PC at Home in Finance

During his first stint as finance minister in UPA during 2004-08, Palaniappan Chidambaram oversaw India's strongest growth surge in the past 2 decades. Hopes again run high as the pro-market reformist takes over as the new finance minister HEMA RAMAKRISHNAN NEW DELHI      Amonth ago, a senior bureaucrat asked Palaniappan Chidambaram if he would be happy returning to North Block. The answer was not an emphatic yes. He merely told him that the economy was going through troubled times and he wasn't sure if he would get full political support to carry out reforms.  Clearly, his second innings in UPA II will prove to be much more challenging than his first --from 2004 to 2008 -- when the economy was on a roll. "He is passionate about expenditure control, tax reforms and also realising revenues. Regaining fiscal control will be his top priority," said a senior finance ministry official who worked closely with him during his earlier innings.  Chidambaram set the tone in the 2004 budget, promising to wipe out the revenue deficit by 2008-09. This would open up fiscal space of up to 3% of GDP for enhanced public investment without undermining fiscalprudence. He created the fiscal space that enabled the government to offer a stimulus package after the global financial crisis. That cushion, unfortunately, is missing now, but Chidambaram's admirers say he has the ability to think out-of-the-box. He signed off from the finance ministry in 2008, after nearly completing the direct taxes code (DTC) that embodied a principle: low rates of tax on the broadest possible tax base so that the burden on individual taxpayers is low. The general anti-avoidance rules (GAAR) to curb sharp tax practices was his brainchild. His successor Pranab Mukherjee diluted the code, but retained GAAR that made foreign investors jittery.  Tax authorities also raised controversial demands on telecom company Vodafone during Chidambaram's tenure. And in this year's budget, Pranab Mukherjee retrospectively changed rules about how Indian assets traded by foreign companies should pay tax to bring Vodafone under the net. The PMO wanted a prospective amendment, but Mukherjee did not relent.  "Chidambaram is a disciplinarian and would never defy any decision taken by the prime minister on budget proposals," recounts an official. Always on the top of his portfolio, he is considered adept at handling pressures from industry.  But he has had his share of unpopularity too. Two taxes that he introduced – fringe benefit tax and the banking cash transaction tax— had to be scrapped later. He also waived off farm loans worth . 60,000 crore in 2008, a year ahead of general elections. Critics dubbed this as a political gimmick, saying the waiver would slow down fresh loans to deserving farmers.  A micro manager with a penchant for details, Chidambaram is known to respect institutions. "Regulators enjoyed complete autonomy during his tenure. He was professional and would listen to others and give reasons if he disagreed with them," says D Swarup, former Chairman of PFRDA.  Insurance regulator J Hari Narayan echoes a similar view. Chidambarm was decisive and encouraged regulators to do their best, he says. The man widely considered a reformer and a darling of the stock market has his task cut out: investment must be revived and inflation tamed.  In 1997, he slashed tax rates, opened up FDI and carried out disinvestment. Now he has to convince allies on signing up to key reforms, be it FDI in multibrand retail or the goods and services tax.  Chidambaram's close analysis of complex issues and respect for collective responsibility may be tested as never before as he faces a challenging economic and political environment.

Group health cover premium may rise 50%

New Delhi: The finance ministry's directive to public sector insurance companies to stop giving discounts on group health insurance policies could push the premium for such schemes by up to 50% of the existing rates if all expenses, as directed by the government, are factored into pricing the products.      The order, issued by the department of financial services to the chairmen and MDs of the four government insurers, says the strategy must be adopted with immediate effect. It seeks to stop discounts on any policy where the combined ratio is more than 100%. The combined ratio refers to the costs on an insurance claim, management expenses, commission to agents and third party administrators (TPAs) and other expenses that may have been incurred in servicing a policy. A study by the ministry found that the combined ratio, or the cost of a policy to the insurer, is in the range of 140%-165% on an average. As per the new order, the four PSUs—National Insurance Company, New India Assurance Oriental Insurance and United India Insurance Company—must bring this combined ratio down to 95%. The four command over 60% of India's health insurance business. In 2011-12, the total health insurance premium income of the four PSU firms was Rs 8,145 crore while the net combined loss was around Rs 1,500 crore (assuring a combined rate of 150%) to these firms. 'Govt order may benefit private insurance players'  New Delhi: The finance ministry ordering a halt to discounts on group health insurance policies, a senior official at a public sector insurance company said each of the four PSU insurance firms have issued directives to their field offices that "premium should be suitably loaded" to recover all expenses related to the policy.      While he said the increase in premium could be as high 50%, insurance experts said several factors would determine the actual hike. "The directive predominantly talks about group health insurance policies. Premiums may go up significantly for these schemes and marginally for retail policies. While the increase for group insurance premiums could be up to 35%, in case of individuals it is likely to be between 5%- 10%," said V Ramakrishna, chairman of India Insure Risk Management and Broking Service.      "This directive drastically reduces the choice available to group customers whose portfolio is healthy and the move is anti-free market," he added.      "Prices should be worked out taking into consideration the burning cost, management expenses and medical inflation to ensure that the premium is revised and that the combined ratio will be less than 95%. Such policies otherwise shall not be renewed," says the finance ministry directive.      "Any cartelization of this sort where prices are determined uniformly may result in the business shifting to the private sector where the management cost is at least 20% less in comparison to public sector insurers," the PSU company official said.

NEED TO TIGHTEN REGULATIONS ‘No clarity on accountability in draft medical insurance rules’

Mumbai: Draft medical insurance regulations by the Insurance Regulatory and Development Authority (IRDA) has no clarity on accountability, the Bombay high court was informed on Thursday.      A division bench of Chief Justice Mohit Shah and Justice Nitin Jamdar was hearing a public interest litigation filed last year by activist Gaurang Damani on medical insurance woes. The PIL highlighted the plight of nearly 7 crore consumers paying Rs 13,000 crore as medical insurance after Third Party Administrators (TPA) stopped offering cashless mediclaim benefits. It also focused on the absence of any kind of regulation to govern this industry. Subsequent to the court's order, IRDA in June 2012 published on its website draft regulations which will govern the medical insurance industry.      Damani submitted that while the draft regulations are "good", some issues need to be addressed. "There is no clarity on accountability if there is violation on any of these new regulations. Just like SEBI enforces a fine on an errant corporate house, there should be something similar in the regulations, so that accountability is introduced,'' he explained. He also said there is no mention in the draft regulations about the method for fixing package rates for different ailments. "This was the primary reason this court was moved after the cashless facility was discontinued,'' said Damani.      To a query from the judges, Damani replied that he has sent these suggestions to IRDA but has not heard from them. The judges said he must await final regulations of IRDA. But Damani said there is no final date or indication when the final regulations will be implemented.      IRDA's advocate Paritosh Jaiswal said suggestions and objections have been invited to the draft regulations and will be considered accordingly. He said since the draft regulations are published, the PIL has achieved its purpose and must be disposed of. The judges have adjourned the hearing to September 6.

‘3-yr profit track record must for insurers’ IPO’

Mumbai: The Securities and Exchanges Board of India (Sebi) has turned down an IRDA proposal seeking relaxation of the profitability criterion forinsurance companies planning an initial public offering. 

    This means that insurers seeking to launch a fixed price initial public offering will need to have a three-year profit track record. 
    The Sebi Committee on Disclosures and Accounting Standards (SCODA) had constituted a sub-committee comprising regulators and merchant bankers to suggest disclosure requirements for insurance companies seeking to go public. 
    The report, which was made public by Sebi on Wednesday, states that there is no need to provide specific relaxation from the eligibility criteria toinsurance companies because those which do not comply with the profitability criteria can still raise capital through the book-building process. 
    The norm requires insurance companies to make a slew of disclosures in their offer document which are not mandatory for other firms. Besides risk factors that are specific to the industry, general insurance companies are required to provide full details of their reinsurance contracts. The Sebi report also defines promoters as all those holding shares in the insurance company at the time of IPO, but excludes employees with stock options. 
    Given that there is no listed insurance company in India, many feel that price discovery for an insurance business could be a major challenge. For instance, Mitsui Sumitomo has acquired a 26% stake in Max Life Insurance in a deal that valued the company at over Rs 10,000 crore. However, the m-cap of Max India, which holds 76% stake in Max Life, is only Rs 4,734 crore. 
    Sebi's observations will not have an immediate impact on theinsurance industry since no company has made plans for an initial public offering. 
    Although HDFC Life had announced that it would go public, the promoters have indicated that they are awaiting relaxation of foreign direct investment norms which will allow FII participation in the issue. "Without participation of FIIs it would be very difficult to sell an issue through the book-building route," said the CEO of a life company. At present, no company can offer shares to FIIs because nearly all companies have a foreign promoter holding of 26% stake—which is the highest foreign shareholding permissible under current guidelines.

SEBI DENIES RELIEF

“I’m from Irda. You’ll get 1.8 lakh bonus if you buy a new policy”

Posing as employees of the regulator or insurance companies, fraudsters are luring policyholders with offers of bonus if they buy a new plan. Here's how they take gullible policyholders for a ride.     Ten seconds is all that Vijay Sharma gives a telemarketeer. But since the call was from the insurance regulator's office, he didn't disconnect it abruptly. Instead, he put everything else on hold and listened intently. "I am calling from the service management department of the Irda. You are losing money on your Ulips because the bonus that accrued on them has gone to the agent," the caller explained. "If you want, it can be refunded to your account."      Sharma is usually circumspect about such offers and SMS marketing. However, the caller knew his name, phone number, address and full details of the plans that the Delhi-based sales executive had bought in the past 3-4 years. So, there was very little reason to doubt his words. Besides, he had nothing to lose.      Or so he thought. Sharma's suspicions were aroused when the caller spelled out the terms of the deal. "Your code has been activated and if you link your existing policies with that code, the accrued bonus will be credited to your account directly. To do that, you have to buy a policy from any company through us," he went on.      Sharma was lucky not to fall for the fraudster's bait. Mumbai-based Ajit Majhi did and got trapped. In February, he was promised a similar deal by someone posing as an official of an insurance company. "She told me that to claim the bonus amount of 84,000, I would have to take another policy of 25,000 from the company," he said in an angry complaint to a consumer forum.      He bought the policy, but far from getting a bonus, his gullibility encouraged the fraudster to go for a bigger kill. She kept fobbing him off with excuses and then announced that the bonus had been enhanced to 1.85 lakh, but that he would have to buy another policy of 50,000. "I told her I couldn't afford to buy another policy and asked her to give me only the original bonus amount of 84,000," Majhi said.      The fraudster was not finished with the milking. For the original bonus too he had to buy another policy. "I told her I had no money, but she advised me to borrow from friends and repay them when I get the bonus money," says Majhi. Eventually, he bought another policy of 25,000 in his wife's name.      By doing so, he only dug a deeper hole for himself. He hasn't got the money yet because there was no such bonus coming his way in the first place. Now he has two insurance policies he didn't need. "Paying an annual premium of 50,000 will be a burden for me," he says. Before Majhi fell into the trap, the fraudster was calling him 6-7 times a day. Now, her phone is constantly switched off.      A senior manager in the customer care department of the company says that after the first policy was sold to Majhi, the company made a welcome call and explained the features of the policy in detail. Majhi admits he was told that there was no bonus offer. "When I called the adviser, she told me that customer care would not know about the bonus details and it would be credited to my account shortly," he says.      Insurance companies are now warning their customers not to fall for such frauds.  What should policyholders do?  Don't go by verbal promises: Never believe an offer till you see it in black and white. Also, make sure that the brochure or table shown to you is authorised by the company. Agents often get promotional material printed with promises of lofty returns. Check credentials of agent: Make sure you see the seller in person. Check his identity card and other details. This is a litmus test: if he refuses, he is probably not authorised to sell. Don't buy in a hurry: Anybody who pushes you to buy a policy within a deadline is probably mis-selling. Don't close the deal in the first or even the second meeting with the broker. Ask for at least 7-10 days to study the plan and compare its features. Take a second opinion: Tell the agent you will be discussing the plan with another consultant before deciding. Fraudsters often ask the victim not to discuss the plan with anybody else. Use freelook period: If the policy document does not mention the promised benefits, return the policy within the 15-day freelook period. Agents try and buy time till 15 days are over.

Crop Insurers in US Could Face First Loss Since 2002

Taxpayers may be responsible for 50-80% of underwriting losses due to severe drought     Crop insurers may face their first underwriting loss since 2002 as the worst Midwest drought in more than two decades threatens the US harvest, according to Iowa State University's Bruce Babcock.  "The only way they would make a profit is if they saw this disaster coming, because of the low water tables and the low soilmoisture levels at the beginning of the season, and they opted to minimise their exposure in the Corn Belt," Babcock, an economics professor at the Ames, Iowabased university, said on Sunday. "But the companies have made money year after year after year maximising their exposure to risk in the Corn Belt because it's been such a good run of years." Hot, dry weather across much of the Midwest has damaged crops, led to a rally in corn and soya bean futures, and boosted insurance loss estimates. The US subsidises farmers' premiums for so-called multiperil coverage, which protects against a loss of revenue or production as a result of drought, hail, wind, frost or other natural causes. Prices for the policies are set by an agency within the Department of Agriculture.  Crop insurers including Ace, QBE Insurance Group and Wells Fargo will probably face higher costs this year as farmers make claims, Fitch Ratings said in a report on Saturday. Private insurers sell and administer multiperil crop insurance in the US in return, the federal government backstops the firms with payments and reinsurance.  Taxpayers may ultimately be responsible for 50% to 80% of underwriting losses, given the severity of this year's drought, Babcock said during a media event hosted by the Washingtonbased Environmental Working Group, which tracks agriculture subsidies.  "Wells Fargo has a geographically diverse crop-insurance business," Gabriel Boehmer, a spokesman for the San Francisco- based bank, said in an e-mail. "We're prepared for what we expect to be another extreme claims season, but it's premature to speculate on the effects the drought will have on underwriting." Wells Fargo has reinsurance to help it share claims costs and protect against risk it retains, he said.  Stephen Wasdick, a spokesman for Ace, and QBE's Paula Symons had no comment.  "It is too early to determine the extent of the losses for the 2012 crop year, let alone determine if there will be an underwriting loss or gain for the industry," Laurie Langstraat, a spokeswoman for National Crop Insurance Services, an industry group, said in an e-mail. "This year's drought and last year's weather problems underscore the need for an efficient private sector-delivered crop-insurance programme." Temperatures will approach 100 degrees Fahrenheit (38 degrees Celsius) from Texas to South Dakota through July 28, intensifying crop stress as corn finishes reproducing and soybeans begin to set pods and fill them with seeds, World Weather said in a report.  Soya bean futures for November delivery rose 2% to close at $16.5225 a bushel on the Chicago Board of Trade after reaching a record $16.7375. Corn futures for December delivery fell 0.7% to $7.785 a bushel.  Earlier, the price reached $7.99. The all-time high on June 27, 2008, was $7.9925.  Drought Hits Insurers Too  Dry weather across much of the Midwest has damaged crops and boosted insurance loss estimates The US subsidises farmers' crop premiums, protecting them against a loss of revenue or production  Private insurers sell and administer multiperil crop insurance in the United States In return, the federal government backstops the firms with payments and reinsurance  Crop insurers will probably face higher costs this year as farmers make claims, says Fitch Ratings

Insurance company penalised for denying claim to accident victim’s kin

The UT District Consumer Disputes Redressal Forum has penalised an insurance company for denying the claim for an insured car as the representatives of the deceased policy holder failed to submit his driving licence.

New India Assurance Company Limited in Sector 30 had rejected the claim on the grounds that the insured was not holding a valid driving licence at the time of the accident.

His wife and two sons alleged Lally had taken an insurance policy for his Skoda car in April 2010. The car had met with an accident 10 days later at Hoshiarpur. Lally along with two others had died in the accident. The necessary documents, except for the driving licence, were submitted by Lally's kin to the insurance company. However, neither the police FIR nor Lally's family could confirm that Lally was driving the car himself at the time of the accident. As his wallet could not be found after the accident, his driving licence could not be produced.

However, the perusal of the insurance cover note mentioned details of the driving licence of the insured.

The forum directed the insurance company to pay Rs 4,73,888 insured declared value (IDV) of the car, Rs 1 lakh as assessed by the surveyor, along with Rs 2,00,000 towards the personal accident claim of the deceased. The company is additionally penalised to pay Rs 50,000 on account of deficiency in service and having caused unnecessary harassment and mental agony to the complainants, along with Rs 10,000 towards cost of litigation.

‘Onus of right info on insured, not the agent’

Mumbai: Observing that the onus of giving correct information lies with the insured and it is immaterial who fills the proposal form, the Maharashtra State Consumer Disputes Commission recently overturned a district forum order that directed an insurance company to pay Rs 2 lakh to the son of man who died in 2003.      Life Insurance Corporation of India filed an appeal against the forum order and iterated that the claim was rejected as the man had not disclosed that he had also taken another insurance policy.      Setting aside the district forum order, the commission said, "The learned district forum had failed to appreciate the facts in the right perspective and arrived at the wrong conclusion."      In April 2001, Nandkishore Agarwal had taken an insurance policy from LIC India and the sum assured was Rs 2 lakh. But Nandkishore died in April 2003. His son Ashish filed a claim which was repudiated by theinsurance company in March 2004. The company rejected the claim as Nandkishore had withheld material information while taking the policy. Considering this as deficiency in service, Ashish filed a complaint with the forum.      The insurance company contested the complaint, sating that while submitting the proposal for the policy Nandkishore had not disclosed that he had already taken another policy.      On March 1, 2011, the district forum directed the insurance company to pay an Rs 2 lakh along with interest. Aggrieved by the order, theinsurance company filed an appeal challenging it.      Ashish's counsel submitted to the commission that the proposal was filled by an agent and Nandkishore had not suppressed information. However, the commission observed, "It is not material who fills the form, it is material to give correct information and it is the responsibility of the insured. Theinsurance is a contract between parties and is based on utmost good faith."

Insurers may Get to Buy Over 10% Stake in Firms IRDA may remove 10% cap; move to benefit LIC that has large equity holding in many cos

The Insurance Regulatory and Developmental Authority is "actively considering" to relax the 10% ceiling on equity investments by insurers in a company, Chairman J Hari Narayan has told ET.  The move is expected to not only bring in the much-needed long-term funds into equities but also offer greater investment flexibility to LifeInsurance Corporation of India, the country's largest insurer.  "A lot of suggestions have been made in this regard and we are actively considering them," Narayan said. The finance ministry and various other arms of the government, including the Planning Commission, had raised the issue of 10% ceiling, he added.  LIC had recently come under the regulator's scanner for exceeding the investment limit in 78 companies.  When asked if the regulator was planning to allow only LIC to buy more than 10% equity in a company, Narayan said Irda "was looking at the overall investment norms for all insurers". But he did not say what would be the relaxation, if any, and when would it happen. A government official said they had sought a special dispensation for LIC since the LifeInsurance Corporation Act of 1956 allows the insurer to acquire up to 30% equity in companies after government approval.  "We have made a case. We feel that at least in case of LIC, which has a huge investible corpus, the limit should be extended," the official said requesting anonymity.  Another government official in the know of discussions said more room for LIC is needed in the current economic scenario.  Among the companies in which LIC has more than 10% equity holding are Larsen & Toubro (L&T), ITC, JSW Steel and Mahanagar Telephone Nigam Limited.  The insurer's high stakes in companies had raised concerns after it recently picked up 4.4% equity in an auction conducted by ONGC Ltd, which took its total holding in the explorer to 9.5%.  LIC plans to invest 15% of its corpus, or about . 45,000 crore, in equities in the current fiscal. It had invested nearly . 49,960 crore in 2011-12. A relaxation in investment norms will benefit government's stake sale in staterun companies as LIC has holdings in many companies lined up for disinvestment.  Cabinet to Consider FCRA Bill Today  NEW DELHI The Union Cabinet will on Thursday consider changes in a bill to give more powers to commodity markets regulator FMC and introduction of new products like options. Last week, the Cabinet had deferred the Forward Contract Regulation Act (Amendment) bill after opposition from key UPA constituent Trinamool Congress. "The bill is on the agenda of the Cabinet meeting on Thursday," a source said. Despite reservation expressed by the Trinamool Congress, the source said that the Food Ministry has not made any changes in the bill. The bill was introduced in the Lok Sabha in December 2010 and referred to the Parliamentary Standing Committee, which submitted its report on December 22, last year. The Food and Consumer Affairs Ministry has accepted most of the recommendations of the Parliamentary panel.— PTI

Seven Little-known Benefits Your Health Insurance Lets You Avail of

The utility of a cover depends not only on its features, but also on how well you are able to utilise them, says Preeti Kulkarni

 Most individuals simply assume that their health insurance policy pays only for the hospitalisation expenses. However, contrary to this common belief, many health policies foot the bill for associated expenses, too. 
There are several under-publicised benefits in health insurance that remain unused due to lack of awareness. Irrespective of whether your insurer or advisor has educated you about these benefits, it would be a great idea to read the policy document yourself. Remember, the utility of your cover depends not only on its features, but also how well you are able to utilise them. Read on to understand such benefits. 
DAILY HOSPITAL CASH ALLOWANCE 
All health policies take care of the cost of hospitalisation. However, what about the expenses incurred on, say, food or refreshments? Or, the money spent by your family while commuting between hospital and home? After all, even these add up to a substantial amount. Well, the solution lies within your policy in the form of Daily Hospital Cash Allowance. Check if your policy offers this pre-fixed, per-day cash handouts. "This sum is handed over without the insured having to produce any bill to support the claim, no questions asked," says Sanjay Datta, head, underwriting & claims, ICICI Lombard. 
CONVALESCENCE BENEFIT 
Hospitalisation costs apart, some companies also take care of the insured's recovery expenses. Also termed as recuperating benefit, this feature promises a lump sum in case of a prolonged stay at the hospital. "The duration of prolonged stay usually varies between 7 and 10 days among policies. This benefit is usually provided to ensure supplementary costs due to the stay in hospital, such as a loss of income for the number of days in hospital," says Antony Jacob, CEO, Apollo Munich. "Associated costs, such as compassionate visits by family members, are also covered to some extent." In case of some policies, the post-hospitalisation stage could be treated as the recuperating period. You need to be aware of the eligible benefit amount and period, which are usually pre-defined. 
ALTERNATIVE TREATMENT 
The recent Insurance Regulatory and Development Authority (Irda) draft guidelines may nudge all companies into covering non-allopathic forms of treatment, like Ayurveda, Unani and Homeopathy, but some of them do so even today. For instance, New India Assurance undertakes to reimburse 25% of such expenses, provided the treatment is taken at a government hospital. The proposed norms seek to let insurers to pay for these expenses even if the treatment has been availed at any institute that is either recognised by the government, accredited by Quality Council of India/National Accreditation Board on Health or any other suitable institution. 
TREATMENT TAKEN AT HOME 
The general impression of health insurance covers is that their scope is restricted to hospitalisation or day-care procedures. However, many policies widen their coverage ambit to include domiciliary treatment, too. That is, treatment undergone at home as per doctor's advice. Primarily, this would be because the patient is unable to visit a hospital. "Here, the insured may be asked to submit bills from the doctor's clinic. The pay-out is percentage orvalue-based," says Datta. The amount and the number of days for which the benefit period is payable is capped in terms of percentage of the sum insured or absolute amount. For instance, your policy wordings could make it clear that the benefit is restricted to 10% of the sum insured or . 25,000, whichever is lower. 
EXPENSES RELATED TO ORGAN DONORS 
Any transplantation surgery puts tremendous strain on the insured – financially and emotionally. What's more, besides the cost of the organ recipient's treatment, the donor's expenses are also included in the hospital bill. Now, there is a provision in your insurance policy to claim expenses related to the donor as well. "As per Irda regulations, the coverage offered during organ donation in all health policies now include treatment undertaken by the organ donor to the insured person. The treatment costs cover the expenses in surgery and harvesting the organ," says Antony Jacob. "However, the coverage does not include screening charges." 
ATTENDANT ALLOWANCE 
For adults looking after an insured child at a hospital, some policies promise a fixed allowance. "If a child aged 12 years or less is hospitalised, a daily cash amount for one accompanying adult for each day after the third day of hospitalisation is included in health insurance policies," adds Jacob. The specific parameters could vary as per the insurer and the product. For instance, Oriental General Insurance's health plan offers . 500 for each day of hospitalisation, which will be paid for a maximum of 10 days per illness. 
LUMP SUM FOR CRITICAL ILLNESSES 
Typically, all policies cover expensive procedures like dialysis and chemotherapy. However, certain products offer a higher sum insured limit for certain critical illness. For instance, L&T Insurance's health policy offers double the sum insured for treatment of these serious ailments. Then, there are others that hand out a pre-defined amount once such illnesses are diagnosed – much like a critical illness cover, just that you need not buy a separate one for the purpose. Certain high-end plans also provide a lump sum as survival benefit 180-270 days after discharge.. 
preeti.kulkarni@timesgroup.com 

LOST COVER Life insurers lose clout in mkt Investment In Stocks Drops In Absence Of Equity-Linked Plans

Mumbai: Investments in shares by the life insurance industry in FY12 has dropped to Rs 26,000 crore from its peak level of over Rs 65,000 crore in FY10. This is a sharp reversal for an industry which was two years back seen as a potential domestic counterweight to foreign institutional investors, thereby reducing volatility in the markets. 

    Industry officials blame changes in regulation that have caused a sharp drop in sales of equity-linked products in life insurance and pensions. As a result, the equity portfolio of life companies in FY12 has shrunk from Rs 5,07,432 crore to Rs 4,73,855 crore. The decline takes into account drop in equity prices with the sensex falling from 19,339 to 17,404. 
    "One reason for the drop in equity investments is that sales of unit-linked insurance plans have dropped for both – private companies and Life Insurance Corporation (LIC). Besides for some companies policies sold in the earlier years are either maturing or being surrendered which also impacts new investments," said Prashant Sharma, chief investment officer, Max Life Insurance. 
    This is also bad news for the government's disinvestment plans where life companies – particularly Life Insurance Corporation – have played a big role. Without Ulips to bring money into equity markets, LIC's incremental investments will have to come from premium collected under traditional plans where less than 10% of the premium is invested in stocks. 
    According to S B Mathur, chief executive of the Life Insurance Council, which released the data compiled from life insurers, the industry has been making a case for encouraging equity investments through pension schemes. "Even low-end government employees can opt for their retirement funds to be invested in equity under the National Pension Scheme. Considering that average premium under pension plans were in the region of Rs 35,000 to Rs 40,000 annually and since this is a voluntary investment, equity should be an option," said Mathur. Since last year insurers have not been able to launch market-linked pension plans because new regulations require insurers to provide guaranteed returns under pension schemes. 
    The new regulations were a setback for insurers who have making a strong pitch for unit-linked insurance plans to be considered a tool for channelizing retail investments into stock markets. Their argument was that unlike mutual funds, which came under pressure to sell assets at distress prices whenever markets tanked because of redemptions, life companies faced no such pressure. They could, therefore, buy shares when FIIs are selling them.

INSURANCE Review RELIANCE SUPER FIVE PLUS

'Double-death' Benefit, but Cover Comes at a High Cost

Product Details 
Reliance Super Five Plus is an endowment plan with a limited premium-paying term. While the policyholder can choose a policy term from 10 to 40 years, the premium-paying term will always be five years less than the policy term. 
Additional Features 
The scheme pays the sum assured to the policyholder at the end of the premium-paying term, which is five years less than the policy term. 
As the policy stays in force, in the event of the death of the policyholder before the policy term is completed, the sum assured shall be paid to the nominee despite fact that the same has already been paid to the policyholder at the end of the premiumpaying term. 
However, in the event of the death of the policyholder during the premium-paying term, the sum assured shall be paid just once, to the nominee and the policy shall terminate. 
    Our View 
Notwithstanding the fact that Reliance Super Five Plus has a limited premium-paying mandate, the premiums charged by the scheme are too high to generate any sort of healthy returns for the policyholder at the end of the premium-paying term. The only interesting aspect about this scheme is that the death cover continues even after the premium-paying term and that the nominee is entitled to the entire amount of sum assured once again despite the same having been paid to the policyholder earlier. 
There is thus an inbuilt double-death benefit, which can be termed as the only unique selling point of this scheme. 
Policy At A Glance 
Assuming a policy term of 40 years where the premium paying term is 35 years, the premium payable and the corresponding returns that will accrue to a healthy male policyholder currently aged 30 years are illustrated herewith…

Health Insurance Policy Clauses You Shouldn’t Overlook

Preeti Kulkarni tells you to read the terms included in policy documents before purchase or renewal to avoid disputes later     Have you gone through your health policy document? Ask this question to an average insurance policyholder and the answer is likely to be in the negative, especially if they have never made a claim. In fact, mosthealth insurance policyholders refer to their policy wordings only when their claim is rejected. Even the language used by insurers is complex and riddled with legalese.  To reduce the confusion, the Insurance Regulatory and Development Authority (Irda) has recently proposed a one-page "Customer Information Sheet" which will explain terms and conditions in a simple manner. In addition, Irda has indicated that it will come up with a standard list of exclusions to be followed by all insurers.  But don't use any excuses. It is in your interest to scrutinise your policy features at the time of purchase and renewal, as it would help you prevent many unpleasant disputes in future.  "Often, insurance-buyers do not read the clauses at all. They should make efforts to read the policy documents before signing up for the policy," says Joydeep Roy, CEO, L&T Insurance. If not the entire document, make it a point to read at least these clauses carefully:  EXCLUSIONS  Irda is encouraging a uniform set of exclusions to be adopted by all insurers. However, as of now, each company has a separate list of expenses that it does not pay for. Typically, these exclusions include dental treatment, preventive healthcare check-ups, diagnostic tests (if they do not result in treatment), post-treatment tonics, tools like wheel-chairs and so on. Then, there are certain conditions that may not be covered in the initial 1-2-year period. For instance, cataract and piles in the first year. Cosmetic surgery, too, is not admissible unless required for medical reasons.  SUB-LIMITS  While some new-age health insurers are doing away with sub-limits, most policies do prescribe internal limits on room rent, surgeons' fees, operation theatre charges, among other things. Remember, the implications of these caps are far deeper — insurers also reduce associated charges proportionately, as tariffs are linked to the type of room chosen.  REASONABILITY  You many not know this, but many insurance policies state that only reasonable and necessary expenses will be eligible for a claim. That is, if your hospital has charged you . 1 lakh for a surgery which ordinarily costs . 50,000, the insurer will approve the lower amount. "By invoking this clause, the insurance company can question high/inflated costs billed by the providers," says V Jagannathan, chairman and managing director, Star Health & Allied Insurance.  CLAIM LOADING  Many policies contain this clause, which increases your premium — at times up to 200% of your current premium — after you make a claim. Again, the pre-disclosed loading policy varies from insurer to insurer. That is why it merits a close scrutiny at the time of buying a health product. "It can have a direct impact on your long-term planning for premiums. Since certain products have punitive claim loading rates of up to 200%, it is an important condition customers should be aware of while buying the product," says Mahavir Chopra, head, e-business, medimanage.com, a health insurance advisory firm. If Irda's proposals are finalised, companies will be able to impose the pre-determined loading only if your claims in each of three consecutive years (except the previous one) exceed 500% of the premium paid.  RENEWABILITY  Manysenior citizens complain that renewal requests are turned down on the basis of their age. Remember, you can take your insurer to court for such refusals. They cannot reject renewal proposals on any ground other than fraud, misrepresentation and moral hazard. Since regulations prohibit changing the existing terms, it is more likely that you will be sold a new product. It's best to scrutinise the features before consenting to the renewal contract.  WAITING PERIOD  Expenses incurred on treatment of pre-existing diseases are usually covered after a period of one to four years, depending on the illness, product and insurer. This time-frame is known as waiting period, which makes it difficult for policyholders to switch insurers at will. However, thanks tohealth insurance portability, you need not serve the waiting period all over again if you transfer your policy to another insurer. For instance, say your two-year-old policy stipulates a waiting period of four years and even the new policy specifies the same waiting period. Now, if you decide to switch to the latter, your waiting period will only be two years.  CO-PAY RATIO  If your policy contains a co-pay provision, it means your expenses will not be borne by the company fully. For instance, if your co-pay ratio is 10%, you will have to pay . 10 from your pocket for every . 100 claimed. The clause could come into play for particular age groups or illnesses, treatment at non-network hospitals and so on.  CONTRIBUTION  So far, insurers are jointly responsible for disbursing claims of policyholders with multiple policies in the ratio of the sum insured. Now, however, Irda's draft guidelines seek to let the policyholder identify the insurer who would pay out the claim. Thus, the policyholder will be able to make optimum use of her covers, avoiding claim loading and loss of cumulative bonus at the same time.  In addition, customers should also go through the clauses related to service guarantees and claim service assurances. For instance, find out whether or not the company is giving a written undertaking on settling claims on time," says Roy.

INSURANCE Review ING LIFE SECURED INCOME INSURANCE PLUS

Double Death Benefit a Plus; Maturity Gains Mediocre Product Details  ING Life Secured Income Insurance Plus is a limited period endowment plan with investors having the option to choose a premium paying term of 5, 7 or 10 years. Similarly, they can choose a policy term of 10 to 20 years and 25 or 30 years. The maximum amount of sum assured that an investor can opt for under this plan is restricted to 50 lakh.  Key Features  The scheme provides for a maturity benefit of 110% of the sum assured at the end of the policy term to the policyholder. In the event of the death of the policyholder before the end of the policy term, the nominee is entitled to double death benefit — partly paid as lump sum on the death of the policyholder and partly as monthly income over a period of 5 years, starting immediately after the death of the policyholder.  Policy At A Glance  We have the assumed the age of the policyholder at the time of taking this policy as 30 years, the policy term to be 30 years and the premium paying term as 10 years. The premiums payable for various amounts of sum assured and the corresponding maturity and death benefits that will accrue to the policyholder are illustrated herewith…      Our View  If one were to consider the investment aspect of ING Life Secured Income Insurance Plus, the scheme is akin to other endowment schemes with mediocre gains to the investor at the end of the policy term.  However, this scheme scores with the feature of double death benefit payable to the nominee in the event of death of the policyholder during the policy term.  Investors may do well to note that if, at the time of death, the age of the policyholder is less than 18 years, the total death benefit payable to the nominee is 200% of sum assured as a lump sum.  For policyholders older than 18 years of age, the death benefit payable to the nominee is 220% — 100% payable as lump sum and the balance 120% payable in equal monthly installments for 5 years or 60 months.