HDFC Ergo sees capital infusion of Rs 80 cr

Private sector general insurer HDFC Ergo is likely to see a capital infusion of around Rs 80 crore in the next one-and-a-half years to support business growth.

"We may need a capital infusion of around Rs 25-30 crore in the current fiscal, as around Rs 75 crore has already been infused into the insurance firm. Similarly, we will require around Rs 50 crore in the next fiscal," chief executive officer Ritesh Kumar said here.

Promoters of the general insurance firm, namely premier mortgage lender HDFC and Germany's Ergo International, have already pumped in around Rs 75 crore in the first half of this financial year. The firm has an equity capital base of Rs 500 crore as of now, he said.

Kumar said the company would not require huge capital from the promoters in future as it had turned profitable on entity level from the last quarter.

"We don't need large support from the promoters, as the growth can be funded from internal accruals," he added.

HDFC Ergo posted net profit at Rs 14 crore in the April-June quarter and is expecting to retain profit for the whole year. "We hope that profitability will be sustained in the rest half of the year," Kumar said.

On the premium front, the general insurance firm has set a target of 35-40 per cent premium growth for this year.

"We had a premium collection of Rs 1,300 crore in the last fiscal and we aim to have 35-40 per cent growth in premium in the current fiscal," Kumar said, adding the insurer witnessed 44 per cent growth in premium collection in H1 of FY12.

HDFC Ergo draws around a third of its revenue from accident and health insurance segments, a third from motor insurance and the rest from corporates. "Growth in all segments is good. However, there are issues relating to third party motor pool, which is a concern for all general life insurance companies," Kumar added.

There is a shift from Ulips to traditional products

SBI Life, the life insurance subsidiary of State Bank of India, has expanded its operations despite Insurance Regulatory and Development Authority's sweeping changes in the norms of unit-linked insurance plans from September last year.

MN Rao, managing director and chief executive officer of SBI Life speaks to FE about his strategies to cope up with regulatory challenges. Excerpts:

How SBI Life is faring in the days when the life insurance industry's numbers are falling?

Business so far has remained satisfactory at SBI Life though falling in line with industry. We have done R2,050 crore of business in the new business premium until August 31 in this financial year, as against R2,390 crore in the corresponding period of the last financial year, thus witnessing a fall by 14% during the period. Now the product mix has changed. We have shifted to low-ticket size product. Still, the total product portfolio remains unchanged from July last year to July this year. Till July during this financial year, our premium has gone up by 3% year-on-year. However, from August 2010 to August 2011, our performance is down by 14%. It has happened as August 2010 (the sales were very good during that particular month) was the last month for all of our old products and we had launched new products in September 2010 in line with the new regulations of regulator Irda. In total business premium, we are growing over last financial year on yield-to-date (YTD) basis in August 2011 when we achieved a sum of R3,983 crore, as compared to R3,706 crore in the corresponding period of the last financial year, thus recording a growth of 7.5%. Going forward, we do expect to show a growth on new business front and total business premium which are expected to go up by 10% and 15-16% respectively by the fiscal-end, as compared to our performance during the last financial year.

While the current volatile capital markets which may nots be conducive for Ulips, how are you trying to push traditional products?

As of now, our product mix-Ulip and traditional and corporate solutions plan (or group plans) is in the ratio 55:45. Total numbers of Ulips have fallen by 10% during August this financial year, when compared to the level of August 2010. Again, our traditional products have gone up by 125% during the period. Our group fund alone has increased by 15% during the same period.

Do you think the highest NAV products launched by insurance companies are misleading and Irda should take some action?

We do have highest NAV product, named as Smart Performer and it is doing well. The regulator is worried about administrative issue related to the product and how to make the disclosures to the customers about such products so that they get a fair deal. Life Insurance Council is working on it.

Has your investment portfolio fallen? Do you think that investment income will fall this year?

Nearly 55% corpus of our total assets under management (AUM) has been invested in equities. In majority of funds, our fund performance has been well so far. In most of the funds, we are in the top performer. In case the same market condition continues, we would invest R6,000-7,000 crore additionally in equities during the remaining part of this financial year. The balance amount would be invested in either G-sec or corporate bonds. There is a shift from Ulips to traditional products happening now. I think, it will stabilise after a year from now.

Do you have any capital infusion plans?

We had our last capital infusion to the tune of R500 crore in SBI Life in 2007-08. It was jointly done by the promoters like SBI and BNP. After that, there has been no requirement of capital infusion because of profitability. We first broke even in 2005-06. Except for a marginal loss, which was incurred by us in 2008-09 thanks to the market crash, we have continued to make profits constantly since then.

With SBI as the parent body, it was expected that SBI Life would emerge as a leader in the life insurance industry soon?

We started our operation some 10 years ago. We are the life insurer with the lowest operating ratio. Also, we are the largest player in the private sector in terms of total business premium as on July-end. The strength of SBI Life is primarily due to the support provided by the SBI. Most of the SBI branches are selling our products through bancassurance channel. On the selling of products of more than one insurers (which is permitted now) by the banks, a report has been submitted before Irda. We are in favour of selling two products each from life insurance and non-life insurance companies. We believe that sale of insurance product is a long term relationship with any bank. There should be close coordination between bank and insurance companies, not only for the sale of their products, but also for servicing of product and grievance redressal so that customers of the bank should have a choice.

Now you have 2 years to revive a lapsed Ulip

A lapsed policy is the last thing a responsible person would want in his/her balance sheet. Imagine the scenario. A policyholder forgets to pay the premium on the due date. He/she fails to pay the premium even after reminders from the company asking him/her to renew the policy within the grace period. The reasons for not paying the premium may be a temporary financial crunch or something serious and unanticipated.

But he/she would lose the insurance cover. In the process, the policyholder's worst nightmare could come true if something were to happen (euphemism for death) to him/her during the period. The whole purpose of buying a life cover - to support the family financially when one is not around - would be entirely defeated.

However, some Ulip (unit-linked insurance plan) holders would get more breathing space now thanks to the recent decision of the Insurance Regulatory and Development Authority (IRDA) to allow policyholders to revive their policies within two years from the premium due date.

The new guideline will be applicable only to Ulips issued after September 1, 2010, when the course-altering norms for Ulips were put in place by the regulator. However, Ulips that have crossed the lock-in threshold of five years will not get any benefit from these regulations.

Relaxed rules

The revised norms, which will become effective from November 1, are aimed at making it easier for policyholders to reinstate their policies that have lapsed. "Under the earlier guidelines, one could not revive their policy once it lapsed 60-75 days after the premium due date. The policy was treated as withdrawn and the balance amount moved to the discontinued policy fund. With the new guidelines, one has the option of reviving the policy for a period of two years (but within the lock-in period of five years)," says Gaurav Rajput, director, marketing, Aviva India.

Until now, if premiums were not paid within the grace/notice period, the accumulated funds were transferred to the discontinued policy fund and remained locked in till the end of the fifth year of the policy, after which it would become payable to the policyholder.

"After this circular, once monies are moved to the discontinued policy fund in the first five years, the policy can be reinstated for up to two years. In which case, the cover will be reinstated subject to underwriting, and the client will again get a choice of investment funds," explains Andrew Cartwright, chief actuary, Kotak Mahindra Old Mutual Life Insurance. For policies more than five years old, reinstatement is not possible, as the funds become payable immediately after discontinuance.

Irda may allow agents to sell products of more than one insurance company

The Insurance Regulatory and Development Authority (Irda) plans to allow agents to sell products of more than one insurance company, allowing private insurers to access the vast army of agents selling products of the market leader - the Life Insurance Corporation (LIC).

Agents can sell products of only one insurer under existing norms, but Irda Chairman J Hari Narayan said the current global trend was to do way with tied agents, who can retail products of only one company. "The idea is to allow agents to sell products of more than one company. This model has been tried in Hong Kong. In England, tied agents have vanished," he said.

The capping of charges on unit-linked insurance plans (Ulips) in September 2010 had reduced the income of agents, resulting in many exiting the sector and forcing the regulator to consider opening up alternative avenues of income.

More than 3 lakh agents have exited the insurance business after the regulator introduced stringent norms.

The new norms led to more than 100 products becoming ineligible. The number of agents came down from 3 million in 2009-10 to 2.65 million in 2010-11, according to data compiled by the Life Insurance Council. LIC has 13.5 lakh agents distributing its products.

"The move will increase earnings of agents. Though consumers buy Ulips of private insurers, when it comes to life products they only go for LIC. This would help us bolster our sales," said Renu Dhavan, an agent with ICICI Prudential.

Private insurers have largely followed the bancassurance model, in which banks distribute insurance products. However, access to LIC agents, particularly the bigger ones, will increase the reach of private insurance companies.

LIC had a market share of around 76% in terms of new business premium for the financial year up to August 2011 while the remaining was divided among 23 private insurance companies. The state-owned insurer has been increasing its market share mainly because of its strong base of traditional products, which were unaffected by the change in regulations, and its group retirement plans.

New Norms

The new regulations introduced a year ago increased the lock-in period and quantum of life insurance cover while capping charges that could be paid out as commission to agents.

Before September 2010, bulk of the premium paid in the first year was passed on by the insurer as commission to the agent responsible for bringing in the client. This created an incentive to sell new policies while existing ones were often surrendered after the initial years.

The intent of the new rules was to encourage consumers to buy more protection against accident or death. The Indian insurance market is dominated by Ulips -investment products with a nominal life cover that compete with mutual funds.

Irda had also made it mandatory for agents to retain 50% of their business in the second year.

This regulation, known as persistency norms, refers to the percentage of business retained without lapsing or being surrendered.

Many agents have found it difficult to meet these norms and operate in a scenario where the commission payable has come down.

The difficulties being experienced by agents were one reason for the insurance regulator to consider allowing them to diversify their portfolio.

IRDA plans end to deceptive policies, upfront commission

The Insurance Regulatory and Development Authority (IRDA) plans to ban misleading products and staggered commission for agents to ensure that policy buyers are not shortchanged.

The insurance industry, which is still evolving a decade after privatisation, needs new rules to ensure that consumers get the best and don't get carried away by products that only promise high returns on paper, the regulator has said.

"One important problem is that what you mean by highest NAV,'' J Hari Narayan, chairman, IRDA, told ET in an interview, referring to many insurers promising highest net asset value of the policy period to holders. "In certain markets, certain products are prohibited. That may be the best way to go.''

Insurance companies, bitten by the slump in sales after new rules curbing the Unit Linked Insurance Policies, are peddling many policies that on close scrutiny could be termed deceptive. One such is the promise of highest net asset value. But what they do not publicise is the calculation behind the NAV. These policies also charge 25 to 75 basis points as additional fees. A basis point is 0.01 percentage point.

"Suppose a company had Tata in its portfolio, over time it may change,'' said Narayan. "At the time of maturity, which highest NAV are you talking about - the portfolio, or Tata. One of the major problems with the product is that how do you communicate to the policyholder. He may be thinking of the highest NAV of the Sensex. So, this is the whole issue.''

Prudential ICICI, Birla Sun Life, Bajaj Allianz, SBI Life, Reliance and Aegon Religare are some of the insurance companies that sell policies promising the highest NAV. These policies have tenure of 10 years with limited premium paying term of 5-7 years.


Though the highest NAV guarantee gives the impression that such products are pure equity products and pay the highest return during the course of the tenure, that is not always the case. When a 100 investment gains by 10-15%, a portion of the corpus is shifted to debt. At regular intervals, when there are gains, some funds are shifted to fixed income securities.

In a way, this could be a strategy where investors don't get the highest NAV they would have received if they had remained invested in equties. The portfolio manager, to avoid liabilities for the company, could actually depress returns for investors.

Another area where investors lose out, commission to agents, could also be plugged.

As high as 40% of the policy premium in the first year on traditional products while 7-12% in Ulips, are paid to agents as commisssion. But once the policy gets running, the agent loses interest in serving the policy holder. So, to ensure that customers are serviced, the commissions could be rear-ended and paid at the later stages of the policy, than in early years.

"Korea has found that front-ending commissions has led to unhealthy practices. So, the question is should we rear end it. A lot depends on the sales history and culture of the country,'' Narayan added.

Rs 9 crore insurance cover for Sunday's ODI

Unseasonal showers and the July 13 serial blasts in Mumbai have forced the Mumbai Cricket Association (MCA) to buy an insurance cover of Rs 9 crore for the India-England one-day international at Wankhede stadium on Sunday.

Sources said MCA will shell out a premium of Rs 5 lakh for a special contingency policy for event cancellation from Oriental Insurance Company (OIC). The policy will protect MCA against financial losses owing to cancellation of matches due to bad weather, natural disasters, terrorism-related incidents or abandonment due to death of a prime minister or president. The cricket association cannot claim compensation if a ball is bowled before the match is called off.

"The cover for the India-England ODI is higher by Rs 1 crore compared to the policy for the India-Australia bilateral series match at D Y Patil Stadium on November 11, 2009," he added.

The India-Australia match was abandoned without a ball being bowled due to incessant rain. A source said, "There has been an increase in premium of the reinsurance market by at least 40% in the past six months. The local insurance company that offers the cover for such events has to peg the premium rates with those prevailing in the reinsurance market."

India is bracketed under the 'extreme risk category' in the terror index of the reinsurance market. The country's record in the terror index got further sullied following the July blasts in Mumbai in July and the bomb blast outside the Delhi high court last month.

Last week, the Anti-Terrorism Squad received an alert of plans to target the Chhatrapati Shivaji international airport on the eve of Diwali. Leander Dias, OIC administrative officer, said, "We cannot disclose financial figures to the media as these are confidential matters."

Apart from terror, rain is a major concern for cricket administrators. The earliest the monsoon withdrew from Mumbai in the last few years was October 7 in 2005. It withdrew as late as October 24 last year.

An insurance official said, "MCA is wary about the weather as the rain refuses to go away. They don't want to take chances as the India-Australia match had met a similar fate."

Bajaj FinServ's Q2 net more than doubles to Rs 158 cr

The life insurance industry, which has witnessed a slowdown this year, will see a revival in top-line growth in the third quarter of this year, said Mr Sanjiv Bajaj, Managing Director, Bajaj FinServ.

Bajaj Finserv is the holding company and the financial services and insurance business arm of the Bajaj Group.

“We are looking to revitalise the agency and the bancassurance channels for the insurance business. Since April, we have added over 10,000 new active agents. We see them bringing in additional business now in the third quarter this year,” added Mr Bajaj.

Bajaj Finserv, which reported its second quarter results on Wednesday, has more than doubled its profits to Rs 158 crore from Rs 69 crore in the corresponding previous-year period.

GROWTH IN SUBSIDIARIES

The strong results in the second quarter of this year are attributed to the robust numbers reported by its subsidiary companies.

The profit from Bajaj Allianz Life Insurance surged by 48 per cent to Rs 295 crore from Rs 199 crore, while Bajaj General Insurance's profit surged by 83 per cent to Rs. 64 crore from Rs 35 crore.

BAJAJ FINANCE

Bajaj Finance Ltd, the lending arm of Bajaj Finserv, has also reported a jump in profit by 64 per cent to Rs 87 crore from Rs 53 crore. Bajaj Finance's Assets Under Management (AUM) has crossed the Rs 10,000-crore mark and stood at Rs 10,071 crore as on September 30, 2011, as against Rs 7,571 crore as on September 30, 2010.

Shares of the company gained Rs 15.3, or 2.9 per cent, to settle at Rs 543.55. The total volume of shares traded on the BSE was 101,571.

Oriental Bank widens focus to include Mediclaim policy

Oriental Bank of Commerce today entered into a memorandum of Understanding with Oriental Insurance Co Ltd for selling Mediclaim policies to the bank's customers through its pan-India network.

Oriental Bank Mediclaim policy is cash-less family floater covering the members of the beneficiary's family. The policies are available for Rs 1 lakh to Rs 5 lakh. For a policy of Rs 5 lakh, the premium is as low as Rs 6,705 a year.

The memorandum of understanding was signed by Mr. R.M. Sharma, General Manager, Oriental Bank of Commerce (OBC), and Mr. A.K.Saxena, General Manager, Oriental Insurance Co, in the presence of Mr. Nagesh Pydah, Chairman and Managing Director of the bank, and Mr. R.K. Kaul, Chairman and Managing Director of the insurance firm.

Mr. Kaul noted that this policy has some features that are unique for OBC's customers. “This product will be available for all OBC customers up to the age of 79 years. Also, no medical check up will be required.”

So far, Oriental Bank was not looking at general insurance products as a source of “revenue” for the bank. However, there is now a change in its revenue model and OBC has decided to also focus attention on general insurance products for increasing its fee-based income.

“This product was a long-felt need of our customers. Oriental Bank Mediclaim policy will fill the gap in our bouquet of products and services. This should help us in our fee-based income and also in bolstering CASA. This will be a great opportunity for us to build our Current Account Savings Account (CASA) deposits,” Mr. Pydah said.

All Metro and urban branches of the bank have been mandated to sell minimum 250 policies in the next six months, he said. The six-month target has been pegged at 175 policies for semi-urban branches and 75 policies for rural branches.

Disclose agreements between TPA and hospitals

The agreements between public sector health insurance companies and hospitals, including those with third party administrators, should be disclosed to ensure transparency in delivery of medical services to an insured person, Central Information Commission has held.

The Commission rejected the arguments put forth by Oriental Insurance Company that the agreements are between the Third Party Administrators (TPA), to whom the processing of claims is outsourced by the insurance companies and the hospitals and since the TPAs are not public authority, there is no obligation to disclose these agreements.

Information Commissioner Deepak Sandhu held that funds for implementation of health insurance policies is paid by the respondent (Oriental Insurance) which is collected as premium from its customers.

"Therefore this argument is without merit," she said directing the company to disclose the information. However, the Information Commissioner agreed that some portions of these agreements could be severed as it could adversely affect commercial interests of the company.

Sandhu was hearing the plea of an RTI applicant who had sought information from Oriental Insurance on the issue and list of hospitals across the country which provides cashless treatments facilities.

“The disclosed portions would serve to provide greater transparency in respect of the medical services to which the insured are entitled and therefore lend itself to better service been provided to the insured," Sandhu held in her order and also directed the company to place on its web site the names of hospitals which provide cashless treatments.

Life insurers may get nod to raise non-AAA exposure

The Insurance Regulatory and Development Authority (Irda) plans to allow life insurers to buy a greater amount of non-AAA corporate debt, which could lead to higher returns for insurance policyholders.

A member of an Irda-instituted committee, looking into the investment guidelines of insurers, said it had decided to include government bonds as part of the AAA-rated investment requirement, enabling insurance firms to take additional exposure to non-AAA-rated securities, including A+ and A papers, by taking board approval.

The panel's move is a part of an exercise to amend the Insurance Act.

The move by the regulator could generate more returns for policy holders as lower the rating on a paper, the higher will be the yield that an investor earns.

It will also widen the investment horizon for insurers and make more funds available to companies that don't have the highest rating, but are credit-worthy.

"We want more money to flow into corporate bond market. The draft guidelines are sent to companies, consultants and other stakeholders for their feedback. It will become a law after the (Insurance) Act is amended," said a senior Irda official.

Insurance companies are now allowed to invest up to 50% in government securities, 15% in infrastructure bonds and 35% in other investment grade corporate bonds and equities. A minimum of 75% of debt instruments must carry triple A rating.

If investments in government bonds become part of the AAA calculations, the maximum permissible investment in non-AAA papers will rise to 25 per 100, assuming that the entire investment is in debt instrument, up from the current 17.50.

"It will give some additional exposure to debt papers," said the chief investment officer of a large life insurance company.

The rating assigned to a bond by credit rating agencies indicates its issuer's degree of creditworthiness and ability to meet financial commitments.

Bonds rated AAA, which is the highest possible rating, are perceived to have little risk of default and offer investors the lowest yields among bonds of comparable maturity.

Life insurance companies had 9,53, 052 crore investment in fixed income instruments as on March-end.

DLF Pramerica Life Launched U-protect term plan

DLF Pramerica Life Insurance has launched a pure term insurance plan that provides higher life protection cover at an affordable premium, especially for women. Premium rates are substantially lower for women, making the plan, U-protect, particularly attractive for women customers, the company said.

While the minimum sum assured in the plan is Rs 25, 00,000, the consumer can take additional riders for accidental death benefit or critical illness, it said.

"With a minimum annual premium of Rs 4,000, U-protect are affordable for customers across multiple income groups," DLF Pramerica Life managing director and CEO Pavan Dhamija said.

The company is a joint venture between realty major DLF and Prudential International Insurance. It started operations in 2008 and operates 40 branch offices and 86 branch units across Delhi, Haryana, Punjab and Gujarat.

LIC opens 2nd divisional office in city

LIC's in-charge chairman D K Mehrotra on Saturday inaugurated the insurance firm's Patna divisional office II. With this, Bihar gets its fifth divisional office.

LIC had earlier four divisions in Bihar - Begusarai, Bhagalpur, Muzaffarpur and Patna. Muzaffarpur and Patna divisions have now been reorganized to form the fifth division. The new divisional office consists of 12 branches and 15 satellite offices spread over eight districts of the state.

Speaking on the occasion, Mehrotra said the changes in Bihar in affluence, awareness of insurance and demography are noticeable. "This is what prompted the opening of a second divisional office at Patna," he said and added it was now up to the firm's marketing and administrative teams to validate this decision by getting close to the customer both in terms of servicing and marketing.

He urged the agents, development officers and employees to walk that extra mile to maintain the LIC's position as a market leader.

Zonal manager Vinay Sah, regional manager (marketing) Rakesh Kumar and senior divisional manager of the newly-opened Patna II office Anirban Sarkar were present on the occasion.

Faster, cheaper trade draws insurers to direct mkt access

The facility is currently available only to institutional investors in India.

Domestic insurance companies have started using the direct market access (DMA) facility for stock market transactions to keep trades confidential and benefit from extremely low broking rates.

DMA is an electronic facility that allows brokers to offer their clients a direct access to the exchange trading system through their infrastructure, but without manual intervention. The Securities and Exchange Board of India (Sebi) had allowed DMA in April 2008. This facility is currently available only to institutional investors in the country.

DMA EXPLAINED

WHAT’S DMA? DMA is an electronic facility that allows brokers to offer clients direct access to the exchange trading system through their infrastructure, but without manual intervention. Sebi had allowed DMA in April 2008 WHO ARE ITS MAJOR USERS? At present only institutional investors are allowed to use DMA in India. Over 30 per cent of FII trades are estimated to come through this route

Foreign institutional investors (FIIs) are the major users of DMA in India, with more than 30 per cent of their trades coming through this route, according to brokers.

“Since manual intervention is not there in DMA, you can have finer broking rates, which can be as low as 25 per cent of the normal rates,” said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance. “You can monitor your trade on a real-time basis. Also, sanctity of trades is maintained as they are not disclosed,” he added. About 25 per cent of IDBI Federal Life Insurance’s trades in stock markets now happen through DMA.

The Life Insurance Corporation (LIC), India’s biggest insurer, has also shown interest in using this facility for its stock market transactions, according to brokerages officials.

The brokerage rate for DMA in the cash market is 5-6 paisa for a turnover of every Rs 100. For trades placed over phone and manually entered by dealers, institutional investors pay an 10-15 paisa per Rs 100 turnover as brokerage.

“We are using DMA in a small way at present. It works well wherever the liquidity is low, as the identity is not revealed. Also, it gives the full control in terms of execution of the orders,” said Sampath Reddy, chief investment officer (equity) at Bajaj Allianz Life Insurance. “Sometimes on smaller orders or orders with a higher monitoring level, brokers may not pay much attention in those cases DMA will be more helpful,” he added.

Bajaj Allianz Life Insurance started using DMA six to seven months ago. Less than five per cent of the company’s trade in the stock market comes through this route. “The use of DMA will keep on increasing gradually. But you can’t replace traditional broking with DMA,” Reddy added.

Terms and conditions that an insurance contract does not cover

Your insurance policy is expected to deliver when things go wrong. The insurance company promises to pay the sum assured when an insured event occurs, provided the policyholder has paid the premium in advance. But to bring down the possibility of anti-selection and also limit losses, insurers introduce the concept of exclusions to the cover offered. Exclusions simply connote conditions that an insurance contract does not cover.

An example will make it easier to understand. An individual, with the intention to defraud an insurance company, may buy a life insurance and then commit suicide. A life insurance policy promises to pay the sum assured to the nominee upon the death of the life assured.

But a suicide in the first year of the policy is not covered at all. This ensures that the insurer does not incur undue losses as individuals are highly unlikely to plan a fraud by committing suicide. The same applies for group life insurance policies other than the policies issued in lieu of employees' deposit-linked insurance where the sum assured is limited.

Similar exclusions are applicable for accident disability rider. If a life assured dies in an accident while driving in a drunken state or participating in a car racing event or due to drug abuse, then his survivors won't be paid the benefit payable under the accident cover rider.

Then there are other exclusions such as deaths occurring in war, terrorism, droughts or accidents incited by the actions of the life assured. In case of surgical assistance, surgeries carried out for cosmetic purposes are also excluded.

An insurer may choose to exclude certain benefits for a specific period of time. This is termed as the waiting period and is seen mainly in non-life insurance policies. For example, a critical illness cover will insist on a waiting period of 180 days from the date of issuance of the policy.

The waiting period protects the life insurance company from a fraudulent claim. Some insurance companies cover pre-existing diseases after a waiting period of four years, whereas a set of daycare surgeries is also covered after a waiting period of two years.

While buying a policy, a buyer should read the exclusions in detail. If you need further clarification, you may check the policy wordings and contact the insurance company. If you are moving from one insurer to another for health insurance, please double-check the exclusions in the new policy. Under benefits due to portability, you are entitled to some exclusion waivers.

Get the right health insurance cover under portability

Until portability was allowed for health insurance, customers were wary of shifting to a new insurer, even if they were unsatisfied with the existing one. The fear was the loss of accumulated loyalty benefits or having to begin the waiting period for existing diseases afresh. But now, with the option of health portability in place, they can right their wrongs. However, it would be wise to keep a few factors in mind before shifting to another insurer.

“Customers can only take the policy in totality. So it’s important to understand the benefits offered under the existing health policy and to match those with the plan one wishes to port to,” says Apollo Munich Health Insurance CEO Antony Jacob.

Those planning to port their services should look for an insurer with a good track record in claim settlements and a large network of hospitals. Besides these, there also are other conditions that should be looked up to avoid being in a spot when making a claim.

WHAT TO LOOK FOR IN A NEW INSURER

Claim-settlement record and network of hospitals for cashless facility Lifelong renewals. Insurers cannot refuse renewals to aged customers Additional premiums, co-pay and sub-limits Incentives for prudent usage of policy Flexibility to increase cover with age Wellness support facilities

Additional loading: Typically, if you have a hospital cash cover, you can opt only for a similar cover with another insurer. Going by the apples to apples logic, there may not be a wider scope for added premiums or loads on renewals.

But insurers say every portability request is considered as a new application. So, if a customer is considered a high-risk person under an insurers’ underwriting norms, he may be asked to pay a higher premium or extra loading. In such cases, unless the insurer is offering a better cover, you should not port your services in haste.

Co-pay and sub-limits: Companies often ask customers to share the risk burden, and levy conditions like co-pay or sub-limits on treatments. Under co-pay, a customer pays a percentage of the total cost, while under sub-limits, he pays anything above the pre-decided cost limit for treatment. For instance, Bajaj Allianz General Insurance levies the co-pay structure, if the customer goes to a non-network hospital.

Customers could look at insurers that reward customers for prudent usage of the cover. So, for instance, Apollo Munich encourages shared accommodation or hospitalisation under its ‘Easy Health’ policy. As an incentive, depending on the slab applicable, it offers Rs 300-500 per day hospital cash to policy holders.

“The cash perks attached to them mean lower price on the product in the long run,” adds Jacob.

Renewals: While insurers have been following 70 years as the average age after which they refuse covers to individuals, customers should now insist on lifelong policy renewals.

“There is no official regulation from the Insurance Regulatory Development Authority (Irda) on the age limit and insurers have been told that they cannot refuse health policy renewals. This, in effect, makes lifelong renewals a must,” says Suresh Sugathan, head (health administration team), Bajaj Allianz General Insurance.

Increase in cover with age: Given the rise in medical inflation, your current cover may be insufficient at a higher age. While you may plan to bridge the gap by buying a new policy, companies are sceptical about covering those in the higher age bracket, as medical risks rise significantly with age.

“Customers should, instead, approach their existing insurers, as they are much more open to upgrades from own customers, subject to the necessary medical tests,” adds Sugathan.

Doing this will also help a customer skip the waiting periods applicable on new policies.

Wellness support: A number of companies now offer wellness support to their customers through helpline set-ups for health tips, medical camps and newsletters. These are value additions and part of awareness campaigns insurers undertake.

But, experts warn, one should take into account the kind of support offered, since the costs involved are met by insurers in premiums. “How many people would really follow the advice dispensed by a doctor on the other side of the phone helpline,” asks an official.

It would be better to see if the new insurer has tied up with hospitals and offers discounted rates for out-patient procedures not covered in the basic policy.

HDFC Ergo to provide $15m cover to Formula 1

Private general insurance company HDFC Ergo, in collaboration with the Delhi-based Ace Insurance Brokers, will provide an insurance cover of USD 15 million (Rs 67.5 crore) to the Formula 1 Race, which is being organized in the Capital from the month end, the company said today.

"The insurance cover would protect the Formula 1 Grand Prix event against adverse weather, non-appearance of several teams, riots, strikes and civil commotion leading to cancellation of the event, its postponement or relocation," it said in a statement.

HDFC Ergo, which is a 74:26 joint venture between the mortgage leader HDFC and Ergo International AG, is the lead insurer for the event, it added.

Commenting on the deal, Anuj Tyagi, Head, Corporate and Rural & Agri Business of HDFC Ergo said, "insuring such a high- profile event in a country like ours is a great learning experience."

As per the company, the organisers would write off the costs including deposits, advertising, printing costs, and booking fees among others in case of cancellation of the event.

"A policy like event cancellation insurance policy is a savior for the organisers because it pays any irrecoverable cost or expense, which have been or will be incurred in connection with the event, following a cancellation, interruption, postponement or relocation due to any of the insured perils," Director of Ace Insurance Brokers, Anil Arora said.

Health data bank for city folks

The Active Network Group of Emergency Life Savers (ANGELS) crew will prepare a detailed health data bank of individuals who are willing to be part of its health forum. A detailed health check-up will be organised for selected members from all panchayat and municipal areas in the district.

To boost the morale of the members of the forum, the organization has joined hands with United India Insurance Company to provide free insurance converge of Rs 1 lakh to all members. The scheme will also help the members to avail free medical care in case of life threatening emergencies like accidents, heart attacks and strokes.

According to P P Venugopal, executive director of the organization, preparation of health data bank of the residents of Mavoor panchayat has already started with the help nursing students. The data collected will also be provided to blood donation drives with the consent of the members, said Venugopal.Health data bank of people is being prepared to form 'Angels Emerald Health Forum' programme. It aims to strengthen emergency rescue operations with the support of ambulances. All those who are interested in extending voluntary service for offering pre-hospital care and emergency medical service to accident victims, will be enrolled in the forum.

The forum members, according to Venugopal, will be trained on emergency care, medical support, resuscitation and rehabilitation, accident prevention, lifestyle modification, and disaster management. All 40 candidates who have completed their training in emergency medical care technology will be included in the forum to help the new members.

ANGELS plans to form around 500 health groups and to affiliate them to the Emerald Health forums, said the office bearers of the organization. The scheme will make the people aware of the significance of pre-hospital care in saving life.

Besides, members of the health insurance forum will assist rescue operations in accidents and disasters.

Keep your insurance policies in demat form

After shares, you can now keep your insurance policies in demat form. In order to reduce transaction costs and ensure swift modifications in insurance policies, the Insurance Regulatory and Development Authority (IRDA) issued guidelines for electronically issuing policies. IRDA has also laid down guidelines for repositories, which compile and store data about policyholders on behalf of insurance companies.

According to the IRDA, the objective of creating an insurance repository is to provide policyholders with a facility to keep insurance policies in electronic form. They can also undertake changes, modifications and revisions in the insurance policy with speed and accuracy.

This would enable the insurance companies to sell all the polices - life, pension and non-life , in electronic form. With the issuance of e-insurance policies, there will be efficiency, transparency and cost reduction in issuing and maintaining them. According to the guidelines, an insurer issuing e-insurance policies will have to take the services of a registered repository. All such insurance policies in electronic form will be treated as valid insurance contracts.

A certified insurance repository has to have a net worth of at least Rs 25 crores, without any foreign investment. No insurance company can hold over 10 percent or hold any managerial position . The repository has measures to safeguard the privacy of the data to prevent manipulation of records and transactions, before the commencement of operations. An insurer can enter into an agreement with one or more insurance repositories for maintaining the electronic insurance policies.

Hence, insurance buyers will now be able to open demat or e-insurance accounts for their contracts and hold the insurance policies in electronic form. Having an e-insurance account will reduce hassles for buyers. The need to provide age and address proof every time a policy is bought will not be necessary now. It will also save insurers substantial money in printing and dispatching policies.

Similar to demat account

E-insurance will be similar to the demat account for shares and mutual funds. Just like the securities market, the IRDA has proposed to create insurance repositories on the lines of securities depositories like the National Securities Depository or the Central Securities Depository. These repositories will be licenced by the regulator and connected to all insurance companies. This will result in efficiency and better customer service by the insurance companies. Since the repository will consolidate all policies under a single account, the family will immediately come to know of the policies purchased by an individual in an emergency.

IRDA will grant licences and regulate insurance repositories, which will act as service providers to life insurance companies. The repository will give a unique number to every individual and all his policies will come under that account. It will hold all types of policies - including life, health, motor and group covers. The data maintained by the repository will include history of the claims of the individual and names of the beneficiary, assignees and nominees.

Dematerialized policies will be more liquid than paper policies as these contracts can be easily assigned. Whenever the policies are assigned, the assignee will have the same rights as the policyholder.

Pay your LIC premium online Click Here LIC Online Payment

Any insurance policyholder or a prospective policyholder can open an e-insurance account. Opening an account will require identity proof and address proof. There would be no additional costs for a policyholder for opting for electronic policies. You will not be required to go through KYC (know-your client) procedure every time you buy a policy.

Pure term plans save money

Invest the rest in mutual funds or debt instruments to create corpus.

One of the basic principles of sound financial planning is to buy insurance only if and when needed - the policy of choice being term insurance. However, most investors have difficulty in accepting the fact that upon survival (or when the term ends) there is nothing the policy yields by way of maturity proceeds. Those who buy term insurance are often told that they are making a totally wasteful investment! This misconception is quite enduring and widely prevalent. But term insurance scores over any other kind of insurance plan that one can buy.

Basically a plan that seeks to combine insurance and investment more often than not tends to be sub-optimal. It is always better to keep insurance and investments separate. All endowment, whole life and ulips are examples of combination insurance plans. On the other hand, a term insurance plan has no cash payout at the end of the term. This means if the policy holder were to pass away during the term of the policy, his family will get the sum assured. However, were he to survive he will not get a single rupee. In other words, term cover is pure life insurance and has no cash or surrender value. If this is indeed the case, why favour term insurance as against a traditional endowment or whole life policy which, at least pays, at the end of the day, no matter what, either the sum assured or the maturity value?

The reason is because basically insurance is a cost. It is a contract (policy) in which you purchase financial protection or reimbursement against a loss or an unanticipated expense. The price paid to purchase such protection is also called premium in insurance parlance. Such premium is payable, year in year out, till you desire protection from the loss. Now, take for instance car insurance. You pay the insurance premium, year in year out, to protect yourself against the financial damage an accident can cause. If you are a safe driver and manage not to damage your car during the year, the premium paid is lost – you don’t get anything out of it. And you are perfectly happy to have done so, so long as you and your car are safe. Or take medical insurance. Again, premium is paid to defray any costs of medical emergencies or hospitalization. However, if you remain fit and healthy the premium paid on buying the medical insurance is lost. But then again, you do not mind this, do you? Then why should life insurance be any different? But it is. It always has been.

The reason for this is mainly because life insurance premiums come bundled with the pure premium part combined with the part that gets invested on your behalf. The policy is sold more as an investment where the insurance just comes along. However, know that insurance never comes along, it always has to be paid for. In the case of life insurance, the premium is known as mortality premium. Such mortality premium is applicable for all polices, year after year, without any exception, till such time that the life is insured. Even in the case of single premium plans or policies where the premium is payable only for part of the policy term, nonetheless, the mortality premium keeps getting deducted every year from the fund value. So, you buy insurance directly or indirectly each year.

Let us take an example to understand this concept in depth Take the case of a 30 year old person who desires to buy an insurance cover of Rs. 10 lakh. Were he to buy an endowment plan, the annual premium that he would pay is around Rs. 39,000. However, a term plan would just cost Rs. 3,800 per annum for the same amount of risk cover of Rs. 10 lakh. This difference of Rs. 35,200 between Rs. 39,000 and the pure risk cover cost of Rs. 3,800 is the called the investment premium. Putting it differently, for a premium of Rs. 39,000 per annum, one can either purchase an endowment plan where the sum assured is Rs. 10 lakh or one can buy a term plan where the sum assured is around Rs. 1 crore. Your choice.

Of course and understandably so brokers earn a far greater commission if they sell you polices other than the term cover. These commissions, that can go as high as almost 40 per cent are recovered from the investment premium (Rs. 35,200 in the above example) that you pay. And it is an easy sell too since the logical sounding argument given against buying a term cover is why opt for the same when you don’t get anything back in the end?

A better strategy would be - buy term and invest the difference.

Comprehensive Health Insurance from Apollo Munich

Everybody wants to have complete health protection. The problem arises when they choose a health policy for themselves. There are very few numbers of people who know how to make a right choice. Majority of people buy the plan that is recommended by their friends or relatives, thus ignoring their healthcare needs. A person should try and buy a comprehensive health insurance policy so that there are no issues before him/her at the time of medical emergency. These policies help a person to enjoy life under the complete coverage.

Apollo Munich, a joint venture between the Apollo Group of Hospitals and Munich Health, has taken all the above said parameters in mind and has designed products, looking into healthcare needs of people. It has brought a variety of products to help Indian citizens seek medical treatment with ease. An insured need not have to worry for the medical expenses while seeking quality healthcare. There are products for people of all income groups.

India’s first 360 degree product, called Maxima, is the most comprehensive health insurance plan designed by Apollo Munich. It offers wide coverage, which includes inpatient as well as outpatient treatment, maternity expenses, optional critical illness cover, outpatient treatment for pre-existing diseases etc. There is no doubt that the premium associated with this plan is quite high but it is far too less than the coverage offered with this plan. There is coverage for pharmacy costs, diagnostic tests, doctor’s consultations, up to a certain limit. It is, therefore said that Maxima makes medical treatment almost free for an insured.

Looking into other products brought by the company, Easy Health has gained much popularity. In the recent survey, in which various health insurance products in India were compared on basis of their price and features, Easy Health gained the topmost position for being the best medical insurance policy. It is one of the 5-star rated products. One good aspect of this product is that there are three variants and a person can buy the one, as per his/her health needs and budget. This plan also offers complete health coverage at cost-effective price.

Both these products, mentioned above, come with a lifelong renewal facility such that its customers can enjoy the coverage for the entire life. Regular renewal also helps them to enjoy continuity benefit. So, a person can enjoy life under the coverage of these plans.

Govt med insurance only for general ward patients

Only patients admitted in a general ward will be eligible for the government sponsored cashless health insurance for inpatient treatment for primary and secondary illnesses in government and private hospitals in Goa. If a patient is admitted in the ICU, the "Swarnajayanti Aarogya Bima Yojana" card will not serve to pay for treatment.

The card has a ceiling of Rs60, 000. Admitting this, health minister Vishwajit Rane said, "The scheme is for primary and secondary illnesses and one doesn't need ICU admission for these illnesses." Doctors, however, differ with the health minister's view. "Treatments under the scheme include major surgeries such as nephrectomy (surgery to remove part or entire kidney), abdomino perineal resection (removal of anus, rectum, or colon), commando operation (surgery for first degree malignancy of the tongue) and other such treatments, in which patients in a majority of cases need to be admitted in the ICU. Also what about patients who come to the hospital for primary and secondary care but later develop complications and need to be shifted to the ICU?" Association of Private Nursing Homes spokesperson Dr Govind Kamat said. Dr Mithun Mahatme of Mahatme Nursing Home, Bicholim said, "The intent may be good but implementation is not practical. The insurance is for admission in a general ward.

What happens if an emergency patient comes and the general ward beds are full? Also, the rates quoted are low due to which we would be forced to cut corners which won't be in the patients' interest." Though private hospitals have shown discontent with the rates, ICICI Lombard, that will run the scheme, claims that Manipal, R G stone, Wockhardt and SMRC-Vivus hospitals (all corporate hospitals) have agreed to the terms and the company is in final talks with a several other hospitals as well.

Pvt hospitals roped in

FISG-ICICI Lombard GIC Vice-president Birendra Mohanty said, "The implementation of the scheme has already begun and we have roped in more than 10 private hospitals in the network, along with three public hospitals. We are in negotiations with other private hospitals." Kamat, however, said, "The hospitals named by the insurance company are not members of our association. As far as we know, except for one member, none of the others have entered into an agreement with the insurance company. We have also called a meeting of all the members on Sunday to decide the future course of action." Goa has about 110 private nursing homes.

Rane added, "We want the association of private nursing homes on board. They do have some apprehensions but that will be resolved by ICICI." ICICI Lombard's "scope of services" clause states that the package will include "bed charges (general ward), nursing and boarding charges, surgeons, anesthetists, medical practitioner, consultants fees, anesthesia, blood, oxygen, OT charges, cost of surgical appliances, medicines and drugs, cost of prosthetic devices, implants, X-ray and diagnostic tests, food for patient etc". It also includes expenses incurred for diagnostic tests and medicines one day before admission and up to five days after discharge from the hospital.

Transportation expense from the patient's residence to the hospital is also covered and would be reimbursed in cash by the hospital to the patient on providing proof of expenditure. The maximum amount payable to the patient for transportation would be `100.

PIN codes to decide health cover rates

Now your PIN code will decide the amount of health insurance premium you need to pay. Besides age, gender and general health, insurers are discovering that cost of real estate plays a big role in health insurance costs and have incorporated that into pricing.

"Hospitalization is more expensive in Mumbai and Delhi compared to other cities one of the reasons for this is the high cost of real estate in these metros," said Joydeep Roy, CEO, L&T General Insurance. He said that his company has done an analysis of costs for each postal zone. However, given the complexity of monitoring each postal area the company has bunched the codes into three clusters.

Earlier, state-owned New India Assurance had come up with differential pricing for New Delhi and Mumbai. But this is the first time that a company is refining the pricing to such a level. L&T General Insurance's "My:health Medisure Prime" is positioned as a feature rich product which is priced slightly above its rivals. The premium varies according to the location. For instance, someone buying health insurance in Sholapur in Maharashtra would end up paying 15% lower than someone in Mumbai. However, if a person from a small city were to seek treatment in a metro he would have to bear a portion of the treatment cost.

L&T's product is one of the first new health insurance products to hit the market after the insurance regulator permitted portability of health insurance plans with effective from October 1. The portability guidelines allow customers to switch service providers and retain their track record.

Pay your LIC Premium Online Click Here – LIC Online Payment

A slew of new health insurance products are expected to be launched by insurers in coming weeks as new features and services are expected to be the prime drivers for policyholders to migrate from one policy to another.

L&T's product is different in other ways as well. Unlike most policies, the "My:health" plan does not have sub-limits under various heads like room rent, medicines, or surgery. Further, the sum insured also automatically doubles on diagnosis of a critical illness. "We have cashless hospitalization available across the country with response time commitment. Our policy also provides features like fully paid pre-policy check-up at the comfort of the customer's home and many more customer friendly features and services to make sure that the terms are understood and claims are hassle-free" said Roy.

FIIs cut, LIC raises stake in Infy during July-Sept

Foreign institutional investors (FIIs) have pared stake in Infosys Technologies marginally during the July-September quarter, but some of its biggest institutional investors — including Life Insurance Corporation of India (LIC), sovereign funds of the government of Singapore and Abu Dhabi Investment Authority — hiked their stakes in the Bangalore-based IT firm.

During the quarter, FIIs reduced stake in Infosys from 36.88 per cent to 36.66 per cent, and the share fell 13.66 per cent from Rs 2,934 to Rs 2,533 apiece.

However, nine out of 10 institutional investors, which held more than one per cent stake in the firm, used the fall in share price to raise their holdings during the quarter, according to the company’s filings with stock exchanges.

Retail investors, who own shares worth up to Rs 1,00,000, pared their stakes in the company by 1,16,798 shares through the quarter, though the number of investors rose during the same period. However retail investors, who own shares in excess of Rs 1,00,000, rose in number by seven to 372, who collectively added a total of 4,56,635 shares during the quarter.

Hemant Kanawala, head of equities at Kotak Mahindra Old Mutual Life Insurance, said institutional investors added Infosys shares as the stock corrected sharply while small retail (investors) sold as they got influenced by the market momentum.

LIC added 35.01 lakh shares raising its stake to 5.49 per cent from 4.88 per cent. Foreign investor Oppenheimer Developing Markets Fund added 1.89 lakh shares raising its stake to 2.71 per cent from 2.67 per cent. Abu Dhabi Investment Authority (bought 19.79 lakh shares) to 2.13 per cent; ICICI Prudential Life Insurance Company (bought 9.65 lakh); Vanguard Emerging Markets Stock Index Fund ( bought 13.51 lakh); government of Singapore (5.45 lakh); Aberdeen Asset Managers (21 lakh); HDFC Trustee Company (5.12 lakh) and Bajaj Alliance Life Insurance Company (82,500).

Only institutional investors to pare stake in Infosys was Franklin Templeton Investment Funds, which sold 14,000 shares).

On an aggregate basis, FII stake in Infosys was down marginally to 36.66 per cent from 36.88 per cent, while the total number of individual FIIs holding the stock came down from 948 to 907.

“When the stock corrected in the last quarter, it was more on uncertainty on FY13 earnings. FY13 earnings estimate continued to be challenging and it will determined only by April 2012,” Kanawala said.

“Because rupee has appreciated 10 per cent, Infosys’ rupee guidance has also gone up. Given that dollar will continue to remain strong, it will help the company,” Kanawala added.

Pay your LIC Premium Online Click Here – LIC Online Payment

“The profitability guidance is robust as the EPS guidance in dollar terms has been raised and EPS guidance in rupee terms has been increased significantly due to higher rupee/dollar expectation (48.98 compared to 44.5 earlier),” said Rohit Kumar Anand, an IT analyst with PINC Research.

Life insurance favorite investment class of urban Indians

Life insurance products are the hot favorite of most urban Indians as an investment option and they are likely to earmark over half of their investable income for these products in future, says a study by market research firm Nielsen.

According to Nielsen's study on the life insurance sector and investment patterns, 'LIFE 2011', a little over 60 per cent of urban Indians hold insurance policies, which are likely to account for a large share of their future investments as well.

A look at the shift in investment habits over the last two years indicates that people are returning to fixed investment products, while investment in risky categories like equity is on the decline.

The study said that Indians, in practice, remain "risk averse" and the main drive behind an urban Indian's investment is returns, followed by unforeseen emergencies and child education.

"Given the recent volatility in equity markets and rise in commodity markets, urban Indians, being traditionally risk averse, are returning to safer, more traditional investment products like life insurance, given the tax benefits and limited risk associated with the product," Nielsen Head - Finance Practice Subhash Chandra said.

As per the study, there is a sizeable opportunity waiting to be tapped. The young investor segment accounts for nearly a fifth of the population and most of them currently do not hold a life insurance policy. This space is the also the most enthusiastic to invest in life insurance in the immediate future.

"With the youth entering the workforce at high salaries these days, the young investor segment is a huge opportunity for most financial service organisations. Coupled with the historical acceptance of life insurance as a safe investment and the added tax benefits that it provides, life insurance seems to have retained favour with even the young investors," Chandra added.

There is also an opportunity to expand coverage by way of additional policies, as around 16 per cent of life insurance holders are open to investing in a new policy within the next six months.

"While in the short-term, marketers can look at ensuring conversions from this segment, the long-term opportunity for life insurance marketers lies in increasing dual policy ownership. Hence, marketers need to promote the benefits of opting for a second policy to current policyholders," Nielsen Finance Practice Head Insurance and Investments Anand Parameswaran said.

Indians are still not open to making insurance purchases over the internet, going by the response of current policyholders, Neilsen said.

ICICI Prudential Life launched two new Ulips

ICICI Prudential Life Insurance has launched two unit-linked insurance plans (Ulips) – ICICI Pru Elite Life and Elite Wealth - aimed at the high net worth individuals. The features of both the plans are similar, save the premium. The minimum premium for Elite Life is Rs 2 lakh, while it goes up to Rs 5 lakh for ICICI Pru Elite Wealth. The premiums can be paid either in one go or over a period of five years.

Under the one-pay option, the life cover for those aged till seven years and over 60 years is limited to 1.25% of the premium. Those between eight and 60 years can opt for a minimum sum assured of 1.25 times the premium, with the upper limit being five times the premium amount.

If the premium is paid over five years, then policyholders aged between 8 and 45 can secure a sum assured that is either 10 times the annual premium or an amount equal to the policy term multiplied by half of the annual premium, whichever is higher. For those over 45, the sum assured will be seven times the annual premium or an amount equal to the policy term multiplied by one-fourth of the annual premium, whichever is higher.

If policyholders chooses a life cover of 1.25 times the premium, the deduction available under 80c of the I-T Act will be limited to only 20% of the total premium and not the entire premium amount. What's more, the returns generated by the product will be taxable, too.

FUND OPTIONS, MATURITY PROCEEDS
The products offer eight fund options, and also the option to invest systematically through the automatic transfer strategy. In case of the insured's death during the policy term, the amount payable will be the sum assured reduced by the partial withdrawal, if any, or the fund value, whichever is higher. Partial withdrawals are allowed after five years of the policy, subject to limits.

CHARGE STRUCTURE
Premium allocation charges amount to 3% of a single premium and 2% under the five-pay option. Policy administration charges are Rs 60 per month for one-pay and Rs 500 per month under the five-pay option. Any alterations in the policy, besides switching funds, will cost Rs 250 per transaction. "The initial charges are lower compared with other Ulips, but they still cannot beat mutual funds which don't have an entry load," says Pankaj Mathpal, CFP.

Upside: Long-term insurance cover with a limited premium payment term. Also, the policyholder can choose between eight funds options and switching between them is free.

Downside: Like all Ulips, financial planners feel the charges are higher vis-a-vis other comparable financial products like mutual funds.

All you need to know about health insurance portability

Now, policyholders, who are dissatisfied with their current health insurers, have the freedom of switching to other insurers who offer a better deal without losing the continuity benefits. But before switching the health insurers, know the fine prints.

Firstly, when a customer shifts to a new insurer, he will have to undergo all underwriting procedures just like a new policyholder. The loading for porting will be decided only after the completion of medical risk assessment.

Bajaj Allianz General Insurance, head-underwriting, TA Ramalingam says, “The new insurer has the right to reject your policy based on its underwriting guidelines, which may differ from your existing insurer. So customers need to be cautious before planning to switch.”

Why would anybody shift to a new insurer? Of course, to get a better deal compared to the existing health one. So, compare the sum insured available with the new insurer that you intend to shift.
It is always better to switch the plans that are similar in nature. Otherwise, the policy will end up in opting either lower cover or higher cover.

The policy holder has to inform the new insurer about the time regarding the choice of switching. According to Irda guidelines, insurers need to be informed 45 days before renewing the existing policy. If the request for the portability is made after 45 days, the insurer may reject the request.

Waiting period for certain illness varies from insurer to insurer. Hence, it is important for the policy holders to check the time period for pre-existing diseases. Besides the specific exclusions, other terms and conditions need to be scrutinised well before shifting.

“Take a conscious decision on shifting. Service levels of the insurers would be the most important criteria while changing your insurer. People would like to shift to an insurer who has excellent service levels especially in claims settlement,” says Shreeraj Deshpande, head-health insurance, Future Generali India.

The earned bonuses so far with the existing insurer may change as per the new portability guidelines. Ensure that you get existing benefits and additional benefits while porting your health insurance policy.

It is advisable to compare the product constructs such as internal sub-limits and co-payments. Also the policy holder should be aware about the age band pricing and how people of higher ages are treated while porting.

“With the implementation of health insurance portability, insurers will have to enhance their service capabilities and engage in constant innovation to service their existing and potential customers. It is expected to bring in new benchmarks in delivery mechanisms and product innovation in the industry,” say Damien Marmion, chief executive officer, Max Bupa Health Insurance.

Aviva Life targets 20% growth in new sales

Aviva Life Insurance is bracing up for 15-20 per cent growth in new business sales in the second half of this financial year as insurance companies have begun to register growth after reporting decline in sales during April–September 2011.

“We registered 25 per cent year-on-year growth in September 2011. Growth is back as the industry is stabilising now. It is also because of the low base effect,” said T R Ramachandran, chief executive officer, Aviva Life Insurance.

The life insurance industry has been hit badly since September 1, 2010, when the new unit-linked insurance plan (Ulip) norms came into effect. With new norms in place, insurance schemes in the market became redundant and insurers had to re-launch Ulips. Agent commission also fell by half and many agents stopped selling Ulips.

Ulip sales were impacted. For Aviva Life, prior to September 1, 2010, Ulips accounted for 80 per cent of overall sales that has now fallen to 55 per cent. The insurer expects it fall further to 50 per cent.

To increase its distribution channel and raise addition capital, Aviva Life Insurance is in talks with Syndicate Bank to divest equity stakes.

Confirming the move Ramachandran said, “Discussions are in preliminary stage right now. We have made a presentation to Syndicate Bank. Talks are on.” He did not divulge the percentage of equity Aviva is willing to divest.

Aviva Life insurance is a joint venture between Dabur and UK’s Aviva, holding 74 per cent and 26 per cent stake, respectively.

Many life insurance companies are trying sell a part of their equity in their of long-term distribution partnership. Recently, MetLife sold 30 per cent equity to Punjab National Bank and Max New York Life Insurance sold 4 per cent stake to Axis Bank. More companies, such as Reliance Life Insurance and DLF Pramerica, are trying to divest stakes for bancassurance partnerships.

Aviva Life is also looking forward to open architecture, where banks will be allowed to sell products of more than one insurance company.

The Insurance Regulatory and Development Authority (Irda) had set up a committee to look into open architecture. The committee recommended banks should be allowed to tie up with two insurance companies. At present, regulator is studying recommendations but is yet to take a final call. “Open architecture is good for both the insurance industry and the customer. If open architecture is allowed, then, customers will have more choices,” said Ramachandran.

Bancassurance channel accounts for about 25-30 per cent of new business sales for the insurance industry.

Reliance Life closes 26% stake sale to Nippon

Anil Ambani-led Reliance Capital on Sunday announced completion of the transaction for sale of 26% stake in Reliance Life Insurance to Japan-based Nippon Life Insurance.

The entire transaction proceeds of Rs 3,062 crore ($680 million) from Nippon Life Insurance have duly

been received, a company statement said. The transaction pegs the total valuation of Reliance Life Insurance at approximately Rs 11,500 crore ($2.6 billion).

Reliance Capital had signed a definitive agreement in March this year with Nippon Life Insurance to sell the 26% stake in Reliance Life Insurance, subject to regulatory approvals, which have since been received.

Nippon Life is the world's seventh largest life insurer and the largest private life insurer in Asia and Japan.

In July, public sector Punjab National Bank (PNB) Okayed a proposal to partner Metlife India for its proposed life insurance business. Last year, PNB had invited expressions of interest (EoI) from Indian and foreign insurance firms to set up a strategic partnership with second largest public sector lender.

Analysts tracking the sector told HT that the many Indian promoters are in discussions to induct a third partner in the existing joint venture companies. Existing laws limit foreign direct investment (FDI) in the insurance sector to 26%.

Reliance Life Insurance Company Limited, a part of Reliance Capital, has an aggregate business premium of Rs 6,600 crore ($1.46 billion) as on March 31, 2011. Nippon Life Insurance posted revenues of Rs 3,49,834 crore ($80 billion) and a profit of Rs 12,199 crore ($3 billion) for the fiscal year ended March 31, 2011

"Nippon's vast experience of over 122 years will help strengthen Reliance Life Insurance's position as a leading and world class insurance company in India," Sam Ghosh, CEO, Reliance Capital said.

"We are very happy to complete the transaction," said Yoshinobu Tsutsui, president, Nippon Life Insurance.