Life insurers to modify policies for tax breaks

Life insurers are in the process of modifying insurance plans for offering life cover of at least 10 times of annual premium paid by customers to be eligible for tax breaks. About 65–70 insurance products being sold at present will have to be either withdrawn or modified to be eligible for tax breaks. Most life insurance companies will approach the insurance regulator, Insurance Regulatory and Development Authority (Irda), seeking clearance for modified policies.

Withdrawal of existing policies or amending them became necessary after finance minster Pranab Mukherjee announced that all policies sold from April 1 will have to offer sum assured at least 10 times of the annual premium in order to qualify as a tax-saving product. The decision was announced in the general budget presented on March 16. Pranab Mukherjee’s budget proposal makes it incumbent upon the insurance companies to offer better life coverage to enjoy tax concessions on the plans that are sold as tax-saving products. Hitherto, most insurers offered five to seven times the premium collected as the life cover. And now, the companies are scampering to modify the products and bring them in compliance with budget proposal.

In case, an insurance policy does not meet the prescribed limit set by finance minister, the policyholders would not be eligible to claim tax deduction under section 80C and 10 (10D). This norm applies for unit-linked insurance plans (Ulip), as well as, traditional insurance products. In case, a product is not qualified as tax-saving product by Irda, its sales are bound to be impacted, thereby, denting the insurance companies sales revenue and margins. “We are in the process of modifying our existing products to meet the prescribed limits, so that products are available to customers even after April 1. Although this is a challenge for insurance players, this is a move in the right direction, as protection is the main motive of a life insurance policy,” said Suresh Agarwal, executive vice-president and head of distribution and strategic initiatives at Kotak Mahindra Old Mutual Life Insurance.

Life insurance products are a popular tax-saving tool for retail investors, and account for a huge chunk of total household savings. If these products lose tax benefit, profits of life insurance companies are bound to take a hit. But, some insurers do feel that modifying the products in a hurry will not be suitable for policyholder and some more time should be given. “We are in the process of modifying our products, but we also plan to approach the regulator so that industry can ask for more time from finance ministry in order to make the necessary changes in existing products or come up with new products,” said Anisha Motwani, director and chief marketing officer of Max New York Life Insurance.

Insurers are also apprehensive about the increase in service tax rates, that will be effective from April 1. “The increase in service tax on traditional policies is marginal, but for annuity-related products, where the policyholder converts his whole corpus into annuity, the impact will be significant,” said Saurabh Mishra, chief marketing and distribution officer at Star Union Dai-ichi Life Insurance.

Source : www.mydigitalfc.com

Is LIC ignoring its policyholder’s interest for government’s divestment programme?

Government’s disinvestment programme is carrying a can on country’s largest institutional investor Life Insurance Corporation of India’s (LIC) small investors.



Almost all of LIC’s investments in government disinvestment programme which was restarted in mid 2009 have gone wrong leading to notional losses for policyholders in the underlying schemes.



Since 2009 LIC has invested in seven divestment issues. In these issues LIC has invested Rs 12,400 crore accounting for quarter of Rs 45,000 crore through public issues in last two years. This holdings of LIC at present are worth of Rs 9,379 crore these investments have seen an erosion of 24.5%. It is a notional loss of Rs 3,038 crore. Eventually these losses will be passed on to policyholder who has purchased insurance policies or Unit-Linked Investment Plans.



This is excluding last’s week’s last-minute investment in the Rs 12,766 crore ONGC sales of shares. Losses are expected to increase if the 7% post auction fall in the explorer’s share price is taken into account.



LIC is investing savings of small investors in government’s divestment programme. Though government is saying that LIC is investing by its investment rationale but there are not many takers for this theory. Results of investments of LIC makes it evident as out of seven issues in which LIC has invested six have given negative returns while four public issues which LIC skipped have performed well.



Another explanation is that institutional investors buy shares for long term and these offers provide opportunity to pick good stocks for long term.



Biggest loss for LIC came in Shipping Corporation of India (SCI) which is down 50%. PTC India is down 41% while NMDC is down 39%. In terms of absolute losses NMDC investments saw the biggest erosion of Rs 2,295 crore while NTPC saw the erosion of Rs 654 crore. In SJVN which has lost around 25% of its value since public issue LIC’S Market Plus 1 scheme held 47.5 million shares as of December 2011. However, it is not clear how much part of it was picked up in IPO.



Like in SJVN LIC is picking up additional shares at lower prices in other companies as well. It has taken up 56 million shares in SCI, 23Million in NTPC and one million in NMDC.



LIC’s only investment in primary market that is in green is Rs 73 crore investments in Power Grid. This investment has witnessed a growth of 22% or Rs 17 crore.



However, issues which LIC avoided gave good returns such as Coal India which has given the return of 35% since its public issue. Other issues which LIC avoided include Rural Electrification Corporation (REC), United Bank of India and Oil India.



In addition to the choice of stocks, the prices of stocks at which they are picked have also raised questions. Several annalists have raised the question on the rationale of LIC of picking up ONGC stock which did not see enough demand at floor price of Rs 290 at a substantially higher price. In the ONGC sale LIC has picked 400 million shares at an average price of Rs 303.



LIC has always been a last resort for government’s divestment programme since 2009. First time government resorted to LIC was in early 2010 when government was pushing Follow-On Public Offer (FPO) of NTPC. Then LIC picked 168 million shares in the FPO of NMDC at the price of Rs 300. Then LIC bought the shares of Engineers India in its FPO which came at the price of Rs 290.

Forum Penalized ICICI Lombard for Not Providing Cashless Facility

Delhi district consumer redressal forum has directed ICICI Lombard general insurance to pay compensation of Rs 40,000 and litigation cost of Rs 10,000 to Satya Prakash for harassing him by not providing him cashless medical facility.



Complainant Satya Prakash has bought a health insurance from ICICI Lombard for two years and during this period he under went a treatment for a heart ailment at Sir Ganga Ram hospital.



Despite acting as per the terms of the policy for availing the cashless facility he was denied the cashless facility by the company.



In its reply company said that request of cashless facility was never denied and case went into closure as no reply was received to its queries either from hospital or Satya Prakash.



However, forum said that hospital provided all necessary information to the insurance company to make available facility to the complainant so he could be admitted to the hospital for his heart ailment.



Forum also said that it appears that company has decided to remain silent about the request of cashless facility hence; it amounts to denial of cashless facility that even without any valid reason. Therefore, this considered as the deficiency of service on the part of the insurance company.

General Insurers Planning to Come Up with Restoration Facility

Like stand alone health insurance companies General insurance companies are also planning to extend restoration facility to their customers.
At present stand alone health insurance companies such as Star health and Allied Insurance and Apollo Munich Health Insurance are offering this facility to their customers. However, both these companies are providing this facility to policyholders who have chosen sum insured of Rs 3 lakh or more.
Under restoration benefit the basic sum insured of policyholder is reinstated by insurer once it as been exhausted due to some illness or accident. However, Insurance companies charge 25-30% more premium for a health insurance policy with restoration facility than a plain vanilla mediclaim policy.
Mean while third stand alone health insurance Company Max Bupa Health Insurance has also recently introduced their flagship product ‘Heartbeat Health Insurance Plan’ with top-up option in Rs 2 lakh and Rs 3 lakh sum insured variants.
Insurers like Star Health and Allied Insurance, Bajaj Allianz General Insurance and United India Insurance already offering top-up plan.

Insurance cos are liable to pay compensationpassengers traveling on the roof tops of the bus.

Punjab and Haryana high court has pronounced a significant decision, according to which insurance companies are liable to pay compensation even for the injury or death to the passengers traveling on the roof tops of the bus.



Six appeals were filed by Oriental Insurance and other insurers in view of conflict of two judgments of this court, first case New India Assurance versus Samundri Roadways, and second case New India Assurance versus Punjab government.



Turning down the appeal court said that judgment in Samundri roadways co. pvt. Ltd case is contrary to number of judgments; hence it does not lay down the good law. Court further said they are of the opinion that insurance companies are liable to indemnify the insured even in the case of passenger traveling on the bus roof tops.http://www.policymantra.com/blog/wp-content/uploads/2012/03/people-on-bus-roof.jpg

Govt. to Drop Proposal of Hiking FDI Limit in Insurance Sector

Due to political pressures government is likely to again take a step back on liberalization. It is expected that government will accept the demand of opposition and cap the Foreign Direct Investment (FDI) limit in insurance sector as well as in pension fund at 26%.
It is expected that government will drop the proposal of increasing FDI limit in insurance sector to 49%. And in pension fund government will cap the FDI limit at 26% and with assured returns.
Parliamentary standing committee, headed by former finance minister Yashwant Sinha, had recommended that FDI limit in pension fund should be capped at 26% in legislation itself. And assured returns should be given to those individuals who park their corpus in government securities. Standing committee has also said that increasing FDI limit in insurance sector, looking at the current global financial scenario will not be in the interest of insurance sector. For raising capital instead insurers should look at other options such as through Initial Public Offering (IPO) or through fund raising on the lines of that those done by banks.
Government is willing to move amendment in insurance sector through, ‘Amendment Bill 2008’ and in pension sector through, ‘Pension Fund Regulatory and Development Authority (PFRDA) bill 2011; in current parliamentary session. In both bills except FDI limit there is no other conflict hence, by keeping the FDI limit at 26% in both sectors government will able to push both these bills.
But as per insurers increasing FDI limit in insurance sector to 49% is the major clause of insurance amendment bill and keeping it unchanged it will send wrong signal to investors. Due to this many foreign companies who were willing to invest in India in insurance sector may review their decisions.
Biggest challenge for insurance industry is capital; foreign companies are eager to invest in India but if ceiling is kept at 26% then insurers will leave with no choice to induct domestic partners to meet the capital requirement.
As per the Insurance Regulatory and Development Authority’s (IRDA) estimates insurance industry will need capital of at least Rs 40,000 crore to achieve an insurance penetration level of 8% of Gross Domestic Product (GDP) and around Rs 66,000 crore for the insurance sector as a whole in next five years.
Besides, FDI limit clause, insurance amendment bill also have some other provisions which will provide IRDA greater flexibility by removing some clauses from statute and bringing under regulatory supervision.

If bill gets passed then IRDA will get flexibility in deciding agent structure and agent’s commission.

PFRDA bill will give the PFRDA statutory status and empower it to regulate the National pension scheme and introduce regulations to reform it. This is the second attempt of UPA government to give it a statutory frame work. Prior to this in 2005 government has failed to get pension bill passed due to the opposition of left parties who were its allies at that time.

Money-back Plans and Endowment Plans might Lose Tax Benefit from Next Fiscal

Budget has proposed to increase the sum assured to at least to ten times of premium paid from current regulations of five times on life insurance policies to enjoy tax benefits. With this move several money back life insurance policies, shorter term endowment plans, limited premium payment life insurance plans and single premium plans will not be able to offer tax benefit from next financial year.

If new conditions in the budget are not met from next month then policyholder will not get tax deduction on the premium as well as income from the policy.

The finance bill has proposed to reduce the threshold of the premium payable to 10% of the actual capital sum assured from 20% of the actual capital sum assured in order to enjoy benefits under section 10(10D) and section 80C of the income tax act. The bill has defined capital sum assured as the minimum amount assured under the policy when the insured event takes place at any time during the term of the policy.

At present provisions section 80C allows premium paid towards life insurance policy to qualify for a tax deduction upto Rs 1 lakh. But if the amount of premium paid in a financial year for a life insurance policy is in excess of 20% of the sum assured, then tax deduction is allowed only for premiums paid for up to 20% of the sum assured.

As per the benefits according to the section 10(10D), death benefit in an insurance policy is tax free, but any other benefit such as the maturity proceeds is tax free if the premium is not above the 20% of the sum assured.
Pure Term plans and whole life plans will remain compliant with new regulations as these plans have cover more than ten times of the premium paid. Problem is with money back plans and endowment plans as most of them are not compliant with this requirement and they will need to be refiled.
At present all regular Unit-Linked Insurance Plan (ULIPs) offers the sum assured of at least 10 times of the premium paid for individuals below 45 years of age. For individuals above 45 years of age sum assured offered is seven times of the premium paid.
These regulations will come in effect from first April 2012 hence; insurers will get only two weeks to transit to new regulations. Therefore, they are demanding some more time to adapt to new regulations.
As per insurers not all people buy insurance for just tax benefit, such persons can buy current products that are available without tax benefits because it will take 3-6 months for insurers to launch products complying with new norms, Firstly they have to file products with IRDA for approval. Insurers will have to change all their systems and they have to even train their agents.

comrehesive motar car insurance

What is Covered?
1. Loss or Damage to your car against Natural Calamities
Fire, explosion, self-ignition or lightning, Earthquake (Fire and Shock) Damage, flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost, landslide, rockslide.

2. Loss or Damage to your car against Man-made Calamities
Burglary, housebreaking or theft, riot, strike, Malicious damage to your car, Accidental damage to your car, terrorist activity, any damage to car in transit by road, rail, inland waterway, lift, elevator or air. Loss of, or damage to, personal property carried in your vehicle, to a limit, Glass replacement (windscreen, sunroof and windows) and Towing charges from the place of accident to the workshop.

3. Personal Accident Cover
Coverage of minimum 2 Lakhs for the individual driver of the vehicle while driving, travelling, mounting or dismounting from the car. Optional personal accident covers also available for co-passengers.

4. Third Party Legal Liability
Protection against legal liability due to accidental damages resulting in the permanent injury or death of a person, and damage caused to the third party property.

What is not Covered?
1. Normal wear and tear, breakdowns and general ageing of the vehicle.
2. Depreciation or any consequential loss.
3. Mechanical / electrical breakdown.
4. Wear and tear of consumables like tyres and tubes unless the vehicle is damaged at the same time.
5. Vehicles including cars being used otherwise than in accordance with limitations as to use.
6. Loss when driving with invalid driving license or under the influence of alcohol.
7. Loss due to war, civil war or nuclear risk etc.
8. Claims arising out of contractual liability.
9. Use of vehicle otherwise than in accordance with 'limitations as to use' (e.g. private car being used as a taxi)

Hit and run motar insurance claime

What is "hit and run motor accident"?
As per Sec 161 of Motor Vehicle Act, “hit and run motor accident" means an accident arising out of the use of a motor vehicle or motor vehicles the identity whereof cannot be ascertained in spite of reasonable efforts for the purpose.

What to do if you got hurt by 'hit and run' motor vehicle?
First, be alert, don’t panic, and remember to get the number plate of the driver who hit you. The plate number is one of the most valuable information for authorities to trace that person.
Second, find witnesses and get their names and contact number.
Third, file a police report immediately, and then contact your insurance company.

When the injured person can claim?
1. It is applicable to only those cases where the person who commits the crime is not traceable. For this a report from the police is must that the person could not be traced.
2. In case the person is traced, the victim or survivor will have to refund the compensation amount.
3. Claimants have to give an undertaking that the amount will be refunded in case they get compensation under any other provisions of the Motor Vehicles Act.
4. Earlier, the rule said that the application for compensation had to be filed within six months from the date of accident or within 12 months, if there were special reasons in case of delay. But now, the rule has been changed, and there is no time limit specified.

Procedure for Claiming Compensation
An application claiming compensation has to be made by the person, who has sustained the injury or by the owner of the property, which suffered damage or by the legal representative of the deceased or by an agent duly authorised by the injured person. The application has to be made before the Claims Tribunal. The claimant has to prove rash and negligent driving on the part of the respondent in order to be entitled for compensation. As soon as information regarding an accident involving death or bodily injury is reported to the police station, the police officer is required to forward such report to the Claims Tribunal within 30 days and the Claims Tribunal considers such report as an application for compensation.

How much claim amount would be paid?
The compensation (solatium~) would be paid as follows:
(a) in respect of the death of any person resulting from a hit and run motor accident, a fixed sum of fifty thousand rupees*;
(b) in respect of grievous hurt to any person resulting from a hit and run motor accident, a fixed sum of twenty-five thousand rupees*;
*As per The Motor Vehicles Amendment Bill 2007
~Solatium Fund Scheme is a scheme introduced in accordance with the provisions of the Motor Vehicle Act to provide compensation to the victims of a Hit and Run motor accident. The Fund has been managed by the IRDA or any other agency specified by the Central Government.

What is covered in 'Third Party Liability' car insurance

Car insurance policies can be divided into two categories on the basis of insurance coverage –
a. Third-party Liability Car Insurance
b. Comprehensive Car Insurance

Who is third party?
As per insurance terminology, the first party is the insured person or the owner of the policy, the second party is the insurance company and the third-party is the injured person, who claims damages against the insured person, or the person(s) whose property the policy-owner damaged. The ‘third party’ should include everyone (other than the contracting parties to the insurance policy), be it a person travelling in another vehicle, one walking on the road or a passenger in the vehicle itself which is the subject matter of insurance policy. Thus, in general, third-party liability insurance covers the damages to other people that are attributable to the policy-owner.

What is Third-party Liability Car Insurance?
Third party cover is the minimum legal insurance requirement (Motor Vehicles Act, 1988). It indemnifies the insured against legal liability arising from both bodily injury and property damage to the third party. It doesn't cover any costs incurred by insured or to insured’s car as the result of an accident. Third party insurance covers following liabilities -
1. Injuries to others (i.e. to the car passengers and other persons not inside the car).
2. Damage to other peoples’ property (e.g. the third party’s car, but not insured’s own vehicle).
3. Uninsured/underinsured motorist coverage helps insured in case the other driver, who caused the accident, has little or no car insurance

Important Features Of Third Party Car Insurance
1. Third party insurance is compulsory for all motor vehicles.
2. In third party insurance the insured person will not have any compensation for injuries but it covers damages to other people, who are injured by the insured.
3. The main beneficiary in third party insurance is the injured third party and the insured is only the beneficiary of the policy. Here the insurance company pays directly to the injured third party.
4. As it is not possible to know in advance the liabilities, in third party policies the premiums do not vary with the value of what is being insured because the insured sum is the legal liability.
5. Third party insurance is almost based on fault done by the insured. You have to claim for damages by providing evidence that the insured person had made fault and is legally responsible for the damages.
6. Third party insurance involves the aid of lawyers to the insured.
Categories:
Car Insurance

Using internet most risky for middle-class kids

LONDON: Children belonging to middle-class families are more likely to be harmed by using internet in comparison to those living in poorer households, a British study has found.

According to the research, they are more prone to being bullied, seeing pornographic images, receiving sexual messages and indulging in risky behaviour such as meeting up with people they have only met online, the Daily Mail reported.

Their parents, however, tend to be ignorant about what their children find on the web, it added.

Middle-class children were at greater risk because they were more likely to know their way round the internet and to have a personal computer in their bedroom, or a smartphone, said the study's author.

Sonia Livingstone, professor of social policy at the London School of Economics, called on parents to talk to their children about their internet use, so that any potential harm could be nipped in the bud.

While surveying over 1,000 children, Livingstone also found over half of the children - 51 percent admitting having neglected homework and ignored family and friends due to internet's excessive use.

Her study also found parents often having no idea of what their child was doing on the internet.

Of the children who told interviewers that they had seen sexual images, 40 percent of their parents claimed being certain that their children had not, and 29 percent said they did not know.

LIC term cover set to get cheaper

MUMBAI: The country's largest insurer, Life Insurance Corporation of India, plansto reduceitsterminsurance rates. Term insurance policies refer to those covers where the insurance company makes a payout only upon the death of the insured.

"We are in the process of reviewing our rates and will do so after this financial year," said D K Mehrotra, LIC chairman. He added that although LIC's rates for term insurance are higher than that of private insurers, the corporation has a much better track record in claim settlement. According to Mehrotra, there is a big increase in the awareness for life insurance protection. Apart from competition, the awareness has been generated because middle-class buyers with loans want to ensure that their liabilities aretaken care of.

At present, a 30-year-old who purchases a 25-year LIC term cover pays Rs 14,600 annually for a cover of Rs 50 lakh. This is much higher than the premium chargedby private life insurance companies which are in some cases up to 40% cheaper. Several companies offer much cheaper cover online. However, LIC officials say that the corporation has a better track record in claim settlements. They also point out that term insurance rates cannot be compared directly because in high value policies the actual premium would depend on medical underwriting and the parameters for "normal" rates vary across insurers.
The rates for term insurance are revised periodically after reviewing changes in lifeexpectancy of theinsured population. As life expectancy has been rising because of medical advances, the cost of cover has been constantly declining and are in some cases a fourth of what they were at the time of opening up of the life industry in 2000. While rates are expected to keep declining until life expectancy rises to 85-the highest level of life expectancy-prospective buyers cannot wait. This isbecause prices risewiththe age of entry.

According to the IRDA's annual report, the claim settlement ratio of LIC was better than thatof the privatelife insurers. Settlement ratio of LIC increased to 97.03% in 2010-11 ascomparedto 89.04% for private life insurers. Similarly, LIC had a low rejection rate of 1% as compared to 8.90% for private insurers. In absolute terms, private life companies rejected 9,966 claims, while LIC had rejected7,384claimsdespitehaving a much larger share of business than private insurers. A senior LIC official said that claims are typically rejected if any material fact which would have impacted the insurer's decision on pricing would have been withheld or mis-represented. In the case of LIC such claims are settled on an ex-gratia basis if the misrepresentation is not related to the cause of death.

Union Budget 2012-13: Life insurance no longer a savings grace

For those whose primary objective is to build a retirement fund, life insurance as a savings instrument will lose its sheen. However, purchasing health insurance will become cheaper as payments for pre-acceptance medical tests will now be eligible for tax breaks.

The finance minister has doubled the minimum cover requirement under a life policy for it to be eligible for tax breaks. All forms of insurance - including life, health, motor and property - will also become more expensive because of the two percentage point increase in service tax.

Budget at ET: Budget 2012 | Union Budget | Live Union Budget Blog | Railway Budget | Budget News | Economic Survey of India

The new limits for tax exemption eligibility under section 80C and 10 (10D) of the Income Tax Act has been revised from the previous sum assured-to-premium multiple of five times to 10 times. This is consistent with the proposal under the Direct Tax Code (DTC) which seeks to have a higher level of insurance under life policies , but at 20 times.

Until now, life insurance was an attractive avenue for accumulating savings for retirement. Now the gains will be vastly curtailed because a big chunk of the premium will go towards life cover."Compared to the DTC, the Budget proposal is a welcome move," said S B Mathur, secretary general of the Life Insurance Council.

An LIC official said those in the higher age group will now find it more expensive to buy a life cover.
According to Bhargav Dasgupta, MD, ICICI Lombard, the tax break of Rs 5,000 for preventive health check-ups will help in bringing a greater focus on preventive health care. General insurers say there's another indirect benefit - health checks will enable early detection of ailments.

"It may also result in product innovation in the health insurance industry," said Shashwat Sharma, partner, KPMG.
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income tax limits for 12-2013

Income                                                          Tax Rate                  ……………..

Up to Rs. 200000                                             Nil         (For woman same)

 From Rs. 200001 to Rs.500000                   10%

 From Rs. 500001 to Rs. 1000000                20%

 Rs. 1000001 and above                                  30%

New Tax for Senior Citizen with the age between 60 years to 80 years

Income                                                          Tax Rate

Up to Rs. 250000                                             Nil

 From Rs. 250001 to Rs.500000                  10%

 From Rs. 500001 to Rs. 1000000               20%

 Rs. 1000001 and above                                 30%

New Income Tax Rate for Very Senior Citizen (80 years and above)……

Income                                                          Tax Rate

Up to Rs. 500000                                             Nil

 From Rs. 500001 to Rs. 1000000               20%

 Rs. 1000001 and above                                  30%

Tax benefit at a glance as per new budget 2012 -2013………………………..

1.       Tax Exemption for interest income (Saving A/C) up to Rs. 10000

2.       Health checkup cost up to Rs. 5000 (with in 80D,15000 Limit)

3.       50% exemption for Rajiv Gandhi Equity Saving Scheme.Rs50000

bad new for investors

Premium has to be 10% of sum assured to avail tax benefits, service tax hiked to 12% In order to enjoy tax benefits under sec 80C and 10(10D), the actual capital sum assured will have to be 10 times the premium. Currently, the actual capital sum assured has to be 5 times the premium. Life insurance companies will have to pay higher service tax in the next fiscal as FM increased it by 2%. Life insurance companies might pass on the increase to policyholders by increasing life and health insurance premiums. However, the Finance Minister has promised once again to move “The Insurance Law (Amendment) Bill, 2008” in this session. The general insurance players feel that the projected higher economic growth is good news for them as it has a direct co-relation with the growth, especially in the manufacturing sector.  KG Krishnamoorthy Rao, CEO and MD, Future Generali said, “The budget provides for increased investments in infrastructure sector and highway development projects. These can lead to generation of insurance premium from these sectors. The minor changes in income tax slabs generates some more disposable income for individuals in that tax bracket, part of this may be channeled towards insurance buying.”

Insurers can designate new agents to service orphan polices: Irda

In a bid to improve customer service in the insurance sector, the insurance regulator is planning to allow new agents to service orphan polices. Orphan policies are those policies where the original agent is not available for servicing, thereby resulting in non-payment of premiums.
The Insurance Regulatory and Development Authority (Irda), in the draft guidelines on servicing orphan policies, has recommended insurance companies have an option to designate another agent for servicing such policies. In such cases, the new agent would be entitled to full commission according to the original policy document.
Also, the policies allotted for services shall not be counted for persistency of the agent.
"Policies in which premium is due and are unpaid even after six months of the due date, will be considered for allotting to new agents. Insurance companies are allowed to allot any of the lapsed and orphan life insurance policies to individual agents whose licence is in force for the purpose of conservation and rendering effective service to the policyholders," Irda said.
Irda has been concerned with the lapse ratio in the Indian life insurance industry. It is much higher in case of orphan policies.
According to Irda data, the lapse ratio for the life insurance industry stood close to 20 per cent, way higher than the expected levels of 10 per cent.
"Termination of agency, quite rampant in the industry, has rendered millions of policies 'orphan'. Orphan policies are prone to neglect, due to the lack of follow-up/servicing support and are known to lapse in large numbers," the report said and pointed out that in the era of multi-channel," Irda had said in its annual report.
Recently, the number of orphan polices has increased, as slowdown in the life insurance industry had taken a toll on individual agents.
According to data collected by Life Insurance Council, around 331,000 agents went out of business during the April-December period, resulting in 34 per cent drop in new premium collection from agency channels. Premiums collected by selling new policies by agents in the same period stood at Rs 31,500 crore, compared with Rs 47,500 crore collected in the same period a year ago. Total number of individual agents as on December 31, 2011 stood at 2.38 million, compared to 2.71 million last year.
In the same period, total premium collected by the life insurance sector, which includes the new business premium and renewal premium, was down three per cent to Rs 1,80,240 crore from Rs 1,86,396 crore. This was largely due to the 17 per cent decline in the first year or new premium collection during the first nine months of the financial year.

Online insurance product offerings being enhanced

Life insurance companies are planning to extend their product offering on online platform for increasing insurance penetration. Insurers have been primarily focusing on online pure protection or term insurance plans. These insurance plans are easy to understand and straightforward for people to buy online.

But, insurers feel that online sales channel can be used to sell other insurance products like Ulips (unit-linked insurance plan) and traditional plans also.

“Online distribution system has not been able to replace traditional form of insurance distribution like agency or broker channels in most developed markets, but vastness of Indian demography may prove to be a huge advantage for online insurance sales,” said Anisha Motwani, director and chief marketing officer of Max New York Life Insurance.

In developed countries like UK and the Netherlands, online insurance sales contribute only around 8-12 per cent, while these sales is less than 1 per cent at present in India.

As per industry experts, online platform has the potential to grow at around 30-40 per cent for next few years. Also, people prefer to buy those products online that do not involve a lot of calculation.

“We were the first ones to launch online term insurance in 2009, after which, the market has evolved a lot. Similarly, there is a huge potential for other online insurance plans as long as they are targeted towards the right customer segment and are kept uncomplicated. We are at present waiting for approval of a health benefit plan which would be on online platform,” said Yateesh Srivastava, chief marketing officer of Aegon Religare Life Insurance.

Traditionally, policyholders rely on known agents to advise them on insurance needs that have changed in recent years with the advent of brokers, corporate agents and bancassurance. “We are very optimistic about the online distribution system. In order to take online distribution to next level and make customers more comfortable, we have also integrated online video conference capability,” said P Nandagopal, MD and CEO of IndiaFirst Life Insurance Company.

LIC faces music for letting policy lapse, asked to pay Rs 60k

LIC and some of its officials have been pulled up by a Delhi consumer forum for "recklessly" misplacing a premium cheque, causing a policy to lapse and then defending their mistake before it. The District Consumer Disputes Redressal Forum directed Life Insurance Corporation of India to pay compensation of Rs 60,000 to policy holder Manoj Kumar for mental pain caused to him and directed the insurance company to revive the policy of Rs one lakh.

"This case not only exemplifies a complete lack of empathy towards its customers at the hand of the officials of the LIC, it also shows a complete break down of supervision by its officers. "We are pained to note that for the lapse of the officers of the LIC, a poor consumer had to fight litigation in this forum, which LIC stoutly defended rather than owning up to its mistakes," the forum presided by Rakesh Kapoor said. Regarding the refusal by the LIC in admitting its mistake, the forum said, "This was not expected of an organisation which boasts of due credibility and serving the largest number of consumers in the country."

Kumar had approached the forum saying he was paying all the premiums of the policy purchased in the name of his minor daughter in May 2008 and the policy was to mature in May 2017. He said when he went to deposit the premium for 2009, he came to know that the policy had lapsed due to non-payment of the last premium after which he approached the LIC and showed them the receipt by which he had paid the premium for 2008. The officials, however, refused to listen to his complaint, he said, adding, even a legal notice of March 19, 2010 did not elicit any favourable response from the LIC.

Source : PTI

LIC is ‘Mr Dependable’ for the Government

Life Insurance Corporation (LIC) of India has come to the Government’s rescue repeatedly in the recent past. It held 4 per cent stake in 34 public sector undertakings (PSUs) in December 2008. This increased to 5.6 per cent stake in 42 PSUs at the end of 2011. An analysis of the shareholding pattern of LIC in companies where it holds over 1 per cent shows that the value of its investments in PSUs amounts to more than Rs 68,000 crore at current prices. This value will increase if the smaller holdings of LIC are also included. We have excluded the holdings of ULIP and mutual fund products of LIC for this analysis. LIC’s role was highlighted in the recent ONGC episode.

The insurance company invested more than Rs 15,000 crore in ONGC this quarter, which includes the shares divested by the Government recently. It is also planning to infuse Rs 7,800 crore into public sector banks in the coming months. The insurance giant is, however, not showing a similar preference for private sector companies. Its stake in private companies during the three-year period ended December 2011 has more or less remained the same at 6 per cent. Playing Atlas The ONGC issue is not the first instance when LIC stepped in to play Atlas to Government. LIC’s stake in companies such as NTPC, NMDC, Shipping Corporation and PFC that made public offers has jumped after the issue. An analysis of NTPC and NMDC shareholding patterns before and after the offer shows that LIC has picked more than half of the offer. In NTPC, the Government divested 5 per cent of its holding.

LIC’s stake in the company jumped to 3.51 per cent from less than one per cent. Similarly, in NMDC, where the Government divested 8.38 per cent of its stake, LIC’s holding surged to 4.97 per cent. In both these issues, institutional participation was low. In other PSU issuances where institutional demand was high such as Oil India, PowerGrid, MOIL, REC and CIL, LIC didn’t figure in the list of institutions holding more than 1 per cent. This underscores the role of LIC in issues where participation is low. Bank capital infusion LIC will now infuse capital into fund-starved public sector banks too. Since the Government is already planning to infuse Rs 20,000 crore into banks this fiscal, there is little scope of further fund infusion from it. LIC has, therefore, stepped in to invest another Rs 7,800 crore to help banks shore up their capital adequacy. Bank of Baroda, Punjab National Bank and Bank of India will be the key beneficiaries of LIC’s capital infusion.

Source : BL Research Bureau

Complete your cover story with a health insurance policy

The change of season among other things is host to several end of season sales and it is common to come across compulsive shoppers at such sales busy looking for the best bargain. Many swear by the deals they have spun, but I have always viewed these with great trepidation.

My worry stems from experience when, because of the hurry, one tends to either buy something that they don't necessarily need or something that doesn't totally match their requirements. Yet, come the last quarter of the financial year, and there is a rush to buy financial products to save taxes; many a times at the expense of not rightly evaluating the need for the right product. There is a lot that taxpayers can gain from aligning their tax planning to their financial plans. Done smartly, it is a win-win situation wherein you not only save taxes, but also achieve your financial goals with ease. A successful financial plan rests on adequate and appropriate insurance covers. While life insurance is addressed by most people even at the expense of being under-insured, health insurance is mostly given a miss.

I have come across several potential customers who question the need for health insurance with the belief that their good health is eternal. They reason that given their good health, the premium outgo on a health policy is a wasteful expense. After all, unlike a life insurance plan that accrues survival benefits; a health plan offers no such tangible advantage if the policyholder does not raise a claim.

Now imagine a situation when a health condition not only depletes your finances when getting treated, it also diminishes your ability to earn. This could potentially drain your savings and lead to a huge financial burden on the family, and it is at times like these that one feels the need to be able to use their life insurance in some way. Therefore, a resource pool to dip into for one's health care needs is an absolute must. In the absence of a strong state-sponsored quality healthcare system in India, healthcare is self-funded, which is one of the reasons why the government provides tax concessions when people buy health insurance.

A little sum provides a peace of mind that one's hard savings and investments are not disturbed to meet healthcare costs. We live in times where healthcare risks are higher due to changing lifestyles and healthcare costs are only rising with the demand for critical care going up. The 15,000 deduction on premiums paid under Section 80D that non-senior citizens can claim or 20,000 that senior citizens can claim are valuable.

However, purchasing health insurance should be driven by the need for it and not to blindly chase tax benefits. There are plans available to suit individual and family health care needs, the premiums for such plans vary. There are policies that also have preventive care considered in the pricing and offer preventive health care through initiatives such as proactive health information, free health check-up opportunities, and dedicated health line. So, it is important that we assess our families' health care need and accordingly look for the coverage provided under than the health insurance policy, rather than be dictated by the premium match tax deduction levels.

Considering the current proposals when the direct tax code comes into effect, health insurance premiums will vie for the same importance as would life insurance premiums and not carry the special treatment that it carries currently. Such a situation should not influence you to value your health insurance lesser than life insurance. After all, you can enjoy life and live to the fullest only when you are healthy and you have the peace of mind this security brings.

LIC pays Rs 1,137.99 crore as dividend to government for 2010-11*

NEW DELHI: Country's largest insurer Life Insurance Corporation of India
(LIC) has paid Rs 1,137.95 Cr to the Government of India as dividend for
2010-11.

The dividend cheque was handed over by LICcurrent-in- charge Chairman D K
Mehrotra to the Finance Minister Pranab Mukherjee yesterday, the
state-owned insurer said in a statement today.

LIC had declared a valuation surplus of Rs 22,752.71 crore for the
financial year ending 2011. This surplus was arrived at, after the annual
actuarial valuation was done and all liabilities were accounted, it said.

The balance amount of Rs 21,614.72 crore would be ploughed back to the
policyholders as bonus, it added.

For the 2010-11, it said, LIC has received a total premium income of Rs
2,03,358 crore as against Rs 1,85,986 crore in the previous showing a
growth rate of 9.34 per cent, it said.

The total life fund of LIC stood at Rs 11,51,200.58 crore as against Rs
9,99,517.59 crore in the previous year. The total assets of the company
rose to Rs 13,17,416 crore from Rs 11,52,057.21 crore in the previous year.

During 2010-11, LIC settled more than 1.89 crore claims for an aggregate
amount of over Rs 57,557 crore. The ratio of claims outstanding at the end
of the year to the total claims payable during the year stood at 1.20 per
cent.

IRDA EXPOSURE ON SERVICING OF ORPHAN POLICIES

http://groups.google.com/group/liafisbschary/browse_thread/thread/75a50b89177e646a#

Insurers lost over Rs 30k crore due to frauds in 2011, says study

NEW DELHI: Indian insurance companies have borne a loss of over Rs 30,000 crore in 2011 due to different kinds of frauds, a study has claimed.

It cited collusion between the employees of insurers and private persons, document falsification and manipulation in citing cause of death to claim insurance benefits, as some of the reasons behind these frauds.
"The losses caused to the insurance sector are Rs 30,401 crore which is roughly 9 per cent of the total estimated size of insurance industry in the year 2011," the report said.

The total premium income of the insurance industry comprising life, non-life and health, is around Rs 3.5 lakh crore, as per the Insurance Regulatory and Development Authority ( IRDA) data.

The study was conducted by a Pune-based company Indiaforensic, which conducts fraud examination, security, risk management and forensic accounting research. It has also helped the country's investigating agencies like CBI in several high profile cases such as the multi-crore Satyam scam.

About 86 per cent of the frauds occurred in the Life Insurance segment while the remaining 14 per cent took place in the General Insurance sector (which includes risk of loss to assets like car, house, accidents, etc), it said.

According to the study, in last five years the frauds in Life Insurance sector had more than doubled (103 per cent) whereas the frauds in the General Insurance sector rose by 70 per cent.

A total of Rs 15,288 crore (Rs 13,148 cr in life insurance and Rs 2,140 cr in general) was the loss borne by the companies in 2007. In 2011, the loss was pegged at Rs 30,441 crore.

"The insurance sector is susceptible to various frauds in the country. There is an urgent need to have strict measures including setting up of a dedicated unit to detect and check frauds in the companies," said anti-fraud and money laundering expert Mayur Joshi, who is founder member of Indiaforensic.

BANK codes for general public CAGR (compounded annual growth rate)

(IFSC) Indian Financial System Code .
(RTGS) It is used for electronic payment applications like Real Time Gross Settlement ,
(NEFT) National Electronic Funds Transfer
(CFMS)Centralised Funds Management System
( MICR) Code: Magnetic Ink Character Recognition as printed on cheque book to facilitate the processing of cheques. /// developed by Reserve Bank of India (RBI). Code has eleven characters "Alpha Numeric" in nature. First four characters represent bank, fifth character is default "0" left for future use and last six characters represent branch.

Insurance firms' tendency to deny claims risks consumer court

Irked by insurance firms' general tendency to deny customers their rightful claims, a Delhi district consumer forum has ordered five insurance companies to pay compensation ranging from Rs 15,000 to 60,000 to five of their customers on separate complaints. "Insurance is becoming a very lucrative business now. On one hand the insurance companies are marketing their products in most aggressive manner, promising to indemnify the insured on the happening or not of the proposed event.

But when it comes to payment of claims set up by the insured, there is a tendency to deprive the insured of the same by repudiating the same on one pretext or the other," the forum said in the opening lines of its judgement dealing with six separate consumer complaints. A Delhi District Consumers Disputes Redressal Forum presided by Rakesh Kapoor directed Reliance General Insurance Co ltd to pay Rs 6.6 lakh to Delhi resident A K Dutt with Rs 6 lakh being the claim amount and Rs 60,000 being the litigation cost and the compensation to the customer for the "mental and physical agony" suffered by him due to denial of his claim by the insurance firm.

Dutt had complained that the company had denied his claim for his stolen car in 2008. On another complaint regarding vehicle insurance, the forum pulled up Oriental Insurance Company Ltd for ignoring a report of its surveyor and instead appointing second surveyor. "Coming to the facts of the case in hand, it has to be noted that Oriental Insurance Company appointed a second surveyor only because, according to it, the report submitted by the first surveyor was on a higher side," it said. "It appears to us that the company had resorted to the appointment of the second surveyor in order to get a report which was tailor made to the liking of its officers," it said while directing the company to pay Rs 37,000 to its customer with Rs 15,000 out of the sum as compensation for "harassment" and litigation cost.

On another complaint relating to health insurance, the forum ordered Reliance General Insurance Co Ltd to pay Rs 35,000 as compensation to one of its customers, while asking the insurance firm to settle his claim of around Rs 22,000. Similarly, in two other cases, the forum directed New India Assurance Co Ltd and the Oriental Insurance Company Ltd to pay Rs 35,000 and Rs 40,000 respectively as compensation to their customers relating to vehicle insurance.

The forum, however, dismissed one of the six complaints, that by a trader alleging non payment of claims for theft in his shop. The complaint was dismissed as it had been filed too late to meet the statutory deadline for filing it. For a theft committed in 2005 in his shop, the trader had moved the consumer court in 2009. The forum while dealing with the six complaints said "courts have on a number of occasions impressed upon the officers of the insurance companies, who deal with the claims, to act in a manner that it serves the purpose of insurance contracts between the parties".

Source : PTI

Urban Indians are not very aware about insurance products

Urban Indians are not very aware about insurance products and their investment planning is not aligned with their current needs, says a survey by private insurer HDFC Life. "Indian urban consumers' current sense of financial freedom is low," the survey said.

HDFC Life in association with ValueNotes, a market intelligence and research firm, today launched its inaugural Life Freedom Index report where over 1,600 respondents were interviewed across 11 Indian cities. "The Life Freedom Index will serve as the primary benchmark for indicating how financial free an Indian urban consumer is in terms of her financial awareness, planning, sufficiency and adequacy of planning," HDFC Life Executive Vice President and Head, Marketing and Direct Channel, Sanjay Tripathy told reporters here.

The Macroeconomic scenario is yet to be positive as household savings seem to have gone down because families had less money to put away in a year of high inflation, he said. "The survey reaffirms that Indian urban consumers have realised the necessity of financial planning. They are already chalking out financial plans and are generally disciplined in adhering to them. However, on the flip side, these plans lack comprehensiveness and need to be realigned with their desired financial goals," ValueNotes Managing Director Arun Jethmalani said.

The survey indicates that while 35 per cent of urban consumers rely on their social network of friends and relatives for financial planning advice, only 27 per cent seek professional help, he said. Given the gaps in financial plans and low awareness levels, it appears that there exists a need for proper professional advice, which will help consumers in ironing out inconsistencies in financial planning and management, he added.

The urban consumers have a long way to go before achieving a complete state of financial freedom. Child education is their primary concern, the sense of financial liberty appears inflated given the inadequacy in their financial planning and awareness levels. But they have realised the necessity of financial planning, according to the survey.

Source : PTI

How fruit and veggies could make you more attractive

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Even a few weeks of eating fruits and vegetables may give your skin a healthy glow and make you look cuter, a new study has suggested.

Scientists at St Andrews University monitored the food consumption of 35 people and clicked their pictures over this period.

Eating an average of 2.9 more portions of fruit and vegetables a day made them look healthier when rated by others at the end of the study, while an extra 3.3 portions enhanced their attractiveness, the Daily Mail reported.

Fruit and vegetables are rich in carotenoids, which guard against cell damage from pollution and UV rays and can prevent age-related disorders like heart disease and cancer.

It was previously known that eating extreme amounts of certain vegetables such as carrots could turn skin orange. However, it was not known that a small increase in these red and yellow pigments in the skin could be perceptible to others - or that it was seen as appealing.

A camera that can gauge close-up changes to the skin`s redness, yellowness and lightness found that these considerably increased in people who increased their intake of fruit and vegetables.

Read about the specific nutrients found in fruits and vegetables

Using light sensors, the researchers revealed that these red and yellow hues were linked with the levels of carotenoids in the skin.

There are hundreds of different types of carotenoids.

But those thought to have the most dramatic effect on the skin are lycopene - which gives tomatoes and red peppers their red colour - and beta-carotene, found in carrots as well as broccoli, squash, and spinach.

Skin colour can also be affected by chemicals called polyphenols, found in apples, blueberries and cherries, which cause blood rush to the skin surface.

`We expected the colour change to be most dramatic in people who ate very few fruit and vegetables to start off with, but it was actually across the board,` said Ross Whitehead, who lead the study.

`A lot of the people were already eating close to the recommended amount.

`But we found even a couple of extra portions could still make a difference to their skin colour,` Whitehead added.

He said the team, who studied white and Asian volunteers, would look at whether this was valid for other races too, and whether it had a smaller or greater effect in older people, as the volunteers were all aged 18 to 25.

The study has been published in the journal PLoS ONE.

NEWS LETTER March 2012

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