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Tuesday, March 29, 2011
Thursday, March 24, 2011
Health sector hails ’misery tax’ withdrawal
23-Mar-2011
Source : SME Times
The roll back of the proposed five percent service tax for private hospitals was Tuesday welcomed with open arms by health institutions and the public.
"This is a welcome decision by finance minister (Pranab Mukherjee). Access to healthcare to all and that of the highest standards has been the driving force for all of us who constitute healthcare sector in India. The imposition of this service tax would have been a huge deterrent to this vision," Prathap C. Reddy, chairman of Apollo group of hospitals, said in a statement.
In the federal budget for 2011-12, the finance minister had proposed to levy five percent tax on services provided by hospitals with 25 or more beds, facility of central air-conditioning and diagnostic tests of all kinds.
"After the progressive move, the country will see our renewed efforts to serve the nation and we will relentlessly persevere to keep all Indians in good health," Reddy added.
Renowned cardiac surgeon from Bangalore-based Narayana Hrudayalaya group of hospitals Devi Shetty, who had earlier termed the hike as "misery tax for patients", termed the move "a victory for the common man".
"It’s a great victory for the aam aadmi. I had told the finance minister that the hike will have an impact on the poor people who are borrowing money even for basic health care," Shetty told reporters here.
The decision was also welcomed by the public.
"Private hospitals would have only increased the cost of treatment...to incur the cost from the patient. This was much needed," said Ambika Goswami, a government employee.
"Government hospitals are always packed, one cannot think of depending on them in the hour of crisis," added Goswami.
Druv Dhall, 38, a private banker, said: "The government should have thought before imposing the tax hike. The cost of treatment at air conditioned hospitals is already very expensive, and another five percent would have meant a lot to the people.
Source : SME Times
The roll back of the proposed five percent service tax for private hospitals was Tuesday welcomed with open arms by health institutions and the public.
"This is a welcome decision by finance minister (Pranab Mukherjee). Access to healthcare to all and that of the highest standards has been the driving force for all of us who constitute healthcare sector in India. The imposition of this service tax would have been a huge deterrent to this vision," Prathap C. Reddy, chairman of Apollo group of hospitals, said in a statement.
In the federal budget for 2011-12, the finance minister had proposed to levy five percent tax on services provided by hospitals with 25 or more beds, facility of central air-conditioning and diagnostic tests of all kinds.
"After the progressive move, the country will see our renewed efforts to serve the nation and we will relentlessly persevere to keep all Indians in good health," Reddy added.
Renowned cardiac surgeon from Bangalore-based Narayana Hrudayalaya group of hospitals Devi Shetty, who had earlier termed the hike as "misery tax for patients", termed the move "a victory for the common man".
"It’s a great victory for the aam aadmi. I had told the finance minister that the hike will have an impact on the poor people who are borrowing money even for basic health care," Shetty told reporters here.
The decision was also welcomed by the public.
"Private hospitals would have only increased the cost of treatment...to incur the cost from the patient. This was much needed," said Ambika Goswami, a government employee.
"Government hospitals are always packed, one cannot think of depending on them in the hour of crisis," added Goswami.
Druv Dhall, 38, a private banker, said: "The government should have thought before imposing the tax hike. The cost of treatment at air conditioned hospitals is already very expensive, and another five percent would have meant a lot to the people.
LIC WINS OUT LOOK MONEY AWARD
Life Insurance Corporation of India continues to occupy the top slot in this category. Among a total of 23 companies, it had a market share of 72 percent in first premium income and policies, as on 31st July 2010. It has already solved over 10 million new policies in the fiscal year with a first premium income of Rs.15,917 Crore, registering a 100 percent growth.It has a customer base of about 280 million policy holders. Its asset figure has now risen to a mammoth.
Rs.11,52,057 crore as an 1st September 2010, an increase of 32 percent over the previous year. It last declared a valuation surplus of Rs.23,478 crore of which Rs.1,029 crore was given to the Central Government as Dividend.
Rs.11,52,057 crore as an 1st September 2010, an increase of 32 percent over the previous year. It last declared a valuation surplus of Rs.23,478 crore of which Rs.1,029 crore was given to the Central Government as Dividend.
Wednesday, March 23, 2011
Tuesday, March 22, 2011
Traditional life insurance or ULIPs?
21-Mar-2011
Source : The Financial Express
By V Viswanand.
What are traditional life insurance plans? Why should I buy a traditional plan? How will I benefit from it? And how is it relevant in today’s environment? How are these different from the more popular ULIPs?
These are some of the questions you would generally ask before making a purchase decision.
Traditional insurance plans, which include term, endowment and whole life policies, offer multiple benefits in terms of risk cover, return, safety and tax benefit. Traditional policies are considered risk-free, as they provide fixed income returns in case of death or maturity of the policy. Investment guidelines also ensure safety of funds with a cap on equity investment.
Here are some of the reasons why traditional life insurance plans are the answer to the apprehensions and challenges faced by consumers and the Life Insurance industry.
1.The interest of the company and the customer are aligned: In participating products the life insurance company can make margins only when the customer makes margins and to that extent the interest of the company and the customer are aligned. As per the insurance law, the company can retain only 1/10th of the profits with 9/10th of the profits shared with the customers. This is colloquially known as the “90/10” rule in the industry. Put simply if the company makes Rs 100 as profits, Rs 90 ( approximately) has to be given to the customer first.
2. Investment risk is managed better in Traditional products: In Unit Linked products the investment risk lies with the customer. But most customers do not fully appreciate the risks involved in such products. In traditional participating products the investments are managed by the company in a prudent manner. This works out to the advantage of a passive investor as there are investment guarantees built into the product design. Not only are investments done in a more conservative manner, the dividends are also ’smoothed’ and declared in a steady fashion.
3. Traditional Insurance is closer to Protection: Right from the sale when the premium is a function of the sum assured to the bonus declaration which also adds to increased growth of protection component within the policy, traditional insurance is closer to protection than ULIPs wherein protection element of the policy, in most cases is more or less constant or subject to vagaries of the market and fund value.
4. The chances of mis-selling are much lower: Traditional participating plans offer in-built guaranteed benefits hence the ’give and get’ equation is fairly simple to comprehend which significantly reduces the risk of mis-selling. Unlike ULIPs these products are sum assured based and not market linked products leaving much less scope for speculative selling and buying behaviour.
In a nut shell
World over Traditional Par Insurance is much more popular than ULIPs and its variants. Customers in western markets who have seen market swings empty out retirement funds have come to appreciate the ’risk-return spectrum’ of insurance plans as well as the difference between investment and savings.
Traditional plans provide the dual advantage of guaranteed returns and protection for long term savings to consumers. This is why traditional participating products are recognised as ideal vehicles for long term savings and protection, even in the Indian context.
— Author is, Director & Head - Products and Persistency Management, Max New York Life Insurance
Source : The Financial Express
By V Viswanand.
What are traditional life insurance plans? Why should I buy a traditional plan? How will I benefit from it? And how is it relevant in today’s environment? How are these different from the more popular ULIPs?
These are some of the questions you would generally ask before making a purchase decision.
Traditional insurance plans, which include term, endowment and whole life policies, offer multiple benefits in terms of risk cover, return, safety and tax benefit. Traditional policies are considered risk-free, as they provide fixed income returns in case of death or maturity of the policy. Investment guidelines also ensure safety of funds with a cap on equity investment.
Here are some of the reasons why traditional life insurance plans are the answer to the apprehensions and challenges faced by consumers and the Life Insurance industry.
1.The interest of the company and the customer are aligned: In participating products the life insurance company can make margins only when the customer makes margins and to that extent the interest of the company and the customer are aligned. As per the insurance law, the company can retain only 1/10th of the profits with 9/10th of the profits shared with the customers. This is colloquially known as the “90/10” rule in the industry. Put simply if the company makes Rs 100 as profits, Rs 90 ( approximately) has to be given to the customer first.
2. Investment risk is managed better in Traditional products: In Unit Linked products the investment risk lies with the customer. But most customers do not fully appreciate the risks involved in such products. In traditional participating products the investments are managed by the company in a prudent manner. This works out to the advantage of a passive investor as there are investment guarantees built into the product design. Not only are investments done in a more conservative manner, the dividends are also ’smoothed’ and declared in a steady fashion.
3. Traditional Insurance is closer to Protection: Right from the sale when the premium is a function of the sum assured to the bonus declaration which also adds to increased growth of protection component within the policy, traditional insurance is closer to protection than ULIPs wherein protection element of the policy, in most cases is more or less constant or subject to vagaries of the market and fund value.
4. The chances of mis-selling are much lower: Traditional participating plans offer in-built guaranteed benefits hence the ’give and get’ equation is fairly simple to comprehend which significantly reduces the risk of mis-selling. Unlike ULIPs these products are sum assured based and not market linked products leaving much less scope for speculative selling and buying behaviour.
In a nut shell
World over Traditional Par Insurance is much more popular than ULIPs and its variants. Customers in western markets who have seen market swings empty out retirement funds have come to appreciate the ’risk-return spectrum’ of insurance plans as well as the difference between investment and savings.
Traditional plans provide the dual advantage of guaranteed returns and protection for long term savings to consumers. This is why traditional participating products are recognised as ideal vehicles for long term savings and protection, even in the Indian context.
— Author is, Director & Head - Products and Persistency Management, Max New York Life Insurance
LIC collections make up for other’s slack
20-Mar-2011
Source : Business Standard
On the back of a surge from the Life Insurance Corporation of India (LIC), the first-year premium collection by life insurance companies increased by 23.8 per cent to Rs 1,03,878 crore in the April-February period of the current financial year.
In this period, LIC collected Rs 73,122 crore by selling new policies, up 34.6 per cent compared to Rs 54,320 crore collected in the corresponding period last year.
During April-February 2009-10, the total first-year premium collected by the industry was Rs 83,891 crore.
According to data collected by the Insurance Regulatory and Development Authority (Irda), during the first 11 months of this financial year, private insurers posted a marginal four per cent rise in premium collection to Rs 30,756 crore, compared to Rs 29,571 crore in the corresponding period last year.
The industry recorded seven per cent growth in premium collection on a month-on-month basis in February to Rs 8,344 crore, compared to Rs 8,301 crore collected in January 2011.
Industry sales took a hit after new norms were introduced in September and most of the growth in terms of premium income happened in the first six months of 2010-11.
The premium collection in January was down by 14.5 per cent, compared to Rs 9,709 crore in December. The new business income in November 2010 was Rs 7,282 crore.
In February, LIC’s new premium collection was up by 12.9 per cent on a year-on-year basis, whereas for its private peers the collection dipped by five per cent.
SBI Life, the largest private life insurer in terms of new business premium income, collected premiums worth Rs 5,845 crore during the first 11 months of 2010-11, up by 1.9 per cent compared to Rs 5,267 crore collected in the corresponding period a year earlier.
Source : Business Standard
On the back of a surge from the Life Insurance Corporation of India (LIC), the first-year premium collection by life insurance companies increased by 23.8 per cent to Rs 1,03,878 crore in the April-February period of the current financial year.
In this period, LIC collected Rs 73,122 crore by selling new policies, up 34.6 per cent compared to Rs 54,320 crore collected in the corresponding period last year.
During April-February 2009-10, the total first-year premium collected by the industry was Rs 83,891 crore.
According to data collected by the Insurance Regulatory and Development Authority (Irda), during the first 11 months of this financial year, private insurers posted a marginal four per cent rise in premium collection to Rs 30,756 crore, compared to Rs 29,571 crore in the corresponding period last year.
The industry recorded seven per cent growth in premium collection on a month-on-month basis in February to Rs 8,344 crore, compared to Rs 8,301 crore collected in January 2011.
Industry sales took a hit after new norms were introduced in September and most of the growth in terms of premium income happened in the first six months of 2010-11.
The premium collection in January was down by 14.5 per cent, compared to Rs 9,709 crore in December. The new business income in November 2010 was Rs 7,282 crore.
In February, LIC’s new premium collection was up by 12.9 per cent on a year-on-year basis, whereas for its private peers the collection dipped by five per cent.
SBI Life, the largest private life insurer in terms of new business premium income, collected premiums worth Rs 5,845 crore during the first 11 months of 2010-11, up by 1.9 per cent compared to Rs 5,267 crore collected in the corresponding period a year earlier.
More options soon in unit-linked pension plans
20-Mar-2011
Source : Business Line
If you are planning to invest in a unit-linked pension plan, you will soon have more choice of products with a possibility of higher yields.
“We want to expand the portfolio of pension plans. Every product will continue to have a minimum guarantee for the policyholders,” Mr Hari Narayan, Chairman, Insurance Regulatory and Development Authority (IRDA), told Business Line.
Since the new regulatory regime for Unit Linked Insurance Plans (ULIPs) from September 1, 2010, there is only one pension product with a minimum guaranteed annualised return of 4.5 per cent on maturity as of now.
According to industry feedback, the existing product is attracting neither policyholders nor insurers.
To offer a minimum guarantee, the insurers are setting aside 5-6 per cent of every premium as a reserve and are only investing the rest, mostly in the government instruments which offer not higher than 8-9 per cent interest, to play safe.
From a policyholder perspective, this kind of traditional investment pattern may not be attractive over a long period of time in view of the lesser returns.
As per IRDA data, since September 2010 till date, the sales of unit-linked pension plans have been less than a lakh, which explains lack of interest both from the policyholder and the insurer in this segment.
“The set of products we are planning to bring in will have more flexible guarantee options in the place of existing one on maturity,” the IRDA Chairman said.
There could as well be a combination of guarantees to suit varied perspectives of customers on risk and returns from a long-term product.
Choice-based exposure
Once introduced, the new norms on pension products would allow a pension plan policyholder to have a choice-based exposure to equity market in the expectation of a higher return.
The trade-off however would be a minimum guarantee of 4.5 per cent on maturity (which also is linked to the reverse repo rate as insurers should offer 50 extra basis points over this as return), as the minimum guarantee clause is likely to be ‘tweaked’ by the IRDA.
“Whatever may the product, there will be minimum guarantee on the capital to ensure policyholder protection,” Mr Hari Narayan said, while not sharing exact details.
Source : Business Line
If you are planning to invest in a unit-linked pension plan, you will soon have more choice of products with a possibility of higher yields.
“We want to expand the portfolio of pension plans. Every product will continue to have a minimum guarantee for the policyholders,” Mr Hari Narayan, Chairman, Insurance Regulatory and Development Authority (IRDA), told Business Line.
Since the new regulatory regime for Unit Linked Insurance Plans (ULIPs) from September 1, 2010, there is only one pension product with a minimum guaranteed annualised return of 4.5 per cent on maturity as of now.
According to industry feedback, the existing product is attracting neither policyholders nor insurers.
To offer a minimum guarantee, the insurers are setting aside 5-6 per cent of every premium as a reserve and are only investing the rest, mostly in the government instruments which offer not higher than 8-9 per cent interest, to play safe.
From a policyholder perspective, this kind of traditional investment pattern may not be attractive over a long period of time in view of the lesser returns.
As per IRDA data, since September 2010 till date, the sales of unit-linked pension plans have been less than a lakh, which explains lack of interest both from the policyholder and the insurer in this segment.
“The set of products we are planning to bring in will have more flexible guarantee options in the place of existing one on maturity,” the IRDA Chairman said.
There could as well be a combination of guarantees to suit varied perspectives of customers on risk and returns from a long-term product.
Choice-based exposure
Once introduced, the new norms on pension products would allow a pension plan policyholder to have a choice-based exposure to equity market in the expectation of a higher return.
The trade-off however would be a minimum guarantee of 4.5 per cent on maturity (which also is linked to the reverse repo rate as insurers should offer 50 extra basis points over this as return), as the minimum guarantee clause is likely to be ‘tweaked’ by the IRDA.
“Whatever may the product, there will be minimum guarantee on the capital to ensure policyholder protection,” Mr Hari Narayan said, while not sharing exact details.
Friday, March 11, 2011
Insurance firm indicted for unfair trade practices
Jehangir B Gai
Publication: The Times Of India Mumbai; Date:2011 Mar 10; Section:Times City;
Page Number 12
Bajaj Allianz insurance indicted for unfair trade practices Backdrop:
Companies often lure consumers with attractive schemes, but later try to
renege on their commitment. In a significant ruling, the Central Mumbai
District Forum bench, comprising president Nalin Majithia and Bhavana Pisal,
came down heavily on Bajaj Allianz and directed the insurance company to pay
penal and deterrent compensation, which is rarely, if ever, done.
Case study: Onkar Prasad Dixit, a senior official of Sahara Commercial
Corporation, had taken a policy known as Bajaj Allianz Swarna Vishranti
Pension Plan from Bajaj Allianz General Insurance. The policy was taken on
July 19, 2004 with a sum insured of Rs 26 lakh, plus bonus. Although a yearly
premium of Rs 6,17,929 was payable, the insurance company offered a rebate
of Rs 18,870, thereby reducing the premium to Rs 5,99,099. This amount had
to be paid every year for a period of five years. Thereafter, the insurance
company would pay a monthly pension of Rs 22,944 during the lifetime of the
insured, and on his demise, the amount would be paid to his wife. However,
the detailed terms and conditions of the policy were not furnished to Dixit.
Right from 2004 till August 2009, Dixit kept paying the annual premium.
Even though the premium for five years would total Rs 29,95,295, the
insurance company collected Rs 30,20,128, overcharging Rs 24,832. Yet,
when Dixit asked the insurance company to release the benefits, available
under the policy, evasive excuses were given to avoid payment.
After persistent follow-up, Bajaj Allianz informed Dixit that the company had
made a mistake in stating the benefits under the policy. The insurance
company also claimed that its Swarna Vishranti Pension Plan policies had been
withdrawn after obtaining permission from the Insurance Regulatory
Development Authority (IRDA) and hence Dixit’s policy automatically stood
cancelled. However, the company offered to refund Rs 29,35,599.
Dixit then took the LIC Jeevan Akshay VII policy, and asked Bajaj Allianz to
transfer the premium paid by him to LIC. Even though this was done, there
was a difference in the benefits available under the LIC’s policy, which had a
lower annuity amount, resulting in a loss of Rs 5,78,360 to Dixit. In November
2009, Dixit filed a complaint before the Central Mumbai District Forum.
The insurance company defended itself by stating the complaint was
misconceived because the policy had been withdrawn after taking IRDA’s
permission and the premium received had been transferred to the LIC on
Dixit’s request for another policy. In his order dated January 29 , Nalin
Majithia, president of the forum, observed that the insurance company had
failed to produce any proof or documents to show that the IRDA had granted
permission for the withdrawal of the policy. It noted that the insurance
company had misled the consumers by offering an attractive policy, but
refusing to honour its commitment, after collecting nearly Rs 30 lakh as
premium. The forum indicted Bajaj Allianz of having indulged in unfair trade
practice and held that there was deficiency in service. The forum observed
that it was necessary to award heavy compensation as a deterrent so that
such unfair trade practices would not be repeated in the future.
Accordingly the forum directed the insurance company to pay a penal
compensation of Rs 4 lakh to Dixit. The forum also directed Bajaj Allianz to
refund the excess premium of Rs 24,832 overcharged by it. It also directed
Bajaj Allianz to pay Rs 5,78,360 to compensate Dixit for the loss caused by the
difference in the annuity amounts between the policy issued by Bajaj Allianz
and that issued by LIC. An interest of 9% per annum on these amounts was
also granted and costs of Rs 10,000 were awarded.It is hoped that the new trend of awarding penal or deterrent compensation will gain momentum. This is the only way to improve the system. Otherwise,
service providers will continue to dupe the vast majority of consumers.
Publication: The Times Of India Mumbai; Date:2011 Mar 10; Section:Times City;
Page Number 12
Bajaj Allianz insurance indicted for unfair trade practices Backdrop:
Companies often lure consumers with attractive schemes, but later try to
renege on their commitment. In a significant ruling, the Central Mumbai
District Forum bench, comprising president Nalin Majithia and Bhavana Pisal,
came down heavily on Bajaj Allianz and directed the insurance company to pay
penal and deterrent compensation, which is rarely, if ever, done.
Case study: Onkar Prasad Dixit, a senior official of Sahara Commercial
Corporation, had taken a policy known as Bajaj Allianz Swarna Vishranti
Pension Plan from Bajaj Allianz General Insurance. The policy was taken on
July 19, 2004 with a sum insured of Rs 26 lakh, plus bonus. Although a yearly
premium of Rs 6,17,929 was payable, the insurance company offered a rebate
of Rs 18,870, thereby reducing the premium to Rs 5,99,099. This amount had
to be paid every year for a period of five years. Thereafter, the insurance
company would pay a monthly pension of Rs 22,944 during the lifetime of the
insured, and on his demise, the amount would be paid to his wife. However,
the detailed terms and conditions of the policy were not furnished to Dixit.
Right from 2004 till August 2009, Dixit kept paying the annual premium.
Even though the premium for five years would total Rs 29,95,295, the
insurance company collected Rs 30,20,128, overcharging Rs 24,832. Yet,
when Dixit asked the insurance company to release the benefits, available
under the policy, evasive excuses were given to avoid payment.
After persistent follow-up, Bajaj Allianz informed Dixit that the company had
made a mistake in stating the benefits under the policy. The insurance
company also claimed that its Swarna Vishranti Pension Plan policies had been
withdrawn after obtaining permission from the Insurance Regulatory
Development Authority (IRDA) and hence Dixit’s policy automatically stood
cancelled. However, the company offered to refund Rs 29,35,599.
Dixit then took the LIC Jeevan Akshay VII policy, and asked Bajaj Allianz to
transfer the premium paid by him to LIC. Even though this was done, there
was a difference in the benefits available under the LIC’s policy, which had a
lower annuity amount, resulting in a loss of Rs 5,78,360 to Dixit. In November
2009, Dixit filed a complaint before the Central Mumbai District Forum.
The insurance company defended itself by stating the complaint was
misconceived because the policy had been withdrawn after taking IRDA’s
permission and the premium received had been transferred to the LIC on
Dixit’s request for another policy. In his order dated January 29 , Nalin
Majithia, president of the forum, observed that the insurance company had
failed to produce any proof or documents to show that the IRDA had granted
permission for the withdrawal of the policy. It noted that the insurance
company had misled the consumers by offering an attractive policy, but
refusing to honour its commitment, after collecting nearly Rs 30 lakh as
premium. The forum indicted Bajaj Allianz of having indulged in unfair trade
practice and held that there was deficiency in service. The forum observed
that it was necessary to award heavy compensation as a deterrent so that
such unfair trade practices would not be repeated in the future.
Accordingly the forum directed the insurance company to pay a penal
compensation of Rs 4 lakh to Dixit. The forum also directed Bajaj Allianz to
refund the excess premium of Rs 24,832 overcharged by it. It also directed
Bajaj Allianz to pay Rs 5,78,360 to compensate Dixit for the loss caused by the
difference in the annuity amounts between the policy issued by Bajaj Allianz
and that issued by LIC. An interest of 9% per annum on these amounts was
also granted and costs of Rs 10,000 were awarded.It is hoped that the new trend of awarding penal or deterrent compensation will gain momentum. This is the only way to improve the system. Otherwise,
service providers will continue to dupe the vast majority of consumers.
LIC continues to ride on Ulips
09-Mar-2011
Source : Business Standard
All 3 Ulips launched post-regulation see robust growth, outperform private peers.
All three unit-linked plans (Ulips) launched by Life Insurance Corporation (LIC) since September have shown robust growth. That has given the company an edge over competitors, which, in sharp contrast, have seen a dip in their Ulips portfolio since the Insurance Regulatory and Development Authority came out with stricter regulation governing these instruments six months ago.
LIC has sold 1.16 million policies and collected Rs5,600 crore under its unit-linked Endowment Plus plan, launched in September. Similarly, the unit-linked pension plan, Pension Plus, has seen 100,000 policy sales, with Rs500 crore of premium collection.
“The Endowment Plus is the largest selling policy this year. Even the recently launched guaranteed NAV plan, Samridhi Plus, has been received very well,” the official said. “In the first 20 days, we have already sold more than 75,000 policies under Samridhi Plus and collected Rs300 crore.”
In the new guidelines, which took effect from September 1, Irda increased the lock-in period for Ulips from the existing three years to five years. And, all Ulips other than pension and annuity products were to provide a minimum mortality cover or health cover. This has resulted in a sharp drop in sales of Ulips, which had constituted more than 90 per cent of the sales of life insurance companies.
Yet, while private companies are still trying to find suitable answers under the new regime, LIC seems a big gainer. According to Irda data, during the first 10 months of 2010-11, LIC collected Rs67,135 crore by selling new policies, up 37 per cent compared to the Rs49,019 crore collected in the corresponding period a year before.
“All products under the new guidelines have been performing very well and this shows if a proper product can be developed, sales will not be an issue,” said an LIC official.
Private life insurance companies, on the other hand, have seen sluggish growth in the financial year so far. In the first 10 months, they collected Rs27,865 crore by selling new policies, a modest 5.8 per cent increase as against Rs26,328 crore collected a year before.
“The product mix has changed quite significantly. Now, 50 per cent of our business is coming from traditional plans. Ulip sale has been on a decline and we are finding no takers for our pension plans,” said a top official of a Delhi-based life insurance company.
“Volumes have come down, as we had to re-approve all our products under the new guidelines, which affected our sales,” said a senior official from another company.
Source : Business Standard
All 3 Ulips launched post-regulation see robust growth, outperform private peers.
All three unit-linked plans (Ulips) launched by Life Insurance Corporation (LIC) since September have shown robust growth. That has given the company an edge over competitors, which, in sharp contrast, have seen a dip in their Ulips portfolio since the Insurance Regulatory and Development Authority came out with stricter regulation governing these instruments six months ago.
LIC has sold 1.16 million policies and collected Rs5,600 crore under its unit-linked Endowment Plus plan, launched in September. Similarly, the unit-linked pension plan, Pension Plus, has seen 100,000 policy sales, with Rs500 crore of premium collection.
“The Endowment Plus is the largest selling policy this year. Even the recently launched guaranteed NAV plan, Samridhi Plus, has been received very well,” the official said. “In the first 20 days, we have already sold more than 75,000 policies under Samridhi Plus and collected Rs300 crore.”
In the new guidelines, which took effect from September 1, Irda increased the lock-in period for Ulips from the existing three years to five years. And, all Ulips other than pension and annuity products were to provide a minimum mortality cover or health cover. This has resulted in a sharp drop in sales of Ulips, which had constituted more than 90 per cent of the sales of life insurance companies.
Yet, while private companies are still trying to find suitable answers under the new regime, LIC seems a big gainer. According to Irda data, during the first 10 months of 2010-11, LIC collected Rs67,135 crore by selling new policies, up 37 per cent compared to the Rs49,019 crore collected in the corresponding period a year before.
“All products under the new guidelines have been performing very well and this shows if a proper product can be developed, sales will not be an issue,” said an LIC official.
Private life insurance companies, on the other hand, have seen sluggish growth in the financial year so far. In the first 10 months, they collected Rs27,865 crore by selling new policies, a modest 5.8 per cent increase as against Rs26,328 crore collected a year before.
“The product mix has changed quite significantly. Now, 50 per cent of our business is coming from traditional plans. Ulip sale has been on a decline and we are finding no takers for our pension plans,” said a top official of a Delhi-based life insurance company.
“Volumes have come down, as we had to re-approve all our products under the new guidelines, which affected our sales,” said a senior official from another company.
Insurers may get to trade in equity futures and options
09-Mar-2011
Source : The Economic Times
Insurance Regulatory and Development Authority, or Irda, plans to permit insurers to trade in equity futures and options contracts , which will help the companies protect returns from equity-linked products against sharp stock market declines.
"The rules will be shaped to allow insurers to use equity derivatives for hedging risks only and not for speculating," a senior Irda official told ET on condition of anonymity. The proposal, currently being vetted, will be evaluated by Irda’s internal committee on investments soon, the official said. Initially, only unit-linked insurance products, or Ulips, which form over 60% of the local insurance industry’s total assets under management of 14.7 lakh crore, will be allowed to trade in equity futures and options, he said. The entire corpus of Ulips can be invested in stocks depending on the mandate.
"Since we manage a large portfolio, equity hedging will help reduce the risk when there is a downside," said Sashi Krishnan, chief investment officer, Bajaj Allianz Life Insurance .
To start with, Irda may cap trading in futures and options by insurance companies at 5% of their assets, said a top official at a state bank-owned insurance company, who did not want to be named. The regulator would raise the limit and give insurers more flexibility to trade once companies are familiar with equity derivative instruments, the official said. Insurers are allowed to use interest rate futures to hedge risks.
Mr Krishnan said several issues, including those related to accounting, need to be addressed before allowing insurers to trade in equity derivatives.
Insurance industry officials expect Irda to follow a roadmap similar to that set out by the Securities and Exchange Board of India, or Sebi, for mutual funds to trade in equity futures and options. In 2002, the securities market regulator permitted mutual funds to use derivatives only to hedge. Three years later, Sebi allowed participation by mutual funds in derivatives on par with foreign investors. The regulator, however, barred mutual funds from selling options last year. Mutual funds have assets worth 6 lakh crore under management.
The move to allow insurance companies to trade in futures and options will boost trading volumes in the equity derivatives market, but only gradually.
"If insurers are allowed to use derivatives, it would only be for prospective schemes. So, insurers would start contributing to the volumes only over a period of time," said Rajesh Baheti, managing director of Mumbai-based Crosseas Capital.
Average daily turnover on the National Stock Exchange’s derivatives segment is roughly 1.13 lakh crore in 2010-11, as against 72,000 crore in 2009-10.
Leading brokers, whose derivatives business have been impacted after Sebi barred mutual funds from selling options, have been nudging insurance companies to push Irda to allow them to participate in the equity derivatives market.
Source : The Economic Times
Insurance Regulatory and Development Authority, or Irda, plans to permit insurers to trade in equity futures and options contracts , which will help the companies protect returns from equity-linked products against sharp stock market declines.
"The rules will be shaped to allow insurers to use equity derivatives for hedging risks only and not for speculating," a senior Irda official told ET on condition of anonymity. The proposal, currently being vetted, will be evaluated by Irda’s internal committee on investments soon, the official said. Initially, only unit-linked insurance products, or Ulips, which form over 60% of the local insurance industry’s total assets under management of 14.7 lakh crore, will be allowed to trade in equity futures and options, he said. The entire corpus of Ulips can be invested in stocks depending on the mandate.
"Since we manage a large portfolio, equity hedging will help reduce the risk when there is a downside," said Sashi Krishnan, chief investment officer, Bajaj Allianz Life Insurance .
To start with, Irda may cap trading in futures and options by insurance companies at 5% of their assets, said a top official at a state bank-owned insurance company, who did not want to be named. The regulator would raise the limit and give insurers more flexibility to trade once companies are familiar with equity derivative instruments, the official said. Insurers are allowed to use interest rate futures to hedge risks.
Mr Krishnan said several issues, including those related to accounting, need to be addressed before allowing insurers to trade in equity derivatives.
Insurance industry officials expect Irda to follow a roadmap similar to that set out by the Securities and Exchange Board of India, or Sebi, for mutual funds to trade in equity futures and options. In 2002, the securities market regulator permitted mutual funds to use derivatives only to hedge. Three years later, Sebi allowed participation by mutual funds in derivatives on par with foreign investors. The regulator, however, barred mutual funds from selling options last year. Mutual funds have assets worth 6 lakh crore under management.
The move to allow insurance companies to trade in futures and options will boost trading volumes in the equity derivatives market, but only gradually.
"If insurers are allowed to use derivatives, it would only be for prospective schemes. So, insurers would start contributing to the volumes only over a period of time," said Rajesh Baheti, managing director of Mumbai-based Crosseas Capital.
Average daily turnover on the National Stock Exchange’s derivatives segment is roughly 1.13 lakh crore in 2010-11, as against 72,000 crore in 2009-10.
Leading brokers, whose derivatives business have been impacted after Sebi barred mutual funds from selling options, have been nudging insurance companies to push Irda to allow them to participate in the equity derivatives market.
Tuesday, March 8, 2011
Returns on Ulip pension plans to rise to 6% in FY12
05-Mar-2011
Source : The Economic Times
Returns on Unit-linked pension products are set to rise to 6% next fiscal after the central bank raised benchmark policy rates in 2010-11 to combat inflation.
The Insurance Regulatory and Development Authority , or Irda, the insurance watchdog had benchmarked that returns on these products should be 0.5%, or 50 basis points, over the reverse repo rate, the rate at which the Reserve Bank of India absorbs funds from banks.
The re-verse repo rate is now 5.75% after a series of rate increases. The Irda had mandated a 4.5% return on unit-linked pension plans last year and had also said that rates would be reviewed annually and vary between 3-6%.
Insurance companies are unhappy with the mandated returns saying that offering a guarantee will hurt their profitability. The share of unit-linked pension products in the overall product mix of insurers has fallen sharply. For insurers such as HDFC Life , the share of pension products which contributed over 30% to overall premium income has dropped to less than 1% after September.
“The structure of the product is such that it is a debt product. Why would anyone buy a product which is offering a return of 4.5% or 6% when inflation is at 9-10 % and the economy is growing at 9%? It is not a good proposition both from the insurer and the customer’s point of view,” said Amitabh Chaudhary MD and CEO of HDFC Life.
Compulsory life cover with pension product and an annuity of two-third of the accumulated sum are also discouraging sales for such products ac-cording to insurance firms. In the revised structure, new offerings by private insurance companies have been restricted to only single-premium, Ulips LIC is the only insurer to have a regular premium pension product guaranteeing a 4.5% return on an annual basis.
Source : The Economic Times
Returns on Unit-linked pension products are set to rise to 6% next fiscal after the central bank raised benchmark policy rates in 2010-11 to combat inflation.
The Insurance Regulatory and Development Authority , or Irda, the insurance watchdog had benchmarked that returns on these products should be 0.5%, or 50 basis points, over the reverse repo rate, the rate at which the Reserve Bank of India absorbs funds from banks.
The re-verse repo rate is now 5.75% after a series of rate increases. The Irda had mandated a 4.5% return on unit-linked pension plans last year and had also said that rates would be reviewed annually and vary between 3-6%.
Insurance companies are unhappy with the mandated returns saying that offering a guarantee will hurt their profitability. The share of unit-linked pension products in the overall product mix of insurers has fallen sharply. For insurers such as HDFC Life , the share of pension products which contributed over 30% to overall premium income has dropped to less than 1% after September.
“The structure of the product is such that it is a debt product. Why would anyone buy a product which is offering a return of 4.5% or 6% when inflation is at 9-10 % and the economy is growing at 9%? It is not a good proposition both from the insurer and the customer’s point of view,” said Amitabh Chaudhary MD and CEO of HDFC Life.
Compulsory life cover with pension product and an annuity of two-third of the accumulated sum are also discouraging sales for such products ac-cording to insurance firms. In the revised structure, new offerings by private insurance companies have been restricted to only single-premium, Ulips LIC is the only insurer to have a regular premium pension product guaranteeing a 4.5% return on an annual basis.
Wednesday, March 2, 2011
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