23-Aug-2011
Source : PTI
Total assets managed by life insurance companies went up by 11.38 per cent to cross Rs 15 lakh crore mark in the first quarter of 2011-12.
As many as 22 life insurance companies had assets under management (AUM), including equity and fixed income assets, of Rs 15, 04,629 crore in April-June 2011 quarter, data compiled by industry association Life Insurance Council said.
The AUM of these players was Rs 13,50,850 crore at the end of the June quarter, 2010.
The increase in AUM is helped by a record 13 per cent rise in renewal premium income to Rs 37,221 crore during April-June quarter 2011. Renewal premium of these companies was Rs 32,959 crore in the same period last year.
"This means increasing number of policy-holders are renewing their respective policies, indicating that the policy-holders are taking an informed decision...," it said.
However, the total premium income of the companies declined by 5.18 per cent to Rs 55,523 crore from Rs 58,559 crore in the year ago period.
Also, the industry’s new business premium income declined 28 per cent to Rs 18,282 crore during the quarter under review against Rs 25,522 crore last year.
The council’s data further revealed that the number of life insurance agents declined to 24.27 lakh from 28.16 lakh in the year ago period.
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Thursday, August 25, 2011
LIC remains wary of realty and telecom stocks: S Bandhopadhyay, equity investment chief
22-Aug-2011
Source : The Economic Times
India’s biggest domestic institutional investor, Life Insurance Corporation of India (LIC), is bullish on oil and cement sector stocks which, it says, have the potential to outperform the benchmark indices. The country’s biggest insurer, which has more than 12 lakh crore assets under management, will stay away from realty stocks, said S Bandhopadhyay, LIC’s chief investment-equity officer.
The public sector behemoth will predominantly invest in companies with good corporate governance. "There are corporate governance issues in most of the companies. We are looking to invest in companies with good corporate governance," he said. LIC had pared its investment in Satyam Computer after the founder confessed of fraud. It later increased its stake and now holds 3.18% in the company.
Although LIC does not have any sector-specific preference, it has decided to stay away from realty. "Apart from realty, we are investing in all sectors. We have stayed away from realty for last two years," said Badhopadhyay.
On the banking sector, he said that pressure on Indian lenders will remain as the Reserve Bank of India continues with monetary tightening to fight stubborn price pressures. "Banks will be under pressure because of rate hikes. But if we see specific banks at attractive rates, we buy," he said. LIC has holdings in most banks and has significant stake in ICICI Bank, Axis Bank, Syndicate Bank.
The corporation is cautious about the telecom sector hit by the second generation spectrum allocation scam. "There are very few stocks looking good and there is so much uncertainty till the 2G controversies go on. Bharti Airtel is one stock, which has consistently outperformed," he said.
LIC’s role in saving public issues is often talked about but the corporation has taken a decision to stay away from the primary market for some time. "Most of time even if demand is 40-45 times, the actual allocation is very low," he said.
LIC is sitting on low cash levels of 3-4% compared with other private sector insurance companies, though the total asset under management of the corporation has gone up.
"I will sell only when I get the right valuation. It is time for some profit-booking also," Badhopadhyay said. "We are on both sides of the market."
LIC is bullish on fixed-income instruments. "Mostly money is going in corporate bonds, CDs," he said. Insurers are required to invest 50% of funds from traditional plans to government securities, 35% in approved securities and 15% in infrastructure. In infrastructure, insurers can only invest in projects with AA rating. Since there are very few AA-rated infrastructure projects insurers fail to touch the infrastructure ceiling.
Source : The Economic Times
India’s biggest domestic institutional investor, Life Insurance Corporation of India (LIC), is bullish on oil and cement sector stocks which, it says, have the potential to outperform the benchmark indices. The country’s biggest insurer, which has more than 12 lakh crore assets under management, will stay away from realty stocks, said S Bandhopadhyay, LIC’s chief investment-equity officer.
The public sector behemoth will predominantly invest in companies with good corporate governance. "There are corporate governance issues in most of the companies. We are looking to invest in companies with good corporate governance," he said. LIC had pared its investment in Satyam Computer after the founder confessed of fraud. It later increased its stake and now holds 3.18% in the company.
Although LIC does not have any sector-specific preference, it has decided to stay away from realty. "Apart from realty, we are investing in all sectors. We have stayed away from realty for last two years," said Badhopadhyay.
On the banking sector, he said that pressure on Indian lenders will remain as the Reserve Bank of India continues with monetary tightening to fight stubborn price pressures. "Banks will be under pressure because of rate hikes. But if we see specific banks at attractive rates, we buy," he said. LIC has holdings in most banks and has significant stake in ICICI Bank, Axis Bank, Syndicate Bank.
The corporation is cautious about the telecom sector hit by the second generation spectrum allocation scam. "There are very few stocks looking good and there is so much uncertainty till the 2G controversies go on. Bharti Airtel is one stock, which has consistently outperformed," he said.
LIC’s role in saving public issues is often talked about but the corporation has taken a decision to stay away from the primary market for some time. "Most of time even if demand is 40-45 times, the actual allocation is very low," he said.
LIC is sitting on low cash levels of 3-4% compared with other private sector insurance companies, though the total asset under management of the corporation has gone up.
"I will sell only when I get the right valuation. It is time for some profit-booking also," Badhopadhyay said. "We are on both sides of the market."
LIC is bullish on fixed-income instruments. "Mostly money is going in corporate bonds, CDs," he said. Insurers are required to invest 50% of funds from traditional plans to government securities, 35% in approved securities and 15% in infrastructure. In infrastructure, insurers can only invest in projects with AA rating. Since there are very few AA-rated infrastructure projects insurers fail to touch the infrastructure ceiling.
Friday, August 12, 2011
Lessons from a smart investor named LIC
12-Aug-2011
Source : Equitymaster.com
The world stock markets saw its worst fall since 2008 after Standard and Poor (S&P) downgraded United States credit rating by one notch to AA+. This sent shockwaves across world markets and ignited fears of a double dip recession. The debt situation in Europe also added spark to the fire. Indian markets also followed the world markets and saw a sharp downfall.
But in the middle of all the panic selling, there were few smart investors who saw this as an opportunity to buy heavily and make money.
One such smart investor was Life India Corporation (LIC). LIC, the country’s biggest investor has often been used by the government to stabilize the stock markets whenever it gets wobbly. LIC bought heavily when the markets crashed in the last three days. LIC had bought stocks worth Rs 1.2 bn over the first four months of this fiscal but raised it to Rs 3.3 bn in the last three days alone when markets crashed and valuations became more attractive.
So is there any lesson one should learn from LIC? If one were to go by history and bought into the Indian stock market in September 2001 just after the 9/11 attacks, one would have made 84% over the next three years and 316% in five years. And if one was bold enough to buy Indian stocks during the collapse of the Lehman Brothers in September 2008; one would have made 61% in three years. There is no rocket science to buying when everyone around you is selling. One should always remember good returns will materialize over time on investments made at cheap valuations.
While investing, remember always that the stock price is not real. It is what other people perceive to be real. When investing, understand the company and the industry it is in. You can always grab a bargain when the stock price falls. The long term fundamentals are still the same but you are getting it at a cheaper rate. But if you put your money without knowing company’s financials or even the type of industry, then you might as well put your money on a casino table, because the odds of your winning are just about the same.
Source : Equitymaster.com
The world stock markets saw its worst fall since 2008 after Standard and Poor (S&P) downgraded United States credit rating by one notch to AA+. This sent shockwaves across world markets and ignited fears of a double dip recession. The debt situation in Europe also added spark to the fire. Indian markets also followed the world markets and saw a sharp downfall.
But in the middle of all the panic selling, there were few smart investors who saw this as an opportunity to buy heavily and make money.
One such smart investor was Life India Corporation (LIC). LIC, the country’s biggest investor has often been used by the government to stabilize the stock markets whenever it gets wobbly. LIC bought heavily when the markets crashed in the last three days. LIC had bought stocks worth Rs 1.2 bn over the first four months of this fiscal but raised it to Rs 3.3 bn in the last three days alone when markets crashed and valuations became more attractive.
So is there any lesson one should learn from LIC? If one were to go by history and bought into the Indian stock market in September 2001 just after the 9/11 attacks, one would have made 84% over the next three years and 316% in five years. And if one was bold enough to buy Indian stocks during the collapse of the Lehman Brothers in September 2008; one would have made 61% in three years. There is no rocket science to buying when everyone around you is selling. One should always remember good returns will materialize over time on investments made at cheap valuations.
While investing, remember always that the stock price is not real. It is what other people perceive to be real. When investing, understand the company and the industry it is in. You can always grab a bargain when the stock price falls. The long term fundamentals are still the same but you are getting it at a cheaper rate. But if you put your money without knowing company’s financials or even the type of industry, then you might as well put your money on a casino table, because the odds of your winning are just about the same.
Thursday, August 11, 2011
How Can Life Insurance Become the Best Legacy You Can Leave to Your Family?
09-Aug-2011
Source : Ezine Articles
By Benjie Tan,
When it comes to planning for you and your family’s financial stability in the future, the best time to do it is now. For most bread-winners, it is an upmost priority to ensure that they can provide the basic needs for their family. But in an event that a family’s provider would untimely pass away, there is no doubt that the surviving family members will be financially crippled. One of the best ways of at least to financially prepare your family and to somehow cope up with the family’s main source of income is for the provider to purchase a life insurance.
Basically, a life insurance is a form of agreement between an individual and an insurance company wherein a set of premium would be purchased. In turn, they will guarantee that they will provide a large amount of money for your beneficiaries by the time the provider passes away. With the help of the money that the surviving members will receive, will somehow provide the financial compensation for their loss.
However, a life insurance is not just a mere financial compensation for the loss of a family’s provider. To further understand how life insurance works for you, here are the examples:
-First and foremost, it functions as a protection for your family’s financial stability as well as their lifestyle. With the loss of the family’s income provider, it is less likely that the family can still continue the current lifestyle. Through this type of insurance, one can rest assure that the family that may be left behind can live a comfortable life.
- Secondly, it can prepare your family’s life events. For instance, you can purchase a life insurance that may potentially cover the financial needs. An example of such instance is for your children’s tuition cost for college of the family when you are gone.
- The third purpose may be as an investment vehicle. When you purchase a life insurance, it can become a risk-free investment to such that your money could potentially turn into a large amount in cases of untimely death that may be enough take care of the family.
- The fourth use is to be a key man insurance because it will protect you, your partner as well as your business. In cases that a business partner passes away, this insurance could be used to ensure that the surviving family members will have enough money to buy the share of the business thus maintaining the same income even if the original provider may no longer be around.
- Lastly, this can be used as a charitable giving as well as inheritance. If ever you have a loved one or a charitable institution you want to share what you have when you pass away, then this is the best option to take. You can purchase a life insurance and have the charitable institution or a loved one as the beneficiary. From here, you can leave them a legacy from the money you have earned.
With the different purposes of availing a life insurance identified, the next thing left to do is to look for the right insurance company that can best provide you with a premium that best fit your budget, plans as well needs.
Source : Ezine Articles
By Benjie Tan,
When it comes to planning for you and your family’s financial stability in the future, the best time to do it is now. For most bread-winners, it is an upmost priority to ensure that they can provide the basic needs for their family. But in an event that a family’s provider would untimely pass away, there is no doubt that the surviving family members will be financially crippled. One of the best ways of at least to financially prepare your family and to somehow cope up with the family’s main source of income is for the provider to purchase a life insurance.
Basically, a life insurance is a form of agreement between an individual and an insurance company wherein a set of premium would be purchased. In turn, they will guarantee that they will provide a large amount of money for your beneficiaries by the time the provider passes away. With the help of the money that the surviving members will receive, will somehow provide the financial compensation for their loss.
However, a life insurance is not just a mere financial compensation for the loss of a family’s provider. To further understand how life insurance works for you, here are the examples:
-First and foremost, it functions as a protection for your family’s financial stability as well as their lifestyle. With the loss of the family’s income provider, it is less likely that the family can still continue the current lifestyle. Through this type of insurance, one can rest assure that the family that may be left behind can live a comfortable life.
- Secondly, it can prepare your family’s life events. For instance, you can purchase a life insurance that may potentially cover the financial needs. An example of such instance is for your children’s tuition cost for college of the family when you are gone.
- The third purpose may be as an investment vehicle. When you purchase a life insurance, it can become a risk-free investment to such that your money could potentially turn into a large amount in cases of untimely death that may be enough take care of the family.
- The fourth use is to be a key man insurance because it will protect you, your partner as well as your business. In cases that a business partner passes away, this insurance could be used to ensure that the surviving family members will have enough money to buy the share of the business thus maintaining the same income even if the original provider may no longer be around.
- Lastly, this can be used as a charitable giving as well as inheritance. If ever you have a loved one or a charitable institution you want to share what you have when you pass away, then this is the best option to take. You can purchase a life insurance and have the charitable institution or a loved one as the beneficiary. From here, you can leave them a legacy from the money you have earned.
With the different purposes of availing a life insurance identified, the next thing left to do is to look for the right insurance company that can best provide you with a premium that best fit your budget, plans as well needs.
LIC buys double as global debt worry-triggered selloff makes valuations attractive
10-Aug-2011
Source : The Economic Times
Life Insurance Corp of India, the government’s institution of choice to stabilise the stock market whenever it gets wobbly, has more than doubled stock purchases in the last three days as the global debt worry-triggered selloff made valuations attractive.
LIC, the country’s biggest investor with stakes in Larsen and Toubro, Axis Bank and Grasim, will raise its secondary market purchases this fiscal as IPOs dry up with promoters not keen to sell shares at lower valuations. "We have been buying in the past few days," said a LIC executive involved in decision making.
"With the market correcting and not many public issues coming up, we would be investing more in secondary market," said the person who did not want to be identified.
TO INVEST Rs 50K CRORE MORE
LIC, which had been buying stocks for an average of Rs 120 crore in the first four months of the fiscal, raised it to Rs 330 crore in the last three days. The official declined to disclose which were the stocks that were bought. It had invested Rs 10,000 crore in the first four months and will invest Rs 50,000 crore in the rest of the year.
Domestic funds have been buying shares in the last three days when the benchmark Sensex fell as global investors turned risk averse after the US credit situation worsened. Although, the US administration managed a compromise on raising the debt ceiling, the downgrade by Standard & Poor’s and scramble over worsening European credit crisis made investors flee risk assets.
The corporation had set an initial target of up to Rs 15,000 crore for investments in the primary market which may not be utilised. The government, which aimed to raise Rs 40,000 crore from share sales, may also miss the target. In sales from government, LIC is the biggest buyer many times, including in Coal India and follow on offers such as NTPC and Power Finance Corp.
Equity purchases could rise if scarred investors choose unit linked insurance policies instead of directly investing in stock markets. "Investment in equity market depends on fund flow," said the official.
"If more money comes in Ulip, equity investments will be high." LIC’s total premium income was Rs 2 lakh crore in fiscal 2010-11, of which Rs 40,000 crore was invested in equities. It expects the income to rise 10% this year to Rs 2.2 lakh crore. It is also looking to sell off 50 illiquid stocks this year, said the official.
It has already exited from 10-12 illiquid stocks. Some of the illiquid stocks include FGP, Thana Electric, Simplex Mills, Shalimar Wires and High Energy Batteries that trade less than a thousand shares a day. LIC will be able to trade in stocks without the broker’s intervention using the direct market access, like most foreign institutional investors, and will be the first domestic institutional investor to use the system.
The corporation has started using implementing the DMA facility. This facility will allow LIC to offer client’s direct access to the exchange trading system through the broker’s infrastructure without manual intervention by the broker.
Source : The Economic Times
Life Insurance Corp of India, the government’s institution of choice to stabilise the stock market whenever it gets wobbly, has more than doubled stock purchases in the last three days as the global debt worry-triggered selloff made valuations attractive.
LIC, the country’s biggest investor with stakes in Larsen and Toubro, Axis Bank and Grasim, will raise its secondary market purchases this fiscal as IPOs dry up with promoters not keen to sell shares at lower valuations. "We have been buying in the past few days," said a LIC executive involved in decision making.
"With the market correcting and not many public issues coming up, we would be investing more in secondary market," said the person who did not want to be identified.
TO INVEST Rs 50K CRORE MORE
LIC, which had been buying stocks for an average of Rs 120 crore in the first four months of the fiscal, raised it to Rs 330 crore in the last three days. The official declined to disclose which were the stocks that were bought. It had invested Rs 10,000 crore in the first four months and will invest Rs 50,000 crore in the rest of the year.
Domestic funds have been buying shares in the last three days when the benchmark Sensex fell as global investors turned risk averse after the US credit situation worsened. Although, the US administration managed a compromise on raising the debt ceiling, the downgrade by Standard & Poor’s and scramble over worsening European credit crisis made investors flee risk assets.
The corporation had set an initial target of up to Rs 15,000 crore for investments in the primary market which may not be utilised. The government, which aimed to raise Rs 40,000 crore from share sales, may also miss the target. In sales from government, LIC is the biggest buyer many times, including in Coal India and follow on offers such as NTPC and Power Finance Corp.
Equity purchases could rise if scarred investors choose unit linked insurance policies instead of directly investing in stock markets. "Investment in equity market depends on fund flow," said the official.
"If more money comes in Ulip, equity investments will be high." LIC’s total premium income was Rs 2 lakh crore in fiscal 2010-11, of which Rs 40,000 crore was invested in equities. It expects the income to rise 10% this year to Rs 2.2 lakh crore. It is also looking to sell off 50 illiquid stocks this year, said the official.
It has already exited from 10-12 illiquid stocks. Some of the illiquid stocks include FGP, Thana Electric, Simplex Mills, Shalimar Wires and High Energy Batteries that trade less than a thousand shares a day. LIC will be able to trade in stocks without the broker’s intervention using the direct market access, like most foreign institutional investors, and will be the first domestic institutional investor to use the system.
The corporation has started using implementing the DMA facility. This facility will allow LIC to offer client’s direct access to the exchange trading system through the broker’s infrastructure without manual intervention by the broker.
Wednesday, August 3, 2011
Ayurveda too comes under mediclaim cover
25-Jul-2011
Source : The Economic Times
Till some time back, health insurance policies used to cover only allopathy treatment while ayurveda, homeopathy, naturopathy and unani treatments were left out of the ambit. Despite having a comprehensive health insurance plan in place, individuals who preferred such systems had to pay out of their own pockets.
These policyholders can now breathe easy as some insurance companies have started including such alternative forms of treatment under their cover, especially ayurveda. "Ayurveda being the most prevalent of the alternate systems, we have designed a product to cover treatments under ayurvedic hospitalization," says S S Gopalarathnam, managing director, Cholamandalam MS General Insurance.
While some insurers only offer it under their group policies, others have started offering the facility to individual health insurance seekers. PSU insurerNew India Assurance and standalone health insurance provider Star Health and Allied Insurance are other insurance companies that have started covering ayurvedic treatments under individual policies.
ICICI Lombard General Insurance covers it under government scheme and FutureGenerali Insurance offers it to corporate group insurance buyers from which employees of the covered company can benefit.
"Our policies as such do not cover any other line of treatment other than allopathy. However, in group policies, if requested for we do offer tailor-made packages to corporate clients to cover ayurvedic treatment subject to certain conditions," explains Shreeraj Deshpande, head, health insurance, Future Generali.
How did this need to cover alternative forms of medicine in health insurance arise? Gopalarathnam, explains, "During various focus group discussions with customers and agents, we found that for chronic ailments like spondilytis, arthritis and epilepsy, many people preferred alternate streams of treatment such as ayurveda, siddha and homeopathy etc."
Though the coverage has been expanded, there are curbs on the amount and situations under which it can be claimed.
New India Assurance’s extends cover to individuals undergoing treatment with the help of Ayurvedic, homeopathic and Unani systems of medicine. "Such claims will be covered only to the extent of 25% of sum insured. Also, they need to have availed of the treatment at a government hospital to be eligible for the claim," informs Segar Sampathkumar, deputy general manager, New India Assurance.
Similarly, Star Health also covers non-allopathic treatment, except Naturopathy, costs under itsUnique Health Insurance Policy, up to 25% of sum assured or a maximum of Rs 25,000 per occurrence, per year.
It is important to note that there is no standalone cover available for covering alternative treatments. You will have to buy a standard health insurance cover from these select insurers and others who start offering the non-allopathic coverage.
Source : The Economic Times
Till some time back, health insurance policies used to cover only allopathy treatment while ayurveda, homeopathy, naturopathy and unani treatments were left out of the ambit. Despite having a comprehensive health insurance plan in place, individuals who preferred such systems had to pay out of their own pockets.
These policyholders can now breathe easy as some insurance companies have started including such alternative forms of treatment under their cover, especially ayurveda. "Ayurveda being the most prevalent of the alternate systems, we have designed a product to cover treatments under ayurvedic hospitalization," says S S Gopalarathnam, managing director, Cholamandalam MS General Insurance.
While some insurers only offer it under their group policies, others have started offering the facility to individual health insurance seekers. PSU insurerNew India Assurance and standalone health insurance provider Star Health and Allied Insurance are other insurance companies that have started covering ayurvedic treatments under individual policies.
ICICI Lombard General Insurance covers it under government scheme and FutureGenerali Insurance offers it to corporate group insurance buyers from which employees of the covered company can benefit.
"Our policies as such do not cover any other line of treatment other than allopathy. However, in group policies, if requested for we do offer tailor-made packages to corporate clients to cover ayurvedic treatment subject to certain conditions," explains Shreeraj Deshpande, head, health insurance, Future Generali.
How did this need to cover alternative forms of medicine in health insurance arise? Gopalarathnam, explains, "During various focus group discussions with customers and agents, we found that for chronic ailments like spondilytis, arthritis and epilepsy, many people preferred alternate streams of treatment such as ayurveda, siddha and homeopathy etc."
Though the coverage has been expanded, there are curbs on the amount and situations under which it can be claimed.
New India Assurance’s extends cover to individuals undergoing treatment with the help of Ayurvedic, homeopathic and Unani systems of medicine. "Such claims will be covered only to the extent of 25% of sum insured. Also, they need to have availed of the treatment at a government hospital to be eligible for the claim," informs Segar Sampathkumar, deputy general manager, New India Assurance.
Similarly, Star Health also covers non-allopathic treatment, except Naturopathy, costs under itsUnique Health Insurance Policy, up to 25% of sum assured or a maximum of Rs 25,000 per occurrence, per year.
It is important to note that there is no standalone cover available for covering alternative treatments. You will have to buy a standard health insurance cover from these select insurers and others who start offering the non-allopathic coverage.
Factors that could determine the premium you pay on car insurance
25-Jul-2011
Source : The Economic Times
After browsing through catalogues, visits to car showrooms, advice from friends, and a thorough check of your financials, you have finally zeroed in on the car you want to buy. You would naturally have taken into account the insurance premium you pay, which currently depends on the model of the car, the security and safety features installed in the vehicle, the driver’s profile and whether the car is for commercial or private usage.
Vijay Kumar, head of motor insurance atBajaj Allianz General Insurance, says, "So far, the premium has been focused more on the vehicle and less on the user. However, this is bound to change soon, as the premium will depend on the parameters that lower the risk. So, more user-specific factors which influence risk will be considered." Here are some that may impact the premium of yourcar insurance in the coming years.
Distance travelled: The number of kilometres you log in each month will be an important determinant. How? The reasoning is that less travelling translates to lower risk, and vice versa. Says Sanjay Datta, head of customer service,ICICI Lombard General Insurance. "If a car is driven less than 5 km a day, say, to drop your kid to school and back, it will be perceived to have lower risk than a vehicle that is driven about 50 km each day, say, to and from your office."
However, Karan Chopra, head, retail business,HDFC ERGO General Insurance, says that to include this feature a device will have to be installed in the car to be able to track the odometer. So it might take some time to include mileage as a factor for deciding the premium because the insurance companies are yet to work out the economics of this.
Credit history and behavioural patterns: Internationally, insurance companies have linked credit history and customer behaviour to premium amount. A credit score means more authentic information about the individual’s track record regarding payment and defaults. KG Krishnamoorthy Rao, managing director and CEO, Future Generali India Insurance, says, "Credit score may be used in the next 2-3 years as insurers are still to develop better fraud control mechanisms."
Behavioural patterns may be derived fromchoices made by the individual, such as the colour of the car. For instance, a person who owns a red car is considered to be more aggressive than someone who owns a white car, and, hence, the risk associated with the former is seen to be higher.
Choice of city: Kumar of Bajaj Allianz General Insurance, says, "When it comes to the premium being determined by geography, currently, the classification is not too granular." As of now, it is divided into two zones-A and B. Zone A includes Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi and Pune, whereas the rest of India falls into Zone B. The vehicles in Zone A are considered to be more vulnerable to theft and accidents and, therefore, their premiums are higher. Kumar adds, "Ideally, the classification should be on the basis of cities and there should be demarcations within the city too."
Source : The Economic Times
After browsing through catalogues, visits to car showrooms, advice from friends, and a thorough check of your financials, you have finally zeroed in on the car you want to buy. You would naturally have taken into account the insurance premium you pay, which currently depends on the model of the car, the security and safety features installed in the vehicle, the driver’s profile and whether the car is for commercial or private usage.
Vijay Kumar, head of motor insurance atBajaj Allianz General Insurance, says, "So far, the premium has been focused more on the vehicle and less on the user. However, this is bound to change soon, as the premium will depend on the parameters that lower the risk. So, more user-specific factors which influence risk will be considered." Here are some that may impact the premium of yourcar insurance in the coming years.
Distance travelled: The number of kilometres you log in each month will be an important determinant. How? The reasoning is that less travelling translates to lower risk, and vice versa. Says Sanjay Datta, head of customer service,ICICI Lombard General Insurance. "If a car is driven less than 5 km a day, say, to drop your kid to school and back, it will be perceived to have lower risk than a vehicle that is driven about 50 km each day, say, to and from your office."
However, Karan Chopra, head, retail business,HDFC ERGO General Insurance, says that to include this feature a device will have to be installed in the car to be able to track the odometer. So it might take some time to include mileage as a factor for deciding the premium because the insurance companies are yet to work out the economics of this.
Credit history and behavioural patterns: Internationally, insurance companies have linked credit history and customer behaviour to premium amount. A credit score means more authentic information about the individual’s track record regarding payment and defaults. KG Krishnamoorthy Rao, managing director and CEO, Future Generali India Insurance, says, "Credit score may be used in the next 2-3 years as insurers are still to develop better fraud control mechanisms."
Behavioural patterns may be derived fromchoices made by the individual, such as the colour of the car. For instance, a person who owns a red car is considered to be more aggressive than someone who owns a white car, and, hence, the risk associated with the former is seen to be higher.
Choice of city: Kumar of Bajaj Allianz General Insurance, says, "When it comes to the premium being determined by geography, currently, the classification is not too granular." As of now, it is divided into two zones-A and B. Zone A includes Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi and Pune, whereas the rest of India falls into Zone B. The vehicles in Zone A are considered to be more vulnerable to theft and accidents and, therefore, their premiums are higher. Kumar adds, "Ideally, the classification should be on the basis of cities and there should be demarcations within the city too."
Buying insurance? Look beyond the portals
01-Aug-2011
Source : Business Line
Source : Business Line
| Buying insurance, whether through an agent or on the Web, is not as easy as effecting other financial transactions. With 24 life insurance companies and a host of products, it can be quite a task to compare products before zeroing in on the right one. The portal route Insurance portals such as Policybazaar.com, click2insure.in and Easyinsurance india.com facilitate the comparison of insurance products such as term and unit linked insurance plans across categories. For investment products, they offer final fund values calculated at assumed growth rates of 6 per cent and 10 per cent as mandated by the Insurance Regulatory and Development Authority (IRDA). Although portals reduce the effort involved in visiting all the insurance company Web sites, results from portals should not be taken as final. After zeroing in on a few ULIPs , it is mandatory to visit the respective insurance company’s site . When we experimented with a live query, we found the following shortcomings with portals. One, though portals try and compare various policies, the products that are filtered out may not be the ones most suitable to you. Let’s consider a situation where you want to invest Rs 50,000 per annum for next 15 years in a ULIP and want to know which insurance company offers a better yield with lower charges. You can start by going to the menu in the portal and choosing between options such as child plan, investment or retirement plan. After comparing similar products offered by insurers, the portal may list four or five ‘best sellers.’ Note that ‘best sellers’ here may not be the products that offer the best returns or are best suited to you. Two, the output contains expected final fund value, expected yield net of charges and tax adjusted yields, but does not distinguish between products which are available only online and those that only can be procured through agents. To address this problem, you may need to visit the respective Web sites of insurance companies. For instance, we ran a check on policybazar.com with the investment criteria of saving Rs 50,000 per annum for a male aged 35 for tenure of 15 years. Based on these inputs, the threw up names of four top sellers: Aegon Religare iMaximise, Aviva Freedom Life Advantage, Bajaj iGain III and India First Smart Save Plan from a search of 25 similar plans that inclusive of online and the products sold through the agents. Of the four, Aegon Religare and Bajaj are online products and the rest are sold only through the agents. Three, there were differences between the yields as presented by the portal and that calculated by the insurance company. For instance, according to Aviva Life Insurance, the internal rate of return (IRR) for Aviva Freedom Life Advantage for the above input is 8.47 per cent with a projected fund value of Rs 14.54 lakh (calculated at a growth rate of 10 per cent as mandated by the IRDA). Whereas the portal projected an IRR of 7.98 per cent with projected fund value of Rs 14.64 lakh (higher fund value and lower IRR!). Sum assured A major concern with portals is that they base their comparisons on the annual premium alone and do not disclose the sum insured for the selected plans. Assume for instance in one product, that sum insured is at ten times the premium paid, whereas in another policy, the beneficiary paid a sum insured at death of policy holder, with the fund value or sum assured paid to the beneficiary. The product with lower risk cover will give higher returns than the product with higher sum insured. However they are not strictly comparable. The difference arises because the risk charges deducted from the premia paid will vary according to the options inbuilt in the plan. Classifications not in order We ran a check in a portal for an investment period of 15 years, but the options it threw up included a pension plan, a Highest NAV Advantage Plan and a whole life policy. If you need to make an investment for your daughter’s marriage then a pension plan or a whole life plan is definitely not the right option to go for. Understanding cost structure Investors may also need to visit the Web site of the insurance company to get the right picture on costs. For instance, Aegon Religare being an online product the agent commission paid is nil, the entire premium without any premium allocation charge is invested after deduction of risk charge. But the IRR of this product presented by the portal, is similar to the IRR of Aviva Freedom Life Advantage plan with premium allocation charge of six per cent in the first year. That looks impossible because the policy administration charge deducted in Aviva plan is 0.10 per cent of the premium per month against Rs 100 per month in the Aegon Religare product. Yet another reason to double check your facts before you make an insurance investment. |
Irda set to drop 4.5% guaranteed return rule
01-Aug-2011
Source : Business Standard
The insurance regulator is set to drop the 4.5 per cent guaranteed return clause in the controversial pension product norms. The revised guidelines for pension products will do away with this guaranteed annual rate of return, linked to the reverse repo rate prevailing in September 2010, when the guidelines were issued. Instead, insurers will have to provide only a capital guarantee.
This is a major relief for life insurers, as pension products used to account for nearly 30 per cent of their sales before the new regulations came into force.
“The regulator has indicated there will be only one guarantee, and that is capital guarantee,” said a senior official of a private life insurance company.
Insurance Regulatory and Development Authority (Irda) Chairman J Hari Narayan confirmed the authority was working on the proposal. “We are examining that model. There should be one form of guarantee which is necessary to protect the interests of policy holders. Insurers are free to provide other guarantees, but as riders,” he said.
This will effectively end the impasse on pension plans. The industry has not introduced any pension product based on the new guidelines.
The guidelines had mandated that returns from pension products be linked to the reverse repo rate. It asked insurers to offer 50 basis points more than the rate. Last year, the guaranteed return was 4.5 per cent. At the current reverse repo rate of 7 per cent, the minimum return should be 7.5 per cent. Reverse repo rate is the rate at which the Reserve Bank of India absorbs funds from banks.
The guidelines led to a sharp fall in the number of unit-linked pension products. While Life Insurance Corporation launched a regular unit-linked pension product, the private players introduced single-premium unit-linked pension plans.
At a recent meeting with Irda, the finance ministry expressed concerns over the drop in sales of life insurance products in the last financial year.
In 2010-11, private insurers posted a marginal 2.55 per cent increase in premium collection, the lowest since 2002-03, when sales had fallen 14 per cent. The drop in sales continued during the first two months of the financial year. The yearly premium collected by private life insurance companies fell 23.2 per cent in April-May compared to the corresponding period last year. Insurers said due to the guaranteed return, they were being forced to invest only in debt.
In 2009-10, around Rs 65,000 crore came from sale of pension roducts. Total premium collected rose 18 per cent to Rs 2,61,025 crore.
Meanwhile, an Irda official said insurers would also be allowed to trade in equity futures and options. The products would have to be structured on the basis of benefits that were to be guaranteed and would be priced accordingly, he said. He added that customers could have a varied equity exposure but two-third corpus on maturity must be converted into an annuity.
Source : Business Standard
The insurance regulator is set to drop the 4.5 per cent guaranteed return clause in the controversial pension product norms. The revised guidelines for pension products will do away with this guaranteed annual rate of return, linked to the reverse repo rate prevailing in September 2010, when the guidelines were issued. Instead, insurers will have to provide only a capital guarantee.
This is a major relief for life insurers, as pension products used to account for nearly 30 per cent of their sales before the new regulations came into force.
“The regulator has indicated there will be only one guarantee, and that is capital guarantee,” said a senior official of a private life insurance company.
Insurance Regulatory and Development Authority (Irda) Chairman J Hari Narayan confirmed the authority was working on the proposal. “We are examining that model. There should be one form of guarantee which is necessary to protect the interests of policy holders. Insurers are free to provide other guarantees, but as riders,” he said.
This will effectively end the impasse on pension plans. The industry has not introduced any pension product based on the new guidelines.
The guidelines had mandated that returns from pension products be linked to the reverse repo rate. It asked insurers to offer 50 basis points more than the rate. Last year, the guaranteed return was 4.5 per cent. At the current reverse repo rate of 7 per cent, the minimum return should be 7.5 per cent. Reverse repo rate is the rate at which the Reserve Bank of India absorbs funds from banks.
The guidelines led to a sharp fall in the number of unit-linked pension products. While Life Insurance Corporation launched a regular unit-linked pension product, the private players introduced single-premium unit-linked pension plans.
At a recent meeting with Irda, the finance ministry expressed concerns over the drop in sales of life insurance products in the last financial year.
In 2010-11, private insurers posted a marginal 2.55 per cent increase in premium collection, the lowest since 2002-03, when sales had fallen 14 per cent. The drop in sales continued during the first two months of the financial year. The yearly premium collected by private life insurance companies fell 23.2 per cent in April-May compared to the corresponding period last year. Insurers said due to the guaranteed return, they were being forced to invest only in debt.
In 2009-10, around Rs 65,000 crore came from sale of pension roducts. Total premium collected rose 18 per cent to Rs 2,61,025 crore.
Meanwhile, an Irda official said insurers would also be allowed to trade in equity futures and options. The products would have to be structured on the basis of benefits that were to be guaranteed and would be priced accordingly, he said. He added that customers could have a varied equity exposure but two-third corpus on maturity must be converted into an annuity.
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