IRDA to Introduce Standard Proposal Form for All Life Insurers

To bring in uniformity in information Insurance Regulatory and Development Authority (IRDA) has proposed a standard proposal form for all life insurers. It will be mandatory for all life insurers to adopt the proposals. These guidelines will be implemented from first September 2012.

In its circular IRDA has proposed to mandate revised proposal form for life insurers in respect of individual policies. These regulations are aimed to provide standard proposal form for individual policies in life insurance that has an inbuilt flexibility for seeking additional information that is product-specific or specific to a particular risk category.These regulations are issued in terms of the powers vested upon the IRDA under section 14(B) of IRDA act 1999.
The objective of the regulation is to introduce standard proposal that not only brings uniformity in information sought but also ensures that it takes into consideration all relevant questions that are required to understand the need for a particular product and make the recommendation to the prospect that is based on Suitability in a simple and straightforward manner bringing transparency and thereby protecting policyholder’s interest.
These regulations will require insurers to have in place a process and system to assess the needs and analysis is carried out for each and every proposal received and soundness of the recommendation about a particular product.
As per the draft guidelines an agent or a broker has to make a declaration that a product that he has recommended is suitable to the buyer based on the information submitted by the buyer. A buyer also has to provide an acknowledgement that agent or broker explained the features of the policy and it suits his needs.

According to IRDA’s prescribed format, details of the prospect, need of the prospect and agent’s recommendations are the three mandatory categories in the form. Specialized information category is mandatory but can be modified by the insurer as required.

Probe LIC’s Purchase of ONGC Shares: Parliamentary Panel to IRDA No Comments Posted by Akanksha on April 25th, 2012

Standing Committee on Finance headed by former finance minister Yashwant Sinha, has asked Insurance Regulatory and Development Authority (IRDA) to inquire whether country’s largest insurer Life Insurance Corporation of India (LIC) has breached investment norms and exceeded the limit stipulated by IRDA, while buying Oil and Natural Gas Corporation’s (ONGC) shares during the government’s stake auction.



Committee also said that government is using Public Sector Undertakings (PSUs) as milching cows to bridge the deficit.



Committee also said that, owing to risk factors associated with recent acquisitions of ONGC shares by LIC, 29 crore policyholders of LIC are likely to be adversely affected.



Last quarter, government raised Rs 12,767 crore through auctioning of ONGC shares and LIC has subscribed to a large chunk of the issue. ONGC share sale was subscribed 98.3% and LIC had picked over 84% of the share on offer while remaining was picked by institutional and retail investors.



Following this purchase LIC’s stake in ONGC has gone up to 9.48%. As per IRDA’s investment norms, insurers can’t hold more than 10% stake in any company.



The committee has also expressed its disapproval of the manner of ONGC disinvestment. It said that it was just financial engineering to shift money from one pocket of the exchequer to other.



During FY’12 government managed to raise just Rs 14,000 crore through disinvestment in PSUs as against target of Rs 40,000 crore. In FY’13 government is expecting to raise Rs 30,000 crore through disinvestment in PSUs.



The committee also said that government should formulate a coherent and effective disinvestment policy without diluting the objectives for which CPSEs have been set up.

Akshay insured for R50 cr!

NEW DELHI, April 23 -- After the makers of Rowdy Rathore failed to convince Akshay Kumar to use a body double for risky sequences in Prabhu Deva's stuntladen film, they insured the actor for a record sum, tipped to be R50 crore. Akshay is said to have put his foot down and refused to use professional stunt artists, as it goes against his image of an 'action-hero'.

"Right at the start, when Prabhu Deva narrated the script, Akshay was kicked about the raw action scenes. But everyone was worried about him doing the scenes himself, considering they were a bit dangerous. And since we all know how much Akshay loves action, we thought of insuring him at a heavy premium even before the film started. We knew he'd insist on doing most of the stunts personally, so we're happy that nothing tragic happened during the shoot," says an insider from the movie's unit.

Complete Annual Health Check Up – Yuvraj’s message for You

“Your report says, you have CANCER”… can you just imagine what would have gone under Yuvi’s head when he heard these dreaded words from a doctor? Although treatable, but still the word Cancer, is enough for anyone to imagine the death bed and last rituals. This gives us a clear message that a complete annual health check up should be on your must to do list.

These are unavoidable circumstances, but they have deep impacts on one’s social and professional life. Yuvraj comes from an affluent family, his father being a cricketer himself and Yuvraj himself a youth icon with crores of income from the game and the endorsements. He can even earn from his illness- check out his advertisement for a life insurance company.Message is right but product is wrong… Anyways it fits well with yuvi’s current situation. A person who was man of the series in world cup is facing such a bad phase of his life. What about a common man? Think if you face similar situation at peak of your career… (Read: Financial Planning Lessons from Cricket)

Yuvi can afford to get treated in one of leading hospitals in cancer care and Government and Cricket Board came to his rescue, but can we afford the same? I know some of you can, and few of my smartest friends would have taken a Health Insurance policy & Critical Illness insurance for them self and family to avoid these circumstances. Believe me this write up is not about Health Insurance or any of the illness plans, but this is about the first step before the insurance itself. We all have heard the proverb “a stitch in time, saves nine”. So why don’t we just recollect a few facts, so that we have a lesser chance to come under “Surgeons knife” or before “popping the pills”.
How can you avoid Health Hazards?

You know we can save a lot of money, by following certain health rules. These are not 100% scientific rules but yes they can be very helpful. These rules are:

1) Know your Heredity: these are generic transmissions from parents to kids. There will be days in future when you would be able to change the structure of your biological traits, but for the time being you can just follow these rules. Observe two things: one your appearance like you are plump, athletic, obese etc . Second watch for any disease history, which can be genetically, be transmitted. Major common ones are Diabetes and Hypertension. Once you are done with these two things, just follow what rationality suggests. Of course give up sweets if your family history is “sweety”. If you can’t give up at least curtail the intake. After all we are planning to save some money here and each penny counts!!!

2) Avoid: even if your chromosomes permit, avoid these below listed things:
Junk food. Oily food particularly the deep fried dishes.
Stress. Mismanaging the routine chores.
Undisciplined food and sleeping habits.
Life on couch. Nor using your physic.
Alcohol, Nicotine and other brothers & sisters of this illustrious family.

Simple 5 things but not so simple to follow.

3) Live in a Healthy environment: live with people who lead a healthy life. Get inspired from healthy people. Gain positive energy from them. Instead of watching movie trailers in morning, tune the channel which airs the fitness program. Subscribe a fitness magazine & take action. Watch live sports or matches. Develop friends who are fitness freaks. Do not neglect the fitness topic.

4) Must do: these are again very small things and you will have to spend also on these a bitbut this works in longer run and will cut your medical bills to a large extent. These are:
Exercise regularly: Walk, Jog, Swim, join a Gym or a sport like tennis or badminton. But shake those legs.
Eat on time and eat healthy.
Plan life and your work. Be smart.
Develop a De-stress mechanism. Meditation may help before medication. Spend some time on something, you wish for.
Go for complete health Check up.Complete annual health check up

Just heard – that Yuvraj’s father has advised – the cricketers that they should regularly go for Health Check-ups. Why only cricketers Sir? This should be for everyone. Our Army follows this system. Each of the grounds-men, be it any rank, has to go for a regular health checkup after a fixed interval of time. They are even graded (shape 1, shape 2 etc.). Even after retirement they go for annual health check up. Army men, cricketers are tough guys, as they are surrounded by medicines, injections, pain-killers etc., but we are not. For us doctors are like “devdoots” on a mission. We avoid them till the last moment as we all know, “emergency unit is open for 24 hours”. So why plan for a regular health checkup? Just see around yourself and ask people how many of them go for a regular check-up? People who can afford also do not go for simple reason of fear and laziness. You know Government is planning to add a 10% cess in your income tax, if you do not provide an annual fitness certificate!!! Just a joke!!! For those who believe that they will only go for regular checkup when it is “Mandatory”.
Free Health Check up

Do you know that Health Insurance policies also provide you a free complete health check up at regular intervals? Normally these are given if there is no claim made in certain number of years. Rationally this should not be point for Health Insurance Portability. Check few such offers – they can depend on the policy variant so please read your policy document:
Apollo Munich – Cost of health check up are covered up to 1% of sum insured, subject to a maximum of Rs.5,000/- per insured person and provided only once at the end of a block of every continuous three claim free years.
Iffco Tokyo – Health check up costs are covered once in a block of 4 claim free years.
United India Insurance – Cost of health check up at the end of block of every three years where no claims made during the block.
ICICI Lombard – Free health check-up coupon for any one insured family member, valid for the policy period.

Even the diagnostic labs (Religare, Apollo, SRL etc) also organize free Health Seminars and provide discounts on comprehensive health checkups. Participate as these are good for us, even though it means spending a few bucks.
Health is Wealth

There is a very philosophical relationship between money and Health. I meet lot of clients who say they lose health because they are earning money. A sales person says he skips lunch and adjusts on a Samosa since he is on constant move. A doctor says he works at odd hours to comfort his patient. Normally when I get a mail after 12 AM & if client is from India – I reply with health tips. (Hi Doc are you reading??) Recently I met a PSU bank manager who said that he consume 35-40 cups of tea as water is contaminated in their region and tea is a boiled so he will not have water-borne ailments. Yet on the other side, I also hear from senior people that they did a mistake of not taking care of their health and even though now they have money but they do not enjoy life because of health related issues. (Also Read: HDFC click 2 protect)

But we require both Money and Health, and that is a tradeoff. Very few people have managed both. Health and Critical Insurance policies and other things can take care of financial burden but do feel secure about our health. Hence we need to feel healthy and that can be achieved by following certain rules as mentioned.

Also, a point here that to save medical bills you will have to shell a small amount today. Fruits are luxury and joining yoga will cost you & some time you may get it free in Baba Ramdev’s camps. Annual health check up will be an expense and some of your friends will also discourage to continue for next year. But, believe me it is not a waste of money and it exceeds the money spent when your doctor with a smile says “Excellent Health, you are fit”.

I am not a doctor so take my advice with pinch of salt. I will love to hear your views on annual health check up.

Budget 2012: Waive service tax on health insurance schemes, says ICICI Lombard General Insurance

By Bhargav Dasgupta, MD & CEO, ICICI Lombard General Insurance Company Limited

NEW DELHI: General Insurance penetration in India is still quite low at 0.7% of GDP. We are hopeful that in this budget, the government will announce a few measures that would aid higher adoption of insurance products among retail consumers. In that context, our budget expectations are:

1. Service tax waiver on health insurance schemes:

Out of the total health care spends of Rs 350,000 crore per annum in India, only 3% is being contributed through health insurance. There is a pressing need to increase the safety net of health insurance in India. One measure that could help is withdrawal of service tax on health insurance premiums, thereby leading to a lowering of cost/premium for the consumer. Healthcare services are already exempt from service tax, and this benefit should be extended to health insurance premiums.

2. Service tax exemption on annual premiums less than Rs 1000

Back in 1994, it was decided that there would be no service tax on insurance premiums less than Rs 50. This threshold has not been revised since then. Insurance penetration in rural areas needs to be increased, and it would help significantly if the exemption limit is raised to Rs 1000.


Also see: Budget 2012 | Union Budget | Railway Budget 2012 | Budget News | Economic Survey

3. TDS benefit on health insurance claims

In case of cashless arrangements of health insurance claims, the ultimate beneficiary of such health care services is the individual. Therefore TDS should not be applicable on payments made towards settlement of claims by the insurance company to the hospital on behalf of the insured.

4. Increasing home insurance penetration

There is significant under-penetration of home insurance. The introduction of a separate clause which allows for deduction of home insurance premiums paid will provide an incentive for a higher take-up rate.


5. Tax deduction at source from reinsurance premium payments made to global reinsurers

The Indian insurers are approximately paying annually Rs 2500 crore towards reinsurance premium to global reinsurers. The foreign reinsurance companies neither have any presence or place of business in India nor can act as reinsurers in India under the license from IRDA and hence under the Income Tax Act, such premium remittances to them cannot be taxed in India as the requisite conditions of income accruing and arising in India are not met.

In absence of clear provisions under the Income Tax Act, the authorities may contend to withhold the tax at the maximum marginal rate. As the withholding of tax on reinsurance premium would be contrary to established international practices, the industry will not be able to recover the same from foreign reinsurers. This in turn would impact the profitability of the Indian insurance companies and also affect the policyholders in terms of higher premium pricing. Our submission is that the provisions of section 195 should specifically exclude payments made to non residents on account of reinsurance premium.
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What’s there for small investors in the Rajiv Gandhi Equity Scheme?

Peerless Mutual Fund focuses on smaller tier II and tier III towns. Its CEO and managing director Akshay Gupta tells Babar Zaidi how the proposed Rajiv Gandhi Equity Scheme will add depth to the markets, how difficult it is to convince first-time investors and why the scheme should include mutual funds as well.

What’s there for small investors in the Rajiv Gandhi Equity Scheme?

Paying tax is a big concern for Indians and this new deduction will certainly be a big incentive to enter the market. Right now there are about 3.5 crore equity investors in India, but over 10 crore people earn more than Rs 2 lakh a year. My guess is that many of them will want to avail of this new exemption after they exhaust their Section 80C limit. They may not invest Rs 50,000, maybe Rs 10,000-20,000. Even so, this will bring long-term money into the market. It is a step in the right direction because it will give a fillip to equity investing. Besides, Rs 50,000 a year is a sizeable limit and will add depth to a market that is on FII steroids.

Should mutual funds be included?

Mutual funds should certainly be a part of this because a fund manager can handle the risk much better than a first-time investor in equities. There are indications that the scheme will be confined to the top 100 stocks but I don’t think this is enough of a safeguard for small investors. Satyam Computer was an index-based stock and look what happened. Institutional investors had started exiting Satyam much before the scam broke out. Similarly, they got rid of Unitech much before the writing was on the wall. However, small investors got stuck with these stocks. Mind you, both Satyam and Unitech were in the top 100 stocks by market capitalisation. If a small investor is left holding such scrips and cannot get out before the lock-in period, he will be ruined.

What is the way out?

The government should open the scheme to mutual funds. Let mutual funds manage it and diversify the risk for the investor. Remember, these are first-time investors, who may not understand the risks involved. An investment of Rs 50,000 is a big sum for a person earning Rs 5 lakh a year-it’s more than the money he earns in a month. Mutual funds will allow him to invest systematically through SIPs, which will reduce his risk.

Peerless Mutual Fund focuses on tier II and tier III towns. What has been your experience there?

The concerns of the first-time investor are no different from those of the repeat investor. The risk-reward ratio is the uppermost concern. They compare the returns with those of fixed deposits and real estate. The memory of the Indian investor is very short and his investment strategy is sharply focused on certainty of returns. He will prefer to lock in at 9% assured returns offered on a fixed deposit for five years even though equity investments would yield a better return.

How difficult it is to convince a first-time investor to put money in stocks?

It is an uphill task. You have to show them charts of SIP returns, tell them the India growth story and explain why stocks will do well in the long term. In smaller towns, real estate is the preferred investment choice, followed by gold and fixed deposits. People don’t understand stocks as an asset class, so it is very difficult to convince them to invest in equity mutual funds. In large cities, people are familiar with stocks and the acceptance ratio is far higher.

Are the KYC norms a major hurdle in smaller towns?

They are because a lot of people don’t have the basic documentation in place. Investors in tier II cities have PAN cards but in tier II towns, many don’t have these. They have either not applied or may have applied but the issuance has become an operational hazard.

Have the unified KYC norms been of any help?

They have, but I will be happier if all the regulators come together and have a common KYC platform. I believe this is happening and will ease the investment process for the customer as well as lower the costs for the industry.

Source : ET Bureau







How to change insurer using insurance portability

If you are not satisfied with the services of your existing medical insurance provider, you can move to a different insurer. Health insurance companies often require a person who has been newly insured to undergo a waiting period before allowing pre-existing health conditions to be covered under the policy.

However, when a policy is transferred, the waiting period completed with the existing insurer can also be transferred. If the new insurer has a longer waiting period, the policyholder will need to wait only for the additional time period with the new insurer after the plan is transferred. The continuity in policy will also be given on timebound exclusions. Many health policies exclude certain surgeries for a fixed period, and with portability, continuity would be considered for these conditions also.

Timing

IRDA has specified that the new insurance provider has to be approached at least 45 days prior to expiry date of the policy. You may have to begin the transfer process at least 2-3 months before your existing policy expires.

Process

You have to fill up the Irda prescribed portability form which is available on its website (www.irda.gov.in) as well as the proposal form once you decide to switch insurers.

Supporting documents

- Previous policies - Claim experience - Age proof - Positive declarations, if any (discharge card, investigation reports and clinical condition)

Confirmation

On receiving the application, the new insurance provider shall ask for the required information from your old insurance provider. If the new insurer is satisfied, it shall inform you of its decision in 15 days.

Points to note

- Depending on your new insurance provider, you can also increase your sum insured while switching to it.

- You can go for portability only at the time of renewal and not during the term of the policy.

- Cover sub-limits (limits on hospital room rents) or policy features (maternity coverage) of the new policy may differ from that of your old insurer as this is not subject to portability.

( courtesy : Centre for Investment Education and Learning ( CIEL)

WHY PAY PREMIUMS THROUGH ECS?


the pention you can eaRn

Choosing the right annuity structure

Annuities refer to the stream of income an insurer pays at regular intervals until your death or the end of the tenure you may have opted for. The corpus at the end of the accumulation phase will be paid out in two parts -one-third as a lump sum and the balance being converted into annuities. You will need to buy annuities using the amount accumulated by your pension plan or any lump sum. The annuity option you choose will depend on your requirements and expectations from the plan. This will be applicable primarily to those investors who may have built the corpus through pension plans until January this year and others with a fund pool.

As mentioned earlier, those buying pension plans henceforth will have to settle for the annuities offered by their insurer. Within the basket of annuity plans offered by your insurer, though, you still have to use your discretion. This will be applicable to everyone looking to buy annuities, irrespective of the date of purchase. "While zeroing in on the right option, you need to ponder upon three questions-what kind of income you would need, whether your annuity requirement would go up or remain the same throughout your lifetime and whether you would like to redirect the proceeds to your spouse upon your death," says Pujari. Adds Kapoor: "While buying annuities, customers should consider the expected rate of return (annuity rate) along with the charges, the period of annuity desired (whether for life or for a fixed period), flexibility in joint ownership and the payout."

Know your annuity

After you have evaluated your requirements, you can choose an annuity option that suits your needs best. Broadly, annuity plans are categorised into five segments (see The pension you can earn), though the range of options could vary depending on the insurer. The pension you can earn

Here’s a look at how much you will get each month depending on the investment.
Annuity payable for life

You will be paid a fixed annuity at regular intervals throughout your life. The insurer will stop paying pension after your demise. This is why annuities are suitable for those who do not have any obligation after death. This option offers the highest amount of pension for an individual compared to any other option available.

Annuity payable for life with a guaranteed period

Here, annuity is paid for a certain number of years, say, the chosen term of 10 years, and thereafter as long as the annuitant is alive. The shorter the guarantee period, the higher is the pension. The annuity stops upon either the death of the annuitant or completion of the guaranteed period, whichever is later. This is a simpler tool to ensure income for the family for a stipulated period of time. For example, you retire at a time when you are still the sole earning member in the family, but expect your children to start earning after five years. In such a case, you could consider an annuity that is guaranteed for five years.

Life annuity with return of corpus

This option works for those who want to leave a legacy for their nominees. Here, the annuitant enjoys the pension till he dies. After his demise, the purchase price of the annuity (that is, the premium paid by the buyer of the annuity) is handed over to the nominee. This is a popular option as both the annuitant and the nominee stand to benefit. Some new variants also offer to return the purchase price in instalments.

Life annuity increasing at a fixed rate

Under this option, the annuity amount payable each year increases at a certain rate, say 3-5%. "While this rate is not linked to the actual inflation rate, the rationale is that the increased amount would take care of the rise in expenses to an extent," says Pujari.

Joint life and last survivor annuity

As the name denotes, the annuitant is entitled to receive the pension throughout his lifetime. If the spouse survives the annuitant, the former is also entitled for the pension, ensuring ’lifestyle maintenance’ of the spouse. The buyer can further choose the quantum of pension (50% or 100% of the annuity) payable to the spouse.

Annuity versus other investments

Though there are various advantages of investing in annuities, you should refrain from putting all your eggs in the annuity basket. "Income from annuities is taxable. Therefore, while buying one, you should ensure that your annual income from an annuity is within the no-tax limit," says Lovaii Navlakhi, managing director and chief financial planner, International Money Matters. You can also consider other tax efficient avenues such as short-term debt mutual funds or tax-free bonds. "Annuity income is fixed, and if the interest rates move up, you may not get to participate in it. This makes it important to ensure that your portfolio gets some exposure to instruments that are liquid," adds Navlakhi. In other words, you would be in a secure position if you have allocated your savings among a mix of products that complement each other.

IRDA Seeking Review of New Tax Norms No Comments Posted by Akanksha on April 2nd, 2012

In order to keep insurance affordable for middle-aged and older individuals Insurance Regulatory and Development Authority (IRDA) is seeking review of two major decisions announced in the Union budget.



Premium-to-sum assured: First decision of which IRDA is seeking review is of premium-to-sum assured. Budget has proposed that an individual can avail tax benefit on insurance only if sum assured is at least ten times the annual premium paid. At present individual can avail tax rebate under section 80C of Income Tax Act if sum assured is at least five times the annual premium paid, up to Rs 1 lakh.



IRDA has expressed concern that if proposed rules will be implemented in current form then policies for middle-aged and older individuals will be deprived of tax benefits. Moreover, at the time of maturity too, they will be taxed.



As per IRDA, due to new rules policyholder’s especially those above the age of 40 years will be doubly taxed. This may deter the sales and growth of the industry.



IRDA also said that there is a flaw in the finance bill regarding linking tax benefits to certain categories of life insurance policies.



IRDA is demanding that government should allow it to decide on matters related to sum assured and premiums.



New rules will discourage middle-aged and older individuals from buying life insurance policies, as they will become expensive. If middle-aged and older individuals have to avail the tax benefit, then sum assured will have to be increased without increasing the annual premium. And if that is done, then such policies will no longer conform to the mortality rates. This liability mismatch could cause serious systemic risk to the industry. As risk cover component for a 30-year-old and 45-year-old policyholder is different for same sum assured.



IRDA is asking that there should be some leeway for designing products for middle-aged and older individuals. If the sum assured is ten times the premium for younger customers then it should be at least seven-eight times for policyholders above the age of 45, or else sum assured has to be increased and which will be risky.



However, industry’s concern is not for term plans as sum assured under such covers is always more than ten times the annual premium paid.



MAT: Second budgetary proposal that IRDA is opposing is of levying Minimum Alternative Tax (MAT) on all companies including insurance firms. At present MAT is not levied on the business of insurers.



At present, all Indian companies, except insurers, pay 30% as the normal rate of income tax and education cess of 2% and secondary and higher education cess of 1% on the tax payable, giving an effective rate of 30.9%.



If profit exceeds Rs 1 crore, a surcharge of 10% is applied on the tax payable at the normal rate with education cesses, translating into an effective rate of 33.22%.



MAT is applied to a company whose tax liability is less than 18% of its book profit. The tax is calculated initially at 18% of the book profit, and with education cesses effective rate translates into 18.54%. If book profit exceeds Rs 1 crore, the tax rate is 19.9305%.



At present, insurers pay normal tax of 12.5% but they don’t need to pay MAT.



IRDA is demanding that MAT might not be removed completely but it should be levied on proportionate basis. If other companies pay MAT of 18% on a normal tax of 30% then insurers should be allowed to pay 7.7% on 12.5% normal tax.



MAT of 18% will be unfavorable for both insurance companies and policyholders. As it will increase premium for policyholders and on the other hand it will adversely effect the profitability and finances of insurers and this will be not beneficial in the scenario when insurers needs 10-12 years to break even.

DK Mehrotra Acting Chairman, LIC interviue with et

In normal times the Rs 12 lakh-crore Life Insurance Corporation of India, the country's largest financial institution , supports nearly 40% of government borrowing. LIC was in the news recently for bailing out the government's disinvestment programme and bearing part of the government's burden of capitalizing banks. The regulatory environment, meanwhile , has thrown up new challenges for the life industry. In an interview with TOI's Mayur Shetty, LIC's acting chairman D K Mehrotra speaks on how the corporation is responding to these changes.

How have the new guidelines on charges, agency and pension plans impacted LIC?

The changes in the charge structure have affected us only marginally as our charges were already low. However, the withdrawal of existing plans and the time lag in approval of new plans led to a dislocation of the whole marketing process as, besides new products, fresh training had to be given to the field force and new marketing strategies had to be devised . The minimum premium under Ulip policies had also to be substantially increased - from Rs 5,000 to five figures - to ensure viability and this has shrunk the Ulip market. The increase in lockin period has also discouraged the customers. Similarly, the new regulations on pension has led to withdrawal of all pension plans barring LIC's immediate annuity plan, Jeevan Akshay VI.

The change in agency regulations has led to accelerated exits and the insistence on 100% online exam - resulting in low pass rate, especially in deep rural areas - has not helped the matter. However, having been in the industry for more than half a century, we hope to weather this storm too. It has become important to clearly define annuity & pension as a common man is not clear about the difference between the two. There should be more thrust on pension due to increased longevity, high cost of medical treatment and shifting to nuclear family structure.

Has the shift away from Ulips hit LIC's ability to tap opportunities in equities?

The shift to traditional plans has been a conscious decision and has not impacted our ability to tap opportunities in the equity market. All investment decisions have been taken keeping the customer's interest at the fore, and if opportunities favor better returns to the customer, we would be back in equity markets in full swing. Witnessing the high volatility in the capital market , retail investors have refrained from going in for Ulips.

There have been reports that LIC is acting as a proxy for the government in recapitalizing banks...

As already mentioned, all investments are done with the focus on maximizing mobilization of people's savings. In the process, the government or banks may have benefited even as we strive to deploy funds to the best advantage of the investors as well as the community as a whole, keeping in view national priorities and obligations of attractive return. LIC is not a day trader and always goes into the market with a long-term perspective . Our decisions are always based upon proper diligence.

LIC continues to hit the 10% ceiling in more companies. Has there been any special dispensation from IRDA?

If you look at the size of our total investment portfolio of Rs 12 lakh crore, there is a limitation in terms of the number of companies that we can invest in. But even in cases where the investment has exceeded 10% of the company's capital, there is no concentration of risk for LIC because that investment is only a fraction of our portfolio.

What is your view on IRDA proposal that banks have zone-wise distribution pact with life insurers?

Prima facie, the idea does not seem to be very practical or customer friendly. The banks and LIC have a pan-India presence and zone-wise arrangements may only lead to duplicity of efforts and resources, which is a waste. We are, however , prepared for any distribution arrangements proposed by IRDA. This step may cause inconvenience to a customer , particularly those employed in transferable jobs.

The Direct Taxes Code proposes an EET (tax exempt at investment - tax exempt at accumulation - taxed at maturity) regime for life insurance policies?

Life Insurance is a long-term contract and EET would only act as a deterrent. The proposed exemption of Rs 50,000 is inclusive of tuition fees. The rise in educational expenses has been pretty steep and once the customer fulfils the educational needs of his children, there is nothing left as exemption for the insurance taken. We would advocate a separate exemption of up to Rs 1 lakh for insurance needs, exclusively for life insurance, health insurance and pension.

What has been LIC's international strategy after the global financial crisis?

Though we want to mark our footprint in some more territories , the regulatory compliance , being time consuming, constraints our entry. Nevertheless , focus is to increase the contribution of the foreign operations into our kitty.

LIC's credit card business has been in the offing for a long time...

We have now tied up with Axis Bank and have a fruitful partnership with them. The ultimate objective is to provide value-added credit card services to customers and employees of LIC, its subsidiaries and group companies. We wanted to increase the customer comfort and credit card was seen as a payment solution for them.

LIC has started selling products directly? What kind of direct distribution set-up do you envisage?

Direct marketing is one of our emerging distribution channels and is doing exceedingly well. This channel caters to customers who are tech savvy and prefer to deal with us online . We hope to sell policies online very shortly. We also have the direct service executives who provide the physical service to customers incase they require partial services like submission of the signed proposal form to the office.

ICICI pru paid 7.15 lakhs to policy holder

Financial Express Thursday, Mar 29, 2012 at 1558 hrs IST
ICICI Pru to pay policy-holder Rs 7.15L

New Delhi: ICICI Prudential has been directed by a consumer forum here to pay Rs 7.15 lakh to one of its insurance policy holders for not informing him that his cheque for second year's premium had been dishonoured and not giving him the opportunity to renew his life-time pension scheme.

The District Consumer Disputes Redressal Forum held that the ICICI Prudential Life Insurance Co Ltd ignored the principle of "natural justice" as it was duty bound to inform the complainant (Ashok Kureel) about bouncing of his cheque.

"The conduct of insurance company was not in accordance with natural justice. It should have informed the complainant about the dishonour of the cheque and he should have been called upon to make the payment for renewal of the original policy," the forum said.

South Delhi resident, Kureel had alleged in his plea that the ICICI Prudential did not only fail to inform him about the dishonour of cheque, but also converted his life-time pension scheme to 'paid-up' on the ground that he defaulted in payment of second year's premium.

He said that after receiving the cheque for second premium in November 2008, the company had issued him a renewal receipt and a consolidated premium certificate in January 2009 for the period 2008-09.

In its defence, the company said it had duly informed Kureel to renew his policy despite which he failed to do so, and as premium was not paid by the due date, the life cover and rider benefit, if any, available to Kureel ceased as per the terms and conditions of the scheme.

The forum observed "the cheque was received by the company in November 2008 and till February 2009 it remained silent and did not inform the complainant".

It directed the company to return Rs 7,00,000, the first premium of the policy, along with Rs 10,000 compensation for causing harassment and Rs 5,000 as litigation charges.

Trains without engines

Economic Times 28 Mar, 2012, 06.10AM IST Shilpy Sinha, Reena Zachariah & Maulik VyasShilpy Sinha, Reena Zachariah & Maulik Vyas, ET Bureau
Missing CEO: Policy paralysis hurting LIC, SAT, UTI, GIC, IRDA & NIA?

Imagine a train without an engine. That's the state of some of the key state-run financial institutions that are without full-time chief executives, including two where millions of Indians invest their hard-earned money.

The state of the government, blamed for policy paralysis, is affecting these vital institutions built over decades, which serve public interest. Institutions such as Life Insurance Corporation and UTI are trusted household names and dithering over key appointments in such organisations could send wrong signals apart from affecting their operations.

Appointments in the government are an elaborate process, but it is supposed to start on time and ensure that decision-making does not suffer. The absence of chief executives, in some cases full-time ones, is hurting. This, at a time when the economy is getting strained, forcing companies to come up with their own solutions. Most of the institutions are stable at this point of time.

But leaving these institutions headless may result in certain important decisions getting postponed, which can cause damage in the long term. Indecision can lead to these companies ceding ground to nimble private sector rivals, who are out to capitalise on such opportunities.

These are not institutions where investors are looking for quarterly earnings that could keep the management on its toes, but closed ones whose financials are not even known, or scrutinised.

Absence of key personnel at the regulator may not look as problematic as it is with corporations, but they are vital for the markets just as much, says ET.

Life Insurance Corporation

Wanted: Chairman
Vacant for: 11 months

Foundation year: 1956
Last Chairman: TS Vijayan

New business income for the country's biggest life insurer dropped 20% in the financial year so far when the industry has slid 14%

India's biggest institutional investor and the custodian of 30 crore investors' savings has been headless for more than nine months. Life Insurance Corporation, the nation's largest insurance company, manages funds worth more than Rs 12 lakh crore and is also at the receiving end of corporate governance issues when it bailed out the government by buying a huge chunk of Oil & Natural Gas Corp share sale.

The government is yet to appoint a full-time chairman after TS Vijayan superannuated in May 2011 amid its unit LIC Housing Finance charged with corruption. DK Mehrotra was elevated to the post of acting chairman, but his powers are limited when it comes to decision-making. His contract, as an acting chairman, has been renewed three times, but the suspense on whether he would be made permanent or not still lingers.

A file nominating him as chairman is somewhere in the pile of such files doing the rounds in New Delhi. To add to the confusion, the government deputed Rakesh Singh, additional secretary, finance ministry, to head the corporation. Uncertainty is telling on its business when new income up to February 2012 dipped 20% to Rs 24,835 crore, worse than the industry's 14% slide.

SAT

Wanted : Presiding Officer
Vacant for: 04 months

Foundation year: 1995
Last Presiding Officer: Justice Sodhi

In October 2011, SAT upheld the Sebi order against Sahara to refund all money to investors; group's two entities have collected through OFCD schemes

The Securities Appel late Tribunal, or SAT, a quasijudicial authority that rules on appeals against the capital market regulator Securities and Exchange Board of India's orders, is awaiting a new presiding officer since last December.

This is an institution that shook the investing community with orders in cases such as the Sahara Group that was ordered to refund Rs 17,400 crore. Justice Nauvdip Kumar Sodhi's six-year term got over in December 2011. During his tenure, Justice Sodhi had passed orders including the one against the kingpin of the stock market scandal in 2001, Ketan Parekh and his associates.

SAT also ruled in cases including former Satyam Computer's promoters and auditors PwC. Unlike other institutions, decision-making has not come to a halt since two other officers have been empowered to decide on matters that are pending. But the catch is that they can't take up new cases till a presiding officer arrives.

Some of the pending cases include International Paper's acquisition of additional stake in AP Paper Mills, Khandwala Securities' case. The authority is without a presiding officer after a long time. For a brief time in 2002, it went without a head.


UTI

Wanted: CMD
Vacant for: 14 months

Foundation year: 2003
Last CMD: UK Sinha

The state-owned asset management company has not been able to launch a fund in the past one year UTI manages Rs 58,000 cr of investor money

UTI Asset Management was created not to repeat the many troubles it faced in the first four decades in its previous avatar as Unit Trust of India.

But it is facing different kinds of issues now. Thanks to public lobbying, the asset management company has been without a fulltime chairman for more than a year, and mind you it manages Rs 58,000 crore of investor money. One of the fallouts has been that it has lost its ranking in the industry to become the fifth-largest by fund-size.

UTI last year witnessed one of the unseen sights in the asset management industry - labour strife - with those managing with temporary powers being accused of bias, prejudice and authoritarianism. The fund house was unable to launch any new scheme last year since rules didn't allow it to, but was later granted a relaxation by Sebi as it had all the processes in place.

The state-owned shareholders of UTI MF such as Life Insurance Corporation, State Bank of India, Punjab National Bank and Bank of Baroda and the US-based T Rowe Price are at loggerheads on who should succeed Sinha.

While state companies back the one favoured by the government, Jitesh Khosla, a civil servant, T Rowe wants a professional. In January, Imtaiyazur Rahman, an acting chief financial officer and company secretary, was made an interim chief executive officer. What signal does it send to investors?

GIC

Wanted: CMD
Vacant for: 03 months

Foundation year: 1972
Last Chairman: Yogesh Lohiya

General Insurance Corp has seen claims of Rs 1,500 crore in 2011-12 due to natural catastrophes that struck Japan, Thailand & Australia

General Insurance Corporation, the sole re-insurer in the country, cannot formulate policies, or take decisions, other than clearing the daily backlog of files, thanks to the fact that it doesn't have a chairman after Yogesh Lohiya retired in December. In January, the government appointed AK Roy as the officiating chairman.

The process of appointing a CMD started well before the post got vacant, but the final appointment is yet to happen as the government is entangled in a maze of issues. Many speculate that Roy would be heading the corporation, but the fact is that since it is not yet in writing, his hands are tied.

GIC has seen claims of over Rs 1,500 crore this financial year, due to a number of natural catastrophes, including the earthquake in Japan, f loods in Thailand and Australia. This is the biggest claim GIC has seen since it took up the role of re-insurance here.

A large part of the claim, arising out of the international operations, may force the reinsurer to re-look its strategy for the domestic market rather than expand outside. Despite the board taking key decisions, a CMD needs to have the power to implement them, which is yet to come.


IRDA

Wanted: Member Actuary
Vacant for : 11 months

Wanted: Member Life
Vacant for: 04 months

Foundation year: 2000
Last Member-Actuary: R Kannan
Last Member-Life: G Prabhakara

How about a police station without enough policemen, or a healthcare centre without doctors or nurses? That probably seems to be the case with the insurance regulator, Insurance Regulatory and Development Authority.

A member on the board to look after actuary services is not around since R Kannan retired in May last - the result is that many products are pending with the regulator. The qualifications for the post were relaxed after the first advertisement failed to attract any application.

Though the government has short-listed two for the post - SK Roy Choudhury and K Sahay - it is yet to give a final go ahead. Another post of Member Life is unoccupied after G Prabhakara's exit in December 2011.

Although Meenakumari J, joint director, has been given additional charge of actuary, there are limitations on what a person can accomplish, or be eager to do without total responsibility for the work.

There are not many takers for these posts because of a gulf between the financial capital of Mumbai and Irda headquarters at Hyderabad. Yet another gulf is the pay. Can the government match expectations?

New India Assurance

Wanted: Chairman
Vacant for : 08 months

Foundation year: 1919
Last Chairman: M Ramadoss

The largest general insurer in the country, New India Assurance, posted a loss of Rs 421 crore in its over 90 years of existence

The st ate of New India Assurance is hardly assuring these days as the state-run company plunged into losses for the first time in nine decades and remains headless after its chairman was ousted on corruption charges. If this is the state of the largest non-life insurer, it is fertile ground for rivals, but not for the firm.

The delay in appointing a full-time chairman here is because the CBI is still probing M Ramadoss for alleged irregularities in selling insurance cover. Ramadoss is accused of misusing his office when he was the chairman of Oriental Insurance Company.

The company provided credit insurance cover to Paramount Airways at unviable rates. Unless, charges against him are proved or denied, the company may not get a full-time chairman anytime soon. His term gets over in December 2013. The delay in coming to a conclusion on whether Ramadoss committed the crime or not may cost the company dear.

This is at a time when the rivals are getting active with enough funds. Meanwhile, AR Sekar has been made the officiating chairman. Also, the insurer has been asked to explain losses of Rs 421 crore.

livemint.com Wed Mar 28, 2012, 12.09AM IST Anirudh LaskarShilpy Sinha, Reena Zachariah & Maulik Vyas

LIC allowed to buy over 10% in listed firms

Govt also allows insurer to pick up as much stake as necessary to recapitalize state-run banks

Mumbai: India’s insurance regulator has allowed the country’s biggest insurer, Life Insurance Corporation of India (LIC), to exceed the cap of 10% that insurance firms can own in listed companies in a move that clearly demonstrates the Insurance Regulatory and Development Authority’s (Irda’s) approval of the government’s use of the insurer as the investor of last resort.

In recent months, the government has used LIC to recapitalize state-owned banks and bail out a share sale of Oil and Natural Gas Corp. Ltd (ONGC), a state-owned firm which it was partly exiting.

Two senior LIC officials confirmed the move by Irda. The officials didn’t want to be named because the regulator has only communicated the decision verbally to the state-owned insurer and is yet to send a formal note.

Insurance regulations currently restrict insurers from buying a stake of more than 10% in listed firms. In infrastructure companies, their holding in the form of both debt and equity is allowed to go up to 20%.

“We are looking at a number of changes in the existing regulations, including investment,” Irda chairman J. Hari Narayan said. “Six committees are working to suggest the changes. The revisions will be subject to approval of the proposed insurance Bill. If we allow LIC to invest more than 10% (in listed companies), we will also allow other life insurers (to do that).”

Giving LIC leeway to exceed the 10% investment limit may provide a boost to the equity markets and facilitate the government’s divestment plan. The government aims to raise Rs. 30,000 crore through sales of shares in public sector companies in 2012-13. It has been able to raise only around Rs. 14,000 crore against a target of Rs. 40,000 crore this fiscal.

LIC bought a 4.4% stake this month in ONGC, the chunk of a 5% stake sold by the government through an auction in which the insurer emerged as virtually the sole buyer. Last month, LIC agreed to pick up a 5% stake in public sector banks, including Punjab National Bank, Central Bank of India and Indian Overseas Bank, for around Rs. 3,700 crore, helping meet the growing capital requirements of the lenders in which the government is the majority shareholder, Mint reported on 6 March. After the preferential allotment, LIC’s stakes in most of these banks may cross 10%, according to information on BSE, breaching Irda’s investment guidelines, that report said. An Irda official said at that time that the regulator would scrutinize LIC’s “final shareholding pattern” before taking a decision.

The government drew criticism for drafting LIC to rescue the ONGC share sale, although it maintained that the purchase was a commercial decision by the insurer, even though comments by LIC officials indicate a worrying absence of walls between the government and the insurer.

“LIC itself is owned by the government. Our money is the government’s money,” said one of the two LIC officials cited above. “All funds are guarded by a sovereign guarantee. So it is up to the government on how it will utilize the corporation’s money.”

Investments by LIC have always been a contentious issue as the insurer continues to hold over 10% in at least 41 listed firms, although most of these holdings have been accumulated over several years.

LIC increased its stake in seven firms between December 2010 and December 2011.

“Earlier, the regulator was allowing us to pick up more than 10% on a case-to-case basis. Now we have been informally allowed by the regulator to invest more than 10% in other sectors as well, apart from infrastructure. We are expecting a formal letter,” added the official.

Several analysts have predicted a correction in Indian equity markets in the coming days over concerns about the government’s inability to push economic reforms, political uncertainty, a depreciating rupee, the high fiscal deficit and slowing economic growth.

After record inflows from foreign institutional investors (FIIs) in the first quarter of the calendar year, several legal experts expect the trend to reverse due to tax implications on foreign investments of the general anti-avoidance rules that, on paper, are meant to help the revenue authority crack down on transactions seeking to circumvent tax laws but, in reality, blur the lines between tax avoidance and tax evasion.

On the back of strong foreign inflows, Indian markets are trading at least 12% up this year after falling 24.6% in 2011.

Historically, whenever FIIs have pulled out from Indian stocks, domestic insurers, especially LIC, have played a critical role in supporting the equity markets.

LIC’s investment in Indian stocks during the current fiscal is estimated at around RS 40,000 crore. The corporation has assets of at least Rs. 12 trillion. During the fiscal, LIC has invested at least Rs. 1 trillion across securities.

In another significant development, the government has also allowed the state-owned insurer to pick up as much of a stake as is required to recapitalize state-run banks that are required to comply with the new international capital norms.

“We have been told by the government to subscribe to the preferential equity shares of state-run banks in order to help them meet the capital adequacy norms,” the second LIC official said.

“We will buy their stocks as long as required to recapitalize them. In some of the banks, we have already decided to pick up an additional 5%. If required, we will buy more. But while selling these holdings in future, we’ll not offload at one go as it may impact the stock and the market,” he added.

The finance ministry has announced a Rs. 15,880 crore capitalization package for public sector banks in fiscal 2013. Under law, the government’s holding cannot fall below 51% in any public sector bank.

Given the state of its finances, it could be difficult for the government to meet its capital commitments. In such a scenario, allowing LIC to buy stakes in state-run banks will ensure that these banks do not suffer from lack of sufficient capital.

According to a Mint analysis, 24 state-run banks have a government holding of much more than 51% as on 31 December 2011.

anirudh.l@livemint.com

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Vijaya Bank gets shareholders' nod to raise Rs 1.47 bln via pref allotment to LIC

Thu, March 29, 2012 | 12 PM IST

New Delhi: Indian state-run lender Vijaya Bank has received shareholders' approval to raise Rs 1.47 billion through preferential allotment of equity shares to the country's largest life insurer Life Insurance Corp of India (LIC).

Accordingly, the bank will issue 22.87 million equity shares to LIC at an issue price of Rs 64.27 per share, Vijaya Bank said in a statement filed with the stock exchanges.

Other public sector lenders like State Bank of India, Punjab National Bank, Bank of Baroda, Indian Overseas and Union Bank of India have also got approval from their respective shareholders to raise funds via preferential issue of equity shares.

Shares of Vijaya Bank Thursday were trading at Rs 56.65 on the Bombay Stock Exchange (BSE) at 11:10 am, down 1.99% from the previous close.

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Punjab National Bank raises Rs 15.89 bln via pref share issue to LIC

Thu, March 29, 2012 | 4:28 PM IST

New Delhi: India's second largest state-run lender Punjab National Bank has raised over Rs 15.89 billion via preferential allotment of equity shares to the country's largest life insurer Life Insurance Corp of India (LIC).

Accordingly, the bank issued 15.84 million shares to LIC at Rs 1,003.69 apiece, Punjab National Bank said in a statement filed with the stock exchanges earlier Wednesday.

The bank is also expected to raise another Rs 12.75 billion from the Government of India through a similar route, for which it has already got the shareholders' nod.

Shares of Punjab National Bank Thursday were trading at Rs 916.70 on the Bombay Stock Exchange in late afternoon session, up 0.41% from the previous close.

Other state-run lenders like State Bank of India, Punjab National Bank, Bank of Baroda and Union Bank of India have also received approval from their respective shareholders to raise capital via preferential allotment of equity shares.

The government is expected to infuse a total of Rs 150-160 billion into select state-run banks in the current financial year 2011-12 to shore up their tier-I capital adequacy ratio to 8%.

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Syndicate Bank raises Rs 3.27 bln via pref share issue to LIC

Thu, March 29, 2012 | 3:43 PM IST

New Delhi: Indian state-run lender Syndicate Bank Thursday said it has raised over Rs 3.27 billion via preferential allotment of equity shares to the country's largest life insurer Life Insurance Corp of India (LIC).

Accordingly, the bank issued 28.66 million shares to LIC at an issue price of Rs 114.15 apiece, Syndicate Bank said in a statement filed with the stock exchanges.

The bank is also expected to raise another Rs 5.39 billion from the Government of India via a similar route, for which it has already got the shareholders' nod.

Shares of Syndicate Bank Thursday were trading at Rs 105.25 on the Bombay Stock Exchange in late afternoon session, down 1.45% from the previous close.

Other state-run lenders like State Bank of India, Punjab National Bank, Bank of Baroda and Union Bank of India have also received approval from their respective shareholders to raise capital via preferential allotment of equity shares.

The government is expected to infuse a total of Rs 150-160 billion into select state-run banks in the current financial year 2011-12 to shore up their tier-I capital adequacy ratio to 8%.

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The Indian Express New Delhi, Mon Mar 26 2012, 21:45 hrs

'No proposal to shift to paperless insurance model'

Insurance regulator IRDA is not considering any proposal to shift the sector to a paperless model, but customers can opt for e-insurance.



"Insurance Regulatory and Development Authority (IRDA) has reported that there is no proposal to shift the insurance sector to a paperless model," Minister of State for Finance, Namo Narain Meena said in written reply to Lok Sabha on Friday.

He further said, "The insurance companies could continue to issue paper insurance policies. However, where an insurer issues e-insurance policies, the company shall do so at the option of the policyholder by utilising the services of an insurance repository licensed by the Authority."



"The insurers issue the electronic policies only at the option of the policyholders thus the paperless model is unlikely to create inconvenience to the illiterate and rural population of remote villages," the Minister added.

It is also clarified that all insurance policies in electronic form shall be treated as valid insurance contracts.

According to the information provided by IRDA to the government, there are five entities which have been granted in-principle approval to act as insurance repositories to hold insurance policies in electronic form on behalf of policy holders.



These entities are NSDL Database Management Limited; CDSL Ventures Limited; Stockholding Corporation of India Limited; Karvy Consultants limited; and Repository Services Limited.

It is explained that the objective of an insurance repository is to provide policyholders with a facility to keep insurance policies in electronic form and undertake changes, modifications and revisions in the insurance policy.

These are to be done with speed and accuracy in order to bring efficiency, transparency and cost reduction in the issuance and maintenance of insurance policies.