Lord, bless us but invest not - Court denies deities right to open demat accounts Lord

The gods cannot play the stock markets.That’s the upshot of a verdict handed down today by Bombay High Court which threw out a petition seeking to open demat trading accounts in the names of Lord Ganesh — the popular god of wealth and prosperity — and four avatars of lesser deities.

The petition was moved by a Sangli-based private religious trust named Ganpati Panchayatam Sansthan. The other four deities are Chintamaneshwardev, Chintamaneshwaridevi, Suryanarayandev and Laxminarayandev.

The trust had contended that if the deities could be granted PAN cards — a key tax-filing requirement for the large assets that temples and trusts own in the name of the ruling deities — they could not be barred from trading on the bourses. A PAN card is a basic requirement for opening a demat account.

The National Securities Depository Ltd (NSDL) had rejected the private religious trust’s request to open demat accounts in the name of the deities, sparking the unusual case where the gods — or at least the mortals who manage their considerable assets — started showing an undue interest in playing the markets.

“Trading in shares on the stock markets requires certain skills and expertise and to expect this from deities would not be proper,” said Justice P.B. Majumdar and Rajendra Sawant while tossing out the petition that challenged NSDL’s refusal to open demat accounts in the names of the five deities.

The trust, which belongs to the Patwardhan family (the former royals from Sangli), had obtained PAN cards in the names of the deities in 2008. They reckoned that trading on the local stock markets — which saw the sensex yield 76 per cent returns in calendar year 2009 — would be a breeze for the gods.

The trust had applied for the five demat accounts in the names of the deities through a private bank.

In its petition, the trust maintained that verdicts handed down by the Supreme Court and several high courts had upheld the right of deities to own property.

Uday Varunjkar, the counsel for the trust, said that shares, debentures and mutual fund units were also regarded as property under income-tax laws and, therefore, the deities could not be barred from placing their celestial bets on stocks.

NSDL chose to rely on a legal quibble to fob off the Patwardhans and their pantheon of deities.

S. Ganesh, a senior officer of NSLD, filed an affidavit in court saying only deities of registered public trusts could acquire property.

He argued that the Sangli-based trust was a private religious trust that was not registered under the Bombay Public Trust Act. Therefore, it could not acquire property in the name of the deities.

The NSDL official said private trusts could own or acquire property, including shares and debentures, in the name of trustees but not in the name of gods.

It is not known whether the deity of any public trust has ever applied for a demat account to trade in shares.

To open a demat account, the prospective account holder needs to show proof of identity (passport, driving licence, ID card issued by a central or state government, membership of professional bodies or credit cards), proof of address, passport size photograph and a copy of the PAN card.

It is not known how many of these documents the trust was able to submit along with its application for opening demat accounts on behalf of the gods.

A couple of years ago, NSDL was sucked into a controversy when it was accused of conniving with several banks and unscrupulous people to open bogus accounts to help certain people corner share allotments arising from initial public offerings (IPOs).

The racket was unearthed in 2005 and had run unchecked for two years. Over 40,000 fake demat accounts had been opened by the banks and the two depositories — NSDL and Central Depository Services (India) Ltd.

Both depositories were indicted in two interim reports that were produced during former Sebi chairman M. Damodaran’s tenure. NSDL was cleared of all charges after C.B. Bhave took over as Sebi chairman.

source : The Telegraph,Kolkata. 17/07/2010

Bad Time for Mediclaim Policy Holder's Too

If you have a mediclaim policy that entitles you to cashless facilities, here is some bad news. You will no longer be able to get these facilities at high-end hospitals like Apollo, Fortis, Ganga Ram, Max or Medicity in Delhi, the national capital region (NCR) and the metros of Mumbai, Bangalore and Chennai.


All insurance companies providing mediclaim facilities, a cashless health insurance, have stopped direct payment of treatment charges to 150-odd high-end hospitals in Delhi and NCR alone from July 1. If you now go to any of these hospitals, you will have to pay from your pocket despite having a valid mediclaim policy with all premiums paid. You will then have to reclaim the amount from the insurer with no guarantee that the entire amount would be reimbursed.


At least 18 insurance companies, including the four public sector entities, have taken off more than 150 hospitals in Delhi and NCR from their designated list for the cashless facility. This facility will now be available at only 100-odd hospitals, none of them from the big chains. There has been a similar axing of hospitals from the list in other cities.


What has forced these insurers to take this step is the fact that they have been bleeding badly. They are making an estimated loss of Rs 1,500 crore annually on a yearly premium collection of Rs 6,000 crore on mediclaim policies across the country,


These 18 insurance companies had so far been providing cashless services at over 3,000 hospitals pan-India. However, a recent study carried out by the TPAs found that only 350 of them or roughly 11% were consuming more than 80% of the total claims.


It was also found that customers were overcharged for each hospitalization, irrespective of the treatment, and were left with very little funds for their next treatment. This is intended to discipline the hospitals who are overcharging a customer.


Segar Sampath of the New India Assurance Co Ltd said, "TPAs have been asked to convey the fresh list of hospitals to individual policyholders as also the new packages available."


These insurers have worked out treatment packages and depending on the hospital's infrastructure, the lower or higher rate will be applicable.


For instance, hospitals that are part of the big chains charged Rs 58,000 on average for a gall bladder operation. Now, according to the new package deal, a hospital would be offered anywhere between Rs 30,000 and Rs 48,000 for the same. Similarly, for a cataract operation, the average payout was Rs 35,000. The new deal provides for a maximum of Rs 24,000, while it would be Rs 14,000 if the surgery were done at a smaller set-up.


The insurers, said have been negotiating with the big chains for the last six months in an attempt to persuade them to accept the packages. So far, however, none of them has responded positively, forcing the insurers to take this drastic step.


The insurers have identified the four metros of Delhi, Mumbai, Bangalore and Chennai to start with the new package deals. The scheme would then be rolled out across the country. These four metros account for almost 50% of the Rs 6,000 crore annual mediclaim premium collected by the 18 insurers. Overall, the premium collection on health insurance is estimated to be upwards of Rs 9,000 crore.

SC issues notices to Centre, insurers over ULIPs

The Supreme Court issued notices to the Centre and 14 life insurers on a petition by market regulator Sebi seeking transfer of cases from High Courts relating to Unit Linked Insurance Products (ULIPs).
Sebi is locked in a turf battle with insurance regulator IRDA over who has jurisdiction over ULIPs.

A bench headed by Justice S H Kapadia also sought response from some PIL litigants who have raised the issue concerning ULIPs in various High Courts.

During a brief hearing, when the petition filed by Sebi was mentioned by Attorney General G E Vahanvati, the bench questioned Sebi's move to file the petition before the apex court.

Sebi is in Mumbai, insurance companies are in Mumbai, LIC is in Mumbai," the bench remarked and indicated that the Bombay High Court could have heard the matter.

Vahanvati, in his submission, said that the issue of jurisdiction too has to be settled by the apex court.

The bench said, basically, both the regulators are fighting and wondered, "why not appoint a super regulator." It later posted the matter for hearing on July 8.

The dispute over jurisdiction of ULIPs between Sebi and IRDA snowballed into a major controversy after the market regulator banned 14 life insurers, including those belonging to SBI (SBIN.NS : 2280.1 -17.05 ) and Reliance Anil Ambani Group, from raising any further money from ULIPs unless they are registered with the market watchdog.

Responding to Sebi's directive, IRDA asked insurance companies to ignore the order of the market regulator and continue with business as usual.

Amid the conflicting orders, the Finance Ministry brokered peace between the two regulators and asked them to jointly seek legally binding order from an "appropriate" court over jurisdiction on ULIPs. Till then, status quo ante was restored.

Following the government directive, Sebi allowed insurers to raise money from existing ULIPs, but asked them not to issue fresh ULIPs after April 9, the date when it issued the order banning 14 life insurance companies from raising funds through ULIPs.

ULIPs are insurance products but part of the premium raised through them is invested in stock market. While Sebi regulates the stock market, the working of the insurance companies is overseen by IRDA.

Sebi tightens norms for fund distributors

Capital market regulator, Securities and Exchange Board of India (Sebi), which believes that unit-linked insurance plans should be supervised by it as they contain an investment component, is now gearing up to issue norms for mutual fund distributors.


Sebi chairman CB Bhave has indicated that Sebi will be coming up with new set of guidelines for mutual fund distributors. "Guidelines for MF distributors are on the anvil,” he said speaking to reporters on the sidelines of launch of Application Supported by Blocked Amount (ASBA) by the state-owned lender, Indian Bank, in Mumbai.

It may be recalled that entry loads for mutual fund schemes had been withdrawn in August last year. These loads, paid by the investors were passed on to distributors as commissions.

Meanwhile, Sebi is unhappy over the way the ASBA is being implemented by banks. Expressing concern that ASBA is not being made available, Bhave said that banks should make the facility available at more branches in the 40 cities, which account for 80% of subscriptions. Surprisingly, only 20% of IPO investors were putting their money through ASBA. Banks must ensure that all the branches of the banks falling under those 40 cities were equipped with ASBA facility, said Bhave. The absence of the ASBA facility, in adequate number of bank branches, sub brokers of the stock exchange were feeling left out, said Bhave. Banks must ensure that all the branches of the banks falling under those 40 cities were equipped with ASBA facility, said Bhave. Talking about the benefits of ASBA, Bhave said that it has brought down refund related investor complaints.

On issue of last day bid in IPOs, Bhave said that Sebi has amended issue of capital and disclosure requirement (ICDR), and given a facility to issuers if they so choose, they can close the issue for institutional investors on day X and for other investors on day X+1.

Coming on listing norms for IPO, Bhave hinted that the Sebi was planning to bring down the closure of IPO to 7 days by December, from the currently existing timeframe of 12 days.

IRDA issues new stringent guidelines for Ulips

Taking extra caution, insurance regulator, Insurance Regulatory & Development Authority (Irda) based upon the insurance related data as of year ending March 31,2010 and related discussions, has issued clarifications on guidelines on unit linked products (Ulips).


All life insurers are advised that only the Ulips, which conform to these revised guidelines, shall be permitted to offer sale from July 1.

IRDA has reiterated that in case of individual products, the minimum policy term shall be five years and group products will continue to be on annually renewable basis. All linked products including pension / annuity products must have a minimum sum assured payable on death.

In case of unit-linked products providing health insurance cover, the provision of death benefit is not mandatory. In addition, no loan shall be granted under Ulips

IRDA has said partial withdrawal is allowed only after fifth policy anniversary for all Ulips except pension/annuity products. In case of unit linked pension/annuity products, no partial withdrawal shall be allowed and the insurer will convert the accumulated fund value into an annuity at maturity.

However, the insured will have the option to commute up to a maximum of one-third of the accumulated value as lump sum at the time of maturity. In the case of surrender, only up to a maximum of one-third of the surrender, value could be availed in lump sum and the remaining amount must be used to purchase an annuity.

Every top-up premium shall have a lock in period of three years from the date of payment of that top up premium. However, top-ups are not allowed during the last three years of the contract.

Tough time ahead for Ulip sellers

The new regulations may deal a body blow to unit-linked insurance plans (Ulips).


Insurers as well as insurance agents, who have so far been making big money selling Ulips, stand to lose after the new norms become effective.

Consequently, insurers are likely to jack up the minimum premium payable on Ulips, while insurance agents may start aggressively hawking traditional products where they will get a higher commission.

“Life insurers have higher expenses in the first year of the policy, which under the new regulations will have to be recovered over the lock-in period of five years. This will put a strain on new business,” said Deepak Sood, managing director and chief executive officer of Future Generali Life Insurance Company.

“The capping of expenses guidelines has been made very stringent and this will have far-reaching consequences,” said Kamesh Goyal, country manager and chief executive officer, Bajaj Allianz Life Insurance Company.

“Small regular premium (Ulips) policies will become unviable. A large proportion of people who were paying a premium of less than Rs 15,000 or so a year will suffer badly. I feel it should be changed and linked to the premium amount. Small-ticket policies of less than Rs 20,000 a year should have higher allowance to make them viable. The difference in gross and net return for this set of policies at the end of the fifth year should be 5.5 per cent (against 4 per cent prescribed in the new regulations),” he added.

“Acquisition of small-ticket policies will become costlier for insurers and hence it is very likely that insurance companies may increase the threshold premium level in Ulips,” agreed Gorakhnath Agarwal, chief actuary, Future Generali Life Insurance Company.

“The capping of charges will affect the (profit) margins of life insurance companies,” insurance sector researchers at Edelweiss Securities Limited said in a report. “The capping of surrender charges is a bigger blow compared with the difference in gross and net yield (return) because it would not only restrict the ability to generate revenue, but also raise the persistency risk borne by insurers,” the report said.

Until now, surrender of Ulips within the first three years would attract hefty deductions — often nothing is returned if the policy is surrendered in the first year. The new regulations have pegged surrender charges in the first year to a maximum of Rs 3,000 (in case of annual premium less than Rs 25,000) and Rs 6,000 (in case of annual premium above Rs 25,000).

“The new regulations on surrender charges will force insurers to trim the commission paid to agents,” said Agarwal.

He added that the increase in minimum sum assured in case of Ulips would reduce insurers’ income from fund management charges because they would have to allocate a higher percentage of premiums towards mortality charges.

“Commission levels and shareholders’ margins are among the lowest in India when compared with other Asian countries. There has to be a fair return for all stakeholders concerned,” said V. Srinivasan, chief financial officer, Bharti Axa Life Insurance Company.

Insurers also feel that lower surrender charges will lead to higher policy surrenders because policyholders will view Ulips as short-term investment instrument.

Base rate - Understand why your EMI will not change

Starting July 1 2010, all banks in India will be moving to a "base rate" regime. What does this mean for you and how does it affect your existing borrowings? Here I help clarify some of these questions.


What is the base rate?

When you borrow money to buy a house or car or electrical appliance, there is an interest rate that you have to pay to the lender. The base rate is the minimum rate that a bank will lend money at. Think of it as a floor below which RBI will not allow banks to lend to you.

Previously, banks used to price the loans they offered you on a complicated system called benchmark prime lending rate (BPLR). Each bank has its own BPLR methodology, which made it difficult for borrowers to compare rates across banks. Now, with the base rate in place, it will be easier for all of us to compare across banks and to get a more transparent sense of how the interest rate for the loan is being arrived at.

Is my interest rate going to be cheaper? Will my EMI change?

The most important thing to keep in mind is that the cost of money is not changing, i.e., if your car loan cost about 12% or home loan cost 9%, this rate of interest charged to you will be no different going forward. It is just that the method used to arrive at this will be clearer to you. Therefore, interest rates are not coming down because of this base rate implementation.

Following on from this, your EMI on an existing loan is also not going to change. You will continue to pay whatever you were paying up to last month in future months as well.

Should I change to a bank with a lower base rate?

As I said above, the cost of money is not changing. Most banks will continue to charge you a very similar rate of interest as they did before. Just because one bank has a base rate of 7.5% and another has, a rate of 8% does not mean you should switch to the bank with the lower rate. On top of this base rate will be added an additional amount of interest that they bank will charge you to cover its cost of doing business with you, and some compensation for the risk its taking in lending to you. Therefore, after all these additions, it is unlikely that the lending rate that a bank will be charging to you will be any different to the rate being charged by your current bank.

You will see no major advantage to shifting from one bank to another.

How does the base rate affect my pre-existing loan?

Nothing is going to change for existing loans. They will continue as is. As mentioned above, interest rates are not changing in the economy. However, when your loan comes up for renewal, then it will be priced using the base rate formula.

Will the base rate remain fixed forever?

No, the RBI has given guidelines to banks to adjust their base rates depending upon the prevailing market conditions and interest rate policies. Expect to see banks update their base rates every few months if that is required. Banks will then communicate this to all their clients.

Ulip rules in place - Lock-in raised, agents to get less

Ulips will now become more of an insurance product and less of an investment scheme following a change in regulatory norms proposed by the Insurance Regulatory and Development Authority (IRDA) today.


The regulator has tightened its rules for unit-linked insurance plans (Ulips) by increasing the lock-in period to five years from three years; spreading out the overall charges evenly over the lock-in period and thereby reducing the high commissions paid to agents in the first year; and hiking the minimum sum assured to 10 times the annualised premium as against five times now.

According to a circular issued by the regulator today, all Ulips sold after September 1 must comply with the changed norms.

Ulips will have a lock-in period of five years, and if a policy is surrendered or lapses because of the non-payment of premium during the lock-in period, the residuary payment will be paid only after five years from the commencement of the policy.

The high, front-ended charges in Ulips, particularly in the initial years, will go.

The regulator said, “Insurers will now distribute the overall charges in Ulips in an even fashion during the lock-in period. Charges on Ulips are mandated to be evenly distributed during the lock in period to ensure that high front ending of expenses is eliminated,” the IRDA circular stated.

Following this, insurance agents will no longer get a commission as high as 40 per cent in the first year from an Ulip.

The regulator has also increased the minimum sum assured in case of an Ulip with a regular premium payment option to 10 times the annualised premium from five times at present.

The sum assured has been increased to 10 times in cases where the policyholder is below 45 years of age. It will be seven times the annualised premium for policyholders who are aged 45 years or above.

An increase in sum assured means a larger amount of the premium will be deducted towards mortality charges, and this will lower the allocation of premium to the investment fund.

In other words, Ulips will yield lower returns to policyholders.

In single premium policies, the minimum sum assured is 1.25 times the single premium for policyholders aged below 45 years and 1.10 times for policyholders who are 45 years or more.

Axis Income Saver Fund NFO: Review Analysis & Details

Here are some basic details about Axis Income Saver Fund.




What are the NFO dates for Axis Income Saver Fund?

The NFO for Axis Income Saver Fund is from May 24 2010 and will close on 16 June 2010. After that, regular buying and purchasing will commence through the end of the day NAV system.



What is so unique about this Axis Income Saver Fund?

This fund claims to be an income fund providing regular income for short duration of time in future, say 2 to 4 years period. This fund is said to have the following investment objectives: Majority of the money collected from investors of this fund will be invested in debt and money market securities and hence it will try to generate some form of regular income in form of dividend payments, coupon payments, etc. That is where the word "INCOME" is derived. A small portion of money will also be invested in the equity as well as derivative products. The purpose for this leg of investment in equity & derivative products is to generate some form of capital appreciation. Therefore, this fund will try to achieve regular income for regular payouts through majority of investment in Bonds, Debt and money market instruments, while some investment in equity & derivative products will try to get some capital appreciation.



However, from a analyst point of view, I look at it as the sole discretion of the fund managers, where they want to put the money on. As like any other funds, this fund is not promising or giving any guarantee that it will provide regular monthly or yearly income or this much percentage of returns in guaranteed if you invest so much for so long time. Overall, it looks like another mutual fund with majority of exposure to the debt instruments, hence investors willing to go for a dent-oriented scheme can put their money in. However, no guarantee of any returns.



The fund also claims "Risk Management", but in the PDF on their site, there is no explanations on how the risk will be managed or what guarantee do their risk management practices will provide. They mention about some simulation model, even have a graph showing how the simulation is beating the underlying benchmark index, but again, no guarantee of anything in future.



Some 5 different reasons are cited for investing in Axis Income Saver Fund: Exposure to Fixed Income security, quantitative asset allocation, professional money management, open ended scheme, Exposure to equities for capital appreciation. Now which mutual fund does not provide these (except for quant asset allocation)? Even for quant asset allocation and so called risk management, there is no guarantee for anything.



The Axis Income Saver Fund will be benchmarked to CRISIL MIP Blended Fund Index Ninad Deshpande will be the Fund manager for Fixed Income investments, while Pankaj Murarka will take care of equity investments.

After the NFO period, the regular buying and selling will commence from 16th July 2010.



Minimum Investment:

Purchases: Rs. 5000/- and in multiple of Re. 1 thereafter.

SIP or Systematic Investment Plan is also available.



Investment Options for Axis Income Saver Fund :

- Growth

- Dividend (Payout and Reinvestment)



No Tax Benefit is available in the Axis Income Saver Fund



The entry load for Axis Income Saver Fund is as follows:

Entry Load for Axis Income Saver Fund :

Zero Entry Load



Exit Load for Axis Income Saver Fund:

Exit within 1 years from the date of allotment - 1 %;

Exit after 1 years from the date of allotment - Nil



Final Thoughts about the Axis Income Saver Fund?

By investing in this fund, one is betting on the skills of the two fund managers. Since the fund is both a mix of debt and equity investments, the asset allocation becomes important. In addition, focus is more on the debt side.

Overall, this Axis Income Saver Fund is just another new fund offer for a hybrid kind, without anything unique that sets it apart.

Matt Monro - Born Free

Happy New Year 2010

Wish all the viewers & Followers of “Sweet Monet" a very happy & prosperous new year 2010 in all respect.

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