‘Don’t involve docs in insurance claims’

Mumbai: Doctors should not be involved in settling medical insurance claims, the Insurance Regulatory and Development Authority (IRDA) told the Bombay High Court on Thursday. Not only is there a shortage of doctors, but it could increase the cost of insurance business, it added. 

    A division bench of Chief Justice Mohit Shah and Justice Anoop Mohta was hearing a public interest litigation by activist Gaurang Damani on medicalinsurance woes. The PIL, filed last year, highlighted the plight of nearly 7 crore consumers paying Rs 11,000 crore annually as medical insurance after third party administrators (TPAs) stopped offering cashless mediclaim benefits. It also focused on the absence of regulations to govern the medicalinsurance industry. 
    IRDA had published draft regulations in June 2012. Its advocate Paritosh Jaiswal submitted that it was opposed to the petitioner's suggestion to involve doctors rather than administrative staff in the settlement of claims as it was not feasible. He said there was a shortage of doctors. Damani argued that the loss assessor or surveyor should be qualified under the Insurance Act. Jaiswal said TPAs are supposed to process and not settle claims. Damani countered that TPAs are given incentives to reduce claims, violating the Insurance Act. The judges summoned a senior officer of IRDA who will take a decision to its next hearing on January 7, 2013.

Buy Insurance to Cover Risks, Not for Returns

Proper insurance is key part of any good financial planning, but the 'Indian' mindset, fixated on returns, prevents many from seeking the right cover, says Madhu T     Why is it so difficult for Indians to understand the importance of buying a proper life insurance cover, wonders an agitated seasoned financial advisor. He is fuming that one of his favourite clients has just bought a child plan. "He called me and told me he has bought a children's policy. He is really quick to grasp concepts and diligently acts on our advice. I just couldn't believe that he would so something like this," says the advisor. "We must have discussed so many times about the importance of adequate life insurance cover and term plans."  Almost every financial advisor can narrate at least one story where a client bought the wrong insurance product. Unit-linked insurance plans (Ulips) used to top the list of "wrong insurance product" list two years ago. However, after the insurance regulator, Insurance Regulatory and Development Authority (Irda), tightened the screws on Ulips in 2010 with a slew of regulatory changes, conventional products (or endowment plans, in insurance parlance) have become the hot favourite among insurance customers. This is because the insurance companies have cleverly shifted attention to regular endowment plans by offering attractive commissions to their sales force, say advisors.  And the numbers clearly indicate the shift in customer preference. According to the Irda annual report of 2010-11, life insurance companies have underwritten . 1,26,381 crore as first-year premium, a measure of new business secured during the year. The first-year premium was . 1,09,894 crore in 2009-10. Of this, 37.38% of the total premium was underwritten in the linked segment, while 62.62% of the business was in the non-linked segment. The figure was 43.52% and 56.48%, respectively, in 2009-10.  CIRCLE OF LIFE  "The current scene is very similar to the one before the opening up of the insurance industry, when LIC used to mostly sell conventional products. After the opening up of the industry, private insurers initially pushed Ulips aggressively. However, they have started focusing on conventional products after the regulatory changes and the lacklustre performance of Ulips because of the poor stock market," says D Sundararajan, investment consultant, Trendy Investment, a wealth management firm.  "It is quite sad that even today there is a clear lack of education among customers about most insurance products. In fact, most insurance products are sold between January and March. It is clearly sold as a tax-saving and investment product rather than as a tool for long-term protection," he says. Of course, a small segment of the population, especially the young working class, has woken up to the charm of pure life covers, or term plans, in 2012. Term plans got a fresh life during the year after insurance companies started offering cheaper versions online, but experts believe most individuals still don't understand the real purpose of a life insurance cover.  "Most people still fall for the age-old sales pitch of insurance being a tax-saving plus investment instrument. They also fall for false claims of assured returns, especially when the stock market is doing badly," says Amar Pandit, certified financial planner, My Financial Advisor, a wealth management firm.  "Typically, traditional products deduct 35% from the first-year premium, 7.5% from the second and third-year premiums and 5% from the next year's premium. Then you have mortality charges and fund management charges and so on. So, how can they offer 9% or 10% assured returns? Since these products invest mostly in debt, it would be almost impossible," he points out. While these charges vary according to companies and products, most endowment policies are estimated to deliver returns of around 5% to 7%. Also, unlike Ulips, charges deducted from your premium are not disclosed upfront. This means you have no idea of the share of your premium that is actually invested.  INSURING LIFE  The idea behind buying life insurance is simple. If something happens to you,your dependants should be able to maintain their lifestyle from the proceeds from your insurance cover. And the only way most people can buy an adequate cover is through a term cover. If you die during the term of the policy, your dependants will get the insured amount. If you outlive the policy, you would not get any money.  "Most people focus on what they will get on maturity of the plan. I always tell them that is a huge mistake and maturity proceeds shouldn't be the reason to buy an insurance cover. One should always think what if something happens before maturity – only then will you understand the real value of insurance," says Pandit. Naturally, many financial advisors blame insurance companies and their agents for the mess. However, agents blame the "Indian" mindset.  "It is very difficult to convince most people about term insurance. They invariably get disappointed the moment they learn that though it is very cheap, it wouldn't give them anything on maturity," says an insurance agent, who doesn't want to be named. "Most people don't care about the cost factor. They are very happy with products that will give them money on maturity or at regular intervals."  Sundararajan believes it is time individuals take responsibility for their actions. "People should go to an insurance company to buy insurance cover, not investment product. I think everyone should keep this in mind. It will automatically help them stay focused on their insurance needs," says Sundararajan.  madhu.tnair@timesgroup.com

MONEYMAKEOVER Build a contingency fund, get more insurance to cover risks

Borrowers with comfortable cash flows should aim to become debt-free at the earliest, advises Gaurav Mashruwala     Few parents allow children to take their own decisions. And of those who do allow, very few of them ensure that the children face the consequences of their decisions. Invariably, if a child makes a wrong move, the parents make good the loss. When such children grow up, they may fear taking decisions because they may not have faced the consequences of making wrong decisions in their childhood.      Nitin Gupta's (35) father, however, allowed him and his siblings to take decisions and face the consequences. It is because of this upbringing perhaps that Nitin stands on his feet today. His father — a banker and a meticulous finance planner — had inculcated a habit of setting priorities. While the family's financial situation was comfortable, children in the Gupta family had to justify their demands. In addition to his father, Nitin also gives credit to his wife Preeti (34) for his progress in life and career as she sacrificed her own career for the sake of the family. The couple has a six-year-old daughter, Akhadha.  What is the couple saving for  •For their daughter's education, the couple needs about Rs 2 lakh every year for the next 12 years  • For her marriage, they would like to spend Rs 20 lakh  • They also want to create an investment pool that can generate regular income for their daughter at a later stage in life  • Finally, they aspire to a foreign vacation at a later date.      All these costs would be revised based on inflation.  Where are they today  Cash flows: Gross inflow of the family per year from all sources is Rs 23 lakh. Against this, annual outflow is Rs 19.45 lakh. This includes mandatory expenses, taxes, insurance premium, regular savings and EMI for home loan. The EMI consumes about 36% of their inflow.  Networth: The total value of all the assets is Rs 1.26 crore. This includes assets for personal consumption — like house, car, jewellery, etc — worth Rs 1.07 crore. The couple's outstanding home loan is Rs 65 lakh, which is about 51% of the assets.  Contingency fund: With a monthly mandatory expense of Rs 1.30 lakh (including EMI), the family has Rs 6 lakh as balance in cash/near-cash assets. This translates into about 4.5 months' reserve.  Health & life insurance: Total health cover by employer is Rs 5 lakh and total life cover is Rs 1.42 crore.  Savings & investments: Apart from the assets for personal consumption, the family has Rs 1.50 lakh in savings account, a bank FD of Rs 2 lakh, Rs 1.50 lakh as liquid fund, Rs 1 lakh in cash, equity mutual funds worth Rs 4.50 lakh and Rs 8 lakh in EPF/PPF.  Fiscal analysis: There are excess funds lying idle in cash/near-cash assets. Health insurance needs enhancement. Life cover is sufficient. Borrowing is slightly on the higher side. Over a period of time, it is important that the couple creates more liquid assets. Currently, liquid assets are insufficient because they have purchased a house and have a loan.  The way ahead  Contingency fund: Keep aside Rs 4 lakh for contingencies. Out of this, keep Rs 25,000 in the form of cash at home and the rest in a savings bank account linked to a fixed deposit.  Health&lifecover:Nitin and Preeti should ensure their total health cover is Rs 5 lakh each and that of Akhadha is Rs 3 lakh. Life cover is sufficient. However, a life cover of about Rs 65 lakh will cease on full repayment of the home loan. Ideally, Nitin should obtain additional cover to ensure the sum assured on his life is approximately Rs 1.50 crore even after the home loan is fully repaid.  Borrowing: Due to a decent inflow, the couple is able to service their EMI comfortably. However, if there is any eventuality with regard to their inflows, they will struggle as their liability is more than 50% of their assets. It is recommended that they aggressively pay off the home loan.  Planning for financial goals  Daughter's education: At present, the couple will be able to fund education requirements from their earnings. However, as a precaution, they should start investing Rs 15,000 every month in a mutual fund scheme that has 15% investment in equity and the rest in debt for about a year. The corpus so created should be earmarked for education and utilized only if there is turbulence in regular income.  Daughter's marriage: A systematic investment of Rs 10,000 every month into a large-cap equity fund is advised. Also, another SIP should be started in a gold fund for Rs 2,500. The amount should be increased by 15% every year.  Corpus to support daughter:  Apart from investing for education and marriage, the couple should start setting aside Rs 5,000 in a mid- to small-cap equity fund every month. The corpus so created can be utilized to support the daughter, if the need arises.  Retirement: While the couple has not stated the creation of a retirement fund as their goal, it is recommended that they start keeping aside some amount for their old age. They can invest in an equity fund as well as a gold fund the maximum possible amount after providing for the goals mentioned earlier to create a retirement corpus. This should be given priority over a foreign vacation.  PLANNER'S EYE      Most young couples who acquire a house earlier in life end up with excessive borrowings and an illiquid asset composition. While this is understandable, it is important that they reduce their liability at the earliest by aggressively paying off the loan. Nitin and Preeti are living within their means — they are aware of their financial goals. With a little more focus on finances, they should aim to be loan free in the next seven-nine years. Nitin Gupta with wife Preeti and daughter Akhadha

Agents trip health cover porting

STICKING WITH ONE

Hesitate To Woo Customers In Absence Of Commissions

Mumbai: Health insurance portability, which has been in force for a year, has not resulted in any major churn among policyholders. Insurers say that one of the reasons could be that agents are reluctant to hand-hold customers as regulations bar commissions on ported policies. 
    Most non-life insurance companies have reported a couple of thousands of customers who have moved out while standalone health companies were the ones to have recorded a net inflow because of portability. A public sector company said that it received a little over 4,000 proposals to shift but ultimately only half the number actually moved. One advantage with standalone companies is that they do not have to license their own agents as existing insurance agents are allowed to sell products of health companies. 
    "Our main distribution channel is our agency force. Since there is no commission paid to the intermediary in the year of porting, there is no incentive for the agent," said K G Krishnamoorthy Rao, MD & CEO, Future Generali India Insurance. According to Sanjay Datta, head of underwriting and claims at ICICI Lombard, the experience of health insurance portability is comparable with telecom where the ratio of customers opting to port is not high. "Health cover customers are stickier compared to mobile customers as ininsurance they have multiple policies with the same company." 
    Manasije Mishra, CEO (designate), Max Bupa Health, said, "Customers are porting in through various channels, agents are also bringing in portability proposals because they know that if they keep their customers' best interests in mind, they will get their commission in subsequent years also. We are discovering that some of the older policies are for a low value and the portability benefits are available only on the original sum insured. The customer finds it prudent to buy a family floater with a larger sum insured." 
    In September last year, IRDA issued its guidelines on portability of healthinsurance. The objective of the guidelines was to allow customers to shift from one company to another without losing their 'no claim' track record or running the risk of claims being rejected under pre-existing conditions.Insurance norms do not allow companies to use the 'pre-existing' defence if an insured has been with the company for four years. 
    The conditions for portability were that the shift could happen only at the time of renewal and both companies are given sufficient notice. Commissions were not allowed on ported policies to discourage agents from needlessly churning policies and also it was expected to be initiated by the policyholder. 
    According to an intermediary, one of the issues with portability is that insurers can willy-nilly be selective about proposals to shift by not having any customer touch points for portability. "At the same time, it is not fair to force insurers to accept policies which might have been shoddily underwritten by others," he adds.

OPENING UP Higher insurance FDI may fetch $5bn

Mumbai: Increase in foreign investment limits in insurance could bring in $5.25 billion of foreign capital — almost thrice the money that has come in from foreign insurers in the decade since the sector was opened up. But if the relaxation is in the form of allowing investment by foreign institutional investors (FIIs), most companies may choose to list their subsidiaries rather than offer strategic stakes. 
    According to a report by Goldman Sachs on the Indian insurance sector, the total market valuation of private insurance companies was Rs 1.26 lakh crore. The total equity investment by foreign insurers till date was Rs 8,744 crore, or $1.7 billion. If one were to include the recent deal by Mitsui Sumitomo to buy out the 26% stake of New York Life in Max Life Insurance, the total foreign direct investment (FDI) amounts to $1.9 billion. 
    "A 23% FDI/FII investment could potentially lead to foreign inflows of $5.3 billion based on FY14E valuations for insurers we cover and applying similar assumptions for the non-covered universe," said the report. 
    The cabinet in October had cleared foreign direct investment of up to 49% in insurance companies up from the present 26%. The bill to amend theInsurance Act includes the proposal to hike FDI to 49%. Yashwant Sinha, head of the standing committee on finance, indicated that the panel was in favour of keeping the FDI limit in insurance capped at 26% but was open to allowing FII/ overseas corporate bodies to invest another 23%. 
    Incidentally, the insurance sector was opened up by Sinha in 1999. Sinha had rolled back a proposal to have aseparate 23% foreign investment limit for FIIs and NRIs over and above the 26% FDI limit. However, opposition from the Congress and Left parties compelled him to cap the overall limit at 26%. 
    "In the event the FIIs are permitted to buy, private insurers could list theirinsurance ventures for two reasons: One, unlock value for existing owners, and two, listing could provide employees a chance to monetize their ESOPs."

HDFC Life ends pension plan drought

Mumbai: The two-year drought in pension plans among private companies has ended with HDFC Standard Life being the first to launch pension plans under the latest guidelines on the unit-linked platform.      Unit-linked pension plans, which until 2010 accounted for almost a third of sales for several insurers, had all but disappeared from the market after theInsurance Regulatory and Development Authority (IRDA) said that pension products should guarantee a return of 4.5%. These guidelines resulted in insurers withdrawing from the pension space as it was difficult to assure returns over the long term. The re-revised guidelines allow insurers to sell policies without the 4.5% return subject to the condition that they guarantee a positive return.      The two products are HDFC Life Single Premium Pension Super and HDFC Life Pension Super Plus. Both the plans offer assured benefit on death and vesting. HDFC Life Pension Super Plus offers assured death benefit of total premiums paid to date accumulated at a guaranteed rate of 6% per annum and an assured vesting benefit of 101% of total premiums paid.

Planning to provide for your child’s future? Avoid these financial pitfalls

 Children are the greatest gift from God and we all want the best for our children, be it healthcare, education, marriage, etc. To safeguard our children's future, we must take care to avoid some common mistakes many of us commit. As Warren Buffet says, "You only have to do very few things right in your life so long as you don't do too many things wrong." So here's a list of 'Don'ts' while planning your child's future: 

t Avoid products with exposure to only debt investments: 
Investing for children often means you want to save for the long term and create a corpus for foreseeable expenditures such as those on higher education and weddings. The cost of education is increasing faster than most of those in other areas of life (approx 10-12% per annum), and shows no sign of slowing. Guaranteed fixed income products like fixed deposits, post office schemes, etc, though considered safe, would not be able to beat inflation in education costs and would lead to an insufficient corpus to meet the actual cost. Hence, parents should not park all the money set aside for their children's future in fixed income instruments. They should consider investing in equities which would possibly give the best inflation-adjusted return over the long term. 
t Avoid investing in short-term products: Many parents just park the money they save for their children in fixed deposits of 1-5 years tenure. Since the goal is 10-15 years away, investing in short-term fixed deposits would not yield the desired results, and it needs to be re-invested every time it matures at the rate prevailing at that point of time, which may not be very attractive. 
t Do not redeem before the goal date or fulfilling required purpose: Many a times, when we see volatility in the equity market, we tend to switch funds from equities to bonds though our investment horizon is long term in nature.Parents should avoid timing the market and rather invest in a disciplined manner towards their goal. Rebalancing the portfolio based on changing needs or situations should of course be done on a regular basis, but redeeming from equity to invest in bonds because of short-term volatility should be avoided. 
t Do not invest all the money in gold: Gold holds an emotional charm for most Indians. Many parents invest a majority of the money saved for their children in gold for their child's marriage. However, the expenditure incurred on gold in the marriage would constitute 20% to 25% of the overall spending. It is rightly said, do not put all your eggs in one basket. Similarly, the money saved for the child's marriage should be suitably divided among various investment classes. Investment in gold should not be more than 10-20% of the overall portfolio. 
t An absolute no to child plans from insurance companies: The name 'child policy' looks very attractive and connects directly with our goal, but these insurance products are nothing but renamed endowment, money back or ULIP policies with similar features. These policies carry high costs and in some cases elements of guaranteed returns can lead to highly conservative investments, thereby providing very low returns that are unable to beat the rise in cost of education. Even though these plans are always sold with an emotional pitch and through highly creative advertisements, getting drawn by the promised returns may only end up causing a severe dent in your child's education plans. 
    To conclude, fortunately, there are enough investment products to help parents fulfil their dreams for their children. If they avoid making basic mistakes and choose appropriate available products, these options can help you save enough to send your child to the best colleges in the world, or organise that big fat Indian wedding. 
NEXT WEEK 
    This week, Nikhil Kothari gives us an idea about what mis-steps to avoid while putting in place a plan for your child. Next week, we will delve into the same subject in more detail. 
The author is director & chief financial planner, Etica Wealth Management

TAKING THE BIG STEP

 Mumbaikars kept their promise with taking the first step to health as thousands turned up on Sunday for the Max Bupa Walk for Health in association with Times Now. The 'walk' took place simultaneously across Mumbai, Bangalore and Delhi. Before hitting the road, participants were treated to live performances and a variety of entertainment acts. A bevy of celebrities also turned up. And kids got an opportunity to meet and click pictures with their favourite toon characters. On-spot contests like 'TheYoungest Walker', The Oldest Walker' and 'Most Bonded Family' added to the dash of excitement. Said Manasije Misra, CEO (Designate), Max Bupa Health Insurance, "Through this initiative we want to spread awareness about the benefits of walking which is one of the easiest and most accessible forms of exercise. We are happy to see that thousands of people across India have joined us in making a new beginning towards good health." Gagan Bhalla, Director Strategy and Operations, Max Bupa, was here too.

Sikander and Anupam Kher

Mumbaikars warm up before embarking on the walk

Kunal Kapoor flags off the walk as (L) Rajat Barmecha and (R) Anurag Kashyap look on

Gagan Bhalla

Aditi Govitrikar

Meet Your NEW INSURANCE Salesman

For the longest time, insurance selling was synonymous with the ubiquitous LIC agent — in some cases, a part of the extended Indian family. But selling insurance is no longer what it used to be. The brick-and-mortar sales model is giving way to the world of clicks and online engagement

    Even though it's a small player in terms of market share, Aegon Religare does have a couple of firsts to its credit — the KILB (Kum Insurance Lene Ki Bimari) campaign which is remembered for its clutter-breaking treatment. And perhaps more pertinent to the story at hand, it stuck its neck out in 2009 to launch the first ever insurance product sold exclusively online. Says Yateesh Srivastava, chief marketing officer, Aegon Religare Life Insurance, "Back then it was seen mostly as a kite-flying project that would die a natural death. Nobody really thought it would grow to a distribution channel." Apparently, even regulatory authorities asked to be informed the day 10 policies were sold. Much has changed since then for both the brand and the category. Today online sales comprise 30% of the total volume business for Aegon Religare. Online is here to stay. And this time, it's a medium to close the last mile. 
    The largest player in insurance, LIC has a 
marketshare of over 80% and an army of nearly 1.2 million agents. But the insurance giant is among those who've realised the power of going online. As per a LIC spokesperson, "the need emerges from the changing customer profile. Today's young, tech savvy executives are looking at ease of access to make purchases." Consumer trends point to the growing importance of "time saving" and "convenience" in all spheres. Adds Manish Dubey, head - marketing, ICICI Prudential Life, "Two basic characteristics of onlineinsurance are 'safety of payments' and 'simple products.' With the increase in online banking transactions, more consumers are becoming comfortable with online payments." As per studies, most buyers are males aged between 28-40 in SEC A & B with an income of over 10 lakh per annum. From a psychographic point of view they are comfortable with technology and seekers of information online. They also welcome a non-intermediated sales process. 
    What makes the affinity for online purchase all the more surprising is the nature of insurance. It's an entity that is relevant but seldom gets adequate attention. Ajay Kakar, chief marketing officer - financial services, Aditya Birla Group admits, "It is not even a felt need by most people who can benefit from it. And this reality is reflected in the fact that despite 38 of the world's best brands continuously investing in this high ad-spend category in India, penetration-levels are as low as 15% of household savings." Even those who have taken a policy, in all probability are heavily under-insured. This explains the industrymaxim that"insurance is sold, and not bought." It is a 'high-touch' category, with sales a byproduct of many across-the-table interactions between prospect and agent. So is all that set to change? For sure, if industry experts are to be believed. 
    For one, ecommerce is becoming a big-ticket industry. Estimates indicate that the market in India is set to grow the fastest within Asia-Pacific, a CAGR of over 57% between 2012-2016. The industry is piggybacking on this growth. Says Anisha Motwani, chief marketing officer, Max Life Insurance, "From a mere 10 crore annually 3 years back, online life insurance sales have come to exceed over 100 crore in the previous 12 months." She estimates the pie will increase to over 250 crore by 2014. 
    Better pricing tops the list of reasons to buy online. While the extent of saving depends on age, health, lifestyle and term of the policy, online plans can be anything between 15% to 70% cheaper. Points out C h a n d r a m o h a n Mehra, head - brand and cross sell, SBI Life, "Increasingly customers are searching for product information and comparing features on the internet before they shop for life insurance in a real environment." They are more likely to make a better-informed decision compared to the offline sales process driven by agents. 
    And so insurance brands that previously spent time training the best agents are now working to understand the path to conversion of users and catalysts along this journey. Vivek Bhargava, chief executive officer of a leading search marketing firm, iProspectCommunicate 2, says, "The deployment of technology allows us to understand and accordingly deploy the social platforms better. The keywords that have led to a sale, typically, give us a lot of insight on what people are searching more of and also what could be leading to those searches." For instance the growth of "term insurance" is primarily because these products are easier to understand and the user requires limited clarifications. 
    Agrees Motwani, "The 'research online, purchase offline' (ROPO) behaviour is being observed across lifeinsurance and in the light of this consumer behaviour, it becomes imperative for brands to anticipate the possible digital touchpoints, and build and sustain communication." Brands will have to evolve and strengthen digital assets, as it increasingly becomes a convergence point for research, engagement, acquisition and service. Says Sanjay Tripathy, head - marketing and direct channels, HDFC Life, "Finally this entire shift will bring a lower cost of acquisition, help companies provide cheaper products, and optimise distribution costs as well." 
    From a media planning perspective, it allows for targeted options instead of carpet-bombing. Says Gaurav Rajput, director - marketing at Aviva India, "Typically we segregate target groups basis their propensity to buy online, visit banking sites, the kind of transactions conducted and what they read about the category. Specific online products can be pushed on the medium." He surmises general as well as life insurance will drive the growth. Motor, travel and health see a greater shift towards online, as these products lend themselves to comparison of features and prices. 
    If brand engagement used to mean a meeting with the agent, it means a whole lot more now. There are premium reminders, query resolution, policy management and premium calculators among the suite of services offered to existing customers. Brands are doing their best to make themselves preferred and Facebook has emerged as the lead battleground. 
    Motwani is certain that advertising on the site doesn't lead to sales in the short term. But the primary expectation for Max Life and indeed its competitors is engagement. The players boast of likes that number in lakhs. 
    Max Life Insurance claims to be in the lead with 4.75 lakh members. Its 'Khushiyon Ki Planning' platform encourages long term planning and sharing the right insurance advice. SBI Life offers content around topics like 'things to do before buying life insurance, 'letting policyholders know their rights and responsibilities', 'e-life insurance dictionary'. It was the first to establish a presence on Facebook and Twitter. The page is branded as "Celebrate Life" and not SBI Life, aligned to the brand campaigns in more traditional media. Aviva's gone both the digital and activation route with 'The Aviva Great Wall of Education', which seeks to donate books to needy children. Says Rajput, "In a 'low engagement' category, on a medium that's all about 'engagement', brand communication needs to move to 'brand conversations' and 'story telling' for a meaningful connect." 
    Amidst this talk of digital and online being gamechangers, Kakar cautions that it can never entirely replace 'human engagement'. Creating a felt need (for insurance) and answering the doubts that come along with this seemingly complex-to-understand category can best be met only through human interactions is his view. The good news is agents who adapt to new technologies are helped by enriched data and better analysis. 
    Finally both types of customer segments co-exist today — those preferring to purchase online and those more comfortable with an agent. Ultimately it is the customer who decides. Says Dubey, "I believe it is not about how net savvy our consumers are, it is about how consumer savvy can our net offering become."

Increasingly customers are searching for product information and comparing features on the Internet before they shop for life insurance in a real environment 
    Chandramohan Mehra, 
    HEAD - BRAND AND 
    CROSS SELL, SBI LIFE

Typically we segregate target groups basis their propensity to buy online, visit banking sites, the kind of transactions conducted and what they read about the category. Specific online products, thus, can be pushed on the medium 
    Gaurav Rajput 
    DIRECTOR - MARKETING, 
    AVIVA INDIA

Should You Go for High Health Insurance?

    Most individuals fear that their health cover of . 5 lakh or . 10 lakh won't be enough to take care of a medical emergency. They believe advances in medical science, along with the rising cost of treatment, medications and procedures, may wipe out their savings and investment if they contract some serious or critical illness. The fears are not exaggerated. For example, an organ transplant, say, of liver or lung, can cost . 20 lakh to . 40 lakh. Even the new medicines for cancer and other serious illnesses cost . 500 upwards per tablet. However, most insurance companies offer a maximum health cover of only . 10 lakh. But the signs of changes are already there. Religare Health recently launched Care, a health insurance policy that offers sum insured of up to . 60 lakh, the highest offered on any health insurance product in the country. ICICI Lombard and Max Bupa Health Insurance already have products that offer health cover of up to . 50 lakh. 

"Due to advancement in technology and medical science, many new procedures have been adopted in critical surgeries and treatment of severe illnesses, which come at extra cost. Also, a change in lifestyle is encouraging individuals to take treatment in super-luxury hospitals. These factors, along with the inflation in healthcare cost, are forcing individuals to look for enhanced sum assured," says Pankaj Mathpal, certified financial planner and managing director, Optima Money Managers. "Individuals with adverse family history should go for a higher sum assured if they can afford the premium. Wealthy people looking for advance treatment and services in super-luxury hospitals can also go for such large sum assured," says Mathpal. 
Also, many people are increasingly opting for medical treatments outside India for critical illnesses. Some of these health insurance products cater to that need, too. For instance, Care covers costs related to medical treatments outside India for individuals opting for a sum assured of above . 50 lakh. "This policy provides coverage for hospitalisation abroad for cancer, benign brain tumour, major organ/bone marrow transplant, heart valve replacement, and heart bypass surgery, for a sum insured of . 50 lakh and . 60 lakh," says Mahavir Chopra, head, e-business, medimanage.com, a healthinsurance advisory firm. 
DO YOU NEED HIGH COVERS? 
Experts are unanimous that a cover of . 10 lakh may not suffice for treatment of any critical illness, especially in the metros. Gaurav Mashruwala, a certified financial planner, says, "People won't have any choice but to visit premier hospitals if they contract any serious illness. In Mumbai, a room in these premier hospitals costs . 5,000 to . 7,000. A room in the ICU would cost at least three to four times the normal room." According to him, if an individual can afford the premium, he or she should go for the maximum health cover. 
Still, affordability could be an issue for many people. For example, the premium for a health cover of . 50 lakh can be in the wide range of . 27,000 to . 50,000 for a 35-year-old individual, depending upon the product and the number of family members covered by the policy. The renewal premiums - ing in inflation and healthcare costs. "These policies do not have a claim-based loading at renewal. However, the premium of every policy increases after 1-2 years because of inflation and rising healthcare costs. So you have to factor in the potential hike in premium when you budget for such high-value policies," says Suresh Sadagopan, a certified financial planner with Ladder 7 Financial Advisories. 
"I would advise a client to go for the maximum health cover. If affordability is an issue, I would ask them to strike a balance," says Mashruwala. Striking a balance is very important because one shouldn't channel all the savings towards health insurance premium. "From a financial planning perspective, risk is only one of the components that includes term insurance, healthinsurance and home insurance. So a retail investor cannot afford spending . 30,000 only on a health insurance policy when he/she has to think about building a retirement corpus, saving for child's education, etc. And the premium will only go up as he ages," says Harshvardhan Roongta, certified financial planner, Roongta Securities. 
If you can't afford the premium, you should try to add a top-up health cover to your existing . 5 lakh or . 10 lakh cover. The maximum top-up cover available in the market today is . 15 lakh. "If you are comfortable getting treated in tier-2 hospitals, a cover of Rs 10-15 lakh in an urban area should suffice," says Roongta. Mashruwala suggests another way out for people who can't afford the premium for high covers. "You should start building a corpus of . 5 lakh for medical emergency. You can use this corpus for treatment of your minor illnesses." 
DON'T MISS THE FINE PRINT 
A large cover doesn't mean it will reimburse every expense. Pay attention to factors such as the network of hospitals, sub-limits in the policy, exclusions, waiting period for pre-existing disease, additional benefits such as maternity cover, neonatal cover, dental treatment and so on. In case of high-value policies, there may not be any caps or sub-limits on the room rent. However, there may be a definition of the category of the room covered by the policy. "In case of Religare Health, for sum insured of . 5 lakh and above there is a room category cap. Such a cap allows only the lowest category private room in the hospital," says Chopra. So even if you opt for a 5-star hospital, you have to opt for the lowest category of the private room. 
Just like health policies with small sum insured, these policies also have a co-pay clause at 20% for senior citizens. "The Religare Health policy applies a 20% co-pay for members who enter the policy at 61 years and above. Max Bupa applies 20% co-pay, even if one enters at the age of 20 and continues the policy for 45 years," says Chopra. So if you opt for tier-1 hospital for medical treatment, the 20% ratio to be borne by the patient will be a heavy sum. 

Revival plan for non-life biz? Insurers Ask FM To Extend 80D Benefits To Property Covers

Mumbai:A revival package is on the anvil for non-life insurance companies on the lines of what was announced by the finance minister for the lifeinsurance industry earlier this month. Finance minister P Chidambaram on Monday met chiefs of non-life companies to decide on measures required to increase general insurance penetration, which has stagnated at around 0.7% of gross domestic product.      "There was a suggestion that tax breaks under section 80D could be extended to property insurance for premiums up to Rs 1 lakh," said Amarnath Ananthanarayanan, MD & CEO, Bharti Axa General Insurance. At present, the only tax break for non-life is on payments up to Rs 20,000 for healthinsurance. "We also discussed in motor insurance third party pricing and of the large number of uninsured vehicles in India, estimated at around 9 crore," said K G Krishnamoorthy Rao, MD & CEO, Future Generali India Insurance. Among the other suggestions was that authorities should mandate propertyinsurance for multi-storeyed housing as is the practice in some countries.      Some insiders say that the industry has not been able to realize its potential because of unhealthy competition for top line. This is partly driven by the four state-owned insurance companies. According to K K Srinivasan, former member of IRDA, there is a strong case for merger of the four non-life companies.      "The four PSUs were created in the early seventies when the industry was nationalized. The purpose was to create a modicum of competition. It has lost its relevance now with around 20 private sector nonlife insurers in the field. It is senseless to keep the four PSUs competing among themselves. It is high time the sector is reformed by merging the four PSUs into one and give a strong united competition to the private sector," said Srinivasan.      Some of the regulatory issues were similar to the ones raised by the lifeinsurance industry. Non-life companies wanted regulations that would permit them to come up with products that could be sold after being filed with the regulator. They also wanted liberalization of distribution norms so that policies could be sold through banks.      The finance minister had earlier announced measures that would address these issues for the life industry.      In the meeting, the finance minister took down the views of all companies and indicated that the government would take measures to improve growth in the non-life sector. State-owned non-life companies highlighted their peculiar problem of not being able to hire actuaries in light of the age restriction which bars those above 70 years from being appointed.

Life Insurers Hit Jackpot with Online Term Plans

Sales rise 125% as people find it easier to buy policies on the Internet

The life insurance sector is witnessing a slowdown, but at least one segment of the industry is growing in leaps and bounds. Sales of online term plans are booming, with nearly 55,750 term policies sold in the past six months. 

During 2011-12, roughly 49,500 plans were sold in the entire year and the figure is expected to more than double this year. 
On an average, every five minutes somebody buys an online term plan in India. Insurance portal Policybazaar.com gets almost 2,600 enquiries for term plans every day. The portal has sold about 33,800 online term plans (60% of the total) in the past six months, averaging more than 140 policies per day. 
The average cover is . 72 lakh, which is 35 times larger than the average cover for all insurance policies sold during the past six months. 
Aegon Religare Life, which pioneered the online sale of life insurance nearly two years ago, is the largest player in this segment. It is followed closely by Aviva India. Snapping at their heels is HDFC Life, which launched its Click2Protect plan in January this year. ICICI Prudential Life and Kotak Life are the other active players in this segment. 
While other big players such as Reliance Life and Bajaj Allianz have also jumped onto the bandwagon, LIC has shelved its plans because of its powerful agent lobby. The LIC offering would have been a game changer because a lot of buyers believe that its high claim settlement ratio makes it the most trustworthy insurance company. But the powerful agent lobby forced the LIC to junk the idea.

Reduce the premium on car insurance

Find out the simple measures, such as installing safety devices in your vehicle and avoiding small claims, that can help you lower the premium

    If you have been planning to buy a new car, you are bound to have been pulled in by the bevy of discounts and freebies. One of the most attractive among these is the offer of free insurance. Since buying a car insurance policy is compulsory, the word 'free' pulls in buyers, but there could be hidden clauses. The first catch is that the insurance provided is typically only for a year. From the second year on, it's your responsibility to renew the policy and pay the premium. Moreover, free insurance would mean a lower discount on the price of the car as dealers invariably recover the premium through the final cost that you pay for the vehicle. Besides, the free policy may not include various types of damages, such as that by floods. So, read the fine print carefully before you take this bait, or you could opt for a higher discount on the car and buy an insurance policy separately. Find out how due diligence and research can help you reduce the insurance premium you may have to pay for the first year as well as subsequently. 
Voluntary deductible 
The part of the monetary loss that is borne by you is called a deductible, and it has two components—compulsory and voluntary. A compulsory deductible of 500 would mean that you pay 500 of the claim amount, while the company pays the rest. You can reduce the premium if you opt for an additional voluntary deductible. However, this also means that when a loss occurs, you will have to pay a large portion of the claim amount out of your own pocket. For instance, a voluntary deductible of 2,500 would give you a 20% discount on your premium, but when an accident occurs, you will have to pay 3,000 of the claim amount (voluntary deductible of 2,500 plus the compulsory deductible of 500). "Those who are confident of their driving ability could opt for a voluntary deductible to save on premium," says Vijay Kumar, president, motor insurance, Bajaj Allianz General Insurance. 
Insured declared value 
The IDV is the market value of your car. The higher the value, the more the premium. You can save a few hundred rupees on your premium by declaring a lower value for your car. If your car is worth 7 lakh, declaring a value of 6.3 lakh could help you save 200-500 on insurance premium. "This is a double-edged sword as the claim amount for accidents will not be affected by declaring a lower IDV. However, if your car is stolen, you will get a lower amount in line with the one declared by you," says Akshay Mehrotra, chief marketing officer, Policybazaar.com. 
Voluntary additional declarations 
The insurance company may not tell you this, but the premium charged for a car may differ according to the profile of the owner. Insurers adopt many parameters to evaluate the risk associated with your vehicle, and these include fuel type, age of vehicle, usage of car, as well as driver-specific details, such as the occupation and driver's age. A diesel-run car is assumed to be used more often than a petrol one, so the premium charged for it would be higher by 10-15%. Similarly, it is assumed that a businessman would use his car more frequently and, hence, would be charged a higher premium. Voluntary declarations about the usage of your car, as well as other details like driving records, can help you get a discount of around 10%. 
Safety devices 
Installing safety devices can bag you 100-200 discount on your premium. You can also lower the premium by up to 200 if you come under a 'safe driver' category. One way to do this is to become a member of the Automobile Association of India. "This improves your image and record in the eyes of insurance companies, which helps you get a discount," says Sanjay Datta, chief—underwriting & claims, ICICI Lombard GIC. 
No-claim bonus (NCB) 
An NCB is the reward you get for not making any claims throughout the year. This can help you bag a discount of 20-50% on your premium from the second year onwards (see graphic). However, since you lose this advantage if you make a claim, avoid making small claims, especially when the amount is lower than your premium. A benefit is that the NCB can be transferred from an old vehicle to a new one as it gets accumulated for the driver, not the vehicle. "By carrying forward your NCB to a new vehicle of the same type, you can slash the first premium," says Kumar. 
Premium declines over the years 
The premium falls with each passing year due to two reasons: reduced IDV and accumulated NCB. Besides, the value of your car will decline each year because of depreciation, and a lower market value automatically translates to a lower premium. However, at the time of a partial damage claim, this depreciation factor kicks in, reducing the claim amount that is payable by the company.

Tips to buy health insurance policy

A viable option is to choose a lifetime plan or one that provides insurance cover post-retirement as well.

Growing incidence of lifestyle diseases and rapidly rising medical costs have made health insurance one of the most bought insurance products these days. To meet the growing demand, health insurance companies have introduced several innovative plans to cater to the needs of the consumers and the target buyer group. The consumers are literally spoilt for choice. However, buying health insurance calls for greater awareness and cost-benefit balancing by consumers in order to buy the best product to provide maximum cover at reasonable cost.

THE RIGHT POLICY

First , the customer should buy a plan with maximum renewable age or lifetime insurance policy. The sole purpose of buying health insurance is to protect yourself and the family from mounting healthcare costs throughout your life. A viable option is to choose a lifetime plan or one that provides insurance cover for post-retirement as well.

Second and the most important point to keep in mind is that the policy should provide adequate cover to protect all the dependent members of the family. Accordingly, the sum insured should be decided according to the family size, past medical history and the area of residence.

A buyer needs to be careful as many companies do not pay for pre-existing diseases and the complications arising from them. These days, however, some companies allow for pre-existing diseases after a specific waiting period and if the insurance policy renewals are continuous.

Similarly, women insurers need to ensure whether maternity benefits are covered under given health insurance.

COST FACTOR

Third, buying health insurance entails a premium which depends on the number of family members and their age group. A buyer must check for all the limitations in an insurance cover and choose the one that provides maximum benefit within the affordable cost to him.

Fourth, for availing cashless insurance facility, it is important to check the list of empanelled hospitals as well. This would help avoid any problems in case of an emergency.

Some insurance companies also offer co-pay and sub-limits in insurance coverage, where the company pays certain percentage of the total amount incurred (say 90 per cent) or provides insurance with a limit for a particular treatment. In such cases, the buyer has to pay rest of the amount himself.

Fifth, till recently, health cover was popular as a group insurance product provided by employers in the organised sector. In such a case, an insurance cover can end abruptly depending upon the employers' policy to offer such a facility. It will be prudent on the part of the employees to have individual protection to cover themselves.

Also, check the credibility of an insurance company. It should be certified by the Insurance Regulatory and Development Authority. An insurance advisor or a broker firm can help in taking the right decision by presenting cost-benefit analysis of various schemes for a given option as against limited information by a company's insurance agent who may not be aware of other companies' products.

(The author is CFO, Max Bupa)

Keywords: tips to buy health insurance policy, choose a lifetime plan, provides insurance cover post-retirement as well

Banks as a shop for insurance

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BANKS | DEEPAK YOHANNAN | INDIA | INSURANCE

(The views expressed in this column are the author's own and do not represent those of Reuters)

The concept of insurance plans being sold through banks is called 'bancassurance' and there is a lot of interest in this distribution channel from all the stakeholders - customers, banks, insurance companies and the regulator.

Bank as a distribution channel offers some very distinct advantage for the insurance companies, biggest being a large established network which can operate on a purely variable cost basis. The time and money required to establish something similar is exhaustive and expensive, almost bordering on the impossible.

So the obvious has happened – all big Indian banks have actually become stakeholders in some insurance company or the other.

From the bank's perspective, it opens up a new line of fee-based income which is so crucial for most in today's world.  An attractive fee-based product like insurance seems too tempting to stay away from.

There is a large amount of trust which the customers have on the banking system and hence the trust factor combined with convenience makes it a good option for them.

The regulator would, of course, want such a large distribution system to function in a way which is fair to all and avoid or minimise systemic risks.

Though out-weighed by the positives, there are some flip-sides too. Banks by the nature of their business know a lot about the customer which most others would not. This creates a conflict-of-interest scenario and can provide an undue advantage to the seller.

Also banks are increasingly trying to move most of their transactions online or through ATMs, and in fact there are dis-incentives for branch visits and cash transactions. As banks move towards automation and reduce interaction avenues, the familiarity with the banker would come down and so the chances of sale too.

Another key point, which is more by the way of regulation, is the fact that banks can sell plans of only one life, general and health insurance company each. So instead of getting the most suitable product, the customer might actually be sold a product which makes the maximum fee-based income for the bank.

Also because of this regulation, new insurance companies are finding it difficult to get a partner as most of the big banks are already tied up with some insurer or the other.

The Insurance Regulatory and Development Authority (IRDA) has attempted to fix this problem by some regulatory tweaks. The changes are yet to be approved and are under discussion.

Banks can operate as brokers whereby they can sell plans of any insurance company. While this is good for the consumer, it means the banker now needs to be trained on a large number of products from multiple insurers. We can safely assume that the "banker" would probably find this too difficult.

The other solution offered is by breaking the country into zones and allowing banks to get into tie-ups with different insurers in different zones. Though this doesn't offer any advantage to the consumer, insurance companies with fewer bank partners will find it easier to find one in some zone.

While it is best for the consumer if the banks take on the role of a broker, it remains to be seen if banks would take that path, as there is a considerable increase in responsibilities towards the consumer. Banks might take the more focussed and easier path of sticking to single tie-ups within their branches.

It reduces the training costs and helps drive more volume to the single insurer.

Bancassurance is a very sought after channel for any insurer and these steps will create an opening for insurers who find it difficult to find banks as partners. These are the days of the supermarkets, so why not banks as financial supermarkets!

For more articles by Deepak Yohannan, please visit MyInsuranceClub.com