LIFEINSURANCE PENETRATION FALLEN TO 3.3% AS 2006

The life insurance penetration in the country has fallen to 3.3% of the Gross Domestic Product (GDP), the same level as it was in FY’06 when it was just 3.14%. It has fallen from the peak of 5.2% in FY’10.

Experts say that high inflation is stifling savings and unattractive tax benefits also discourage investors to invest into insurance products. The first year individual premium collection has been falling steeply as fewer people are reaching out to investors with insurance as an investment tool.

Insurance behemoth, Life Insurance Corporation of India (LIC) in a presentation to a parliamentary committee has suggested that favourable tax policies will go a long way in increasing the insurance acceptability.

For insurance products, maturity proceeds after excluding the premiums are taxable, while equity schemes are exempt for deduction under 80C for notified schemes. Other products like Public Provident Fund (PPF) and National Pension Products are also exempt.

LIC has also sought for exemptions to be allowed on the basis of the term of the policy rather than the current practice of exemption being allowed for life insurance policies with premium not exceeding 10% of the sum assured. The rationale for this is because in a life insurance policy, the premium amount is locked for the policy term.

LIC said that policyholders of advanced age or of sub-standard health are adversely affected due to this provision. Policyholders having no regular income but willing to pay single premium are also adversely affected.

Experts also said that coverage can be increased through low-ticket size policies and incentives to these segments be given in the form of tax benefit.

vinay mohanty

Panchkula Court has dismissed the anticipatory bail application of Chief Executive Officer (CEO) Sandeep Ghosh

Panchkula Court has dismissed the anticipatory bail application of Chief Executive Officer (CEO) Sandeep Ghosh and Vice President (VP) Gaurav Bhatia of Bharti Axa Life Insurance.

They were booked by the Panchkula police in a case of cheating, forgery under sections 420, 467, 468, 471 of the Indian Penal Code (IPC) on September 12, 2015.

The Court stated that prima facie, the allegations against accused are very serious in nature, and hence a detailed probe is required to verify the allegations. For this purpose, their custodial interrogation is required. Therefore, the Court dismissed the anticipatory bail of the two accused.

The case was registered on the complaint of P D Joshi, 67, a resident of Sector 9 of Panchkula. He alleged that he was trapped by the tele-callers who had given wrong information on the refund of earlier policies by showing the fear of income tax raid and impersonating as Insurance Regulatory and Development Authority of India (IrdaI) Chairman, insurance complaint officers, bank officers and tax officers. In the name of fixed deposit, they took the huge amount from him through cheque.

Joshi also said that eight life insurance policies worth Rs 14.29 lakhs were issued in the name of his family members, Shelly Joshi, Prerna, Janvi and in his name, and he has been shown as the proposer, though he had never given his consent to insure them with his money.

Highlighting the illegalities, Joshi said that his annual income, educational qualification, height, contact number and email ID were mentioned differently in the eight policies, indicating the company had violated the anti-money laundering guidelines.

vinay mohanty

will policyholder beneit rom bank becoming insurance broker?

Will Policyholders Benefit From Banks Becoming Insurance Brokers?

On November 19, 2015

With an aim to increase insurance penetration, Reserve Bank of India (RBI) has allowed banks to act as an insurance broker. Prior to this, banks were allowed to act as a corporate agent. As corporate agent, banks were allowed to sell products of only one life, one non-life and one health insurance company but now they can sell products of multiple insurance companies. But here question arises whether banks can be trusted.

Some say that banks can be trusted since they also generate revenue through the sale of insurance products while other argues that mis-selling will be a common problem.

At present, there are over 80 banks in the country with over 1.2 lakhs branches across the country. This can surely help to increase insurance penetration in the country.

Those in favour of banks say that since banks have all details of their customers they can ascertain their needs based on their loan and credit history. So, they can offer need-based expertise while selling insurance.

They also say that banks have physical presence everywhere, even in remote areas. Moreover, employees generally form a good rapport with long-term customers and provide useful tips on buying insurance.

While on the fillip side, experts say that with host of other products to sell, banks may not take a particular keen interest in selling insurance products. Moreover, even if they do sell, they may not take the need based approach instead of selling the plan which generates maximum revenue. This may result in mis-selling, which is the major concern in the insurance sector.

And also, unlike an agent who collects your renewal premium from your doorstep, banks will not extend this facility and the policyholder will have to take care of the renewal premiums and other facets of policies generally assigned to agents.

Though mis-selling is common in case of agents too, it is the sole responsibility of the customer to understand the complete terms and conditions before buying any insurance policy.

Banks may solicit expert financial advice, yet, that should not be blindly followed. Trusting banks as brokers is helpful because of the range of products available to choose from so that the best plan is chosen.

But to get a comprehensive understanding of all the plans, it is better to refer to online insurance comparison portals. Through online insurance comparison websites, you can get an unbiased view on all the products available in the market so that you can make informed decision.

Research is the key to sound portfolio be it through banks or through other distribution channels. So, do thoroughly research before making any decision.