Robin Hood of Las Vegas

Los Angeles, Dec. 27: Their three-year-old daughter, Madison, had been diagnosed with a brain tumour and they were $35,000 in debt.

But when they heard what the caller had to say, they broke down in tears, hardly able to believe their ears. He was a mysterious, high-rolling Las Vegas gambler who had been choosing needy families to give them his winnings. “You have been chosen,” the voice told the Keglers. “I’m flying you to Vegas, and I’m going to win your money for you.” What followed seemed like a dream. A stretch limousine to the airport, first-class flights and a Rolls Royce to their 8,000 square-foot suite in the Palazzo hotel. There, Kegler, 48, and his wife, 29, were met by their benefactor, who promptly staked huge amounts of his own money in a marathon card session.

It wasn’t plain sailing on the blackjack table, despite his confidence: the Keglers saw him go down hundreds of thousands of dollars before he managed to hit a winning streak and recover.

When he was $35,000 up he quit the table, and handed the proceeds to the Keglers in a giant bag of hundred dollar chips. “It completely changed everything,” said Kegler’s wife.

Since the episode a year ago, which has become part of Las Vegas folklore, rumours have swept Sin City about the identity of the secretive card player who wants to give his money away. He is even said to have been spotted handing out hundred dollar bills on the Las Vegas strip.

So who is this gambling Good Samaritan? He calls himself “Robin Hood 702” and runs a website on which he promises to milk the casinos and give the proceeds to the poor. The number 702 refers to the Las Vegas postal code area. Anyone down on their luck is invited to send in their story and, every so often, “Robin” selects someone to help.

The only criterion is that the amount they need must not exceed $50,000 — he isn’t that wealthy. As well as the Keglers, he also recently selected a woman from Charleston, South Carolina, who had run up medical bills caring for her elderly parents and won the $20,000 she needed. In April he offered to pay for a holiday in Las Vegas for the crew of the Maersk Alabama, the US ship attacked by Somali pirates.

Little is known about “Robin”. He has given television interviews, but with his face in shadow. He is known to be teetotal, white and tall. He prefers to dress in jeans and a T-shirt. Casino bosses regard him as a “whale”, one of the elite high rollers for whom nothing is too much trouble. He has won and lost six-figure sums in a single night.

His aim, he says, is simple. “I’m going to take the dark side associated with gambling and use it for good”. He plans to select another hard-up family to help in the New Year and he has plenty to choose from: there have been as many as 300 applications in a single day to his website.

I wish there is Good Samaritan like "Robin Hood702" in everyone's life. MayGod bless us all.

Source:  The Telegraph,Kolkata. 28/12/2009.

Some Important Things You Must Ask Your Insurance Agent Before You Sign Him/Her On.

Buying a life insurance cover is easy, finding a sincere agent is not easy. It doesn't make your job easier that a Supreme Court verdict held that the Life Insurance Corporation of India (LIC) cannot be held accountable for its agents' actions.

 Fact is, you have to depend on your agent & he identifies the right policy for you, collects the premium cheques from you when they are due, and is your insurance newscaster. In short, he is more often than not the sole link between you and the Insurance company.

There are more than 10 lakh + of them to choose from and the idea is to identify the con artists and put them at an arm's length before they get you. Their disqualification by the tens of thousands every year tells a sordid story of the ways of Insurance agents.

An unscrupulous agent could sell you the wrong policy, or lie that he got you a loaded premium or encash the premium cheque in his favour, or be untraceable when needed.

LIC won't share the blame. At the most, it will terminate the services of the agent. And he will join the ranks of more than 1 lakh agents the Corporation debars every year. The main reasons are failure to meet business quotas and alleged malpractices. 

In 1995-96, LIC terminated the services of 1.17 lakh agents. But the termination will not solve your problem. It will only aggravate it, for you have to find a new agent, get hold of old records, tally the numbers and recalculate premiums.

How do you avoid these problems? By sitting him down and asking a few simple questions. How he answers them should decide whether he gets your business.

Are you from the neighborhood?

An agent knocks at the door. After the initial courtesies, ask him whether he lives in the same area as you do. That will help you verify his antecedents, contacts and standing in the profession. You could compare notes with other people in the neighbourhood and be forewarned against erratic, irresponsible agents.

However, there is a problem with over familiar agents. Don't buy insurance because you have to oblige someone. It's your money-and your life.

Are you real?

No metaphysical twist there. Just ask him if he is a professional agent-a full-timer, in other words. There are many amateurs, part-timers and proxies masquerading as authorized agents in the business, hoping to make some money on the side.

Many have less than a year's experience. Any matriculate can be an agent, and Life Insurance Companies outdated yearly business quota system encourages unprofessional oddballs into the business. Buy policies only from professional agents.

What if the agent says he is a full-timer and you are still not convinced? 

In that case, ask when he is available for his clients. If it is before or after normal office hours, you can be sure he is a part-timer. Non-availability during these hours is fine only if he gives a branch number where he can be contacted during the day. Be particular to check that he is not acting on somebody's behalf.

How many years have you been in the profession?

If the answer to the last question was in the affirmative, ask him how long he has been an agent. A matriculate could get in and out of the profession inside a year. Or work for five years to qualify for renewal commissions. Sources say only about 9 per cent of LIC agents have 10 years' experience. Remember, your policy term will be longer than that.

Do you have an office?

Never mind if he works out of a room in his flat or a coop in some dilapidated building. If he has an address he calls office, he means business. If it is "at this number between 10 am and 2 pm, and after 6 pm at my residence", he is not the guy you want.

Which branch do you work for? Who is your development officer?

You know that agents work for development officers attached to a particular LIC branch. Take down the name and telephone number of the officer, and make a call to double check.

You can even visit the branch and chat up the officer on your plan to buy a life cover-and learn more about LIC and its products from him. Also, you know where to make a complaint (branch manager is the first stop), if you have any in future.

Can I have the names of a few clients?

So far so good. Time to ask for references: names and phone numbers of a few clients. Make a few calls now to casually enquire how thorough and prompt this agent this. If it turns out that most complain about him, you know what to do.

Do you have experience of claim settlement?

A 'claim' occurs either on maturity of the policy or on the policy-holder's death. Almost all the insurance companies are fairly prompt in discharging maturity claims.

To ensure prompt disbursal of maturity claims, your agent must remember exactly when it is due, and make a few queries at the branch at the right time. However, successful death claims are the true measure of an agent's resourcefulness and ingenuity in arguing cases.

This is because Life Insurance Companies uses its discretion in passing these claims-and rejects many every year.

Why did you choose this policy for me?

Okay, you have settled for him/her and worked out the insurance sum amicably. Now, he/she will advise you on the policy that best suits your needs. Ask why he/she advises one, or rejects another. Helps if you know a bit about insurance policies and how they work, but if your agent is good, you wouldn't need to.

 Life Insurance Companies does not print prospectuses with full details, so make an effort to understand the product you are buying. You could also ask for a written proposal or printed illustration and cross-check with another agent.

Could the premium be lower?

The rebate you are entitled to depend on your age, health, the policy term and the sum assured. Did he/she ask you about your medical condition of present & past?

If he/she hasn't, chances are there that premium amount may be inaccurate.

Alternatively, he might have randomly provided for illnesses and disabilities where none exist, in which case you would be paying more than required. Insure yourself against such possibilities by verifying with other agents, or in a branch office.

If the policy includes an accident cover, the premium would on an average go up by Re 1 per Rs 1,000 of the assured sum. On a big policy, this would be a substantial difference. If you are paying it, make sure the policy you have bought includes accident cover.

If your agent offers to collect the premium cheque (it is not his duty), make sure the cheque is made in favour of Life Insurance Company, and the policy number is written overleaf. Never pay cash. Check your bank statement to see how promptly he deposits the cheque. Always, as a rule, insist on receipts.

Don’t buy insurance from the first agent you meet


Insurance is not a vacuum cleaner you buy soon after a demonstration. Also, it is not just a one-time purchase. You constantly need to evaluate your risk and enhance your cover. The first agent is just a stepping stone; acquaint you with the basics before settling for just a Rs. 50,000/- (average policy in India) and feel secure.

Don’t follow the crowd


Bought a plan because that is the only one my agent suggested, my friend also has the same one:

Your friend having a plan doesn’t mean you should go for a similar one. Always ask your agent questions. Don’t let him dump policies that would give him the highest commission. You should get a cover that suits your risk profile.

I just bought a cover two years ago:


The issue is not the periodicity of purchase, but adequate cover that really matters. Got a promotion or increment lately, got married, or got a kid? Each of these occasion calls for reviews your risk profile and new additions. A good agent would be invaluable help here.

Term plans, not for me:


Ignoring term plans for endowment plans is a common mistake. True, they will not give you a fancy addition on maturity, but are cheaper and yield substantially on death.

To put it differently, you like endowment plans for saving part of it; for the same reason they are costly. What if you can’t afford them? You are definitely better off with a term plan rather than being underinsured.

Preferring a moneyback plan without noticing the higher premium: regular payments of survival benefit sure do look attractive, but they are costliest among insurance policies. You can’t justify the higher premium if you are not specific about utilizing the money.

Lastly I must say sincerely try avoid buying your insurance policy from any corporate agent. They always sell the policy with their own recipe.

There is a high risk of getting any after sell support which is very much important ingredient in life insurance industry world wide.

TITANIUM PLUS

This is going to be a new era of life insurance products in India after the new IRDA guideline.Initialy there could be some problem but lastly the customers are going to be the big winner at the end of the day. Here goes a genuinely unique product from our company named Titanium plus. One can use this product with various targets to meet up his/her need in the years to come. The simple USP of this plan is it is a wealth creation tool.

• Entry Age of Life Assured - 8 to 70 years of age
• Policy Term - 10 years
• Premium Paying Term - 10 years
• Annual Policy Premium - Minimum Rs.25000 p.a. if paid annually
• Minimum Rs.30000 p.a. if paid monthly, quarterly or semi annually i.e. Rs.2500, Rs.7500, Rs.15000, and Rs.25000 respectively.
• Sum Assured Annual policy premium * 5(minimum)Fund
• Titanium Fund => Income Advantage, Assure, Protector, Builder, Enhancer, creator, Magnifier, Maximiser, Multiplier, Super20.

 Titanium Fund- Optimal participation in capital market while safeguarding your investment. Titanium Fund comes with a guaranteed unit price. BSLI will open a new series of Titanium Fund every three months at a starting price of Rs.10 for a three month window to accept new business. After every three month the next series will opened. With every Titanium Fund series the highest unit price recorded in the three month window is guaranteed as the guaranteed unit price.

 

• Your first actual premium will be invested in the latest Titanium fund if desired by you .The next two years actual premium too will be invested in the same fund. Only from fourth year onwards, all subsequent premiums will be invested in any of the other ten funds chosen by you in the self-managed option & you can switch between these funds any time free of charge.

 

• On the fifth policy anniversary, the units of your titanium will be redeemed at the prevailing unit price or the guaranteed price whichever is higher & will be invested in the new series of Titanium Fund thus capturing any appreciation as of that date.

 

• At the point of maturity, the units in your Titanium Fund will be redeemed at the then prevailing unit price or the Guaranteed unit price at reinvestment, whichever is higher.

 

There is a guaranteed loyalty addition at the end of 5th and 10th year calculated at the rate of 3% of your premium for every year of premium paid. Thus you can enjoy up to 15% loyalty additions at both 5th and 10th year if all 10 premiums are paid.

 

Maturity Benefits:

 

You will receive the fund value at maturity apart from an amount equal to the number of units in Titanium Fund times the excess ,if any ,of guaranteed unit price over the then prevailing unit price of this investment fund, if you have opted for guaranteed option.

 

Guaranteed unit protection-On the 5th Anniversary, GUP of at least 10.
At Maturity - GUP + any unit appreciation in first five years  .
Non guaranteed unit Appreciation -On the 5th Anniversary, any unit appreciation in the first 5 year.     At Maturity - Any unit appreciation in last five years.

 

Death Benefit:
In case of unfortunate death the nominee will receive greater of (a) The fund value or (b) SA – Partial withdrawals.

 

Benefits:
• Top up facility is there. Subject to clear all due premiums. Minimum Top up premium is Rs 5000 and the maximum top up premium to date shall be capped at 25% of all policy premiums to date. Top up Premiums are not allowed during the first 3 policy years if you choose the Titanium Fund.

 

• Tax benefit under section 80 (c) and 10 10(D)

 

Features:

 

• Unlimited partial withdrawals are allowed after 3 policy years, free of charge. The minimum Amount is Rs.5000.There is no maximum limit, but you are required to maintain a minimum fund value equal to 1 Annual premium + any surrender charge or Top up premiums paid in the previous year in the previous three years, whichever is higher.

 

• Partial Withdraw is not allowed if the age of life insured is < 18 years.

 

Premium Allocation Charges:

 

1st year – 10%, 2nd onwards year- 5%, Top up – 2% in any policy year.

 

Surrender Charges:

 

<3 Policy year - 40%, <4 Policy year -20%, <5 Policy year - 10%.

Practical Indication

Vikram Kotak, Chief Information Officer of Birla Sun life Insurance believes the year 2010 will not be as exciting as 2009. “One can expect USD 2 billion on an average coming in ULIPs between January and March.”Kotak is bullish on the banking sector despite interest fears. “The excess liquidity, which will go away from the system, will actually help banks to earn more money.” He is also upbeat on capital goods and pharma space.


Here is a verbatim transcript of the exclusive interview with Vikram Kotak on CNBC-TV18.

Q: What does 2010 finally look like in terms of the index? What are the themes you are looking at and which of those themes do you think will get translated into market interest?

A: Year 2010 will not be as exciting as 2009 because in 2009, people got bargain values. Now, it’s more of fair valuation to reasonable valuations in some pockets. Always markets are ahead of the economy and that is what has happened in 2009, you had the global economies uneven in terms of growth despite most markets outperformed the 2008 and 2007.
Year 2010 is going to be more normalization rather than very-very hyped year. You will see volatility both the side. But net-net it will give you a long-term average return. Our view is that we may see good allocation coming in both from FII (Foreign Institutional Investor) and insurance. So, you may see a new high coming in Q1 of the year and then possible normalization of things happening post that. But there will be long-term average return for the year.

Q: You seem to be expecting an average year and perhaps a burst up in Q1. There is one theory in the markets, which is globally also held, you will see a serious breakdown as fiscal stimuli are withdrawn. Do you believe that you are going to get another if not fire sale but at least bargain values? Do you see that possibility also?

A: You may see a dip but not like what we have seen in 2008 third quarter. But you are going to see definitely bargain values coming at some point of time because you have many events to play out. Particularly the inflation, which you have seen in the emerging market, can definitely slowly translate from food to core and from emerging to the developed markets. But you will see some bargains coming in.

But the broad point is that you will see a continuous flow coming to the emerging market from both global and local investors. That money, which is under invested in equity from both the side, at every lower level they (investors) will be able to play out and they would kind of allocate more money. Because logically India despite of so much hype, we are still under-invested in terms of global allocation. We have been allocated just 0.8% of global allocation versus 5% of the GDP, so that ratio will slowly shrink. So my view is that you will see more allocation coming with every dip coming in the system.

Q January-March quarter is usually the best quarter for insurance companies? What kind of growth in the pie are you seeing in terms of actual money that will flow into the industry? How much of that will be for ULIPs?

A: The one big change, which happened recently, the IRDA, changed the rules on the insurance new policies and they changed the structure a lot. So there is going to be some lag in terms of new business growth. But one thing is sure that there is going to be a strong renewal pipeline across the insurance company, which is going to be there. So whatever people have bought for last 8-10 years, they will continue to contribute as a premium, so that will actually flow in to the fund managers' kitty. So the total number we are looking at is almost USD 4-4.5 billion per month kind of flow for the next three months, of which 45-50% you can see in the ULIP. So you can expect on an average USD 2-2.25 billion coming to the equity flows in the next three months.

Q: You said the new IRDA rules might smother the new flows. I thought there were still more rules expected to come in terms of agents payments. Are you seeing all that dampening the flows?

A: It will not dampen. It will have some short-term impact. Finally, these changes actually will spur the customers’ penetration. I don’t see it is going to be a long-term problem; it is going to be a lag of one-two months. So possibly you may not see as robust, possibly a new business premium growth as what we would have seen normally and also you have the lag effect of overall economy also coming in. So my sense is that over a period of time you will see lower commissions or the new rules will benefit the customers and in turn benefit the penetration of the insurance market.

Q: One of the rationales you see in a booming market is because everybody is buying phones, telecom will do well. That is we still don’t see investors look at the fund manger to decide the fund but just look at the fund – it is still a sales pitch. General explanation is India’s telecom growth is highest but the tariffs have fallen from Rs 3.48 in 2000, to 20 paisa. We are reaching a point of saturation, so you cannot continue to grow and you have new players coming in who offer even bigger discounts. How do you pick stocks in this environment? So while India maybe becoming mainstream, some would say the arbitrage is getting lost for many fund managers?

A: I agree with the point of telecom and it has been our view for some time. There is intense competition across the board and it’s clear that Indian used to enjoy 40% EBITDA margin, which is unseen, despite the lowest tariff rate. So, some of the global guys have realized that 40% EBITDA margin is a great number, so let’s go and do more competition.

Our view on sector is clear that we are neutral to negative on the sector. There is a huge value in terms of telecom in that area. Second penetration I have a different view, my view is that you will still see a growth of 25% for the next 2-3 years because we are talking about one phone penetration. We are not seeing the multiple phones and usage going up and your value add is still 10% of your total kitty.

So in that area, there is a growth possible. But the immediate you will see is that from 40% EBITDA margin if you start falling, you will have concern in terms of growth of the profitability. That is where the bigger concern today is. But over a period of time once you see the consolidation phase in the market, possibly some pickers will emerge in the telecom space but today the view is that it will not outperform the markets, so right now we are neutral to underweight on the sector.

Q: Let me get some help in sectors since you won't talk stocks. There are some who have described the power sector as today's dotcom. What is your stand there? Will you still buy some companies and leave us with some hints as to what you as a long-term investor will look at?

A: It's all about valuation game – at what valuation you are getting what stocks. Of course, you are rightly said, stocks have actually risen more than what is required and if you look at the demand in merchant power or compared to that the prices, which has risen are definitely much higher, but I am not sure whether dotcom or not.

On our sector pick we like banking despite the worry on interest rate hike. We think that the margins will be better for the banks after interest rate hikes. The excess liquidity, which is going to go away from the system, will help bank to earn more money because the money will go to productive sector instead of lying in the repo. Second, credit growth we think is going to pickup and the signs are already there in the credit growth pickup. So with the private capex and public execution happening, I think banking looks quite interesting despite there is a worry on the rate hike around system.

We like capex related stories because now the cycle for capex will start because the interest rates today are 10 year or below average interest rate and in this scenario and when the capex utilisation in aggregate is 85%, my sense is that you will see some capex happening in a big way.

So banking looks quite and we like capital goods as told and the other sector we like is pharmaceuticals; it has actually moved up sharply but a lot of exclusivity is coming in the next one year and the growth visibility is much better. So at every dip we like to participate in pharma.

Published on Wed, Dec 23, 2009 at 15:22 Updated at Thu, Dec 24, 2009 at 08:31 Source: CNBC-TV18

Birla Sun Life to have simpler Ulip offerings

MUMBAI: Birla Sun Life Insurance (BSLI) has decided to reposition all its unit-linked insurance plans following the insurance regulator’s decision to cap charges.Instead of having highly flexible schemes, the company will now have a bouquet of plans under a new programme christened Swagatam. Each plan will be standardised and structured so that it can be explained and sold with less effort. The biggest advantage of the new product is the higher return following the reduction in charges.

“We have decided to take advantage of the IRDA directive to cap charges on all ULIPs as an opportunity to enhance competitiveness. Based on feedback, we are revamping our entire portfolio to make them simpler to understand,” said BSLI CFO Mayank Bathwal.
Instead of offering the same product with a variety of investment option, the companies has decided to pre-package products according to the buyer’s profile and sell products that are specific to the individual’s requirements.

For instance, the earlier Saral Jeevan has been replaced with three plans, Saral Jeevan Wealth, Saral Jeevan Health and Saral Jeevan Guaranteed option. Those who have a low risk taking ability can go for the guaranteed option under the same scheme.
The cap on charges imposed by the regulator has forced all insurers to cut distribution costs and reduce frills on policies. However, since the amount being deducted from policyholder contributions has come down, the overall return to policyholder has improved.

In absolute terms, the returns under BSLI’s reworked plans on maturity can be higher by up to 10 per cent compared to BSLI’s old policy. For instance, under the earlier Saral Jeevan, with an annual premium of Rs 20,580, a 35-year old could buy a Rs 2.2 lakh policy that would accumulate savings ranging from Rs 5.6 lakh to Rs 8.9 lakh at maturity. Under the new Saral Jeevan, the same policy holder would get a sum insured of Rs 1.2 lakh and accumulate savings ranging from Rs 6.18 lakh to Rs 9.57 lakh. The returns are calculated estimating a yield of six per cent at the minimum side and 10 per cent at the higher end.
“The biggest contributors to the charges are the fund management charges which are fixed for the entire term of the policy. We have decided that the ceiling on fund management charge 135 basis points will apply not merely on new plans but on all existing policies as well” said Mr. Bathwal.

source: The Economic Times 11 Dec 2009, 0328 hrs IST, ET Bureau

New Policy of Swarup committee’s proposal and the out come

India’s insurance regulator, Insurance Regulatory and Development Authority (Irda) has written to the finance ministry, objecting to a government-appointed panel’s proposal that wants agents’ commissions removed from policyholders’ premiums. If the government sees merit in Irda’s argument, 3 million life insurance agents in the country will heave a sigh of relief. IRDA chairman J. Hari Narayan says the insurance regulator has written to the finance ministry, opposing the proposal to remove the agents’ commission from policyholders’ premiums.

“We have protested the Swarup committee’s proposal to remove commission from the premium,” Irda chairman J. Hari Narayan said on Thursday, confirming the development. “We have written to the ministry.”
The mandate of the six-member committee headed by D. Swarup, chairman of the Pension Fund Regulatory and Development Authority (PFRDA), was to suggest measures to protect and educate investors. One of the key recommendations in the consultation paper released by the committee in early September was the elimination of upfront commissions paid to life insurance agents by April 2011. Swarup said the panel was meant to represent customers. “The remit of the committee is the consumer’s side of the equation. Therefore, we are focusing on that.”
The committee includes representatives from the Securities and Exchange Board of India, or Sebi, the Reserve Bank of India, Irda, PFRDA, and the finance and corporate affairs ministries. The recommendation on commissions is one of a total of 33 made by the panel.
The Insurance Act currently allows agent commissions of up to 40% in the first year for some life insurance products. In the second and third years, the firms can pay commissions of up to 7.5%, and a maximum of 5% thereafter. Life insurance agents in India earned Rs15,000 crore in commissions last year, according to the panel’s report. In defence of the commissions, R. Kannan, member (actuary), Irda, said agents play an important role in the insurance sector and one of the reasons behind non-life insurance penetration stagnating at 0.6% of population could be low level of such incentives.
Life insurance penetration in India increased from 1.77% in 2000 to 4.1% in 2006, before declining to 4% in 2007, a survey tabled in Parliament in July by finance minister Pranab Mukherjee shows. India’s life insurance industry collected annual premiums of Rs2.23 trillion in 2008-09 through the sale of new policies and renewals.
The current system of sales incentives encourages insurance agents to tailor advice in such a way that it promotes the interests of the industry rather than the insurance buyer, Swarup said in the paper. The Life Insurance Council, a representative body of life insurers in India, has written to IRDA against the Swarup committee’s recommendation on the removal of commissions.
“The recommendation will not work in a retail-based industry like life insurance,” said S.B. Mathur, the council’s secretary general. “IRDA should discuss the matter with the pension regulator.” According to him, at least 80% of sales in the life insurance industry come from agents. A senior official at a large life insurance firm sees merit in Mathur’s argument.
“Mr Swarup’s recommendations are simply not practical,” the official said on condition of anonymity as he did not want to be quoted on regulatory issues. “Whatever penetration we have in life (insurance) industry today is because of the huge agency force. Adopting the committee’s recommendations will hamper the growth.” The recommendations can be adopted if the insurers agree to incentivize the agents by matching the commissions paid to them by the customers, but such a move will increase the expenses of the insurers and impact their profitability, the official added.
Some insurers, such as ICICI Prudential Life Insurance Co. Ltd and HDFC Standard Life Insurance Co. Ltd expect to break even in the next two-three years, but if the commissions are removed from customers’ premiums and transferred to the expense books of insurers, they will take longer to break even. “I haven’t come across any part of the world where you do not have agents when it comes to insurance products,” said IRDA’s Kannan. “We should not bring any measure which could jeopardize  this  industry.”
Mint had reported last month that the regulator has proposed the scrapping of agent commissions from premiums for policies sold directly. Currently, customers have to pay agent commissions even when they buy insurance directly from companies, either online or by walking into an insurance company’s office. The objective behind the move to abolish agent commissions for direct applications is to ensure that the entire premium paid by investors is put to work, increasing returns on investments.
This critical recommendation follows a similar investor-friendly move by the capital market regulator. Seb, discontinued distributor commissions in the mutual fund industry after August. Following this, the asset management companies, or AMCs, had to start incentivizing the agents and distributors to retain their interest in the business.
While investors benefit from the move, the profitability of AMCs will be affected. A recent study by McKinsey and Co. said AMCs will see profit erosion of up to 50% in FY10 due to the new Sebi rule. “The industry is likely to witness consolidation as smaller AMCs may not be able to accommodate the acute P&L (profit and loss) stress,” the report said.

Ref: http://www.livemint.com/2009/10/12180351/Irda-wants-agents8217-commi.html

Raw deal for life insurance Agents?

The recent report of the Committee on Investor Awareness and Protection, headed by D. Swarup, Chairman, Pension Fund Regulatory and Development Authority, has rattled life insurance agents throughout the country.
The committee has recommended that instead of paying commission, insurance companies should ask their agents to charge their clients a fee for the advice given. This will lead to a cut-throat competition and end up in customers preferring agents charging the lowest fee over those capable of giving the best advice.
Sec. 41 of the Insurance Act prohibits an agent giving part of the commission to his client since such rebating will give rise to unfair trade practices and induce the customer to prefer an agent giving higher rebate. When the Insurance Regulatory and Development Authority (IRDA), the Life Insurance Corporation and agents’ organisations are striving to rid the industry of this unfair practice, it is unfortunate that the committee has recommended it as a desirable practice.

Much maligned lot
The committee has stated that a huge sum of Rs. 14,704 crore is being paid as commission to agents. When divided by the number of agents, this would amount to just Rs. 8,000 a month per agent, much lower than what a clerk in government service gets. The agent can only dream of job security, guaranteed pay with regular increments and fixed hours of work.

On an average, he has to meet 10 prospects, at times convenient to each, to procure one policy. Not only that. The first year commission constitutes a major portion of his income and about 50 per cent of it goes towards expenses for procuring the business.

To make matters worse, the effect of the Insurance Amendment Bill introduced in Parliament will be to remove some of the existing provisions for protection of agents. In 1993, a sample survey, covering cities, towns and villages across the country, was conducted by an independent agency. More than 95 per cent of the persons interviewed could recognise the LIC’s emblem and had a good opinion of the organisation. The credit for creating such an awareness for insurance goes to the field force. Why then is this class of insurance workers being meted out such a bizarre treatment? It defies all logic.

High lapsation ratio
What about high ‘lapsation and churning of policies’ pointed out by the committee? This is to be measured by the average number of policies that last through maturity, as a proportion of the number of policies issued each year. This is about 40 per cent in Indian and less than 20 per cent in developed countries. The private insurance companies which suffered high lapsation during the initial years have shown good improvement over the last three years.
An agent cannot continue to earn his living unless he keeps abreast of the fast changing financial environment, rules and regulations. Many institutions, run by agents themselves, have come up throughout the country to give continuous training and the agents pay from their pockets for this periodical training. The IRDA has enough funds. But, it requires will and vision to make proper use of these funds. It should extend liberal assistance to the institutions engaged in making the agents better professionals.

Front loading myth
The committee has also criticised the front loading of the cost by life insurance companies. This refers to the practice of recovering upfront from the policyholder the cost across many years. In actual practice, however, just the reverse happens.
The higher first year cost of insurance companies is not due only to agency commission. It includes the cost of (a) agency managers, whose duty it is to recruit and train the agents and also guide them continuously about the new products and changes in rules and regulations (b) sales managers (c) medical examinations, underwriting of risk and issue of policies and (d) publicity and promotion. This higher first year cost and other renewal costs are spread uniformly over the entire term of the policy and included in the premium charged. That is, the companies first spend and recover the amount spent over the years. In many developed countries, the high first year cost is collected upfront separately as policy fee and does not form part of the premium. Not so in India. Only under unit linked insurance products, which are a recent phenomenon, is there some front loading.
The LIC enjoys the distinction of having the lowest first year cost ratio among insurance companies of all countries. The new insurance companies in the private sector will reach this comfortable level in the next ten years. The Indian consumer is thus in a better position than his counterparts elsewhere.

Policy lapses plague life insurers

The life insurance industry is seeing a sharp rise in policy lapses as subscribers are not paying renewal premiums on time.


The rate of policy lapses in the country has increased more than three-fold in the last three years — this is the highest since the industry was opened to private players in 2000-01.

Industry-wide data available from the Insurance Regulatory and Development Authority (IRDA) and the Life Insurance Council revealed that the retention ratio which was at 95 per cent in 2002-03 had declined to about 83 per cent in the year ended March 2009 (See chart).

A decline in the retention ratio means an increase in the policy lapse ratio.

While the retention ratio fell 2.5 percentage points to 92.51 per cent by 2005-06 from 95 per cent in 2002-03, between 2006-07 and 2008-09 it declined nearly 10 percentage points to 82.96 per cent. Besides, the lapse ratio had increased significantly in 2008-09 compared with the previous years.

A large part of the rise in the lapse rate is attributed to the introduction of unit-linked insurance plans (Ulips) and their mis-selling. Currently, more than 75 per cent of all life insurance policies sold in the country are Ulips.

In most cases, Ulips were sold as an investment instrument rather than as an insurance product; a majority of those who bought them didn’t properly understand the risks and charges under such policies.

In 2008-09, the bloodbath in stock markets affected fund values under the unit-linked plans, leading to the non-renewal of policies.

“We have seen higher policy lapses under unit-linked plans than under traditional schemes,” said Sunil Kakkar, chief financial officer of Max New York Life, a private sector life insurance company.

In many cases, Ulips were wrongly sold to people, who could not take market risks.

In other instances, agents sold regular premium policies as single-premium policies to customers. “To pre-empt the occurrence of such incidents, we made our policy proposal forms in different colours for single-premium and regular-premium policies,” said P. Nandagopal, chief executive officer of Reliance Life Insurance Company.

Even the insurance regulator had expressed concern many times over the gross mis-selling of Ulips.

During a visit to the city a few months back, IRDA chairman J. Hari Narayan had expressed apprehension about the predominance of Ulips in the portfolio of life insurers. “The percentage of Ulips has to be brought down to at least 50 per cent if life insurers want business sustainability,” he had said.

However, it is not solely because of the high commission structure of individual agents that mis-selling happens.

Agents have to meet steep sales targets, failing which their agency gets terminated.

The high attrition rate of individual agencies explains the high prevalence of “orphan” policies.


Source: The Telegraph,Kolkata,13/10/2009.

Points to remember before Buying an Insurance Policy

Insurance is a necessity in this fast moving life full of contingencies, therefore it is really important to get yourself insured to secure your loved ones in such unforeseen moments of your life. Nowadays Insurance is sold more as a product rather than a service where the insurance seekers are misguided while buying a policy. So before taking a plan you should be aware about your need to buy insurance policy.

What do you want your Insurance policy should stand for?

The most important element to buy Insurance is your need. The various elements that Insurance can be bought are mentioned below. Read to know which one is best suited to fulfill your requirement in life:

1) Term Plan: Required for people who want life cover in case of there death. The sum assured will be given to your nominee. In case you survive, then there is no amount that will be paid back to you. Get Term Quote Here


2) Pension Plan: This plan ensures fixed monthly income for you in your golden years by investing small amount today you can cherish all the moments in your life post your retirement too. Check Here to Calculate your Monthly Pension Amount


3) Children Plan: The plan offers to secure the future of your child. With the help of a children plan you can design the future of your child the way you want it. There dream of becoming a doctor or an engineer or a professor can easily be fulfilled by just investing small amount


4) Investment Based Plans: Insurers offer two kinds of plans to stay invested to earn returns along with a Life Cover. A) Conventional Plans B) Market-Linked Plans.


A) Conventional Plans: These are those plans wherein your money is invested in government backed securities, AAA+ rated bonds & etc., having minimal risk.


B) Market-Linked Plans: These are typically known as ULIPs & wherein the investments are done in market-linked instruments, as per your risk appetite you can choose the debt-equity proportion varying across different funds.


Points which must be taken care while buying an Insurance policy to avoid mis-selling:



1) Charges: There are different set of charges which an insurance company charges like Fund Management Charges (FMC), Mortality charges, Admin Charges, Allocation Charges etc. The agents sometime don’t disclose these charges but you really need to check before buying an insurance policy.


2) Illustration: Always ask for an illustration from the agent as it helps you to get exact figure of your fund value @ 6% & 10%. It also helps you to know all the charges & taxes included in the policy.


3) Documentation: An Insurance policy can not be logged in without proper documents of the customer like Photograph, Address proof, Identity proof & Income proof(if required), always mention on the documents purpose of providing the documents ex- For purchasing Insurance cover only .


4) Terms of the policy: Always cross check all the terms of the policy explained by the agent must be same in the documents/bond you’ve received against the policy you have bought. If it seems to be different, then according to IRDA rule you can return your policy within 15 days time period from the date of policy issued. This period is called "Free Look-up Period".


5) Tax-Planning: If you are sincerely planning to secure your family with a policy, then you must do it after a proper examination of the plans & their charges insurers offer. Most of the customers procrastinate their insurance buying decision till March so as to save taxes, however during this time there is a lot of rush and you might just select a plan in a hurry without looking at the charges & fee, therefore its always advisable to take a plan in advance so that you have good enough time to look at the plan details comprehensively.


6) Go for a comparison: Always try to get comparison from different Insurance companies' agents to understand the things better. Compare the benefits as well as the charges of the different companies & chose an appropriate plan best suited for your requirement.


So, do check these things before buying an insurance policy. It is better to do your home work before buying an insurance policy. You can compare and buy the insurance plan you feel important for yourself and can live a secured life.To get a better comparison it’s really important to meet the advisors of different companies so that you can sort all your doubts regarding the plan you require and want to buy.


Term Plan

I strongly recommend Term Plan is a Must Buy for the every people who have dependents. Buying a term insurance plan is really important as this is the cheapest form of Insurance where you can secure your loved ones life by only investing a little money. Only after paying a small premium amount you can save up an adequate amount to fulfill your families' needs in your absence.

New Brand Ambassadors of BSLI

Birla Sun Life Insurance (BSLI), one of India's leading life insurance player, a part of the Aditya Birla Financial Services Group, announced its association with ace cricketers Yuvraj Singh, Virender Sehwag, Suresh Raina and Rohit Sharma as brand ambassadors of the company in Bangalore, today. The partnership kicks of with the launch of BSLI's first campaign for its 'Wealth with Protection Solutions' category.
The campaign is a series of 3 TVCs featuring the cricketers in a very fresh format, striking a direct connect with the consumers. The central idea of the TVC revolves around the theme 'Jab Tak Balla Chalta Hain, Thaat Chalte Hai Warna....’ ('You rule till your bat rules'). The theme creates a common thread between cricketers and the common man, both of which need a systematic and disciplined approach to meet their wealth creation goals over a long-term in order to confidently face uncertainties of life. The TVC captures the real individuals behind the cricketers, as they talk about their insecurities through the high and low points in their cricketing career. Through this TVC, BSLI intends to provoke consumers to realize that even successful individuals have their ups, downs and insecurities but are able to confidently overcome these fears by planning for their future in advance.

Commenting on the occasion, Mr. Ajay Kakar, Chief Marketing Officer - Financial Services, Aditya Birla Group, said, " Cricket, today reflects the attitude of today's Indian who is confident, driven and committed to earning his space, one who believes in the fact that 'Nothing is impossible'. Our brand ambassadors, too represent the entire spectrum of the Indian consumer. While, Suresh Raina and Rohit Sharma represent the young and aspiring icons who have found their space. Sehwag and Yuvraj are the seasoned players who have witnessed success and have realized the need for working towards continued successes since its only hard work that brings in true recognition. He further added "Keeping this in mind, Birla Sun Life Insurance provides 'Wealth with Protection Solutions' for its consumers to help them navigate through the ups and downs in life with confidence".

Details on the Campaign:

Category: Birla Sun Life Insurance 'Wealth with Protection Solutions'

Concept: The TVC aims at building awareness amongst consumer for a systematic plan to build wealth which can be met through, 'Wealth & Protection Solutions' offered by BSLI. These solutions are aimed at providing customers financial security and help build wealth for purposes like an emergency fund or specific goals like the down payment to buy a house. The TVC has been created around the insight that most individuals while in their peak earning years tend to forget the need to actively save and build wealth to tide over the ups and downs in life.

This insight is captured in the phrase - 'Jab Tak Balla Chalta Hai....Thaat Chalte Hai, Warna...’ The campaign will be series of three TV commercials with four leading cricketers as the protagonists. The commercials will show the cricketers in a totally different light than has ever been seen on television. It will bring to front the real individuals behind these cricketers who have some of the same fears and insecurities as all of us have.

Creative Execution:
The essence of the brief was captured in the line 'Jab Tak Balla Chalta Hain, Thaat Chalte Hain Warna....’. The cricketers are portrayed as common individuals by bringing out their insecurities associated with the highs and lows of the game and therefore need for them too, to train and practice regularly.

Creative Agency: JWT (Mumbai)

Production House: Chrome Productions

About Birla Sun Life Insurance

Birla Sun Life Insurance Company Limited (BSLI) is a joint venture between the Aditya Birla Group, a well known Indian conglomerates and Sun Life Financial Inc, leading international financial services organization from Canada. With an experience of over 9 years, BSLI has contributed significantly to the growth and development of the Indian Life Insurance industry and currently is on of the leading life insurance companies in the country. Enjoying trust of its over 2 Million customers, BSLI is known for innovation. It was the first Indian Insurance Company to introduce "Free Look Period" and Benefit illustrations, which were subsequently made mandatory by IRDA for the industry. BSLI offers a complete range of pension, health and life insurance products and has an extensive reach in over 1500 markets through its network of 651 branches and 1,58,429 empanelled advisors. This is well supported by the sound financial that the Company has. The AUM of Birla Sun Life Insurance surpassed Rs. 11,670 crs and it has a robust capital base of over Rs. 2000 crs as on June 30, 2009.

For more information, please visit http://www.birlasunlife.com/

About Aditya Birla Group

A US $28 billion corporation, the Aditya Birla Group is in the league of Fortune 500 worldwide. It is anchored by an extraordinary force of 100,000 employees, belonging to 25 different nationalities. The group operates in 25 countries across six continents - truly India's first multinational corporation. Aditya Birla Group through Aditya Birla Financial Services Group (ABFSG), has a strong presence across various financial services verticals that include life insurance, fund management, distribution & wealth management, security based lending, insurance broking, private equity and retail broking. In FY 2008-09, the consolidated revenues of ABFSG from these businesses crossed Rs. 4763 crs, registering a growth rate of 36%.

For more information please visit http://www.adityabirla.com/

About Sun Life Financial Inc.

Sun Life Financial is a leading international financial services organization providing a diverse range of protection and wealth accumulation products and services to individuals and corporate customers .Chartered in 1865, Sun Life Financial and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. As of March 31, 2009, the Sun Life Financial group of companies had total assets under management of $375 billion.

For more information please visit www.sunlife.com

India membership at MDRT soars 80%

Financial advisors (or agents) in the domestic life insurance business promise to strike it big at Indianapolis, where the annual meet of the Million Dollar Round Table (MDRT) is to be held from June 7 to 11, 2009. The MDRT is a gathering of almost 40,000 members from 87 countries and 497 life insurance companies across the globe. The growth in membership of MDRT professionals from India has been phenomenal, with a 80% growth logged over the last couple of years. SBI Life, HDFC Standard, LIC, Max New York Life have grown their MDRT numbers substantially. A MDRT membership is recognised internationally as the standard of sales excellence in life insurance business. For starters, to be an MDRT qualifier in 2009, he or she should have earned a first year commission of Rs 7,59,100 or a first year premium income of Rs 30,36,400 in the calendar January to December 2008. Anand A Jathan, member of Whole Person Task Force, MDRT, and former country chair for MDRT, told DNA Money, "India today holds the fourth position in terms of membership worldwide and the first position in terms of membership growth. Its membership has grown from just 229 members in 2003, 618 members in 2005 to 1999 members in 2007 and 3991 members in 2009. The number of qualifiers is much higher. In LIC, for example, number of qualifiers are 1196 but members are only 335." A qualifier has to pay $625 to become a MDRT member. "It is important to showcase yourself in the international space. These days many life insurance companies give incentives to agents to become a member. However, number of members who attend the meeting are less as this involves Visa issues and other registration charges," Jathan said. What's more, LIC's Rajesh Satoskar and R K Shetty will be the first two Indian life insurance agents in the history of MDRT to deliver speeches in the focus session at Indianapolis. How difficult was it to sell policies over the last few months? Satoskar said, "Obviously there was an impact of the recession on selling of big policies. Many people had blocked their funds and, due to the liquidity crunch, many big sales were in difficulty. Most high networth individuals were regular investors in stocks and properties and hence fund flow was restricted for life insurance. But a strong set up and a new product Jeevan Aastha geared sales". Rajender Sud, director and head, agency distribution, MaxNYL, said, "MDRT is one of highest pinnacles of success achieved by an agent advisor. At Max NYL, we provide and encourage our agents to look at insurance sales from a more holistic frame of mind." While their core responsibility is sales, our systems also encourage them to look at it as a viable career option. We have set in place certain processes that encourage our advisors to follow certain 'must do' items. Source: DNA / Kolkata: Wednesday, June 3, 2009 2:58 IST

Birla sunlife Insurance business has grown by 305% in 2008-2009

* Achieved first year weighted annualized premium of Rs. 2,959 crore, as against Rs. 2,205 crore in the previous year o a growth of over 34% o improved market share to 4.3%, from 2.9% in FY08 and grew market share to 8.5% from 6.6% amongst private sector players o ranked number 5 amongst private sector players o among the fastest growing life insurance companies in 2008-09 * Total premium revenue growth of 37% to Rs. 4,414 crore from Rs. 3,223 crore last year * Launched 5 new products in individual life segment to widen the customer offering o penetrated new segments such as Pension, Health and Traditional * A substantial growth in customer contact points o number of branches have grown to 600 from 339 last year o number of advisors grew to over 1,65,000 from 1,15,000 in March 2008. * All the funds have beaten benchmarks * The AUM reached an all time high, close to Rs 10,000 crores * The company has an enviable zero outstanding claims ratio · Emerged as only one of two life insurance companies in the top 10 to have shown YOY growth in each month of 2008-09

Satyam back to track with Rs 1,000 cr on salaries

Scam-hit Satyam Computer today said it has spent over Rs 1,000 crore onpaying salaries to its employees in the first three months of this year. According to the cash outlays information of the company for the first threemonths of this year, Satyam spent a total of Rs 1,026 crore on paying salariesand another Rs 342.72 crore in other employee-related segments. The company made a cash outlay of Rs 91.17 crore on medical insurance foremployees and Rs 251.55 crore on statutory compliance, the company said in thefiling to the stock exchanges. Overall, the company's total operating cash outlays stood at Rs 1,836 crore atthe end of March this year.The other expenditures of the company include — subcontractors, rent and utilities, travel and forex and other operating expenses. At the end of March this year, the company's total headcount stood at 41,622,while its key subsidiaries, including Satyam BPO, had an employee strength of3,828 associates. Further, the non-operating cash outlays by the company in the three monthsperiod include — capital expenditures (Rs 52.54 crore), marked to market losseson account of foreign exchange contracts (Rs 147.81 crore) and repayment ofloans (Rs 103.86 crore). It also includes — deposits and margin money for bank guarantees and other nonoperative expenses, it added. For the quarter ended December 2008, Satyamreported a consolidated net profit of Rs 160.50 crore and the total incomestood at Rs 2,327.21 crore.

Promise of big leap in Ulip returns

Come October, unit-linked insurance plans (Ulips) will give more returns to policyholders. The Insurance Regulatory and Development Authority (IRDA) today issued a circular capping overall charges that life insurers can levy on Ulip subscribers. The cap will come into effect on October 1. The insurance regulator has also decided to approve only those new Ulip filings that conform to the provisions of the circular. “All existing products that do not meet the requirements of this circular should be withdrawn or modified by December 31, 2009,” the regulator said. “Insurance companies have a number of Ulips and under each product there are various charges which are recovered from the contribution or from the fund value. It is decided that the IRDA will prescribe one cap on all charges put together,” the regulator said. The charges include a mortality levy, fund management fees, policy or administration fees and a surrender charge. The regulator has said the cap on charges will be based on the difference between the gross return showed in benefit illustrations and the actual return that policyholders get after adjusting for all charges. Benefit illustrations give policyholders an idea about how much they will get taking into account all charges. For unit-linked plans having a policy term of less than or equal to 10 years, the differences between gross and net returns shall not exceed 300 basis points (100 basis points is equal to one percentage point) and of this, fund management charges shall not exceed 150 basis points. For policies above 10 years, the differences between gross and net returns shall not exceed 225 basis points, of which fund management charges shall not exceed 125 basis points. At present, while selling Ulips, life insurers are required to show prospective policy-holders benefit illustrations assuming two gross returns — one at 6 per cent and the other at 10 per cent. Let us understand this with the aid of a benefit illustration of a unit-linked plan of a leading private insurer. A 40-year-old male paying an annual premium of Rs 1 lakh, with a sum assured of Rs 5 lakh for 15 years, will get Rs 26,88,132 at the end of the 15th year provided his investment grows at a gross rate of 10 per cent. Under the new rule, he should get at least Rs 28,69,336 on maturity, which is a gain of Rs 1,81,204. Post-October, insurers will also have to give on maturity a certificate to policyholders showing year-wise premiums, charges deducted, fund values, partial withdrawals by policyholders and the final payment. The new rule will certainly put private insurers on the back foot because over 90 per cent of their total business come from Ulip sales. The initial expenses on Ulips are very high, varying between 20 per cent and 60 per cent of the premium. A large part of this initial charge is spent by insurers on agency commissions. The new directive of the IRDA is expected to result in reduced commissions for insurance agents. Justifying lower caps on charges for longer term Ulips, the IRDA said, “Insurance products are long-term saving vehicles and the policy prescriptions should help the customers to move towards long-term-savings-cum-protection rather than short-term one.”

Prop for new pension plan

Subscribers to the New Pension Scheme (NPS) won’t have to pay any tax on maturity provided the sum is used to purchase an annuity plan in the year of exit. To make this possible, the finance bill of this year’s Union budget has proposed to amend section 80CCD of the income tax act and insert a new sub-section (5) . Under the proposed amendment, the assessee (who is a subscriber to the NPS) shall be deemed not to have received any amount (from the NPS) in the previous year if the amount is used to purchase an annuity plan. The New Pension Scheme allows for the receipt of 60 per cent of the corpus on maturity, while the contributor will have to buy an annuity plan with the remaining 40 per cent and get a monthly pension. If contributors invest the 60 per cent in an annuity plan of a life insurance company they won’t have to pay any tax under the proposed sub-section (5). The monthly pension income from the annuity plan will, however, be considered as income and suitably taxed. Contributions to the NPS and fund accumulation therein are already tax free. The New Pension Scheme, which was rolled out for all other individuals besides government employees from May 1 this year, didn’t find much favour with investors. Only 650 people joined the scheme since its launch, accounting for a total fund size of Rs 80 lakh. Though the NPS is a relatively cheap retirement product — only the Employees Provident Fund and the Public Provident Fund are better in terms of cost as they don’t have any charges — it failed to attract investors because the withdrawals on maturity were taxable. Even pension plans offered by life insurance companies allow for the receipt of one-third as lump sum on maturity without any tax liability. Thus, despite having the highest cost compared with all other products, premium income from pension plans accounts for 20 per cent of a life insurers’ total business. “The new provision on tax treatment will make the NPS more attractive to investors,” said Anil Chopra, group CEO, Bajaj Capital. “However, people should consider investment in the NPS in conjunction with the PPF or the EPF where withdrawals are tax-exempt,” he said. Chopra said that the exemption of the NPS Trust from paying the securities transaction tax and any tax on income would increase the return on investment for beneficiaries. Source: The Telegraph,Kolkata.Friday,10/07/2009

Annuities Story

• Did you know that the biggest risk for an average 30-40-year-old Indian without an inflation-linked guaranteed pension is that of living too long? And if your reaction to the above statement refers to working till you die or that your progeny will take care of you in your reclining years, stop. And think. About the time when you will be 80 years old, without a means of income on your own, completely dependent on someone else. Pension planning, therefore, is critical. Some retirement products like the public provident fund (PPF) allow you to accumulate over the years, and return a corpus. A pension product, on the other hand, takes in your regular contributions over your earning years, and then pays you regularly starting your vesting age the age at which you intend to retire. Insurance companies offer two kinds of pension plans - endowment and unit linked. Endowment plans invest in fixed income products, so the rates of return are very low. Unit-linked plans are better, as they are more flexible. You can stop contributing after 10 years and the fund will keep compounding your corpus till the vesting date. You can opt for higher exposure in the stock market for your plan if your risk appetite allows it. Lower risk options like balanced funds are also offered. Though insurers may try to sell you a life cover bundled with your pension plan, stay with your pure term policy and buy a pure pension plan to maximize post-retirement benefits. Select a plan that gives the maximum maturity value. The ultimate value of your pension fund corpus will depend on costs, fund management, and market performance over the years you pay into the fund. Fund management and market performance is never under your direct control; so you might not be able to do anything much about them. But you can definitely shop around to find a plan with the highest projected maturity value based on past performance as well as lowest costs. Did you know that, after retirement, you can ask your insurer to transfer all the funds to another that gives a higher pension, at no extra cost? Such tips will help you to maximize your capital appreciation that will ensure your golden reclining years.

A review of the new plan -- Jeevan Saral

Recently in the market a life insurance policy has made sensation due its uniqueness. What is the uniqueness is all about? When I went to a my old client he told me that he recently took the new plan of LICI that gives him 250 time sum assured. I really shocked. I thought why not other companies at least mine can’t produce a plan close to this. 

The client even told that it is far better than the plan he took from BSLI named saral Jeevan From me. I argued with him but he was just fanatic about the new plan he took. He told, we private players are only interested to sale the product wrongly because he thinks if we state the client the right scenario he /she will not take the policy….. .Crazy does not it sounds? Let’s find what is Jeevan Saral is all about?

Under a life insurance policy there are two types of Sum Assured. The Sum Assured payable on maturity and the Sum Assured payable in case of death claim.

Under most of the Plans both are equal. Under some plans (ex: Jeevan Mitra Double Cover) the sum assured payable on death is twice the sum assured payable on maturity. It is thrice in the case of Jeevan MitraTriple Cover.

 Once the customer chooses the Plan and the Sum Assured required on maturity. Sum Assured payable on death gets automatically determined, whatever be the age and policy term. The Premium Rate can then be obtained from the agent’s manual, on the basis of age and policy term. 


Under the Jeevan Saral Plan, the customer has to first decide the amount of premium he wants to pay per year. Once the Premium is chosen, The Sum Assured payable on death gets automatically determined, whatever be the age and policy term. This is called the Sum Assured under the policy. 


The Sum Assured payable on maturity can then be obtained from the agent’s manual on the basis of age and policy term.

Suppose a person decides to pay a premium of Rs.1200 per year. The Sum Assured payable on death will then be Rs.25000, whatever be the age and policy term. The Sum Assured payable on maturity can then be obtained on the basis of age and policy term. 

Why this odd amount, 1200 per year?

It is the same as Rs.100 per month. In other words, by paying Rs.100 per month, a person can get a Risk Cover of Rs.25000, whatever be the age and policy term.

What is the advantage of starting from the premium and finding the Sum Assured payable on maturity, instead of starting from Sum Assured and finding the Premium?

The advantage can be seen when we come to Surrender Values. A Unique Feature There is also a Unique Feature under Jeevan Saral. In case of death claim, in addition to the Sum Assured payable on death, All Premiums Paid, (excluding the first year premium, extra premiums and premiums for rider benefits), will be refunded. This is the first time that such a feature has been introduced. The result is a continuously increasing Risk Cover from the second year onwards. 

Is Jeevan Saral a With Profit Plan?  

 YES. But bonus will not be declared each year as under other plans. Only “Loyalty Addition” will be given. The Loyalty Addition is payable only if premiums have been paid under the policy for at least Ten Years and Ten Years have been completed since the date of commencement. This Loyalty Addition is payable even when a policy is Surrendered and also under Death Claim, Paid-up and Surrenders. 

A policy will acquire paid-up value provided premiums have been paid for at least three full years. Once a policy acquires a paid-up value, it can be surrendered. 

But there is a unique feature when it comes to Surrenders. Provided premiums have been paid for five full years, Surrender will be treated as a maturity for a reduced policy term.

 What does this mean? 

 Take for example a policy for term 20, being surrendered after premiums have been paid for 12 years. This will be treated as if the policy was originally taken for a term of 12 years, and the maturity value corresponding to term 12 will be paid. Since premiums have been paid for 12 full years, the Loyalty Addition corresponding to term 12 will also be paid

 What is the significance of this novel provision?

 It is quite simple. A policyholder need not decide the policy term at the time of completing the proposal. He/She can first opt for the maximum permissible term corresponding to his/her age, and postpone the decision on a suitable term to a convenient date in future. 

How does this work? 

Take, for example, a person aged 30. He can initially opt for the maximum term permissible, 35 years. If, after 17 years, he decides that the policy term can be 17 years, he can surrender the policy. He can even decide to have a term of 17 years and six months. Since the Risk Cover (Sum Assured Payable on death) is independent of age and term and policy surrender will be treated as policy maturity, there will be NO LOSS due to the postponement of decision. In this sense, Jeevan Saral can be called a Flexible Term plan. One can now appreciate the advantage of starting from premium and going to the sum assured payable on maturity. 

Can a person have multiple terms for the same policy?

The answer is YES. Let us see how this is possible. Consider, for example, a person paying a premium of Rs.700 per month (i.e. Rs.8400 per year) under his Jeevan Saral policy and initially takes the maximum term permissible (say, 30 years). 


The initial Risk Cover will be for Rs.175,000, increasing by Rs.8400 each year from the second year onwards. Later, he decides to have a term of 12 years under One Seventh of the policy.


It will be presumed that there were two policies originally, One with the annual premium of Rs.1200 for a term of 12 years and another for an annual premium of Rs.7200 for a term of 30 years. 


At the end of 12 years, the Maturity Value, along with Loyalty Addition, will be settled under the portion for term 12 years. Under the balance policy, the annual premium will now be Rs.7200, Risk cover Rs.150000 and Term 30 years. If death claim occurs at any time later, say during the 14th year, the claim amount payable will be, [Rs.150,000 + (14 - 1) x 7200 + Loyalty Addition for term 15 years). 


After another 3 years, he decides that under another Two Seventh of the original policy, the term should be 16 years. It will be presumed that there were three policies originally, One with the annual premium of Rs.1200 for a term of 12 years (which has already matured), another for an annual premium of Rs.2400 and term 16 years, and another for an annual premium of Rs.4800 for a term of 30 years. At the end of 16 years, the maturity value corresponding to annual premium Rs.2400 and term 16 will be paid along with the Loyalty Addition.


Under the balance policy, the premium will be Rs.4800 and Risk Cover Rs.100000. If death claim occurs during, say 20th year, the claim amount payable will be, [Rs.100,000 + (20 - 1) x 4800 + Loyalty Addition for term 20 years). Later he decides that under the balance policy, the term should be 26 years. 


At the end of 26 years, the policy will be closed and the maturity value along with loyalty addition, corresponding to annual premium of Rs.4800 and term 26 years will be settled. 



It can thus be seen that the decision regarding policy term need not be taken at the outset. Take the maximum permissible term first and take the decision, in installments, at later dates, without any loss. 


It is like Partial Surrenders, with the surrender being treated as maturity. It can also be said that with this facility, Jeevan Saral is almost like a Flexible Money Back Plan, with the customer choosing the dates of survival benefits and the amount of survival benefits. Only almost, not exactly equal to. 


Under the Money back plan, the Risk Cover remains the same throughout. But, in this case the Risk Cover reduces with each maturity benefit taken. This can however be compensated by taking a suitable Term Rider along with the main policy. The agents dealing with high-end customers can readily appreciate the value of this flexibility. But, one word of caution. 


It may also be a source of confusion in the case of customers not much interested in such flexibility. So, use this feature with utmost caution while talking to a prospective client. 

Are there any Restrictions on such Partial Surrenders?

Yes. But only a few and very reasonable restrictions. These are, the reduced annual premium after the partial surrender, excluding rider and extra premiums, should not be less than Rs.3000, where the admitted age under a policy is less than 50 and, Rs.4800 when the admitted age is 50 or above and should be a multiple of 600 (i.e. the equivalent monthly reduced premium has to be a multiple of 50).


The amount by which the annual premium can be reduced for the purpose of a partial surrender has to be a multiple of 600 and should not be less than Rs.1200. A minimum waiting period of one year is required between successive surrenders. 


When a partial surrender is made and the Sum Assured payable on death gets reduced, the sum assured under Accident and Term rider benefits, if any, will get correspondingly reduced. Before making a partial surrender, any outstanding loan under the policy has to be repaid in full. Rider Benefits Accident and Term cover can be availed of as rider benefits. 


The sum assured under rider benefits has to be the same as the sum assured payable on death under the main policy. 

Loyalty Addition- A policy will be eligible for loyalty addition only after payment of premium for full 10 years and after completion of 10 years from date of commencement. A loyalty addition is payable on death or maturity or when a policy is surrendered. If a death claim occurs in the 10th year of a policy, provided the policy is in force at that time, it will be eligible for loyalty addition even if the premium for the 10th year has not been paid in full.

 When will the Loyalty Additions be declared?

 The loyalty additions will be declared after each actuarial valuation. It will be based on policy term. In the case of death claim & surrenders, and in the case of policies under paid-up condition, the period for which premiums have been paid will be taken as the policy term. For example, suppose a policy taken in the year 2004 becomes paid up in the year 2015 after payment of premiums for 11 years. 


It is then surrendered in January 2017. The loyalty addition under the policy will be that corresponding to term 11 as declared in the valuation results declared in September 2016. That is, the valuation just preceding the date of surrender. 

What will be the surrender value?


The surrender value as on the date of lapse (i.e. due date of first unpaid premium) will be equal to the maturity value corresponding to the policyholder’s age at entry and Term 11. Suppose the period between the date of lapse and date of surrender is 1 year and 9 months. Interest (compounding yearly) will be paid on the surrender value for a period of 1 year and 9 months. To this will be added the loyalty addition. The rate of interest to be used each year for this purpose will be declared at the start of the Financial Year. 

Why only Loyalty Addition and not the Conventional Regular Bonus?

It is technically difficult to combine regular yearly bonus with the flexibility built into the product. So, the concept of Loyalty Addition has been introduced instead of the regular bonus. Some may feel, going by the experience of recent years, that amount given by way of loyalty addition may be negligible.


It will not be so in the case of Jeevan Saral. Actuarial analysis will show that the actual loyalty addition that can be paid will not be less than the total regular bonus payable on death claim, surrender or maturity. It is only a change of concept. 


The policyholder will be the ultimate gainer by this change of concept. One has to keep the policy in force only for ten years, and not till maturity, to be eligible for loyalty additions. Freedom has been given to surrender the policy at any time after 10 years without any loss.

 In the case of surrenders within ten years and death claim within nine years, there will be no terminal bonus. In the case of the latter, since all premiums except the first year premium are being refunded along with the sum assured, paying also loyalty addition will be difficult.

In the case of death claim after nine years, after refunding all premiums (except the first year premium) along with the sum assured, expenses are being met and payment of loyalty addition becomes possible.


Miscellaneous Issues


a) In all the examples given under “Surrenders”, the number of years for which premiums have been paid was taken as integral number of years. Suppose a person desires to surrender the policy after paying premiums for 11 years and 3 months. Then find the maturity values corresponding to terms 11 and 12. 


For term 11years and three months the surrender value can be obtained on pro-rata basis from these two maturity values. That is, it will be equal to Maturity value for term 11 +one fourth of the difference between the maturity values for terms 12 and 11 +Loyalty addition corresponding to term 11. 



b) If premiums have been paid for three full years, then surrender value will be equal to 80% of the maturity value corresponding to term 3.


c) If premiums have been paid for four full years, then surrender value will be equal to 90% of the maturity value corresponding to term 4. 


d) The minimum term under this plan is 10. But, for the purposes of calculating the surrender value, the Sum Assured payable on maturity has been given for terms 3 onwards. 


e) There is no rebate for high sum assured. But, rebates of 1% and 2% are given for half yearly and yearly modes respectively.