Insurance cos strike gold as Bollywood runs for cover

Mumbai: Insurance companies have struck pay dirt with a new client—Bollywood films, whose premiums are steadily fattening their bank balance. What was earlier an afterthought, with film-makers running for cover only at the nth hour, is now becoming an extremely lucrative business for insurance companies, with film companies opting for not one or two but four different policies on each film.
    As TOI reported as far back as August, politics, 'public sentiment' and last-minute legal wrangles have made it mandatory for Bollywood to seek cover; subsequently, the amounts for which films are being insured have been rising exponentially. Reliable industry sources say that Karan Johar's My Name Is Khan, currently being shot in Los Angeles, Nikhil Advani's Chandni Chowk to China (slated for a January 16 release) and Aashtavinayak Cine Vision's Blue (which is 60 per cent complete) have been insured for amounts close to Rs 80 crore each.
    Aatur Thakkar of Alliance Insurance Brokers Pvt Ltd, whose company has underwritten these films, refuses to confirm the exact amount, but says, "Things are so vulnerable at this point that insurance companies can underwrite everything except the commercial success of the movie.''
    Thakkar confirms that the three most in-demand policies are the production policy where risks during the production stage are underwritten; the error and omissions policy that usually covers disputes arising out of copyright infringement, defamation, libel/slander and such other issues; and the distributors' loss of profits policy which covers losses that may occur when a film release is stalled on account of riots/terror attacks or even weather conditions.
According to Thakkar, this last policy is fast gaining in popularity. An inside source from Aamir Khan's team confirms that the distributors of Ghajini have bought a distributors' loss of profits cover of Rs 60 crore, beating earlier highs like Karan Johar's policy for Dostana that stood at Rs 25 crore and Percept Picture Company's cover for its animated film Jumbo that reportedly cost PPC approximately Rs 8-10 crore.
    The fourth and much in-demand policy is the change in release date policy that covers risks arising out of postponements. Rohan Sippy's The President Is Coming, for instance, was scheduled for a November release but has been pushed to January 2009 after the 26/11 terror strikes.
    While it seems to be a win-win situation for both insurance companies and Bollywood producers, who have to pay a premium that is a mere 0.5% to 1% of the insurance cover, what happens when the time for claims comes? No one is sure on this score, as no producer has reaped the benefits of his policies yet. However, Dharma Productions have put in their claim for losses that occurred when Dostana screenings were stopped after multiplexes were forced to keep their shutters down after 26/11. The claim is being processed, with the insurance company still drawing up what the estimated losses could be.
    Trade estimates say that the highest business done by a Bollywood film (Singh Is Kinng) across India is Rs 34 crore (net). Yet, the same distributors, Indian Films, insured Ghajini for almost double the amount—a clear indication on how insurance on films has doubled.

SBI to inject funds into insurance arm

Kolkata: The country's largest public sector lender, State Bank of India, is planning to inject fresh capital into its insurance arm, SBI Life, which is awaiting the right market conditions to raise funds through an initial public offering (IPO).
    The company's MD & CEO Uday Sankar Roy, however, denied to reveal the amount SBI Life Insurance intended to bring in as fresh capital. "It is difficult to say now. It will all depend upon the business requirement," he said. Commenting on the IPO, he said: "We are progressing on the IPO. But, in the current market scenario,it is difficult to say at this point of time when it will hit the market." SBI chairman O P Bhat had earlier said SBI Life Insurance, in which the banking major has a majority 76% stake,would hit the capital market by the end of 2009.
    BNP Paribas Assurance holds the remaining 24% stake in the life insurance venture.
    Apart from the volatility of the capital market, the company's IPO might wait for few issues to be settled, including some impending regulatory changes domestically, such as increasing higher foreign direct investment. The government has tabled the Insurance Bill in Parliament aiming to increase the FDI cap in the sector to 49% from 26% now.
    "As on September end, our solvency ratio is 2.6% as compared with the regulatory requirement of just 1.5%," Roy said. SBI Life Insurance has a paid-up capital of Rs 1,000 crore, while the authorised capital is Rs 2,000 crore. The company's market share rose to 14% in the first seven months of the current fiscal against 12% at the end of the last financial year.
    Meanwhile, Roy expects the new business premium income from the last quarter could grow by 30% compared to the corresponding quarter of the last fiscal. AGENCIES

Govt moves to hike insurance investment cap

NEW DELHI: Government on Monday sought parliament's approval to raise foreign investment limits in domestic insurance firms by up to 49 percent, despite noisy protests in the national legislature.
The move sparked protests, resulting in adjournments in the assembly's two houses and verbal attacks on the government, which had kept the proposal in cold storage for nearly four years over fears it would meet political resistance.

Junior finance minister P. K. Bansal was interrupted by leftist MPs who tried to snatch papers as he revealed plans to almost double the cap on overseas capital from the existing 26 percent, a move he said would attract foreign capital.

Private insurance companies

are delighted by the plans but the measure may not be passed in the current session of parliament because of insufficient time.

India must hold general elections by May 2009, meaning the measure could have to wait for a new government.

Foreign insurers have said increasing the limit is important as it will allow them to expand their array of products and improve distribution channels.

Four-fifths of India's 1.1 billion population has no insurance cover and around 90 percent have no pension scheme, forcing them to rely on savings and relatives in old age.

Marxists opposed to the move accuse the government of taking the step to help out cash-strapped companies in the United States.

"The government is trying to bail out bankrupt insurance industries in the US by inviting them to come to India," Marxist MP Brinda Karat argued in parliament.

Create a financial war chest

MONEY-MAKEOVER

Financial planner Gaurav Mashruwala says that the first investment should be one that protects you from any health or life contingencies

    Under any circumstances, don't develop bad habits." This is what Sagar's parents drilled into him throughout his childhood. Not only is it bad for character, but it is also bad for health and wealth. Sagar Naik (28) thanks his parents for being so forceful about this. His father is a teacher in a government school and his mother is a nurse. His only sister is married and lives in London.
Sagar, his wife Shamla, and his parents live in Mulund, Mumbai. This place was bought after Sagar got his job. The family has steadily progressed from a one-room kitchen house to a one-bedroom hall kitchen and now to a two-bedroom house. While he is a manager in private airline, Shamla works in the private sector. They are expecting their first child early next year.
    There will be a
change in the family income composition soon. With the arrival of the baby Shamala will remain home. Also Sagar's father is retiring in the next few months. The arrival of child will increase expenses. Managing the transition in family income and family size is the focus of this plan.
WHAT ARE THEY SAVING FOR?
(1) The arrival of a baby brings in thoughts of education and marriage. For both these responsibilities, the couple wants to start saving now --They want Rs 8 lakhs for higher education and Rs 4 lakhs for marriage after 18 and 25 years. (2) Further, they want to set aside Rs 3 lakhs to meet their parents' health eventualities. (3) For their retirement, they want a corpus of Rs 1 crore. All these are at today's rate of inflation. They also want a car of about Rs 3 lakhs and dream of foreign travel.
WHERE ARE THEY TODAY?
Cash flow: Total yearly inflow of the couple is Rs 9.46 lakhs. Against this, the outflow is Rs 7.62 lakhs, going towards mandatory savings routine expenses, insurance premium, taxes and EMI for home and personal loan. About 26% of the income is being used to service loans.
Statement of net worth: Total assets are worth Rs 44.84 lakhs. Of this, assets worth Rs 41 lakhs are in the form of house and jewelry. Total outstanding home loan is Rs 17 lakhs and personal loan about Rs 83,000. Liabilities constitute about 40% of assets.
Contingency fund: Mandatory monthly expenses are about Rs 50,000. Against this, the balance in savings bank and cash at home is Rs 68,000. Health & life insurance: There is Rs 1.50 lakhs health cover provided by the employer for the entire family. Life insurance cover in the form of a term plan is Rs 15 lakhs for Sagar. Shamala has money back policy of Rs 1.00 lakhs.
Savings & investments: Value of investments is Rs 3.84 lakhs. This includes savings bank balance of Rs 60,000, cash at home Rs 8,000, equity mutual fund Rs 1.27 lakhs, EPF/PPF Rs 1.35 lakhs and investment in post office schemes Rs 54,000. About 33% of the overall portfolio is in equity, the rest in debt.
FISCAL ANALYSIS: Decent income. The family is low on contingency funds, health insurance and life insurance. Borrowing is within permissible limits. Debt to equity ratio is reasonable. Overall, the family is ill prepared for the transition.
WAY AHEAD:
Contingency fund: Preferably, keep about four months' reserve for contingencies, ie Rs 2 lakhs, keeping in mind the baby. This seems a little difficult right now. However, from now on, for a few months, divert some regular savings towards creating this corpus.
Health & life insurance: Opt for health cover worth Rs 5 lakhs for each member of the family. Do not go for a family floater, as the family can afford dedicated policies.
Life insurance cover for Sagar should be increased to Rs 50 lakhs through term plans.
Planning for Financial Goals:
    Firstly, focus on creating the contingency reserve and purchase of health and life insurance. Child's education & marriage: Invest systematically in an index fund and an international fund. Parental responsibility: Consider balance in EPF for parents and build it up steadily Retirement: Continue systematic plans used for child's education and marriage further to create corpus for retirement.
PLANNER'S EYE
The contingency fund, health and life insurance are like the war chest against financial eventualities. Contingency fund helps withstanding situations where no formal insurance is available --like job loss, catastrophe etc. Health insurance helps us meet expenses due to illness, hospitalization, etc. Life insurance takes care of the financial loss created due to the death of an earning member.
    In the absence of these three, the family gets exposed to financial vagaries of life. The absence of this war chest would mean that the family will erode its wealth and/or get into debt.
    When any one asks me what should be their first investment, my standard answer without blinking an eye is, create contingency and ensure proper health and life insurance.

Sow young, reap the rewards

Financial planner Gaurav Mashruwala advises parents not to shelter their children from money matters

 Education and self-reliance usually go hand-in-hand. This is what Viral Harsora's parents believed in and practiced for him. While education was his primary focus, and Viral went on to do his BE, right through college, he also used to do small assignments to earn pocket money. His parents insisted on teaching him the value of being financially independent. Viral earned his first income when he was a teenager.
    Today, 33-year-old Viral lives with his parents, wife and son in Pune. The family has a residential property in Mumbai as well as Pune.
WHAT ARE THEIR GOALS?
    (1) Firstly they want a bigger house, which would cost about Rs 1 crore. (2) For his son's higher education after 15 years they need Rs 8 lakhs, and Rs 5 lakhs for his marriage after 20 years (3) The couple also wants a corpus of Rs 2 crore at the time of retirement after 25 years. All these costs are at today's rate of inflation. If wealth permits, they wish to purchase a luxury car worth Rs 15 lakhs.
WHERE ARE THEY TODAY?
Cash flow: Their total income from all sources is about Rs 10 lakhs. Against this, they spend Rs 5.62 lakhs on routine expenses, insurance premium, EMI towards the mortgage. About 14% of the income services their home loan.
Statement of net worth: The total value of their assets is Rs 53.30 lakhs. This includes cash, invested assets and assets for self-consumption. Noninvested assets are worth Rs 42 lakhs (house Rs 40 lakhs and jewelry Rs 2 lakhs). Outstanding liability on the home loan is Rs 2 lakhs.
Contingency fund: Mandatory expense per month is Rs 40,000. They have Rs 1 lakh in cash, which is 2.5 months' expenses.
Health & life insurance: Viral's employer provides health cover for the family so his parents are covered. In addition, he has independent health insurance of Rs 2 lakhs each for himself, his wife and child. Total life cover for Viral is about Rs 10 lakhs, all in investment-oriented policies.
Savings & investments:
Value of total assets is Rs 53.30 lakhs. The balance in the savings bank is Rs 1 lakh. The balance in EPF/PPF is Rs 7 lakhs. At current market rates, the equity portfolio is valued at Rs 2 lakhs and equity mutual fund, Rs 1 lakh. They have Rs 30,000 in post office schemes. Asset allocation between debt and equity is 64:36.
FISCAL ANALYSIS: The family is able to save more than 40% of inflow. This is great. The contingency fund is a little low. The health insurance is currently sufficient. However, in case Viral were to quit his job, his parents may not have coverage. Life insurance is very low and is in investment-oriented policies. Debt:equity allocation is not optimal. Since most goals are far-off, equity has to be higher. Borrowing is well within permissible limits.
WAY AHEAD:
Contingency funds: Since there are elderly parents, keep aside funds equivalent to about 4/5 months monthly expenses towards contingency.
Health insurance: Purchase maximum possible health cover for both parents.
Life insurance: Recommended life cover for Viral is Rs 1 crore--because the couple dreams of a bigger house for which they will have to borrow funds and they also need large retirement corpus. Cover should be bought in form of term plan. In case of any eventualities, use insurance proceeds to pay off loan and invest balance to create desired corpus.
Borrowing: After increasing contingency reserve, purchasing health cover for parents and life insurance for self, aggressively pay-off home loan. Try and complete loan within a year.
PLANNING FOR FINANCIAL GOALS.
Bigger house: After meeting recommended financial obligation, invest maximum possible amount every month in a mutual fund having 75% equity and 25% debt. When buying the bigger house, sell off the existing Pune residence. Also, liquidate mutual fund portfolio. Use proceeds to make a down payment. In case of shortfall, borrow the funds.
Son's education & marriage: After buying the house, invest Rs 40,000 in mutual funds every month. Allocate between an index fund, international equity fund and gold fund. Do not invest in sectorial, thematic or structured products.
Retirement: Continue the above investment strategy for retirement planning as well.

ADAG co to roll out health mgmt services

Mumbai: Medybiz, a disease management company of Reliance Health Venture, is set to unveil its integrated health management services. Part of the Anil Dhirubhai Ambani Group, the firm will attempt to cut healthcare costs by 40% by focusing on homecare programmes for chronic patients.
    The 22-city rollout, which begins in Mumbai early next month, will go national in a phased manner. In the long run, the company plans to offer these services across tier-1 and tier-2 cities, sources said.
    Five pilot projects are under way in Mumbai to understand the patient pool and set up chronic care infrastructure. The projects are on at Andheri (W), Khar, Nerul (Navi Mumbai), Bandra and Vile Parle, sources said.
    A Medybiz spokesperson declined to comment on the pilots, but said, "In a country like India where there are limited resources catering to health and competing demands, not all conditions can be treated and not every intervention provided at public expense. Here, disease management services will act as an effective healthcare delivery tool.''
    The concept, highly popular in the West where it was introduced by insurance companies as a preventive care measure, would aim to improve outcomes for chronically ill and high-risk patients. The programme is based on the module of a unique partnership between the physician and the patient and serviced by a panel of medical and paramedical professionals.
    Medybiz will focus on 12 chronic ailments as part of its portfolio, some of which will be diabetes, arthritis, asthma, chronic lung disease, cancers, heart diseases and Parkinson's.
    With fees starting from as low as Rs 1,200 to Rs 1,700 a month, the patient-centric service model will have all services practically provided at the patient's doorstep, including delivery of medication.
    The disease management service is an addition to Reliance's ambitious plans for its healthcare business, which already caters to medical insurance and the hospital business.
    To take this further, Medybiz is in talks for a strategic tie-up with insurance majors for specialised products. The company is also keen to launch a geriatric care vertical in addition to its chronic ailment business, and aims to tap a senior citizen population of 85 million.

FDI booster dose to rejuvenate health insurance cos

Premium Income Expected To Touch Rs 30k Cr In 7 Years; Half Of The Population May Get Cover

HEALTH insurance is poised to record a massive growth in India. Half of the country's population is expected to come under the health insurance umbrella in the next seven years, according to an Ernst & Young study. A mere 12% of the population is currently covered by healthcare.
    The health insurance premium income is likely to touch Rs 30,000 crore in 2015 from the existing Rs 4,000 crore, according to the study. The premium was Rs 670 crore in FY02. Experts say the government's proposal to scale up the foreign direct investment (FDI) in the insurance sector from 26% to 49% will boost the healthcare business. Ernst & Young National Leader-Financial Services, Ashvin Parekh says, "The health insurance report is yet to be tabled, but increased FDI investment will help the sector. The committee on health insurance has submitted its report recommending a reduction in capital, transformation of health providers into stakeholders in health insurance companies to prevent over-treatment and encouragement of regional health insurance companies vis-a-vis pan-Indian ones."
    Ideally, three years of health reforms should give rise to 16 regional health insurance companies. "It is important to create a pool of resources at the grassroots level and cover communities instead of individuals. Moreover, abuse needs to be checked, given the importance of data," Mr Parekh said.
    With rising income levels, changing lifestyles and dietary patterns, the healthcare consumption in India has increased by 8% in the past 20 years, compared to the overall consumption growth of 4.7%. The health expenditure across the country was Rs 180,000 crore last year. Given the escalating healthcare costs, rising demand for healthcare services and limited access of the low-income group to quality healthcare, health insurance is emerging as an alternative mechanism for financing healthcare. And with merely 12% of the population being covered, companies are looking at the health insurance space as a lucrative segment.
    The state-owned companies constitute nearly 70% of the health insurance market and private companies account for the remaining 30% As the out-of-pocket expenditure on healthcare is pegged at more than 70%, private insurers are treating this as an important target market. ICICI Prudential has started a division catering to health insurance, while Bupa-Max is awaiting the IRDA's approval to launch health insurance schemes. LIC recently unveiled its health insurance scheme to compete with players such as Apollo, Star and Bajaj Allianz.
    Bajaj Allianz head of health insurance Shreeraj Deshpande said, "We are going to the semiurban and rural areas. We are targeting the informal sector by having viable products and communicating through NGOs." The channels of reach are also seeing a change, with companies tapping banks' databases in an attempt to reach people. "Banks will play an important role in selling policies, given the difficult environment. The entry of additional companies into the health insurance sector will depend on regulations and companies' abilities to make profits," he said.
    "The growth in healthcare will be supported by standalone health insurance companies and new players. Moreover, domestic life insurance players are augmenting their product portfolios with innovative standalone health insurance products for catering to the growing health insurance segment," the report stated.
    nina.mehta@timesgroup.com 

The five-point insurance guide

Choosing an insurance policy needs as much attention as choosing other investment avenues. Nikhil Walavalkar gets you started on some basics to help you make a sound decision

 WHETHER it is for protection, retirement savings or to bequeath some capital, a large section of the working population today owns an insurance policy. To make the best out of this investment, there are some factors that should be kept in mind while buying an life insurance policy.
Keep it simple
    Several policies do not make sense because by splitting the cover across policies, a buyer loses 'large sum assured discounts'. Also in the context of marketlinked policies, multiple policies mean big money spent on charges. If you are only briefly exposed to certain risks you can go for specific covers. For example, an individual who has to travel extensively for work can consider buying a personal accident policy. Besides being cheap, the policy can be bought for short terms such as one year.
Nominations
    Insurance is primarily aimed at meeting protection needs. The product must function when the insured is not around. This need is best served by the concept of nomination. Hence, the policyholder should ensure that the right person is registered with the insurance company as a nominee. All so often a policy is bought when an individual is single and single persons usually nominate either their parents or siblings. Post marriage, it becomes imperative to consider if there is a need to change the nomination. Cover yourself
    Large businesses often provide their employees with insurance covers. This is usually up to a maximum of three times the annual cost to company of the employee. Some companies also go as far as to offer an option to buy voluntary covers for their employees.
    In an age where job hopping is the norm, it becomes imperative that individuals don't depend on their employers for protection needs. The insurance cover offered by the employer may not be enough to satisfy your individual insurance needs. The risk is higher when an individual quits a job and takes a break before joining another organisation. Health insurance is important in the golden years. Idea of buying it post retirement is good, for those who have health insurance from employer if and only if they remain in good health at their superannuation age.
Buying policies for children
    In India, there are many who buy life insurance policies for their children. This is primarily done to provide for their education and marriage. However, many forget that the child does not earn for the family, and hence, it makes sense to buy insurance for the bread winner and keep the investments in his name. Parents can always liquidate their investments and provide for their children's needs. A point to note is that the policies bought on the life of a child (minor) vests in the child's name till he or she attains majority. In other words, the parents have no say in the proceeds of the policy.
Opt for loan insurance
    If you are a borrower and the lender entity offers you an insurance cover on group insurance platform, consider it. Especially if you are 45 years and above because purchasing insurance at this stage in your life becomes tougher as multiple factors come into play, such as more number of medical tests and health guidelines.
    nikhil.walavalkar@timesgroup.com 

ADAG eyes AIG’s Asian life insurance business

RELIANCE Anil Dhirubhai Ambani Group (ADAG) is looking to buy out the Asian insurance business of AIG. If it goes through, the deal — which would exclude AIG's Indian businesses — would make Reliance South-East Asia's largest life insurer. It could well be the secondlargest overseas buyout by an Indian firm. ADAG is likely to be one of several bidders looking to buy these AIG businesses.
    Sources told ET that the asking price for American International Assurance Company (AIA), AIG's wholly-owned arm, has been pegged at around $10 billion. Sources said Citibank, acting on behalf of AIA, has approached ADAG to buy out AIA. AIA is AIG's flagship life insurance company for South-East Asia and is the largest life insurer in the region with businesses across South East Asia.
    Last month, the US nationalised AIG which was on the brink of collapse with an $85-billion loan and restructured its top management. This was followed by another $38 billion last week. Now, the insurance giant is 80%-owned by the US government.
    Last year, Tata Steel had acquired Anglo-Dutch steel major Corus for $12 billion and Hindalco had acquired Novelis for around $7 billion. In comparison, Indian financial services firms have been rather conservative in their international acquisitions. Indian venture may be kept out of deal
    INMOST geographies, AIG operates as AIA while in some like Australia and New Zealand, it functions as AIG.
    When contacted, the R-ADAG spokesperson declined to comment. Sources, however, told ET that the group is interested in the deal, given AIA's dominance in the region. The Indian group has been spreading its financial service businesses overseas through Reliance Money, the retail brokerage and distribution arm of Reliance Capital. The company recently acquired a 15% stake in Hong Kong Mercantile Exchange, which came on the back of a partnership with local firm Goldride Securities, for distributing financial products and services.
    Reliance Money, which is looking to generate half of its revenue from abroad by 2013, is actively expanding operations in the Middle East. Top group executives are currently evaluating options and likely to take a decision soon. "Chances of a deal are 50:50. R-ADAG could be looking at a modest valuation, in the $5-6 billion range. The deal is still at a nascent stage, and there's no certainty that it will go through," said a source.
    R-ADAG already has a life insurance venture in India — Reliance Life Insurance — which is an associate company of Reliance Capital, the flagship financial services firm of the group, which has interests in asset management, stock broking, insurance, proprietary investments, private equity and other activities in financial services.
    In India, AIG has a 24:76 life insurance joint venture with the Tatas. This business is unlikely to be part of the proposed deal with Reliance-ADAG, as the Tatas may have a right of first refusal in any sale by AIG.
    AIG, which had assets in excess of $1 trillion in 2007, has been looking to sell parts of its businesses and assets and focus on the core general insurance business. AIG's move to sell AIA is at variance with its earlier statement to retain a continuing ownership interest in its foreign life insurance operations.
    Life insurance and retirement services business is the largest revenue generator for AIG. Out of the total revenues of $110 billion in 2007, life insurance generated $53.6 billion and general insurance $51.7 billion. Asset management and other financial services are comparatively smaller business areas of AIG globally. In 2007, AIG generated $92.7 billion worth of aggregate business.
    chaitali.chakravarty@timesgroup.com 

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New marketing code to be issued for insurance: MF

THE spat among the insurers and mutual fund houses is set to end with the regulators expected to come out with detailed set of guidelines for MF houses wishing to sell schemes bundled with insurance cover. The guidelines could ask for enhanced disclosures from fund houses while selling these products, that include the source of the insurance provided, with all the future advertisements adhering to the code.

    "We are waiting for Sebi or Irda to give us the Irda guidelines that govern the selling of insurance products," says AP Kurien, head of Amfi, a trade body of all the mutual fund houses in the country. "Once we receive it, we have no issues in following the guidelines to be followed for marketing of such products," he said.
    Moreover the heads of Irda and Sebi are expected to meet over the next few weeks to further consider the issues that trade bodies in the MF and insurance sector have raised. Life insurers complain that while insurance companies have to compulsorily sell a fraction of their policies in rural areas, fund houses concentrate only on metros for their customers. This distorts the level playing field, they claim.
    The dispute over group covers for mutual fund is the second phase of the turf war between life companies and mutual funds. In the first phase, mutual funds were complaining about the insurers stepping into mutual fund territory with ULIPs. Mutual funds decided to get back by offering systematic investment plans (SIPs) with life cover, structuring it on the lines of ULIPs. A handful of companies such as Kotak Mahindra AMC, Birla Sun Life AMC, and Reliance AMC had taken a lead in this direction.
    Selling such products was banned by Life Insurance Council, Amfi's counterpart in the insurance industry. But on Tuesday, after the intervention of finance ministry, this ban was lifted and fund houses would now get to sell insurance laced products too. But this compromise was reached after it was decided that the marketing of such products was done as per new rules and an established code to be announced by Sebi soon.
    Firstly the code could involve telling the buyer the source of the insurance company that is providing the cover and a disclosure that it is not structured by the fund house. Mr Kurien says that fund houses have always pointed that the cover provided is just an add-on, but they would be willing to accept additional disclosures.
    The code could also involve more details about the advertisements made by fund houses. Currently all the ads made for selling funds adhere to a Sebi code, and is essentially a self-regulatory process. But the code could be modified to include a few clauses on insurance cover loaded MF products.

Now, register for a free terrorism cover

MUMBAI: IN the wake of rising terrorist threats across the country, click2insure.in — a portal launched by Optima Insurance Brokers in alliance with New India Assurance Company, a leading public sector non-life insurance provider — is offering a terrorism cover free of cost. 

    Anyone who is 25 years of age or above can register for this cover. One just needs to log on to the site, fill in the basic information required and the policy is delivered to the applicant's e-mail ID. "The policy is on a first-come-first basis and for the first one-lakh Indian applicants only," says the insurance portal in a press statement. This cover was introduced after the serial blasts in Jaipur, Bangalore and Ahmedabad. Already, 16,000 persons have availed of the cover so far. 
    "With the increase in the acts of terrorism, it becomes vital for everyone to look closely at such covers. The holder of this policy is insured against the loss of life caused by or against the act of terrorism for Rs 1 lakh for one year," says Rahul Aggarwal, CEO, Optima Insurance Brokers.

Eddie Izzard  - "Never put a sock in a toaster."

COVER STORY

Most general insurance products in the market today have sufficient cover for all kinds of perils that arise out of force majeure and natural calamities. Sanjeev Sinha lists some of them

CYCLONE Nargis. Hurricane Mitch. The Asian tsunami. Gujarat and Pakistan earthquakes. The Mumbai deluge. And now the Bihar floods. True, despite mankind's best efforts to make the world a better place to live in, there's little escape from nature's fury which sometimes not only leaves thousands dead but renders millions homeless as well. 
    Worse, natural catastrophes are striking with greater frequency today than at any time in recent memory. For instance, in the past decade alone, the direct losses from natural disasters are said to have reached a $1 trillion, 20 times higher than five decades earlier. And by one World Bank estimate, onethird of India's 603 districts are today hazardprone, placing about half the country's economy potentially at risk. However, more than economy, it's the lives and properties of millions and millions of people which are at stake and need protection from natural disasters. It goes without saying that the loss of human life can never be compensated, but the financial shocks from unforeseen eventualities can easily be absorbed just by taking adequate and the right insurance. 
    The good news is that most of the general insurance products being offered in the market today have sufficient cover for all kinds of perils that arise out of force majeureand natural calamities. So whether it's flood, earthquake, storm, cyclone, fire or riots, among others, there's cover for all. Thus, while individuals can protect their homes, self and vehicles by taking householder's insurance, personal accident policy and motor insurance, respectively, fire and project insurance with earthquake extension may be a suitable option for business houses. Similarly, while shopkeepers insurance policy can be taken to protect one's shop, villagers can take weather or crop insurance to protect their crops. 
    Of all these, householder's insurance is the best bet to safeguard the most valuable asset of your life — your house — because "it not only covers the structure of your home but also all its valuable contents from different kinds of perils such as earthquake, terrorism, flood, burglary and house-breaking," says Ajay Bimbhet, MD, Royal Sundaram Alliance Insurance Company. 
    Coverage for structures and buildings, for instance, pays for all the expenses related to the insured house's rebuilding or repair, while coverage for home contents protects your personal belongings, household items and furniture in case they are destroyed or damaged by one of the disasters you've been insured against. Besides you can also get liability coverage, among others. 
    As a package policy, a householder's insurance covers a combination of risks spread over 10 heads such as fire & allied perils, burglary & house breaking, all risk, plate glass, machinery breakdown, electronic equipment, pedal cycle, baggage, personal accident and public liability. While fire, lightning, explosion & implosion, riots, storm, cyclone and flood & inundation, among others, are covered under the head fire & allied perils, for instance, loss of or damage to jewellery and valuables caused by accident or misfortune while anywhere in India is covered under the all risk section. 
    Thus, if you want, you can also take individual policies like fire and allied perils and others to get limited cover. "However, it is advisable to take a package policy rather than managing so many individual policies as it is very difficult to predict which natural disaster will strike you first. Also, in a package 
policy we have the option to choose the number of sections required (minimum four out of which fire and burglary are compulsory)," says Pavanjit Singh Dhingra, V-P, Prudent Insurance Brokers. 
    Another advantage of a package policy is that by mixing and matching the sections, you can get the best mix of covers you need. Also, by buying cover under more than six sections, you can even get a premium discount of up to 20%. However, it is advisable not to buy a cover which you don't need. For instance, getting cover for loss of your personal baggage doesn't make any sense if you are not a frequent traveller. Similarly, the pedal cycle cover is not needed by a majority of households today. 
    However, if apart from your house you also want to get your shop insured, then you will require a separate policy known as shopkeepers insurance policy, which is again a package policy. "The risks that a shop is prone to are different from that of home. Hence, there is a need for a different policy. For example, in a shopkeepers package, stocks held or neon sign is covered, which is not there in a householder's policy," explains T A Ramalingam, head, underwriting, Bajaj Allianz General Insurance. 
    "There are some common features also under householder's and shopkeepers insurance policy. Like the fire section is compulsory to be included in both the policies. But there is difference in premium rates for fire and terrorism," says Dhingra. 
    Importantly, it is relatively difficult to get a householder's policy in rural areas as apart from the issue of availability of insurance, getting kutcha houses insured is not always possible. "A householder's policy covers your household contents only when they are kept in the building which is not made of a kutcha construction i.e., building(s) having walls and/or roofs of wooden planks/thatched leaves and/or grass/hay of any kind/bamboo/plastic cloth/asphalt cloth/canvas/tarpaulin and the like," says Bimbhet. 
    Although some insurers provide cover to kutcha houses with equal to or more than 100% loading, their number is very limited. Therefore, another variant of this policy, which is more suitable for villagers, is kissan package policy, which not only includes covers under householder's policy but also covers risks against livestock, cattle and tractors, among others. 
    Likewise, crops can be covered under weather insurance, but weather insurance covers damages to crops caused only due to adverse climatic conditions and claims made due to any other reason are not entertained. "For example, claims arising out of flood and drought are covered under weather insurance, but cover against pests and diseases can be taken under crops insurance only," says Dhingra. 
    Thus, buying the right cover 
can, to a large extent, ensure 
your piece of mind. Still some 
precautions are needed. For instance, apart from doing the correct valuation of your property and valuables (which should be insured on a reinstatement basis because in the event of a loss, both would have to be replaced at today's cost of construction or replacement), you also need not ignore the conditions or warranties mentioned in the policy. Simply because non-compliance of any of them may not hold the insurer liable of paying the claim and make the contract null and void! 
SAFETY FIRST 
FIRE INSURANCE Rs 25 per lakh 
BURGLARY/ROBBERY 
Rs 50-100 per lakh 
JEWELLERY/PRECIOUS STONES 
1-1.25 % of sum insured PLATE GLASS 0.5-1% of sum insured 
DOMESTIC APPLIANCES 
Varies depending on equipment PEDAL CYCLE Rs 10 per Rs 1,000 
ELECTRONIC EQUIPMENT 
0.75 % of sum insured BAGGAGE Re 1 per Rs 1,000 PERSONAL ACCIDENT Rs 150 per lakh EARTHQUAKE Rs 8 per lakh TERRORISM Rs 8 per lakh

Jane Wagner  - "The ability to delude yourself may be an important survival tool."

Better safe than sorry

A health insurance plan is a safeguard against unforeseen events. But check out if you are adequately covered

NEVER let bad choices spoil your future. You surely cannot correct your past mistakes, but definitely secure future by taking right decisions now. Take, for instance, Ramakrishna Pandya who learned from a stumble. The 50-year-old PSU employee, despite covered under a health plan, had to shell out a hefty sum of Rs 2 lakh while undergoing treatment for a bypass surgery in a private hospital. Pandya's fault was that he had picked up a health insurance plan which had sub-limits imposed on room rent, doctors' fee and diagnostics. He could have easily saved himself from such a huge financial loss if he would have opted for a right health insurance policy, which fulfilled his requirements. To make sure that you don't suffer due to an inadequate cover, here's an insight into how to select the right medical insurance. 

HOW TO CHOOSE 
First and foremost, insurance experts advise you should make sure that the health policy you opt for provides the right kind of coverage which is in line with your family history of ailments and professional hazards. It's a daunting task, keeping in mind that there are a host of health insurance products available in the market that differ widely in coverage and cost. Says Sanjay Datta, head, health and accident insurance services, ICICI Lombard: "Contact insurance companies call centre or ask your agent to show you policies from several insurers so that you can compare them. Make sure the policy protects you from large medical costs, and beware of single disease insurance policies." 
    According to Datta, there are some polices that offer protection for only one disease, such as cancer. Thus, if you already have health insurance, your regular plan probably already provides all the coverage you need. Do check for the coverage you have before buying any more insurance. 
MUST HAVES 
The basic purpose of health insurance, according to health insurers, is to protect you against health problems that impact you financially. "Therefore, your plan must insure you for three major categories — critical illness, hospitalisation and surgeries,"says Sitesh Prasad, vice-president, Tata AIG General Insurance. Another thing, points out insurance experts, you should look before buying a health plan is cashless facility, which gives you the freedom of not making any advance cash deposits in case of hospitalisation. 
    Datta believes the cashless facility serves as a boon for those times when you need finance the most. You have to simply use your health ID card at any ofinsurance providers' network hospitals to avail of cashless service. "It is important for you to know that all insurance companies do not provide this facility," says Datta. According to insurance experts, a Rs 1 lakh plan for a 30-year-old that provides coverage for all the three categories (mentioned above) should result in premium of not more than Rs 3,000-5,000 a year. 
SCAN THE RIDERS 
For starters, you must remember that not every disease comes under the purview of a health insurance plan. Generally, a health insurance plan covers major diseases or illnesses such as cancer, bypass surgery, myocardial infarction, kidney failure, paralysis and so on. But with a rider — they do not protect from illness/ injury existing before the inception of the policy for the first four years. Other cases when you can not count on your health insurance are — allopathic treatment, pregnancy and childbirthrelated diseases, cosmetic aesthetic and obesity related treatment; expenses arising from HIV or AIDS related diseases, use or misuse of liquor, intoxicating substances or drugs as well as intentional self-injury; any medical expenses incurred during the first 30 days of inception of the policy, except accidents; congenital diseases; war, riot and strike-induced hospitalisation. 
    Further, you should review the room and boarding cost thoroughly before you opt for a plan. Most of the insurance policies cap room and boarding costs at 1% of sum insured a day and at 2% a day for those in an intensive care unit. Thus, when you sign up on the dotted lines, do check if the insurer has assigned a substantial sum for these expenses. 
    There's also a chance that your company is providing a health cover under a group plan. Group health insurance is a benefit that companies, private bodies and trusts provide to their employees or a homogeneous group of people and enables them to receive private medical treatment quickly and at low cost. However, what you must make sure is that you are adequately covered under a group plan. If you are not, then you should buy a health policy immediately. Remember, penny wise, pound wise!

Marcel Marceau  - "Never get a mime talking. He won't stop."

DO YOU HAVE HEALTH COVER?

As medical needs and emergencies come unexpected, it's better to take a health insurance cover to tide over the expenses

 An increasing trend among nonlife insurers is to avoid selling health insurance policies as profits are declining in this business. This is seen more in the case of select public sector companies.
    On the other hand, life insurers like LIC are busy advertising the benefits of their newly-launched health plans. As a consumer, you are bound to be confused. So, let us throw some light on this situation.
    Health insurance is a catch-all term that covers three distinct policies. A health policy reimburses you the actual hospitalisation cost for treatment of any disease and is offered only by non-life insurers. Such policies are popularly called "Mediclaim" policies (Mediclaim is actually a brand name, which has now become a general term).
    The other two plans are offered by both life and non-life insurers.
    One can be loosely referred to as a "Hospitalisation Policy," where you primarily get a daily allowance for every day spent in the hospital. Some policies also provide higher daily allowance for stay in intensive care unit (ICU). Others have a provision for lump sum payment if you undergo any of the surgical procedures covered in the policy.
    The next type of health insurance covers critical illness. Given the increased stress and strain of modern life combined with unhealthy and sedentary lifestyles, most of us are prone to serious illness. But advances in modern medicine ensure that most of us survive these. This, however, comes at a cost and makes a serious dent in our ability to pay, either from salary or business. This is where a critical illness cover can step in and pay off a lump sum benefit.
    Most life insurers have for long offered these covers as riders (riders are covers for additional risks or to enhance the existing risk covers).
    Now, these critical illness covers are also being offered as standalone policies for specific illnesses like cancer. These policies are recommended for salary earners.
    A relevant question would be whether one would need a hospitalisation policy if s/he already has a Mediclaim policy?
    A Mediclaim policy only reimburses the expenditure incurred in the actual treatment of the disease/illness at a hospital. There are several other expenses that are typically incurred, which the Mediclaim policy does not reimburse. Expenses such as travel, attendant's lodging, loss of income (for both the patient and the attendant), pre-hospitalisation diagnostic tests, medicines among others can run up to as much as 30 to 40% of the total treatment cost. A hospitalisation policy takes care of these.
    You will find that the policies offered by life insurers are actually an addition and not replacements for Mediclaim policies.
    Remember, it is an absolute must that you and your dependents have adequate cover on your Mediclaim policy. It cannot be replaced by any other kind of policy.
    When it comes to hospitalisation and critical illness policies, life insurers offer excellent products. Such policies should be a necessary part of your risk cover portfolio.
    Our recommendation is based on the fact that policies offered by life insurers cannot be cancelled during their tenure. Non-life policies can be cancelled.
    Non-life insurers normally retain the right to terminate any contract of insurance, even during the tenure of the policy, by sending you a 30-day notice. In such cases, the insurer will then refund a pro-rata premium for the unexpired tenure of insurance. This right is exercised rarely but is not unknown for corporate insurance policies.
    Also, policies issued by life insurers guarantee a cover during their entire tenure. Non-life insurers may not agree to renew the policy at the end of tenure.
    Thus, if you intend to buy a Mediclaim policy, there is no choice but call a non-life insurer. For other two types of health insurance policies, our recommendation is to choose a suitable non-savings product offered by a life insurer.
    Harsh Roongta is CEO, Apnainsurance.com 

Fran Lebowitz  - "Life is something to do when you can't get to sleep."

Don't confuse insurance with investment

It's the most common mistake, and they get hit on both sides, says financial planner 

 Ashfak Shaikh never asked his parents for pocket money. Since his childhood, he knew his father was working double shifts to support the family--with the Pune municipality during the day and giving tuitions in the evening. He managed to educate three sons. Ashfak rose to the occasion and became a broker for second-hand two-wheelers. "I must have traded in 50-60 two-wheelers," says Ashfak. He believes in the joint family system where bonding counts for more than materialism.
Ashfak, now 38, holds a BE and works with a multinational company. His wife Jasmine is a doctor. They have an eightyear-old daughter, Aliya.
WHAT IS THE COUPLE SAVING FOR?
(1) Ashfak wants to ensure that even in the worst of times he can support his parents (about Rs 60,000 per year) (2) A larger house (Rs 40 lakhs) (3) Rs 5 lakhs for Aliya's higher education after a decade and another Rs 5 lakhs for her marriage after 16 years (4) When they retire, after 23 years, they need a corpus which will generate Rs 9 lakhs per annum. They also dream of a luxury car (Rs 10 lakhs) and foreign travel.
WHERE ARE THEY TODAY?
Cash flow: Total yearly inflow from all sources is Rs 17 lakhs. Against this, they spend Rs 13 lakhs on EMI for car and holiday home, taxes, insurance premium, support to parents, regular savings and expenses incurred on travel and entertainment. The last car EMI is due in October. Total EMI payout is about 10% of inflow. Mandatory monthly outflow is about Rs 95,000.
Statement of net worth: Value of total assets is Rs 48.70 lakhs. Of this, assets worth Rs 30 lakhs are for self consumption and non-earning (house, car and jewelry). Outstanding loan on car
and holiday time-share is Rs 1.07 lakhs, about 2.21% of the assets.
Contingency fund: Total in savings bank, FD and in cash at home is Rs 3.95 lakhs—about four months' mandatory household expenses.
Health & life insurance: Ashfak's employer provides health cover of Rs 3 lakhs for the family. His life cover is Rs 17 lakhs through a ULIP and endowment policies.
Savings & investments: Value of assets other than those for self consumption is Rs 18.70 lakhs. Out of this Rs 3.95 lakhs is in cash/near cash. Apart from this, the value of direct equity is Rs 1 lakhs, equity-based mutual fund Rs 75,000, bonds/FD Rs 2 lakhs, EPF/PPF Rs 3 lakhs and stocks of Cosmos Bank valued at Rs 2 lakhs.
Total premiums paid till date on ULIP and other investment-oriented policies is Rs 6 lakhs. However, its market value is currently lower.
FISCAL ANALYSIS:
Very good income level. Savings rate is also good. Health and life cover are insufficient. Amount spent on insurance premium is too large. Borrowing is within permissible limit. Equity component is low and is also skewed in favour of single Cosmos Bank stock.
WAY AHEAD:
Contingency fund: Keep only Rs 2.85 lakhs for contingencies. Deploy surplus as follows.
Health insurance: Increase health cover of Ashfak and Jasmine to Rs 5.00 lakhs each and that of Aliya to Rs 3.00 lakhs.
Life Insurance: He must discontinue certain expensive insurance plans after completion of five years. Further opt for term plan worth Rs 75.00 lakhs.
Financial Goals:
Parental responsibility: Surplus in cash/near cash asset should be transferred into a monthly income plan of a mutual fund. However, continue supporting parents from regular income. Only in turbulent times use this fund to support parents.
Home buying: Preferably wait for twothree years, and then save about Rs 5 lakh per year in a debt fund. At the time of buying a new house, sell old one. Use sale proceeds plus investment in debt fund. If there is a shortfall, liquidate a part of the equity portfolio.
Aliya's education and marriage:
Firstly, reduce investments in Cosmos Bank stocks to half. Park proceeds in a debt fund and systematically transfer into an index fund. After purchase of new home, systematically invest in index fund and gold fund for her education and marriage.
Retirement: Next two years' savings would be needed for home buying. For another three-four years, deploy surplus for Aliya. Later, invest entire surplus in large cap fund and international equity fund for retirement.
PLANNER'S EYE: The family's weakest link in their finances are their life insurance policies. Out of total life cover of Rs 17, lakhs, Rs 5 lakh cover is provided by the employer. For the rest, the premium being paid annually is Rs 2 lakhs.
Instead, if he had opted for term cover, then annual premium for Rs 12 lakh cover would have been Rs 5,000. Balance Rs 1.95 lakhs invested in a pure investment product would yield higher returns. It is the most common mistake people make-confusing insurance and investment.
(To be featured in this fortnightly column, write to moneymakeover@indiatimes.com)

Casey Stengel  - "All right everyone, line up alphabetically according to your height."

Be financially prepared FOR LIFE

Insurance cover is not a static need—it's something you need to customise to suit each stage of your life. We help you figure out how to do this

For most of us, our insurance portfolio consists of a term cover and a Mediclaim policy. This may not suffice, for an insurance cover should be taken as an effective antidote to our family's financial problems in our absence, adding to one's sense of security.
    Moving on with different roles—from a dependent child's to a provider's—our needs change. To keep pace with them, we need to re-examine and improve our insurance covers just as we need to re-jig our investment portfolios from time to time.
    "Buying insurance is subject to an individual's needs. The focus should always be the number of dependents, and how protected they are financially after his demise," says financial planner Amar Pandit. However, this may not be the only reason for buying insurance. Some customers think of insurance products as investment instruments, too. Thus, a host of insurance plans are woven around retirement, children's education, marriage, disability, and wealth creation. The basic benefits of insurance, however, remain the same—providing maturity benefits to a person who survives the end of the policy term, and death benefit to dependents in case the policyholder passes on.
    As you moves beyond single status, you can customise your insurance cover, much as one would move into a bigger home as one's family grows larger. This can be done by simply opting for multiple policies that cater to different needs, or buying policies of varying tenures. "Going for multiple policies is a better option, because you can take advantage of the latest insurance products available," says insurance advisor Parineeta Shetty.
    Younger people—those between 23 and 35—prefer unitlinked insurance plans (ULIPs). These investment-based insurance schemes offer good returns. The growth prospects of the scheme are tempting, especially after marriage, when one begins to look beyond just "me", and thinks about "us" as the core of any plan. However, the best bet here may actually be a term plan insurance plan. These work out the best if you have dependents, as they are cheap but offer a large cover.
    Interestingly, more policies are bought between September and March than during the rest of the year. This suggests that insurance plans are sought after for the tax benefits they offer. Other insurance schemes like endowment plans, which yield 8% to 10% over a fixed term, are popular too. In terms of returns, they may not be your best option, but if you're a risk-averse investor, the scheme provides the safety of assured returns. However, premiums for these schemes are much higher than those for term insurance plans. If liquidity is crucial, go for a money-back policy that pays back after specified periods. However, the returns on such plans are lower than the total premium, so they may not be as
good an insurance cover as an endowment plan.
    With new products hitting the market, look out for combination plans—a mix of term and ULIP—which give you back your premium, if not the insured amount.
    The birth of a child is an occasion for joy—and for additional insurance cover. Most children's plans are as much about investment as they are about insurance. Several of them keep your money locked up for a long period. Depending on how long it is before your child will need the money, many schemes offer attractive savings-linked or unit-linked plans. These allow you to get maximum returns on the sum insured. Most schemes consider parents as policyholders, and the child as a beneficiary.
    A child's education and marriage are two milestones that her parents should start working towards early in life. Many insurance schemes are designed for this. Some schemes give the child the sum insured plus full maturity benefits, even if the parent passes away before the term ends and
    some premiums
    are still unpaid. Schemes
    that offer returns in instalments over a period of time are also a good bet, since most will coincide with one's most important educational years. The proceeds can be used to fund those.
    If you travel or commute to your college or job, consider buying personal accident cover. In fact, this is one insurance plan meant for everyone, no matter what phase of life you're in, and whether or not you have dependents. An accident can wipe out your savings, and result in income loss until you recuperate. Worse, it could result in disability. So it's vital to be protected against accidental permanent total disability, permanent partial disability, and temporary total disability.
Some financial experts believe personal accident cover makes more sense than a life insurance policy, especially if you're young. The logic is that life insurance covers the risk of natural death, which is less likely to happen to those in the 25-30 age bracket.
Another health-related insurance product is Mediclaim, helpful in medical emergencies. In case of a sudden illness or accident, your policy should take care of hospitalisation, medical tests and other related expenses. There is a number of innovative products covering health—for instance, one lets you cover your entire family under a single policy, for a single premium. Another is the kind of health plan that returns over 90% of the sum insured in case the money was never used.
    Next on the agenda would
    be planning for the golden
    years. Your insurance kitty can
    be part of your retirement income, as various pension or annuity plans help build a corpus. This is useful after retirement, when there is no steady stream of income to absorb expenses. ULIPs backed by equities (which have been giving higher returns than any other investment avenue) can also be a source of income, although it's important to bear in mind that it is a high-risk, highreturn investment. Opt for it only if it fits your risk profile, because not many will take chances with money during years when there is no regular income.
    Today, innovation drives India's growing insurance market. There are as many products to choose from as there are needs that warrant insurance. The discerning customer thus needs to find a balance between using insurance cover as protection for his loved ones, as well as using it as an investment tool.

George Carlin  - "In comic strips, the person on the right always speaks first."

Now, get a life cover for 40% less

Lower Solvency Margin Requirement Drives Down Term Insurance Rates

LIFE protection has become far more affordable. The cost of life insurance has come down by up to 40%, with Insurance Regulatory and Development Authority (IRDA) reducing the capital that insurance companies need to sell term policies. For the second time since the liberalisation of the insurance industry in 2000, there has been a dramatic reduction in term insurance rates, making life protection a great deal cheaper.
    Term policies are purely life covers as against endowment policies, which have a sizeable savings component. While the premium for endowment policies will also soften, the benefit will be more apparent on term covers.
    Among private life insurance companies, Kotak Life has announced new rates, while newcomer Aegon Religare has announced term rates, which the company says, are the lowest in the industry.
    Largest private life insurance company ICICI Prudential Life Insurance is in the process of unveiling new rates. The chief of Life Insurance Corporation of India (LIC), the largest insurer in the country, said the Corporation may review its term rates.
    Kotak Life Insurance managing director Gaurang Shah said: "Two developments have led us to reduce our rates. First, we had the opportunity to review our own claims experience, since we introduced preferred term for non-smokers six years ago. Also, the revised solvency margin requirement introduced by IRDA in March has brought down capital requirement by almost two-third, which has helped bring down rates." LIC reviewing rates
    AEGON Religare Life Insurance, which launched operations earlier this month, has decided to use competitive pricing on term rates as an edge. "We had decided to introduce a product with the lowest rate, which is also supported by our campaign. Given our pricing, it is possible for a 30-year old to get a Rs 10-lakh cover at only Rs 166 a month," said Aegon Religare Life Insurance CEO Rajiv Jamkhedkar.
    When contacted, LIC chairman TS Vijayan said LIC is constantly reviewing its term rates to retain its competitive advantage and any improvement in mortality was always passed on in the form of lower term rates. In a statement issued here, Kotak Mahindra Old Mutual Life Insurance said the new rates were almost 40% lower than the old rates. " Kotak Life is among the first life insurance companies to pass on this benefit to the consumer," the statement said. However, agents of insurance companies said it is not always possible to get the standard rates.

Take insurance and spare your survivors the home loan burden

In Case Of Eventuality, Insurer Will Settle The Debt On Behalf Of The Family

Nikhil Walavalkar MUMBAI

    HOME loan borrowers should ensure that their debt do not continue beyond their death. One option is to buy term insurance or regular premium term insurance for a tenure at least equal to the loan tenure and for a sum that equates the loan amount. The other option is a mortgage reducing term insurance (MRTI) on group life insurance platform. The cover offered falls each month in line with the reducing principal amount outstanding after every EMI is paid. In other words, the cover reduces as the borrower goes on repaying the loan. In case of eventuality, the insurer pays off the sum assured at the time of death of the borrower to the bank and settles the loan.
    The good part for those with home loans who do not have this cover is that one can opt for an MRTI in the currency of the loan if he is not bought at the inception of the loan. The sum insured reduces as the outstanding loan reduces. If money is left after paying for the loan outstanding, the bank pays the money to the borrower's nominee. This is possible in loan part pre-payment cases. But a point to note is that the cover ceases as the loan comes to an end.
    Some insurers offer additional benefit of total and permanent disability though at an extra cost. Though such additional benefits carry a set of exclusions and a provision of waiting period, they enhance the insurance solutions. The key benefit of MRTI on group life platform is the concept that the borrower need not undergo medical test if he satisfies certain norms in terms of sum assured required, age, occupation and level of education attained. Of course this benefit is subject to signing a good health declaration (GHD). Here the product covers over a term insurance product in terms of ease of purchase.
    "In case of claim settlement, the banker has a helping hand as the banker is an interested party. The claim settlement is faster in group products than in the individual life products," said a senior executive with a private sector bank. But there is a flipside to the MRTI group life covers. In a rising interest scenario, the MRTI cover does not serve the purpose fully as the cover ceases as per the contract date and does not get extended along with the tenure of the loan. Sometimes it becomes difficult to buy additional cover at the end of original cover due to high age of the borrower and higher cost of insurance. To overcome this draw-back, a borrower may consider buying a level cover regular premium plan for a lifetime or for maximum possible term.
    Those who want a loan cover on the individual platform can avail of LIC's mortgage redemption assurance policy. This is a without profit product with no surrender value. The buyer of the policy has to undergo medical examination. Insurance premiums payable qualify for tax deduction under section 80C of IT Act. Proceeds from the insurance products above, if any, in the hands of the nominees are tax free under section 10 (10D) of IT Act.
    nikhil.walavalkar@timesgroup.com 

a Unique Business Initiative in Insurance

Max New York Life Innovates a Unique Business Initiative in Insurance 

Max New York Life Insurance Company Limited has innovated a unique business model, MAX VIJAY, that will make insurance accessible to the financially underserved people of India. Max Vijay has created new benchmarks in product, distribution, service delivery and marketing for life insurance in the country. Max Vijay has been designed keeping in mind the lifestyle, income patterns and needs of the rural and semi-urban population

Bob Hope  - "You know you are getting old when the candles cost more than the cake."

Policy curbs may be hindering insurance sector growth

THE insurance scene, especially that of life insurance, resembles the famous Charles Dickens conundrum of being the best of times and the worst of times simultaneously.
    First, the flip side. Insurance perpetration in India is still at a low level at 4.1% of the GDP. In comparison, UK, South Africa and Taiwan have ratios between 11-13%. The global average is 6-9%. Only 24% of the Indian households own life insurance. Among the rural households, only 18% have life insurance protection. Only 14% of the policy owners are women.
    Of the 321 million paid workers in India, only 105 million are covered. Among the 216 million uncovered workers, about two-thirds are "highly unlikely" to think about buying an insurance plan either because they feel they cannot afford it (63.5%) or because they (36.5%) are disinclined for various other reasons — 'not interested', 'no one has explained benefits to me' or 'poor investment', as per a recent IIMS Dataworks study.
    On the bright side, this leaves the remaining one third of the working force who may buy a life insurance policy. Of these, nearly one out of five or 18% plan to do so. Further, the demand for life insurance continues to expand among existing policyholders (repeat purchase) and given the right atmosphere, are likely to buy more life insurance. In some states, as many as 40% of the existing customers believe this to be the case. Among the states, Kerala has topped among the policyholders' opinion about 'adequacy' of their coverage, while Chhattisgarh was at the bottom.
    Other things being equal, the present $40-billion (Rs 1.7-trillion) market is expected to grow to $100 billion in the future, as per a recent Mckinsey and Co Report.
    Some of the reasons that are holding back growth are:
    Lack of suitable products : Insurance companies are ordained by the regulator Irda to fulfil a certain percentage of its business from rural areas. However, a lot of ground still needs to be covered by rural insurance. The rural citizen who is dissatisfied by the one-size-fits all products offered by companies is on the lookout for products to suit his specific needs. And by and large, he is still waiting. The advent of micro-insurance since 2005 and framing of suitable regulations in this regard have helped better focusing on the problems in expanding the reach in rural areas. Hopefully, real progress will be recorded some time soon.
    Regulatory issues: Companies, especially standalone health insurers, are looking for flexibilities in minimum paid up capital requirements (pegged at Rs 100 crore), compensation structure to reward agents in rural areas, easier premium payment facilities for the ultimate customer as well as the primary contact point, the NGO's, greater freedom to devise relevant products. The Irda can justifiably take credit for being the first regulator in the would to formulate clear-cut guidelines for micro insurance. What remains to be done is to incorporate changes/amendments in all these areas in the light of experience.
    Solvency requirement: The present stipulation of keeping 150% assets to match liabilities is seen to be too onerous by many insurance companies and experts. If the ratio is brought down to 100% (with freedom to increase it for specific plans) a sizeable amount of capital will be released for expansion of business activities. This is important as life insurance is a highly capital intensive business.
    Labour reforms: LIC is a titan among life companies with about 70% market share. It is, however, hobbled by a huge unionised workforce in its class III and Class II cadres who often hold up operational reforms and prevent the corporation from realising economies of scale and scope. LIC can give better returns to its policyholders if the management is given a free hand to rationalise its workforce.
    Legal reforms: Many of the legal provisions emanating form the Insurance Act 1938 are in great need of change. If the government is able to push the proposed amendments, it will impart great dynamism in the way business is done.
    Agent's compensation: While the mutual fund industry has been nudged constantly to reduce transaction costs, the same cannot be said of the life insurance industry in India. The agents get a really huge initial commission of nearly 40% on the first premium they generate and 5% on subsequent premium payments. There is a strong case for downsizing the compensation to bring the costs down and thereby make life insurance less expensive and attractive. The regulator should play a decisive role here as Sebi did in the case of mutual funds.
    Sleeping giant: The 40 odd insurance companies have accounted for an equity exposure of Rs 70,000 crore in the last fiscal. The current fiscal will see a 10–15% surge. LIC is a mega player with its Rs 6,50,000 crore in investible financial assets. At the end of the last financial year, LIC had Rs 90,000 crore mark-to-market investible funds purely out of its Ulip portfolio. LIC's net investment in equity in FY08 is estimated to be at Rs 6,000 crore or more. If the joint venture life companies and LIC is offered greater relaxation in and freedom they would register amazing progress to reach the $100 billion size much sooner than anticipated.
    The author is associate professor, Birla Institute of
    Management Technology