Insurers say GSV norms will kill traditional plans

Life insurers have started voicing their concern on the guaranteed surrender value (GSV) norms proposed by the Insurance Regulatory and Development Authority (Irda) for traditional plans. 

Surrender value is what the policyholder gets if he chooses to terminate the policy or stops paying the premium before the term ends.

Currently, traditional plans have a lock-in period of three years. For surrenders after three years of policy initiation, the surrender value is 30% of the premium paid till that date, excluding the first year premium.

In its first draft on product design, circulated in June this year, Irda had suggested that all traditional policies shall acquire a GSV even before three years but had not spelt out the term. 

In the revised draft, which was made public a week ago, the regulator has proposed that an insurer should repay the full premium paid by a customer if he surrenders a policy in the seventh year or thereafter. For surrenders in the second and third years, a policyholder will get back 50% of the premium paid; the payout will be 75% in the fourth year and 90% between the fifth and seventh years.

“This is an unfair move from the regulator as policyholders completing the term will get a lower benefit compared to those who terminate in the middle of the policy tenure,” said an industry official, unwilling to be named.

Others see the relaxation defeating the very purpose of having a traditional policy and leading to more policy terminations. Looking through their eyes, a low surrender value acts as a disincentive for premature policy terminations.

“Policyholders will be inclined to exit if the regulator goes ahead with the proposed norms on GSV. Industry has approached the regulator and expressed concerns on the same. We are optimistic of getting it changed and have given the required suggestions on the norms,” said a senior official from the industry, requesting anonymity. 

An actuary from a reputed private company concurred, saying, “The revised norms are likely to restrict the design of traditional life insurance plans.” 

The industry also sees the proposed changes altering the cost structure of the product, pushing up the premiums for traditional plans. 

“If these norms get finalised, insurers have to change the cost structure of the product, other margins and adopt more effective customer retention policies,” said one of the industry officials quoted earlier.

To be sure, the Irda draft has said nothing on the surrender penalties of 6-8% charged by unit linked insurance plans. Ulips acquire GSV in the very first year and after the fifth year, a customer can get the full fund value in case of surrender.

Reliance Life to Introduce Fixed Salary System for its Advisors

To reduce attrition and improve customer service, Reliance Life, is introducing fixed salary for insurance advisors in semi-urban and rural areas. Company is introducing fixed income system for its insurance agents under its new format called ‘Career Agent’.

Company’s basic objective behind the fixed income system for insurance agents, is to provide a minimum fixed salary to agent in order to infuse a sense of security and professional commitment.

Company will give fix stipend to insurance agents for the first six months during their training tenure and help them pass the licensing examination, before they become the part of the company.

Company is planning to hire 5,500 career agents across 200 branches by the end of this financial year.

This move of Reliance Life has been prompted by its Japanese partner, Nippon Life’s strategy.

Nippon Life has all its insurance agents on pay-roll. This mechanism has helped the Japanese company to retain the talent pool and provide dedicated services to customers.

In India, insurance agents work on commission basis and have uncertain income level. Hence, industry is facing very high attrition rate.

Apart from recruiting Career Agents, company is also planning to hire 50,000 insurance sales advisors on commission basis in the next seven months. Company is eyeing to increase the number of insurance advisors to over 150,000 by the end of current financial year from around 120,000 now.

Company sells more than 60% of its insurance policies through its agents.

Premiums for Fire and Property Insurance Set To Rise

Finance ministry has asked four PSU General Insurers, New India Assurance, Oriental Insurance, United India Insurance and National Insurance to do away with massive discounts on fire and property insurance policies to grab market share. This means premium rates for fire and property insurance is set to rise.

Finance ministry has asked four PSU General Insurers to segregate fire insurance portfolio under four parts i.e. Rs 100 crores, Rs 100-500 crores, Rs 500-1,000 crores and above Rs 1,000 crores. Finance ministry has also asked PSU General Insurers to raise premiums.

These insurers offers huge discounts on big-ticket fire and property insurance policies to big companies like Oil and Natural Gas Corporation (ONGC), Air India, Reliance Industries, Jet Airways (India); Institutions such as Board of Control of Cricket in India (BCCI) and High-profile  individuals and celebrities.

High-value or big-ticket insurance policies are those policies where sum assured is more than Rs 25 crores.

Insurance companies are offering 100% discount on standard fire insurance policy by not charging any premium on basic policy but only for add-on covers. Taking advantage of this practice corporate accountholders has been able to get windfall discounts.

Finance ministry has asked PSU General Insurers, average premium per policy in different sum insured brands should be enhanced in such a manner that combined ratio does not exceed 100% and total premium collection increases by 20% under each brand of sum insured.

As insurers are required to maintain combined ratio below 100% the premiums will raise by 30-50% across various categories. The impact will be higher on big-ticket policies.

Finance ministry has also advised PSU General Insurers to coordinate among themselves with regards to growth, profitability and procuration of fire insurance business and discourage unhealthy competition of pricing or otherwise.

ONGC, which is the holder of biggest insurance policy in the country, has been paying merely the same premium over the last few years despite considerable rise in its asset size. This year ONGC renewed its policy by paying over Rs 125 crores to cover its assets, last year it paid nearly same premium, though its assets have increased.

Similarly, premiums of Air India’s annual insurance policy, increased marginally to around Rs 160 crores, though its fleet size remained same.

LIC Witnessed Marginal Growth in Renewals

Life Insurance Corporation of India (LIC) has witnessed a marginal increase in renewal premiums but it has witnessed a sharp fall in premium collection from single premium policies.

During 2011-12, LIC’s renewal premium collection stood at Rs 1, 21,027 crores as against Rs 1, 16,461 crores in 2010-11, which is the growth of 4%.

An analysis of 11 large private life insurers had revealed that their renewals have increased by 6% in FY’12.

Premium collection of LIC from single premium policies declined by 18% to Rs 41,667 crores in FY’12 from Rs 50,747 crores in FY’11.

First year premium collection of LIC in FY’12 increased by 11% to Rs 40,194 crores as against Rs 36,265 crores in FY’11.

Total premium collection of LIC, which includes renewal premiums, single premiums and first year premiums decreased marginally to Rs 2, 02,889 crores in FY’12 as against Rs 2, 03,473 crores in FY’11.

Persistency ratio, which indicates the percentage of policies that are active, rather than lapsed, also shows that LIC has improved on renewals. Thirteen-month persistency of LIC has gone up to 67% in FY’12, from 64% in FY’11. Similarly, 25-month persistency has also improved to 64% in FY’12 from 58% in FY’11.

The average thirteen-month persistency of eight private large life insurers for FY’12 was around 68% and 25-month persistency was around 73%.

For LIC, individual agents continued to be the dominant sales channel, with about 99.2% of commission income being earned by them. Commission paid by LIC to individual agents increased by 5.3% in FY’12 to Rs 13,956 crores as against Rs 13,252 crores in FY’11.

LIC has also increased focus on bank partners to sell insurance policies. During FY’12 LIC paid Rs 70 crores to bank partners as commission as against Rs 53 crores in FY’11, a growth of 32%. Consequently, portion of commission paid to banks has increased to 0.5% during FY’12 compared to 0.4% during FY’11.

In FY’12, total commission disbursement by LIC has also increased by 5.4% to Rs 14,063 crores from Rs 13,347 crores in FY’11.

An analysis of eight large private life insurers had revealed that, although commissions given to various distribution channels has decreased by 7.25%, commissions paid to insurance brokers increased by 13.34% in FY’12.

Reliance Life Launched Post-Sales Customer Service

Private insurer, Reliance Life Insurance company has launched Post-Sales Customer Service initiative, named ‘Reliance Life Plus Club’. With this initiative Reliance Life has become the first insurance company in India to introduce structured Post-Sales Customer Service platform.

Under this initiative company will mandate an advisor or insurance agent to go back to the customer, beyond just premium collection, with a view of maintaining a closer and long-term relationship with its policyholders. This initiative will make it mandatory for Company’s 1.5 lakh representatives including employees, agents and channel partners to visit policyholders at least once in a year.

This initiative is inspired by ‘Zutto Motto’ (Forever For Service) service at Nippon Life insurance in Japan.

Through this initiative company is targeting to meet 10 lakh customers by the end of current fiscal. During these interactions, the representatives will review the customer’s existing policies, understand the changes and developments in the customer’s life and family since their last policy, evaluate current insurance needs and requirements, offer advice on suitable new products, and its benefits.

Company is expecting to incur expenses of around Rs 12 crores in this current financial year under this initiative.

As a part of its efforts to improve customer service, company is also planning to hire about 50,000 advisors in current fiscal. Company is also planning to hire 5,500 full-time consultants by September 2012. Company has already hired about 7,000 advisors in April and May. As of 30 June 2012, company had a total of about 1.2 lakh advisors as against 1.5 lakh in year ago period.

Company is also focusing on hiring employees on fixed salary basis to lower attrition rate.

Reliance Life is 74:26 joint venture between Reliance Capital, a financial services arm of Anil Ambani led Reliance group and Japan based Nippon Life.

Avoid These 6 Mistakes to Become Rich

Invest a fraction of your hard earned money in some good financial plan. But before you create your investment portfolio and enter this money world, make sure you don’t commit the following most common investment mistakes.
1. Investing Without Doing a Good Homework
 Never sign up for an investment plan without researching about the plan, its pros and cons and the organization where you are planning to invest your money. A proper planning is very important before you make an investment. It’s always good to enter in some long-term investment plan with lesser amount of risk attached and which would help you make more profit. Avoid being a rapid investor and the tendency of frequently getting in and out of investment deals.
2. Not Calculating Your Liability
 A good investor must always calculate his liabilities and others expenses attached to an investment plan. Before investing it is necessary to set your price and return targets according to your liabilities. As you are a newbie in the market, you cannot assume the perfect time to invest, so it’s better to lose a little chunk than making a huge lose. So don’t be overconfident about your portfolio. Assert only how much you have. Studies show that overconfident investors, especially the newbies, have a tendency of trading rapidly, as they think they have more knowledge than the person on the other side.

 Also calculate the taxes related to your investments. If you are not good at calculating the taxes and fines then do seek help of a financial adviser. A adviser would not only help you to get acquainted with the various investment plans but also provide you with figures stating the exact return available with each plan.  Spending time in choosing a good monetary plan is always better than the time spending to correct our mistakes.
3. Making an Off-Shore Investment

 Many a times we come across shrewd businessmen who persuade us to invest in some fake business plan or in some real estate located off shore. Avoid such investment plans if you suspect the reliability of the plan and its return. Financial experts says it is seen in the market that investors in hope for a good return invest in a off-shore deals which have less regulations but higher probability of being dubious. In many cases investor suffer due to indulging themselves over a fraudulent investment plan without correctly verifying the authenticity of the company.
4. Becoming Impatient
 Never attach your emotions with money and change your deals in accordance with your changing moods. Think wisely and don’t panic because you see too much of fluctuations in the market. If you chase time and try to deal with share based on the recent performance then don’t be surprised to see if it doesn’t work in your favour. Share markets are unpredictable. Always remember that the past performance is no indication of future performance. In order to judge how well your deal is? Ask yourself: would I prefer buying this investment plan again? And if your answer is, No, I wouldn’t then this is the time for discontinuing the investment plan. Review your past investment plan so that you don’t make the similar mistakes and move further with some other deals.
5. Following the Crowd
 Your investment decision should be your personal choice. You must not follow the crowd or a heavy advertised investment plan. Your deal will give gains or incurs loss solely to you and your dependents. Your investment plan must be suitable to your individual goals. Broker often approaches you for the deals which will fetch them high commission but could be inappropriate to your investment goals. Think twice before making an irrational investment deal which has the combination of non-disclosed cost and uncertain return.
6. Ignorance
 We often ignore the fine prints of the terms and conditions relating to an investment deal. Always remember that being ignorant will never prove to be bliss in a financial market. When you make decisions of investing your funds in a company’s share then don’t only take into consideration the yearly performance of the company and its short lived profit. Instead look into the company’s performance over the last four to five years and its average rate profit. Select a company which is transparent and honest instead of those which does extraordinary things to give extraordinary result.

Bharti AXA Mulling to Launch Unemployment Insurance Product

Mumbai: Bharti AXA General Insurance is likely to come up with an "unemployment insurance" product in the current fiscal as the domestic economy is witnessing a downturn, a top company official has said.

 "At present, we have applied for getting approval for an 'unemployment insurance' product from the regulator (IRDA). If we get the necessary approval, we will launch the product this fiscal," Bharti AXA General Insurance CEO Amaranath Ananthanarayanan told PTI in an interaction here over the weekend.
 Earlier, another general insurance player, ICICI Lombard had come up with such a product in 2009.

 Referring to product specifics, he said it would cover general credit risk of a person.
 "It will be an umbrella product, which will cover general credit risk of a person during a loss of job. For example, payment of equated monthly installments of the person insured for some months...," he said.

 Unemployment insurance is a new product in the general insurance category in the country, though it is a very popular product in the western countries.According to experts, as the country becomes more economically integrated with rest of the world and faces cyclical downturn in its economy, the demand for these kind of products will be higher in the coming times.

 Referring to overall product launch, Ananthanarayanan said there are 5-6 products which are pending for approval from the Insurance Regulatory and Development Authority of India (IRDA) and will be launched after getting its approval.

shift to advisory from distribution

Subhabrata received his best advice from his mentor Anil Talaiya, who was in charge of training IFAs in N J India Investment. “MrTalaiya used to narrate a short story of two friends and their professional life. The story inspired me and made me realize the fact that I need to develop a sustainable model to survive in the industry,” says Subhabrata.

The short story that inspired Subhabrata is narrated below:

There were two friends who supplied water in a village. Both of them had to walk miles to get water and then supply it to villagers. One day they realized that they can’t carry on this job in their old age. One of the friends started constructing a pipe-line and but the other carried on his regular job as usual without thinking of an alternative solution.

It took two years for the friend to construct the pipe-line; meanwhile his other friend lost the job. So, the friend who wisely developed a sustainable model enjoyed supplying water to villagers without walking miles.

After listening to this story, I thought of shifting my business model to advisory from mere distribution.  Due to advancement in technology, clients can invest online or through mobile. But good advice can only be given personally as every individual is a different investor.

“So, I did my CFP so that I can provide a complete financial advisory to clients,” says Subhabrata.

Top 3 Things One Should Know About Cheap Car Insurance

Cheap car insurance if fantastic and what everyone wants to be able to benefit from. And, everyone can. Getting your cheap car insurance is essential so look around online and by using comparison sites as much as you can. The importance of getting a cheap car insurance policy goes further because, with the money you save, you could really benefit from taking out a gap insurance policy to suit your circumstances as well.

Gap insurance comes in different forms and offers massive peace of mind should anything happen to your vehicle. Cheap gap insurance is easy to find and can adhere to all of your financial needs. Get gap insurance for Ferrari’s, Audi’s, Rover’s; whatever your car, you can get the cover that suits you best. If your car is your pride and joy then gap insurance can help you ensure you are never left without it. From a new car, to paying off that finance, to buying the same car all over a again; you don’t have to find that eventuality stressful and can live with the peace of mind that you will not be without your much needed vehicle, regardless of what might occur.

So, what is gap insurance? There are three popular types of gap insurance that you could really benefit from. Firstly, there is RTI which is an abbreviation of return to invoice. This can help you in times of need, when you need to claim and will protect you by covering the difference between the value of your original invoice and the value of your car now. This means you won’t fall short if the worst were to happen.

If you have purchased your vehicle with the use of a loan or financial agreement then Finance gap insurance will be vital to cover you. Finance gap insurance helps you when you need to claim and will protect you by covering the difference between the value of the finance left on your car and the value of your car now.

Finally, there is vehicle replacement insurance, or VRI. This is designed to ensure that when you need to claim you will be covered for the difference between the amount your car is worth brand new in today’s market and the value of your car now.

The benefits of having a gap insurance policy speak for themselves and you can benefit from less stress during those stressful times. If you use your vehicle for getting to work then there is no way that you want to find yourself in the situation where you don’t have a car! The deals sound pretty amazing, right? By heading online you can find cheap gap insurance to cover you to the fullest possible extent in any eventuality.  Get gap insurance for Ferraris without having to spend the massive amounts that you might expect!

 

Bharti AXA General Planning to come up with Unemployment Insurance Product

As the country’s economy is witnessing a downturn, private general insurer, Bharti Axa General is planning to come up with an Unemployment Insurance Product.

Company has applied for getting approval for an unemployment insurance product from the Insurance Regulatory and Development Authority (IRDA) and as soon as the company gets all necessary approvals it will launch it. Company is planning to launch it in current fiscal.

Earlier another private general insurer, ICICI Lombard had come up with such a product in 2009.

The unemployment insurance product will cover general credit risk of a person during a loss of job. For example, payment of Equated Monthly Installments of the person insured for some months.

Unemployment Insurance is a new product in the General Insurance category in the country. However, it is a popular product in the Western countries.

As per experts, as the country becomes more economically integrated with rest of the world and faces cyclical downturn in its economy, the demand for these kind of products will be higher in the coming times.

Apollo Munich health insurance has launched ‘Optima Senior’ for citizens

Stand alone health insurer, Apollo Munich health insurance has launched ‘Optima Senior’ for citizens above 61 years of age.

With the onset of retirement, most people find themselves losing their corporate health insurance coverage, at a time when it is needed the most. Optima Senior caters to senior citizens who seek uncomplicated and easy to understand health insurance coverage, with minimum restrictions and maximum benefits.

Optima Senior provides lifelong health insurance coverage with the guarantee of no-loading on change of health status.

Under this plan one can choose from three levels of sum insured i.e. Rs 2 lakh, Rs 3 lakh and Rs 5 lakh.

Policyholders of Optima Senior can also enjoy 5% non-cumulative discount on the renewal premium payable under the policy after every claim-free year, provided that the policy is renewed with the company without a break.

Optima Senior also provides coverage for an e-opinion, wherein a policyholder can obtain a second opinion, from Apollo Munich’s medical panel for listed critical illness suffered during the policy year.

Apollo Munich is a joint venture between Apollo Hospitals Group and Munich Health, Munich Re’s newest business segment.
 Categories: News | Tags: Apollo Hospitals Group, Apollo Munich, Apollo Munich Optima Senior, Munich Health

PSU General Insurer’s Captive TPA Plan Gathering Pace

The plan to set up a captive Third Party Administrator (TPA) company jointly by all four PSU general insurers is gathering pace, as fraud claims still remains a challenge.

In order to minimize the fraud claims in the health insurance sector, four PSU general insurers –New India Assurance, United India insurance, Oriental insurance and National insurance have come together to float a separate TPA company for captive purpose.

As per estimates, currently there are around 15-20% exaggerated claims.

TPAs manage the insurance company’s claim processing and disbursements to the insured.

At present insurers outsource the process to different TPAs and results have not been satisfactory.

Though the health insurance segment is registering strong growth on year-on-year and shaping up well in terms of market expansion and product innovation, it is a major area where there is an element of exaggeration leading to big losses for the industry.

Till few years ago, the loss ratio in the health insurance segment used to be between 140% and 150%. But it has been corrected and now industry has managed to bring it down below 100%.

Insurance cos against IRDA's product design & pricing norms

The insurance industry is not happy with the second exposure draft on product design and pricing. In particular, it wants to discuss the norms for Guaranteed Surrender Value with the insurance regulator, reports CNBC-TV18’s Mitra Joshi.

 Insurance regulator IRDA's second exposure draft on product design and pricing has evoked mixed reactions from the industry. Most players welcome the norms, which give clarity on cover in traditional products. But, the Guaranteed Surrender Value norms have insurance companies atwitter.

 Currently, the minimum guaranteed surrender value is 30% of the total premium paid, minus the first year premium. But now, this will be governed by a slab.

 For second and third year, it will be 50% of the total premium paid. For fourth year, it will be 75% of the total premium paid. For fifth and sixth year it will be 90% of the total premium paid, and from seventh year onwards, it will be 100% of the total premium paid.
 Players say these slabs will leave nothing for the insurance companies themselves, and are pushing for talks with IRDA to soften the blow.

14/8/12 Money control.com

TALENT + MOTIVATION + OPTIMISM = SUCCESS


"There is very little difference in people, but that little difference makes a big difference."  W. Clement Stone

TALENT + MOTIVATION + OPTIMISM = SUCCESS

Optimism is the constant companion of high-performing salespeople. It's their trademark, their way of life. Optimism is the difference that makes a big difference.

The traditional formula for success has looked something like this: Talent + Motivation = Success.

Psychologist Martin Seligman suggested some new formulas:

Talent + Motivation + Optimism = Success
Talent + Motivation + Pessimism = Failure

The idea is that you can have both talent and motivation and still fail if you don't have optimism. The critical ingredient in the success formula is optimism.

Talent has been shown to be largely inherent. It's not something you learn. You can sharpen it. You can focus it, but it is depressingly hard to increase.

Motivation can be boosted rather easily. In a 30-second bite, clever advertising can motivate you to buy. Motivational speakers and seminars pump up participants to exuberance. The trouble is more pumping is needed in a week or a month.

Research has revealed a measure of optimism is a more effective predictor of a salesperson's survival and success than career assessment profiles. Salespeople with the highest optimism scores tend to produce the highest dollar volume. These are the salespeople who make the second and third call, and the fourth and fifth call. And they make each, optimistically.

Optimists believe good events are going to continue; bad events are transitory.

In school, Thomas A. Edison was classified as "confused & not teachable" by his teachers. He was totally deaf in his left ear and impaired in his other ear. Edison experimented many thousands of times before he invented an acceptable incandescent lamp in 1879, and perfected it in 1880. Edison once said, "I have not failed 700 times. I have not failed once. I have succeeded in proving that those 700 ways will not work. When I have eliminated the ways that will not work, I will find the way that will work." And, "discontent is the first necessity of progress."

The good news is you can learn to think optimistically.

The result is energy.

The result is eagerness to make the next call.

The result is enthusiasm on that interview.

The result is success!

2012 - STAMP IT WITH EXCELLENCE!

Good luck and good selling,

Jack and Garry Kinder

vinay mohanty

misuse of customers DD's and cheques Circular

Happy Independence day To all LIAFIns

Happy       Independenceday
vinay mohanty

Tax relief on the anvil for insurance policy holders, insurance companies

NEW DELHI: Holders of insurance policies with the sum assured five times the annual premium may soon become eligible for a tax rebate. The move comes amid finance minister P Chidambaram's efforts to revive the slowing insurance sector, officials told ET.

 Officials at the finance ministry and insurance regulator IRDA are working jointly to explore various options, including diluting the 18% minimum alternate tax, or MAT, applicable on non-life insurers.

 An IRDA official told ET that the new finance minister wants to make insurance products an attractive investment option, without creating a situation that existed in the case of unit-linked plans. "So there may be some relief in terms of taxation," the official said.

 The government had announced in the Budget that all insurance policies, except pension plans, will have to offer a cover of at least 10 times the annual premium to be eligible for tax benefits under section 80C and 10 (10D). While Section 80C allows a deduction on life insurance premium up to .Rs 1 lakh, Section 10 (10D) exempts maturity proceeds from tax.

 "We are reviewing this position," a finance ministry official said, adding, "IRDA has already stated that this has affected senior citizens the most as the cost of insurance products has gone higher."

 The move is expected to provide relief to the sagging insurance industry, which reported a 3% drop in the total premium to.Rs2.83 lakh crore for FY 2011-12, from .Rs 2.91 lakh crore in the previous fiscal.

 The industry body for all life insurance companies, Life Insurance Council, attributed this drop to the change in regulatory road map, declining number of products and disappearance of pension business in the individual segment.

 "The move to reduce the 10-year period is in keeping with the market sentiments. There is a huge segment of population which has irregular income and needs short-term premium paying policies," said SB Mathur, secretary-general, Life Insurance Council.          economictimes 9/8/12

Hindus' lives 'living hell' in pakistan

Small Bonus, Big Cover Irda changes rules for endowment plans


Big annual bonuses on endowment insurance plans could be a thing of past. The Insurance Regulatory and Development Authority (Irda) has proposed a minimum death benefit on endowment plans, which means a larger part of the premium may go towards insuring the life of the policyholder.

For regular premium plans, the minimum death benefit proposed for entry age less than 45 years is 10 times the annual premium, or half of annual premium multiplied by the policy term, or 105 per cent of all the premiums paid, whichever is higher.

For entry age over 45 years, the same is higher of seven times the annual premium, one-fourth of annual premium multiplied by the policy term and 105 per cent of all premiums paid.

"For customers, this would mean higher protection cover, higher mortality cost and higher premiums," says Pavan Dhamija, managing director and chief executive, DLF Pramerica Life Insurance.

The guidelines also link commission paid to agents with the policy tenure. For policies with a tenure of five-nine years, the first-year commission cannot be more than 14 per cent of the annual premium, 28 per cent for 10-14 year tenure, and 40 per cent for 15 years or more (35 per cent for insurers more than 10 years old).

Irda has also proposed to make policies eligible for surrender value if premiums have been paid for two years instead of the current three years.
Curticy Business today businessline

IRDA prohibits insurance companies from booking the penalties to policy holder's account


The regulator has recently levied hefty penalties on a few insurance companies for violation of regulatory norms.

In a circular, IRDA has instructed that penalties for various acts of omission and commission have to be debited from share holder's account and not from policy holder's account.

"Penalties levied by the Authority shall only be debited to the shareholders’ account. In the event any insurance company has inadvertently booked the penalties to its policyholders’ account, the entries shall be reversed. Action taken in this regard may be confirmed to the Authority," says the circular.

A CFO of a top life insurance company said, "In the past, some insurance companies have booked the penalties to policyholders’ account. Hence IRDA has taken this step for consumer protection."

vinay mohanty

‘Endowment Plans are not bad’


A lot is heard and read about surrender of endowment plans in the media. No doubt term cover is one of the cheapest ways to protect the family for income replacement, but that is not the only thing that protects the family from practical situations.

There is no doubt that investing in equity and mutual funds do give better returns, which is the basis on which the CFPs are advocating surrender of Endowment plans. And it is one of the easiest ways for the CFP to impress the client by comparing higher returns through equity based investment with the returns of endowment plans.

While endowment plans do not give better returns compared to mutual funds, what is lacking in the advice is the practical aspect of living.

We prepare a comprehensive financial plan or for that matter even a goal based financial plan and advise the client that a systematic investment in the chosen mutual fund will meet the goal which will beat inflation. But, can we look at this more practically?

As human beings we are disciplined only when we are compelled to. When there is no compulsion the discipline tends to go awry. This is proved by the fact that approximately only 40% of the persons who have started the SIPs (Systematic Investment Plans) with mutual funds are actually staying till the end of the term. This means, 6 out of 10 discontinue in between.

When this concern was discussed with some of the CFPs, the answer was “it is up to the investor to stay the course if they want to meet the goal”. Agreed that it is the individual’s necessity so he better stick to his commitment.  But as professionals, is it not our duty to also look into it more practically?

Life is not as smooth as it appears on paper. In spite of all the planning, life can throw surprises and unforeseen emergencies. So in such circumstances the easiest fall back is on funds that are easily accessible - mutual funds.  And what goes for a toss is the goal for which the mutual fund was meant for.

Imagine a situation where a person had planned his/her child’s professional education or daughter’s marriage. If he/she had invested only in mutual funds and taken a huge term cover, and unfortunately a situation similar to the 2008 global meltdown arises. Where does the person stand? Can the person postpone the child’s education because the Planner failed to protect them in such situation?

Dear CFPs, please note that it is very easy to advise surrender of policies, but wake up to facts of life and reality. Working on excel sheets no doubt gives impressive output, but let it also work in all circumstances.

To substantiate my view, I have taken an example of a 35 year old person who has taken LIC’s endowment plan for 21 years in order to accumulate some money for his child’s overseas education who is one year old. Now let us see, how this endowment plan performs..

I have considered two scenarios i.e., with tax benefit (30% slab) and without tax benefit (under section 80C) after setting aside the term cover part of the premium…
Investing in a term plan vis-à-vis an endowment plan


          

 Without Tax Benefit
 With Tax Benefit
 No Tax Beneift but with Term Cover Included
   Annual Premium
 Rs 47888
 Rs 47888
 Rs 47888
 Less: Savings in Tax
 0
 14654
 0
 Less term cover
 5600
 5600
 0
 Net premium
 Rs42288
 Rs27634
 Rs47888
 Term of ndowment
 Plan
 21 years
 21 years
21 years

 Total Net Premium Payable
 Rs 888048
 Rs 580314
 Rs 1005648
 Risk cover
 Rs 10,00,000
 Rs 10,00,000
 Rs 10,00,000
 Accident death covor
 Rs 20,00,000
 Rs 20,00,000
 Rs 20,00,000
 Maturity Amount
 Rs 21,08,000
 Rs 21,08,000
 Rs 21,08,000
 Yield on IRR basis
 7.30%
 10.62%
 6.3%


In the last column, we see that in spite of including the term premium and by also not considering any tax benefit the internal rate of return (IRR) works out to 6.30%, while the first two columns show clearly the IRRs with and without considering the tax benefit, which are 10.62% and 7.30% respectively. These are conservative returns, and the capital is also protected. Thus an endowment plan can be safely considered as debt component in the asset allocation, instead of asking the client to surrender.

Yes, one can include existing insurance plans based on its merits and then suggest improvements and additions while drawing up a financial plan.

This will indeed help the client overcome an adverse situation by protecting the extent of the maturity amounts from endowment plans which are not directly impacted by the market fluctuations.




vinay mohanty

people first trust the advisor and then the product.


My first client was my father in law's brother who had approached me directly without consulting my father in law. He had never invested in mutual funds till then. When I tried to explain the concept of mutual funds, he just said he trusted me and handed me a cheque without understanding the details.  

I had recommended an equity fund to him. He continues to invest through me even now.

After some time, I asked him what convinced him to invest through me and that too in an instrument which he did not know very well. He said, “My hair has not turned grey playing in the sun, but with experience. I can judge a person by his actions, and felt that you would not be reckless with my money".

Then I asked him whether being related was the factor that swayed his decision, his reply was that he was a businessman and did not make decisions based on emotions.

After hearing this I realised that trust is an important factor and building trust is the basic ingredient for business.
Another thing which I realised was that people first trust the advisor and then the product.

vinay mohanty

IRDA mulling special facilities for senior insurance agents


The regulator released an exposure draft on investment norms.

In the CII insurance summit held today, IRDA Chairman, J Hari Narayan said that the regulator was working on an exposure draft for senior agents.  The regulator wants to give these agents some special facilities as they have served the industry for a long time.

The regulator released an exposure draft on investment norms relating to swaps, hedging and equity exposure for the industry players. IRDA also made it clear among the insurers that IRDA will now carefully examine if the product design matches expectations of the consumers before approving it. "IRDA will release the final product guidelines by the month end and will also examine the product carefully before approving it," said J Hari Narayan, IRDA Chairman.

The regulator will also announce the final guidelines for general insurance IPO in a week's time. It has already incorporated the recommendation suggested by SEBI.

IRDA set to raise Equity Exposure Limit for LIC to 20%

Insurance Regulatory and Development Authority (IRDA) is set to increase the equity exposure limit of Life Insurance Corporation of India (LIC) in a single company to 20% from current 10%.

At present, LIC can invest up to 10% of capital employed by the invested company or 10% of the fund size in a corporate entity, whichever is lower. The capital employed includes Share Capital, free Reserves and Debentures or Bonds.

However, there is a caveat, LIC will have to bring down its stake to 20% in companies where it holds more than 20% stake and it also have to pare down its stake in illiquid stocks and in unlisted investments which constitutes around Rs 5,000 crores or 2% of its total Equity Exposure.

This move assumes significance as now LIC will be able to invest in many blue chip companies in which it already holds more than 10% stake and it was not able to raise its stake in these companies due to existing cap such as TATA Steel, ITC, L&T, State Bank of India etc.

Besides this finance ministry is also pushing this issue at the earliest because of its pending disinvestment target. For the current financial year government is targeting Rs 30,000 crore from stake sales in public sector undertakings. In last financial year government could raise only Rs 14,000 crore by disinvestment as against the target of Rs 40,000 crore.

10% cap came into force in 2008, and since then LIC has been lobbing to relax this norm as it has already exhausted its limit in most of the blue chip companies.

Though, IRDA has not asked LIC to bring down its existing holdings in companies in which it holds more than 10% stake, but it has been asked to follow 10% cap in fresh investments.

As of 31 March, LIC’s total investment corpus stood at around Rs 13 lakh crore, and of which 20% or Rs 2.6 lakh crore is in equities. During 2011-12 LIC invested Rs 1.95 lakh crore, of which Rs 40,000 crore was invested in equities. In current financial year, LIC has plans to invest similar amount in equities.

The equity investment portfolio of LIC includes investments in around 400 unlisted companies and book value of such firms is estimated at around Rs 1,500 crores.

However, both finance ministry and Irda are of the opinion that LIC’s investments in illiquid and unlisted stocks is more than desirable limits and it should be brought down to comfortable level which could not be more than Rs 1,000 crores.

LIC has already initiated the process and during FY’12 it has knocked-off its stake in more than 60 illiquid stocks and exited from certain unlisted investments.
Posted on August 6, 2012 by Akanksha

Policy rules for surender and maturity

vinay mohanty

Deal code of airlines for c m club convention pune

Deal code of airlines for c m club convention pune 
Jet Airways -                     9W0210002
Air India-                          B267
KINGFISHER-                LIC01
JETLITE-                         S20210002
INDIGO-CORPORATE-LIC1 RETAIL-RLIC1

FOR OTHER AIRLINES NO NEED OF DEAL CODE


IRDA journals 2012 april, may, June, july

insurance booklet on travel/motar/Property

LIFE INSURANCE HANDBOOK English/Hindi/telugu/oriya

health insurance hand books English / hindi / oriya/ telugu

Road Safety

Prudence and Caution: Key to Road Safety
Sometime ago, the newspapers reported that two persons were killed and a third was critically injured when a bus rammed into their Toyota Qualis on the Nizamuddin Bridge in Delhi. Police say that the accident occurred while one of the victims was changing a flat tyre in the middle of the road.
 A flat or punctured tyre is always a problem. Changing a flat tyre in the middle of the road can be dangerous. In such events how do you deal with a flat or a burst tyre?
  1. If a tyre bursts while you are driving, try to keep control of your vehicle.
  2. Grip the steering wheel firmly and allow the vehicle to roll to a stop at the side of the road.
  3. Stop as soon as it is safe to do so.
  4. Firm up your grip on the steering wheel, this helps you to keep the vehicle in control.
  5. Get your vehicle off the road. Do not halt or park vehicles on the main carriageway.
  6. Remember not to slam on brakes; let the car slow down gradually.
  7. Keep your sidelights on if it is dark or if visibility is poor.
  8. To get to a safe point, you may have to steer for a short distance
  9. Continue to drive on a flat tyre; don't worry about it being damaged further.
  10. As you slow down, try to manoeuvre the vehicle towards the kerb (extreme left).
  11. If you have to change lanes, clearly signal your intentions and do it slowly and carefully.
  12. Keep a watch on the traffic around you.
  13. Keep all four warning lights blinking, which is a known distress signal.
  14. Inform the traffic police or the Police Control Room vehicle at 100.
  15. The nearest policeman can be asked to arrange to tow the vehicle from the main carriageway.
  16. Once you have come off the main carriageway, keep the indicators on so that other road users are alerted of your problem and don't ram into you.
  17. Your safety and the safety of others should be your only priority.
  18. If you are aware of a service centre in proximity of the spot you are stranded in, walk over after locking up your vehicle.
  19. Do not stand (or let anybody else stand) between your vehicle and the oncoming traffic.
  20. At night, or in poor visibility conditions, do not stand where you will prevent other road users from seeing your lights.
  21. If you cannot leave the carriageway or move into a service area you should: 
  22. Pull on as far to the left as possible, with your wheels turned to the left.
  23. Leave the vehicle by the left-hand door and ensure your passengers do the same.
  24. Do not attempt even simple repairs.
  25. Ensure that passengers keep away from the carriageway, especially children. 
  26. Only change the tyre if you have the right equipment, and make sure you are aware of how to change it and can do so without putting yourself or others at risk. Otherwise call a breakdown service.

Home Safety

Senior Citizens & Safety at Home

 As the average life expectancy increases and social values change, a vast majority of our senior population is left without any financial or medical support. Coupled with the fact that older people develop impaired vision and have slower reaction time, they become more prone to accidents and mishaps. A mishap that may merely inconvenience a young person can put an aged person out of commission for a long time.

 Here are some hints that could help our senior citizens to reduce the risk of personal injury.
 According to The American Academy of Orthopaedic Surgeons, falls are the leading cause of injury for people over 65. The likelihood of dying from a fall-related injury increases with age and deteriorating vision.

Vision:
 As one ages, physiological changes set in, which impair a number of sensory organs. Similar changes are also seen in the eye (smaller pupils, yellowing of the lens, cataract), which result in failing vision. Thus seniors need more light than young adults.
Soft overall lighting is essential for tasks like reading, sewing and taking medicines
Night-lamps in areas like bedrooms and bathrooms are essential to prevent falls
Head and foot of stairways require more light
Light switches should be placed at convenient points such as room entrances
Easy to clean and change fixtures should be used
Do not block electrical outlets with furniture
Avoid pictures or other eye-catchers near stairs
Falls in the bathroom: 
 Wet and slippery surfaces, several electrical fixtures and occasional glassware make a dangerous combination.
Use non-skid mats over the bathroom floor
Install grab-bars around the shower and for the toilet
Ensure that there is no sill or threshold between the bathroom and other rooms, to prevent tripping      Safety in the living room: 
Avoid glass furniture and in case it is unavoidable, use shatter proof glass
Arrange furniture so as to provide open passages
Keep electrical and telephone cables out of the way
Furniture should be easily movable
Furniture should not block exits and doorways
Safety in the kitchen: 
 The elderly are more at risk in the kitchen, as their skin tends to burn more easily and they may have difficulty in escaping if and when an injury occurs. Moreover, ordinary looking tasks like boiling water, heating food can cause extraordinary risks.
Keep all combustible items away from the stove, especially when it is lit
Use lightweight pots, pans and bowls
Do not use any overhead cabinets that are more than 12 inches deep or more than 72 inches high from the floor level, Avoid having storage spaces above stoves and refrigerators
Safety in the bedroom
Make sure a phone is next to your bed, within arm's reach
Keep emergency telephone numbers, hearing aids and spectacles (if necessary) handy as well
Never smoke in bed. Make sure that you are alert when you smoke
Do not smoke while under the influence of alcohol or if you are taking prescription drugs that can cause drowsiness
Never leave smoking materials unattended, and collect them in large, deep ashtrays
Check around furniture, especially upholstered furniture, for any discarded or smouldering smoking materials
Soak the ashes in the ashtray before discarding them 

Contributed by General Insurance Corporation of India (GIC).