarantee of policy continuing in case of death of parent and guaranteed coverage for child after maturity.

ING Life Insurance launches child plan

ING Life India, part of ING group today launched their new non linked and non participative child plan ‘ING Aashirvad’, which helps parents plan for their child’s future landmark.
Ajay Kapoor, regional vice-president (North), ING life Insurance introduction the new product ‘ING Aashirvad’ maintained the new product was a traditional product and guaranteed development advantage selected by the policyholder.
Kapoor added ‘ING Aashirwad’, a unique product which helps parents plan for child’s future comes with 4 guarantees. The guarantee of maturity value as decided by parent, that of death benefit in case of any possibility of the policyholder, coverage for child after the maturity of the product and policy continuing in case of any eventuality of the parent(policyholder).”
ING Life India having Rs 4,500 crore asset under management, had previously announced their plan to infuse Rs 240 crore additional capital to fund the 5 years growth purpose, including growing the business base by 5 times.

IRDA on Health insurance cashless dispute

The Insurance Regulatory and Development Authority (IRDA) Friday said the issue of offering cashless treatment under health insurance policies issued by the four government-owned general insurers 'is getting resolved'. IRDA Chairman J. Hari Narayan said that prior to dispute there were only 300 government owned insurers as compared to 400 now.
The four government-owned non life insurers had earlier delisted major hospital chains from offering cashless hospitalization facility for their health insurance policy holders on the ground that the hospitals are over charging the patients.
He was in Chennai to launch the country's first health cum life insurance product introduced by the city-based Star Health and Allied Insurance Company Ltd partnering with private life insurer Shriram Life Insurance Company Ltd. when he clarified.
There are talks of creation of separate regulator for the healthcare sector. Also, Confederation of Indian Industry (CII) has said none of the major super speciality hospitals have signed with the Raksha TPA (third party administrator).
CII’s members are waiting for a response from the insurers and the TPA since the meeting Raksha in Delhi. As on August 12, the hospitals in Delhi have worked out the packaged rates for 42 procedures and submitted to the TPA.
Once cashless is restored in the empanelled hospitals, in the second phase, hospitals and insurers along with other stakeholders of the health insurance ecosystem and the competent authority would work on a classification of hospitals, which would be agreeable to all.

The other side:

Shivinder M. Singh, managing director, Fortis Healthcare said 'There will always be a differential in the levels of care and services provided by hospitals for a single type of illness. This differential is a function of structures, processes and outcomes. A scientific analysis of all these parameters is essential to grade hospitals.'
Sanjeev Bagai, CEO, Batra Hospital and Medical Research Centre said, 'This grading or categorization of hospitals should then translate into pricing of procedures in each grade. Premature conceptualization or inference of this complex process must be avoided'. It is essential that a comprehensive exercise be undertaken of grading hospitals based on their infrastructure, clinical expertise, technology base, clinical outcomes, competency of para-clinical man power, accreditation and standards of care is done.

Irda permission revelation in Ulip advertisements

To improve transparency in unit-linked insurance products (Ulips) and protect the interest of policyholders, the Insurance Regulatory and Development Authority (IrDA) has asked life insurers to release the underlying circumstances and elements while advertising products.
“A review of the advertisements, particularly those relating to unit-linked life insurance products, reveal the necessity to improve the content and presentation in fulfillment with the provisions of the above referred regulation and guidelines,” said IrDA.
The regulator said when an insurance advertisement is highlighting the benefit of guarantees; it obviously needs to disclose the underlying environment under which the guarantee operates, including cost of guarantee and charges.
Further, Irda said if the underlying conditions are very complex, the text, wording on guarantee must be accompanied by the phrase “Conditions Apply” in a font that is at least 50(%) per cent of the font size used to highlight the guarantee.
The advertisement will also have to clearly state the availability of underlying elements of ‘life insurance coverage’ to help identify the product as an insurance product.
It has warned against brand names of products that use terms or phrases that convey a fictional sense of security.

Revival of lapsed policies made easy

Once in a while there comes a time when the payment of premiums becomes difficult thus causing the policy to lapse. Policy lapsation can be dangerous as you or your financial dependants/beneficiaries may not get any benefit, which was the reason for buying the insurance cover in the first place.

You just need to know the reasons behind the policy lapsation and process of revival if ever there is any requirement in future (whatever the reason may be).

Reasons for policy lapse:
- because of carelessness
- because one doesn’t see value in continuing with the policy,
- because of a financial crisis and can’t afford it any longer

Policy will lapse only if you fail to pay your premiums regularly. If something happens to you during this period, the insurance company will honor its commitment and pay you or your beneficiaries, depending upon the type of policy you hold. However, if you stop paying your premium, then the insurance company will no longer be obliged to continue providing an insurance cover on your life. In this situation, your policy is said to have lapsed. The insurer might not provide any monetary benefits (the sum assured under the policy) to you or your beneficiaries if something were to happen to you.

Before your policy lapses, you still have a limited time period during which you can make well on a delayed premium payment. If you are late on your premium payment, the insurer will send you a reminder and give you a grace period within which to pay your premium. This is usually 15 days when you pay your premium monthly and 30 days in all other cases. If you fail to pay the premium even after this grace period, your policy will lapse. The insurer will send you a letter informing you about the same.

Revival: Most traditional policies (like term, whole-life and endowment plans) can be revived, subject to certain criteria that your insurer might impose on you.

Revival can happen at any time, but the conditions for revival might depend upon how long the policy has been lapsed for. Under the insurance laws, if the policy has been in force for at least three years, the insured gets up to two years to revive the policy. Some insurers like LIC have special schemes under which policies can be revived for up to five years from being lapsed.


- If you revive the policy within six months from the date of lapsation, the process might be as simple as paying the overdue premium (and interest) to catch up on the delay on your part.
- If you revive the policy after six months from the date of lapsation, you might be required to pay the overdue premium, penalty fees, as well as interest payment that could be up to 12-18% of the premium payment, depending upon the type of policy and the date of purchase.

At the time of revival, the insurer might impose a lot of conditions or even decline your request for a policy revival if the company is not convinced about the honesty of your application on grounds of suspected fraud or the like. It can be very likely that the insurer will ask you to appear for a medical test before the policy can be revived to ascertain whether you have developed a new medical condition during policy lapse that might expose the insurance company to a high risk in insuring your life.

At the time of revival, usually, full benefits that you or your beneficiaries are eligible for will be reinstated. However, if after revival, the insured commits suicide within one year, the insurer can deny the claim. Similarly, if the insured passes away within two years of the revival, the insurer has the option of conducting an inquiry before they decide to pay the claims to the beneficiaries.

Irda may cap charges on basic policies

After setting stiff norms for unit-linked insurance plans (Ulips), the Insurance Regulatory and Development Authority (Irda) is planning to cap charges on traditional products within three months.
“We will review the situation after September. If insurers try to cover the cost of squeeze in margins (due to new Ulip norms) by levying a higher charge on conventional products, we will cap it,” said a senior Irda official.
Last year, after the market regulator banned entry load on mutual funds, Irda capped overall charges on Ulips from January this year.
The difference between the net and the gross yield was capped at three per cent for products with a tenor of less than 10 years and at 2.25 per cent for those with a tenor of more than 10 years. In the new Ulip guidelines, the regulator capped this difference even during the policy term.
“At present, we are busy clearing Ulips. We will start working on the guidelines within three months of seeing the impact of the cap on Ulips,” the official added.
The regulations allow insurers to pay up to 40 per cent commission on life insurance products, including traditional plans. Insurers with more than 10 years of operation can pay only up to 35 per cent commission on selling both Ulips and conventional products.
Insurance companies are, however, against any price control and micro management by the regulator in conventional policies. “Fundamentally, we are against price control. But the industry also needs to become more responsible while designing products. On participatory products, the regulation is such that 90 per cent profit goes to policyholders and only 10 per cent to shareholders. Given the high protection and other features, there products need not be subject to price control,” said Rajesh Sud managing director and CEO, Max New York Life.
“There is nothing to cap in traditional products. These are a different class of products. There is a well defined premium and investment pattern stipulated by the regulator. They do not have any characteristic of Ulips,” said G V Nageswara Rao managing director and CEO, IDBI Fortis Life Insurance.

Insurance IPOs doubtful till hike in FDI limit

Listing plans of life insurance companies may take longer, with the delay in raising the foreign direct investment (FDI) cap to 49 per cent from the present 26 per cent.
According to a study by HSBC, insurance companies may not go for an initial public offer (IPO) till the FDI limit was raised
“Political winds have changed in recent weeks and the FDI limit increase was not tabled in the monsoon session of Parliament as expected. Indian insurance IPOs are unlikely until the FDI limit is raised, as the foreign partner understandably prefers to raise their stake ‘off market’ first,” the report said.
At present, insurance companies may list only after completing 10 years of operation. HDFC Standard Life will be the first since the sector was opened to complete 10 years, this October, while ICICI Prudential will do so in November. Birla Sun Life will be eligible to tap the public market in January and SBI Life, promoted by the country’s largest bank, can do so by March.
“We do not see the current grey requirement of a 10-year track record as an immovable object… The vast majority of insurers we met seemed keen to do an IPO once regulations permit, owing to a desire to raise capital and/or establish a price discovery mechanism,” the report said.
Foreign partners are interested in increasing their stake from 26 per cent to 49 per cent once the FDI limit is raised. “Then, both the local promoter and the foreign partner would sell down equally in any IPO to meet Sebi’s (the regulator) recently introduced 25 per cent minimum free float,” the report said.
While most insurance companies have agreed to a fair market price at which foreign partners can increase their stake, Allianz has set a price with Bajaj to raise its stake.
Valuations, however, will be subject to negotiation, with each partner appointing an investment bank to hammer out the deal. Most Indian insurers have not disclosed their embedded value (EV) or the valuation of a company in the absence of a standard industry norm. Three insurers — HDFC Standard Life, Max New York Life and Birla Sun Life — have disclosed their EV.

Cashless hospital cover possibly will come back in a week

Corporate hospitals may restore cashless treatment to policyholders of the four public sector health insurance firms in a week.
Such hospitals as Apollo, Fortis, Max and Medanta will negotiate new package rates with individual third party administrators (TPAs) and arrive at an agreement in the next five to six days, a meeting of the representatives of leading private healthcare chains and the nodal TPA of the public sector undertaking insurance firms decided here today. Delhi-based Raksha TPA represented the insurance industry in today’s talks.
The TPAs are the facilitators between the hospitals and health insurance firms like New India Assurance, United India Insurance, National Insurance and Oriental Insurance.
Pervez Ahmed, managing director of Max Healthcare, who heads the hospital delegation on behalf of industry chamber Confederation of Indian Industry’s National Healthcare Committee, said the decision would be an interim one and a comprehensive agreement will be ready within a month.
He hinted that policyholders might have to pay different levels of premium, depending on the hospitals one opts for treatment.

Pvt hospitals get together insurance firm today

Leading corporate hospitals, which are out of the preferred provider network (PPN) of public sector health insurance firms, will offer standardized treatment packages for nearly 250 procedures to see their PPN status restored soon.
The representatives of hospital chains such as Apollo, Fortis and Max are expected to meet their health insurance counterparts with the new proposals tomorrow.
The move comes after a recent meeting of the heads of the hospitals and the four state-run insurance firms — New India Assurance, United India Insurance, National Insurance and Oriental Insurance — decided to form separate working groups to sort out the pricing issues the insurance firms had with these hospitals.
The groups were expected to sort out a compromise formula within 10 to 30 working days.
The insurance firms had stopped offering cashless services to their policy holders approaching the hospitals that are not in their PPN list as they felt that such hospitals were ‘over charging’ their insured patients.
The hospitals, grouped under industry chambers such as CII and Ficci, had argued that isolated incidents should not be the basis for excluding corporate hospitals from PPN.
“The insurance companies had never raised such an issue before. Now that they have expressed their concerns, we will try to address their problems. Tomorrow’s meeting will not be the final one, but we expect most of the current issues to be solved soon,” a healthcare industry executive, who is part of the negotiations, said today.
The high claim ratio — health insurance claim ratio stood at 130 per cent during 2009-10 — was the main reason for the insurance firms to have a strict scrutiny of the rates being charged by the hospitals for various procedures.

IndiaFirst Life Insurance cross 1 lakh policy marker

IndiaFirst Life Insurance, a joint venture between Bank of Baroda and Andhra Bank along with UK’s leading risk, wealth and investment company Legal & General, has announced that it has crossed the 1 lakh policies landmark in less than one year, the fastest by any private life insurer.

This was announced by P. Nandagopal, managing director & CEO, IndiaFirst Life Insurance.

The company has achieved the fastest run rate amongst all life insurance companies at the start up phase by crossing the 1 lakh policies landmark within just 9 months of its operations.

“We are indeed happy to receive such an encouraging response from our customers. The achievement of 1 lakh policies in just less than 9 months indicates the potential of our bancassurance model and the value of our product portfolio. We will intensify our efforts to introduce simple and value for money plans backed up by unparalleled service delivery,” said Dr. Nandagopal.

The company targets to collect Rs 700 crore through new business premium by the end of this fiscal year.

IndiaFirst claims to be the fastest to achieve Rs 100 crore in just 100 days of operations, Rs 200 crore in 4.5 months of operations, and over Rs 300 crore in under 9 months from inception.
Dr. Nandagopal said the company aims at taking its products and services closer to its customers. “As part of our overall expansion plan, we have activated all 4,500 bank branches (Bank of Baroda and Andhra Bank put together) to reach out to our customers across the country,” he said.

Get more information about Life Insurance.

Max New York Life launched: “Platinum Protect”

Max New York Life Insurance has brought ‘Platinum Protect’, the newest chronicle of term plan to the fore, and by means of the same, it is increasing product portfolio of risk protection solutions. Max New York Life Insurance happens to be one of the foremost life insurance companies in the realm of India and is attaining laurels increasingly with the passing of each day almost.

It is worthwhile to mention that Max New York Life Insurance, as a result of this term plan, has launched an inimitable aspect of ‘Reduced Insurance Cover’ in the Indian market or the first time. Thanks to the same, it is likely that in longer duration plans of over 20 year policy term, policyholders will be able to take pleasure in continued protection coverage from the 16th year onwards albeit they opted for not to make additional premium payments.

Speaking on the development, Rajesh Sud, CEO and Managing Director, Max New York Life Insurance Company, stated, “India is an underinsured market with low per capita spend on life insurance. People are increasingly becoming aware of the true value of life insurance but need a solution that bridges the gap between their Life’s Economic Value and their propensity to spend on the product. With Platinum Protect, we will not only be able to bring the benefits of life insurance to a larger segment of the market but also ensure adequate protection for them at an affordable price.” The basic purpose of life insurance is protection and Max New York Life Insurance has led the market in the protection space having the highest sum assured multiple in the industry. Our strategy targets moving this further”, added Mr. Sud.

Max New York Life Insurance Company Ltd. is basically a joint venture between Max India Ltd., one of India’s leading multi-business corporations and New York Life International, the international arm of New York Life, a Fortune 100 company.

Only for the risk-disinclined

Despite Irda’s good moves, insurance policies should be bought for cover, and not for investment.
Those planning to buy unit-linked insurance plans (Ulips) might as well wait for some time. This is because products launched from September 1 will be quite different from the existing ones
This is a crucial phase where the regulator, the Insurance Regulatory and Development Authority (Irda), and insurers are exchanging notes to fine-tune the products. Since June 28, when the first round of guidelines came, more changes have been introduced. Last week, Irda issued another set of clarifications that would change things further.

GUIDELINES
• 4.5 per cent guaranteed return for Ulip pension plan on gross premium till March 2011
• After March 2011, returns will be 50 basis points above the average of reverse repo rate at each quarter-end in the 3-6
per cent range
• Difference between minimum and maximum distribution charges to not be more than 1.5 times
• From 5th year onwards, minimum difference to be given on completed year
• Life cover on top-up premium to be based at the age of payment and not at the entry age
Pension plans
Pension plans will certainly look better. But, only for the risk-averse who have more than Rs 70,000 to invest annually. With a guaranteed return of 4.5 per cent on Ulip pension plans on gross premiums, returns will be higher than the existing savings deposit rate of 3.5 per cent.
But this 4.5 per cent will only be paid till March 11, 2011. After that, the returns will be linked to the reverse repo rate. Policyholders will get 0.5 per cent more than the average reverse repo rate at the end of each quarter. The regulator has asked insurers to give in the range of three-six per cent on pension plans after March 2011.
Since policyholders cannot withdraw money in the interim, liquidity could be an issue. For liquidity seekers, it makes sense to look at fixed deposits. State Bank of India is offering 7.25 per cent on five to eight years and 7.5 per cent on eight to 10 years deposits.
Also, most people already have exposure to the higher paying employee provident fund (8.5 per cent annually) and the public provident fund (8 per cent annually). But returns from these two can get capped as one can invest only up to Rs 70,000 annually. For ones who wish to invest more than this, this option could be good.
Costs
The newly-inserted clause...“the maximum and the minimum charges shall not vary by more than 1.5 times” should come as a relief.
For instance, if one considers a policy that was charging a premium allocation charge (PAC) of 50-60 per cent in the first three years, earlier, the cost in the first year could have been 30 per cent in the first year, 20 in the second and 10 in the third.
Now, because of the formula, the charge will be over five years. So, one could see numbers like these: If an insurer is charging, say, eight per cent in the fifth year, he cannot charge more than 12 per cent in the first year. Accordingly, PAC will be between a 44 and 56 per cent, spread over five years.
Besides the formula and spread over five years, the difference between the net and gross premium has to be maintained – four per cent in the fifth year (for a 10-year policy), 3.75 per cent in the sixth year, and so on.
“The regulator has also clarified that the minimum returns prescribed starting from the 5th policy year will be given on completed years,” said an actuary of a life insurance company.
Where the policyholder could possibly lose out is top-up premiums. In new guidelines, Irda said top-up premiums would be used to purchase an additional cover and not invested entirely. But latest clarifications specify that policyholders will not be allowed to pay top-up premiums in the first five years. After that, top-up premiums will be used to purchase cover, but according to the existing age.
As a result, the mortality rate will come into play. If a person purchases a policy at the age of 30 and starts top-ups at 35, he will have to pay higher mortality fees.
“The new notifications remove all ambiguity. Manufacturers cannot interpret the guidelines in their own ways. Of course, if the policyholder has a very long-term perspective, he should look at insurance.
Otherwise, if you have a horizon less than five years, mutual funds, bank deposits and the likes suit you,” said P Nandagopal, managing director & CEO, IndiFirst Life.

Private Life insurers go on to book profit

The controversy over rule of unit-linked insurance plans (Ulips) has had modest impact on the private life insurance industry. Most companies reported profit throughout the first quarter of the financial year on the back of marginal growth or drop in new sales and decrease in expenses.
Birla Sun Life Insurance reported its maiden profit since it started operations in 2001. It registered a net profit of Rs 9 crore during April-June 2010 as against a loss of Rs 111 crore in the parallel quarter last year. The income from new business grew around 8(%) per cent. Private players recorded a 21(%) per cent increase in income from sales of new policies during the quarter.
“The profit has risen mainly because of an increase in renewal premiums by 27(%) per cent, a reduction in the operating expense ratio by two-threee bps (basis points) and an improvement in the product mix, which now includes a larger share of traditional products, reducing the strain of new business,” said Mayank Bhatwal, chief financial officer, Birla Sun Life Insurance.


UPWARD MARCH
Q1 profit/loss of life insurers (Rs cr)
Insurers 2010-11 2009-10
SBI Life 114 39
ICICI Prudential Life# -116 -27
Bajaj Allianz Life 169 68
Birla Sun Life 9 -111
Source: Companies, BSE
# Q1 2010-11 -Before accounting for a surplus of Rs 235 crore in the non-participating policyholders’ funds
SBI Life, which was at the number one position in new business income throughout the quarter, reported a net profit of Rs 114 crore as against Rs 39 crore in the related quarter last year. Its new business income fell 9(%) per cent. It was renewal premium that helped the insurer show good result.
“Our new income dropped due to group business. There was an overall increase in assets under management under the Ulip portfolio as well as non-Ulip and shareholders portfolios,” said M N Rao managing director and CEO, SBI Life.
Bajaj Allianz Life Insurance registered a net profit of Rs 169 crore compared to Rs 68 crore in the same quarter previous year. Its new business income grew marginally by 4(%) per cent to Rs 603 crore from Rs 578 crore as the company focused on profitability.
ICICI Prudential, the largest private sector player in terms of new business, reported a loss after tax of Rs 116 crore during the quarter, which will be shown as a profit of Rs 119 crore at the end of the year.
The insurer posted a profit of Rs 258 crore previous financial years. ICICI Prudential Life Insurance reported a loss after tax of Rs 116 crore, before accounting for a surplus of Rs 235 crore in the non-participating policyholders’ funds, which would be transferred at the end of the financial year based on the selected actuary’s recommendation, the bank said.
Though insurance companies have turned profitable, the shareholders of these companies, except SBI Life, will have to wait for a few more quarters for dividends as insurers are yet to wipe out their accumulated losses.

LIC assessment surplus up 11(%) Per Cent

Life Insurance Corporation (LIC) recorded a 10.99(%) per cent rise in survey surplus to Rs 23,478 crore in 2009-10 as compared to Rs 21,152 crore in 2008-09. Valuation surplus is the money offered with LIC for distribution after paying all expenses and taxes. LIC paid Rs 1,029 crore dividend to the government.

The insurance giant’s first-year premium income rose 33.87(%) per cent to Rs 70,891 crore from Rs 52,954 crore in 2008-09

Its total assets under management increased 31.88(%) per cent to Rs 11, 52,057 crore. The premium income rose 18.32(%) per cent to Rs 1,85,985 crore from Rs 1,57,186 crore in 2008-09 while total income went up to Rs 2,98,721 crore, a 49.15(%) per cent increase from 2008-09.
Also, first-year premium collections doubled to Rs 18,740 crore. LIC’s market share inched up to 73.43(%) per cent in the 1st quarter of 2010-11.
LIC Chairman T S Vijayan said the expenditure ratio last financial year was 13.10 (%) per cent as compared to 12.92(%) per cent in the previous year, which was “within prescribed limits” and the lowest in the highly competitive life insurance spaces.
This financial year, the insurer is targeting premium collection of Rs 2, 01,000 crore. In the first quarter of 2010-11, LIC invested Rs 39,000 crore, of which Rs 10,000 crore was in equities.
“We have targeted to invest Rs 2, 00,000 crore across asset classes by the end of this financial year,” said Vijayan. This is higher than the Rs 1, 92,000 crore invested last year. Vijayan, however, said the investment in equities would depend on the premium collected from unit-linked insurance policies (Ulips).
Last year, the share of Ulips in the total premium pie of Rs 1, 85,000 crore was 75(%) per cent and total equity investments stood at Rs 61,000 crore. “If the markets are good, people invest in ULIPs and if interest rates are good, they turn to non-linked policies,” Vijayan said.
The largest insurer has 15 lakh agents and expects a net addition of 20(%) per cent this year. LIC is one of the few insurers paying the least commission to its agents. While the average commission on Ulips is 12-15(%) per cent, LIC pays around 7(%) per cent.

Returns on Ulip pension plans put to increase

As Irda refuses to move on guaranteed returns.

The Insurance Regulatory and Development Authority (Irda) has fixed to its guns on returns from unit linked pension plans. Despite several representations from the industry, the monitor has decided that insurers will have to provide guaranteed returns of 4.5(%) per cent on gross premiums until March 11, 2011.

After that, returns will be linked to the overturn repo rate or the rate at which banks deposit their extra funds with the Reserve Bank of India for a day. Investors will get half a percentage point more than the standard reverse repo rate at the end of each quarter. In a note to insurance companies, the regulator said returns will be in the range of 3(%) per cent to 6(%) per cent.
This move will result in increased returns for investors after the new rules come into result from September 1.
On group pension plans, the guaranteed return will be applicable to individual contributions made to group pension products, if the agreement has been in force for 5 years continuously. After failing to reduce the rate of return earlier, insurers had in a meeting held a fortnight back with the regulator, requested that the 4.5(%) per cent should be paid on the net premium. But Irda rejected this request.
Insurers are as expected unhappy. “Managing this return on gross premium will make the product costlier by 2(%) per cent. We wanted return to be subjected to net premium,” said an actuary of a large insurance company.
In another significant explanation to its June 28 circular, Irda has asked insurance companies to come to a formula while charging the premium allocation and premium management charges during the first 5 years of the policy contract. “The charges could change from year-to-year in a logically, orderly manner so that the difference between the maximum and the minimum charges shall not vary by more than 1.5 times,” Irda said. For instance, if the charge in the 5th year is say, 10(%) per cent, the first year’s charge cannot exceed 15(%) per cent.
In another clarification, Irda said the top-up premiums on unit-linked insurance plans (Ulips) will not be based on the entry age, but on the age at which the top-up premium is paid. “The top-up premium will also have a lock-in period of 5 years. Policyholders will not be allowed to top-up the premium during the last 5 years of the term. The contractual premium payable by the policyholder cannot be altered during the policy term,” IrDA has said.


CUP OF JOY

# Guaranteed return on unit linked pension plans to be in the range of 3-6 per cent

# Returns will be 50 bps above the average of reverse repo rate at the end of each quarter

# Charges to be evenly distributed in the first five years of the policy term

# Charges could change in evenly manner, should not vary more than 1.5 per cent

# Life cover on top-up premium to be based at the age of payment and not at the entry age
For example, if a person wants to top-up his premium under the present norms, his premium will go into the investible corpus. Under the revised norms, he will not be allowed to pay a top-up premium in the initial 5 years. After that, when he pays a top-up premium on the existing policy, he will be provided a life cover based on his existing age, not the entry age. This implies that the mortality rate would come into play and the policyholder will have to pay a higher amount.
While loans have been allowed against policies, insurers can now charge interest.

Purchasing a policy in India is cheaper

Students going overseas for studies need to have an insurance cover. And the good information is that purchasing the cover in India, if the country or the university allows you to do so, is a cheaper option.
In countries like Canada and New Zealand, universities themselves offer cover to their students. In fact, the cover is integrated in the tuition fees. These universities do not accept insurance purchased by a student in his\her home country. But one can buy an additional cover from India, too.
“The university may not permission that insurance purchased by a student provide coverage in these areas. But, such additional coverage is helpful. For instance, coverage for medical expenses connected to mental disorders may be useful if a student suffers from depression or stress and needs medical aid,” says T A Ramalingam, head-underwriting, Bajaj Allianz General Insurance.
Universities in the US and the UK are more elastic and allow students to buy insurance from their home country, provided it satisfies the requirements of the university. Rasika Iyer, set to travel to the UK this September for her higher education, seems converted by the logic. As she puts it, “After expenses a huge amount for my studies in the UK, a little extra expense to cover medical emergencies seems worth it.”
The policies offered by Indian companies like Tata AIG, Bajaj Allianz and ICICI Lombard are received by most universities in the US. Even if purchasing university insurance is required, students usually prefer to take an additional policy from India.
It makes sense to do so, say financial planners. “A major segment of the insurance offered for students covers medical costs. This is a big benefit if you think how expensive medical treatment is outside India,” says Suresh Sadagopan, a certified financial planner.
“The waiting period at public hospitals can be very long from time to time. When the student cannot afford any delay in treatment, he can use his Indian insurance policy at a private hospital,” says Vinayak Kamath, director, G B Education.
If you have an option to choose between Indian and university policies, purchasing a student insurance policy in India will show to be more cost-effective. It will cost you approximately one-third the amount you will have to pay for the university insurance.
For a sum assured of $100,000 and upwards, a 2-year insurance cover from the university costs Rs 27,000-36,000 ($600-800 per year), at the rate of $1=Rs 45. Indian insurance policies will charge anywhere Rs 7,000-19,000 (between $ 150 and $425) for a related policy.
The university insurance mostly covers only medical expenses, and in certain cases, dental expenses. However, student insurance policies available in India offer certain benefits over and above the medical coverage like:
Study interruption
Say, you meet with an accident and cannot follow your studies further because of medical reasons. In this case, the insurance company will repay the tuition fee paid for that semester.
Sponsor protection
If your parent or guardian who is financing your education expires, the insurance cover will ensure your studies are not broken up. You will be entitled to tuition fees payable up to a certain limit, specified in the policy.
Compassionate visit
In case you get hospitalised for more than 7 consecutive days, the insurance company pays for the return air fare for one of the parents to visit you. Similarly, if either of your parents gets hospitalised in India, your return air fare is enclosed.
Repatriation of remains
If a student dies while studying overseas, expenses incurred for repatriating his leftovers to India will be taken care of by the insurance company.
So, go ahead and choose an insurance product that best suits your needs. It will go a long way in ensuring that you have a smooth sailing during your education years overseas.

Birla Sun Life Insurance rides Ulips to timepiece profit

Increased focus on unit linked life insurance plans has helped Birla Sun Life Insurance Company book net profit for the first point in 10 years for the quarter ended June 2010.

This happens at a time when the unit-linked insurance products (Ulips) face many dogmatic hurdles.

For the April-June quarter, the company posted a net profit of Rs 9 crore beside net loss of Rs 111 crore in equivalent period previous financial years.

“The company is working on reinforcing the Ulip as a long term protection cum savings product,” the company said in its release.

The Bachat (Endowment) plan launched in May this year is garnering positive reply from investors, the release said.

The company has more than 85(%) per cent of the their portfolio in Ulips, while traditional plans amount to a sub-15(%) per cent.

While the new business premium saw 7(%) per cent increase, the renewal premium helped the revenue growth with a 27(%) per cent increase. The new business premium grew to Rs 473 crore and the renewal grew to Rs 669 crore for the financial year ended March 2010.

The company recorded a growth of 18(%) per cent in total premium income at Rs 1,143 crore. Assets under management (AUM) of the company scaled up by 44(%) per cent to Rs 16,841 crore.

The company’s value of new business margin (NBM) grew from 20.3(%) per cent last year to 22.5(%) per cent this financial year. The company made the public admission of its fixed value of Rs 3,816 crore as on March 2010, up 25(%) per cent year on year.

Embedded value is the future value of the present business (in-force policies) of the life insurance company.

Get more information Life Insurance

Hospital corpse to clarify position on cashless medical insurance

The Association of Hospitals, which represents most private hospitals in the city, will on Wednesday simplify its stand on the issue of cashless medical insurance. Many insurance holders had been left in the pitch as public sector insurance companies had determined to limit cashless mediclaim policies to only those hospitals that characteristic in the favorite Provider Network list drawn up by them.
This covered only 81 hospitals in Mumbai.
The public sector companies had done this saying the hospitals were billing patients advanced if they came under mediclaim.
The companies want hospitals to stay to a set of standard rates for surgeries and medicines.
“Hospitals are being asked to conduct bypass surgeries for Rs 1.8 lakh, which is not likely in a city like Mumbai,” said General Vijay Krishna, chief executive officer (CEO) of Breach Candy Hospital, who is a member of the association.
“The insurance companies are also saying they will buy equipment and medicines straight and give to them hospitals,” he added.
“This is just not practical. If we need some equipment immediately, will we have to wait till it is sent to us.”
“The insurance companies should have held a discussion with us before making such decisions. We have not been given a consideration,” he added.