Ways2Insurance

5 mistakes to avoid while buying online insurance

2012-01-29T17:17:00.001-08:00

Online plans offer convenience, but since you are your own agent, find out how to be responsible too.

Of late, online insurance plans have gained popularity, spurring investors to use the medium for various reasons—low premium, convenience, absence of agents. Despite this, there is widespread scepticism about purchasing policies online. If you too have doubts, consider the following points and ensure that your online ride is smooth and not rendered bumpy by ignorance. 1 Submitting incorrect information in form

Just because there's no agent to oversee the filling up of the form, do not submit incorrect information. The insurance company can reject a claim if it discovers that certain key facts are wrong or have been deliberately hidden by the policyholder. The main objective of the policy would go up in thin air if a claim is rejected. If a close relative has suffered from any of the specified ailments (diabetes, heart problem, hypertension), say so in the form. If you are a heavy smoker, don't categorise yourself as a casual smoker. This would be tantamount to suppression of a key fact. Keep in mind that the nicotine levels can show up in your blood tests. "Also, medical tests vary widely from company to company. Some may be lenient, while others could be very strict. It is important that you disclose the facts because later your dependants will have a tough time handling the claim. As it is an online policy, they won't have any agent to argue their case," says Jayant Pai, vicepresident, Parag Parikh Financial Advisory Services. How you can avoid it: Obtain all information about your family's medical history before you fill up the form. Disclose all facts about your social habits and lifestyle. 2 Not comparing all the available options
Unlike other, more complex and sophisticated insurance products, a term plan is a commodity. By and large, its features do not vary across insurers and it all boils down to the lowest premium. However, zeroing in on the cheapest plan is possible only if you have done adequate window shopping and compared the premiums of all the 8-9 companies that offer online term plans. Some buyers believe that a certain company with a higher claims ratio is a better option, but this may not be true. "Comparing term plans is not difficult as most policies have the same features, but it becomes difficult with health policies, as you need to dig out more information, such as hospital network and exclusion clauses," says Deepak Yohannan, CEO, MyInsuranceClub.com. How you can avoid it:Evaluate and compare plans before you buy. Use an aggregator site to go through the premiums of other plans. 3 Buying too big a cover for too long a term
Ironically, the biggest advantage of online policies may also prove to be a drawback. The low premium may entice you into taking a cover that is bigger than what you need. "Do not buy a big cover just because the premium is low. Do so only if you need it," says Gopal Kumar, principal consultant, Allons Insurance Research. You may need a 1 crore cover that costs 12,500 a year, but since a 2 crore cover can be bought for an additional payment of 5,000, you jump at the offer. "It may seem like a good deal, but if you do not require that much insurance, you are actually wasting 5,000," explains Pai.
The other problem is that you may take a cover for a tenure that extends well after you stop earning. Some companies offer covers till the age of 75. However, there is no compulsion to pick one that lasts longer than your earning years. How to avoid it: Though low premium may seem attractive, it should not be the guiding factor while buying a policy. Once you decide that you need a certain level of cover, look for the options that are available online as well as offline. Depending on your affordability, choose plans that offer suitable premiums. "Assess your need and assetliability situation while buying insurance," says Kumar. 4 Opting for too short a tenure or low insurance cover
The flip side of the above mistake is taking too small a cover or doing so for too short a term. A life cover of 50 lakh might seem enough right now, but even 6% nominal inflation will reduce its value to about 28 lakh in 10 years. Buy a cover that is big enough to take inflation into account. The bigger mistake is buying a cover for a short tenure. A policy that ends when you are in your 40s is a big waste of money. You are effectively insuring yourself during the low-risk years, but when the risks and liabilities are at a peak, you are without cover. Buying a fresh cover at that age will cost a bomb. What's more, you could be denied insurance if you have developed a medical condition. How to avoid it: Buy a cover that continues till the time you are 60-65 years old. Also, make sure that you calculate your insurance needs carefully before deciding on the insurance amount. Take into account inflation as well as your other expenses and outstanding loans. Sanjay Tiwari, vice-president, strategy & product, HDFC Life, suggests the use of insurance calculators. These are easily available on the websites of companies and tell you how much insurance you need depending on your income and other factors, such as age. 5
remind you about paying the premium in subsequent years, the onus of paying on time lies on you. If you miss the due date as well as the grace period for making the payment, the policy will lapse and
Not setting up reminders for premiums
With no agent to
you will have to buy it afresh. Yes, there is a 15-30-day grace period for paying the premium, but this is only for renewing the policy, not for continuing the cover. In other words, if the premium is not paid and something happens to the policyholder, the company will reject the claim saying that the policy has lapsed. How to avoid it: The best way to avoid missing the due date to pay premium is to give an ECS mandate to your bank for doing so. In this manner, you can ensure that your precious life insurance cover does not blow away just because you didn't pay the premium. Even if you forget, your bank won't. This also means that you will have to ensure there is enough money in your bank account when the ECS payment is due. You can also set reminders for the premium payment.
Online policies are meant for buyers who understand the need for insurance and know which product they want to buy. One should opt for an online policy only if one is willing to take the trouble of doing the agent's job himself. From submitting the form to paying the premium and rectifying errors, it is your responsibility and you should know how to fulfil it.

INSURANCE Review KOTAK ASSURED INCOME PLAN Assured Income for Life, Limited Cover for Death

2012-01-29T17:12:00.000-08:00

Product Details
Kotak Assured Income is a 30-year savings cum protection plan, with a premium paying term of 15 years. As the name suggests, this plan guarantees payment of an annual income to the policyholder starting from the end of the 10th year until maturity, ie, for a period of 20 years. Apart from this guaranteed annual income, the plan will also pay a lumpsum amount on maturity that will be 104-110% of the basic sum assured
Key Features
The annual tax-free income guaranteed by this plan ranges from about 9.1% to 10.10% per annum of the sum assured, depending upon the amount of annual premium paid by the policyholder. The sum assured (insurance cover) under this plan is 10 times the annual premium. Investors should, however, note that the assured income is payable annually only to the policyholder and not to the nominee.
Returns ANALYSIS
Kotak Assured Income gives the policyholder the dual benefits of guaranteed annual returns and a lumpsum payment on maturity. This maturity benefit is determined by the age at entry as (110% - 0.1% × Age at Entry) × Sum Assured. Thus for an individual aged 30 years, the maturity benefit will be 107% × Sum Assured. Assuming 30 years as entry age, the returns that will accrue to an individual under this scheme are illustrated below.
Our View
The guaranteed annual income payable under the Kotak Assured Income Plan is definitely impressive and so is the maturity benefit, which is a percentage higher than the basic sum assured. In fact, after the 10th policy year, the annual assured income broadly compensates for the premium outgo. If one were to assess the total cumulative returns under this plan, they range from 91% to 108% (absolute gains over 30 years) depending upon the entry age and premium payable by the policyholder. A downside to the scheme, however, is that the annual assured income accrues only to the policyholder and not to the nominee. The nominee is entitled only to the basic sum assured, which is 10 times the annual premium, in the event of policyholder's death before maturity. Kotak Assured Income is thus an impressive savings plan, suitable for those who do not have major medical complications. Those seeking healthy insurance cover should rather opt for a term plan. W i t h t h i s p l a n, h o w e v e r,i t p a y s t o l i v e l o n g e r !

BETTER DEAL Portability drives health cover innovation

2012-01-04T19:41:00.001-08:00

Mumbai: Health insurance market has become competitive following the introduction of portability which allows customers to switch companies without losing their "no-claim" benefits. Although prices have not come down, companies are offering better features.
    The latest is a health policy by Apollo Munich where the sum insured is reinstated in full after a claim. Under the health plan "Optima Restore", if the policyholder uses up the sum insured for any ailment, the sum insured will continue to be available for any new ailment.
    Earlier in October, L&T General Insurance had launched a new plan that reinstated the sum insured if the policyholder had an accident. Apollo Munich has extended the reinstatement for all ailments and is also offering the feature on a family floater plan. Family floater plans are covers where the same sum insured is available for all members. Under "Optima Restore" even if a family member uses up the sum insured the cover is once again reinstated after the claim. Also for those who do not claim, the sum insured will double in two years under a multiplier scheme. Other insurers such as Bajaj Allianz General Insurance are using direct marketing to sell policies through the internet.
    Until now, it was largely property covers like fire insurance that had a reinstatement clause. This allowed for the sum insured to be restored and the cover to continue for the rest of the year for any subsequent claim. According to Antony Jacob, CEO, Apollo Munich Health, despite the additional benefits the price has been kept competitive compared to plans of companies that do not the reinstatement option. He said the company every month sees around 1,000 policyholders from other companies choosing to shift to Apollo Munich.
    Besides the introduction of portability, innovation in health insurance is being driven by monoline companies like Apollo Munich that specialize only inhealth insurance. Other specialist companies include Star Health and Allied Insurance and Max Bupa Health. More recently, Cigna has entered into a tie-up with TTK Group to provide health insurance in India.

IRDA wants lifelong renewal for health covers

2012-01-04T19:39:00.001-08:00

Mumbai: The insurance regulator has told insurance companies that when they design new health plans there should not be a maximum age for existing policyholders. Companies will continue to have the freedom to set an age limit for entry — that is for buying the policy for the first time. But once they have issued apolicy, they will be obliged to continue renewing it during the life time of the policyholder.
    Most health plans in the past have had a maximum age limit. The plans that were introduced earlier with a maximum age limit will continue to be sold as the pricing was based on the earlier design.
    "Our health policies were life long renewable even without the regulator insisting on this feature," said Antony Jacob, CEO, Apollo Munich Health Insurance. Insurance officials said that lifelong renewal would require a re-look at pricing because their claims experience at the higher age bracket of 85 and above was more than 100%.
    Secondly, health insurance penetration has picked up only in recent years and insurance companies do not have enough experience of morbidity at higher age groups. According to Jacob, unlike life insurance it is not possible to have flat premium rate over the years because the cost of treatment keeps rising because of medical inflation. TNN

Can you rely on your policy?

2011-12-12T03:29:00.000-08:00

ACCORDING to the Irda, of the 7.62 lakh life insurance claims filed in 2009-10, nearly 15,000 were rejected by insurers. This means 15,000 families were denied the money that policyholders had thought would reach them if they died. Though the 2010-11 figures are still being compiled by Irda, unaudited data individually sourced from insurance companies shows that roughly 16,000 insurance claims ended up in the rejection bin last year. The rejection ratio of some companies, especially those that started operations a few years ago, is alarmingly high. Aegon Religare rejected 45% of the claims. Future Generali, IDBI Federal and DLF Pramerica turned down one of every fifth claim that was raised. In comparison, the LIC has a rejection ratio of just 1.1%.

Does this mean buyers should stick to older, established insurance companies and steer clear of the newer players? Not really. Claim settlement statistics should not be seen in isolation. Most of the claims received by the new companies are early death claims, where the policyholder died within two years of buying the cover. "An early claim is a warning as this could be a deliberate attempt to defraud," says Yateesh Srivastava, chief marketing officer, Aegon Religare. In suchcases, insurers investigate the cause of death in great detail, which could take up to six months.
Early claims are not a problem because if everything is found to be in order after the scrutiny, the company will pay the insured sum even though it might reach the nominee late. The bigger problem is rejection of claims because the insurance company believes that pertinent facts were deliberately suppressed by the policyholder at the time of buying the cover. The villain is often the insurance agent, who filled up the form on behalf of the buyer. Don't think the agent is doing you a favour if he deliberately overlooks any health problem. He's doing so only to sell the policy and will not be around to help when the claim gets rejected.
WHAT YOU SHOULD DO Don't rely on the agent: Fill up the application form yourself. If you can't, go through the form after the agent has filled it. Retain a photocopy. Don't hide your health condition: Do not withold any information relating to your health and family medical history. Incorrect information is the most common reason for rejection. Don't avoid medical tests: A rigorous medical test actually helps the buyer. It rules out the chances of the claim being denied on account of pre-existing diseases. Give correct information:Be completely honest about your age, occupation, income and other insurance cover. Crosscheck the policy: After the plan is issued, check the policy document and notify the insurance company if there is any inaccuracy.
Why claims are REJECTED
Early death
If death occurs within two years of buying the policy, the insurer will probe the case closely. This can take up to six months.
Non-disclosure of health condition
If insurer believes the policyholder deliberately hid his condition, claim can be rejected.
Non-divulgence of family medical history
If close relatives suffer from a disease but it's not mentioned in form, the claim may be turned down.
Details of hazardous occupation
Certain jobs carry a high risk. If the policyholder has not correctly stated his occupation, the claim can be refused.
Over-insurance
One must declare income and other insurance plans. Taking a high cover and not mentioning other plans arouses suspicion. — ETW, May 9, 2011

T H E B E ST OF INSURANCE BIGGER LIFE COVER, LOWER PRICE

2011-12-12T03:28:00.000-08:00

It's more important than buying the right stock or investing in the best mutual fund. And it's more useful than any other investment in your portfolio. Yet, many Indians continue to buy insurance for the wrong reasons. Insurance is the lynchpin that keeps your financial plan steady even if unforeseen events threaten to derail it. This is why ET Wealth covered life and general insurance in detail, telling readers about the benefits of taking cover against risk, guiding them on the best ways to insure themselves and cautioning them against mis-selling by unscrupulous agents. Advice on life insurance would have been incomplete without talking about eschewing unsuitable policies or ensuring that a claim is not rejected. We also tracked the changes in the health insurance landscape as also the possible impact of portability.

    It's that time of the year when showrooms try to get rid of merchandise that may not find buyers till next year. So, something far more precious than off-season apparel and household appliances is being sold at unbelievably low prices. Term plans, which are seldom pushed by agents, but are arguably the best form of insurance, are being sold at premiums 40-50% lower than those offered 1-2 years ago.
    Much of this has to do with the growing competition in insurance. Some of the newer players, desperate to get a toehold in the market, are offering lower premium rates to attract customers. They are encouraged, in part, by the improving life expectancy figures in the country. The average Indian now lives for almost 65 years, compared to about 55 years in the 1980s and 58 years in the 1990s.
    There is more good news. Online term plans, where a customer buys the policy directly from the company, are up to 35% cheaper. By removing the intermediary between the customer and the company, the Internet has helped bring down the price of the cover. Says Madhivanan B, executive director, ICICI Prudential Life Insurance: "The online channel lowers the costs of processing and servicing, which we pass on to customers."
    Online term plans have become a huge hit with buyers. Every 18 minutes, an online term plan is bought in the country. In the past six months, the seven life insurance companies that offer such term plans have issued more than 14,500 policies with a combined cover of roughly 9,100 crore. This is almost equal to the total cover offered by all new policies sold by the newest five life insurance companies (Star Union Dai-ichi, Shriram Life, IndiaFirst, DLF Pramerica and Sahara Life) in 2010-11.
    The large cover offered by online plans is good news for an underinsured country like India. The average life insurance policy - issued in 2010-11 offered a cover of 1.93 lakh.
    — ETW, December 20, 2010

CHOOSE THE RIGHT INSURANCE

2011-11-14T02:42:00.000-08:00

Every insurance policy is designed to meet a specific need. Find out the policies that will suit you at different stages of life

The phone rings. It's a wealth manager with an offer of a triple benefit investment plan. You can save tax, grow wealth and even enjoy life cover. The best part is that the plan guarantees the highest NAV achieved during the next seven years. Even if the markets fall in later years, you get the historical high rate.
    Before you latch on to this golden opportunity, ask yourself three questions.
Do you need life insurance?
How much cover do you need? Finally, does the plan fulfill your financial requirements?
    Your answers could help you take a better decision on what experts say is the lynchpin of any financial plan.
    Buying life insurance is a national pastime in India. After bank deposits, it is the most favoured destination for household savings, accounting for almost 25% of the wealth of small investors. Noidabased software professional Gaurav Tiwari has bought 12 endowment plans in the past nine years.
    Much as Indians love to buy life insurance, they are not buying the cover they really need. Tiwari's dirty dozen gobbles up 71,000 in premium every year, but offers a cover of 14.4 lakh. This is very low, given that he has outstanding home loans of 11 lakh. But it is better than the national average of about 1.16 lakh per policy sold till now. The figure is improving but has a long way to go. The average life insurance cover of policies sold in 2010-11 was 1.93 lakh. "Investors need to strike a balance between the risk cover and investment in their insurance portfolios. Most of the time, there is a skew towards investment, while insurance gets neglected," says Deepak Sood, CEO and managing director of Future Generali Life Insurance.
    At the root of the problem is the advice given to the investor by the insurance agent. Till a little over a year ago, Ulips were being peddled as the best investment you could ever make. But after the new guidelines issued by Irda in September 2010, agents have started pushing traditional policies. A distributor earns 30-40% commission from selling a traditional policy compared with 8-12% from a Ulip.
The essential covers
The basic purpose of insurance is to serve as hedge against risks. Therefore, pure protection plans should be the foundation of your insurance portfolio. A term plan, for instance, is your protection against the risk of early death. It provides the family of the policyholder with a corpus that can replace his income. Experts say that a term plan should be an individual's first life insurance policy. "It is even more important than a bank account," says T.R. Ramachandran, managing director and CEO of Aviva Life Insurance.
    The earlier you buy a term insurance plan, the better it is for you. At a young age, when your health is in fine fettle, the premium is unbelievably low. At 25, a man will pay about 7,500 a year for a cover of 1 crore for 35 years. As he grows older, the premium shoots up exponentially (see charts). If he buys the same cover 10 years later for 25 years, the premium is higher by 50%. Within the next 5 years, it will shoot up by another 50%.
    A term plan alone isn't enough to cover the basic risks that life throws at us everyday. You also need a medical cover to guard against high expenses due to an illness or injury.Health insurance is perhaps more important than even term insurance because the chances of someone in the family requiring medical care is higher than a person dying. Also, while the term plan covers only the breadwinner, the medical policy covers the entire family.
    It helps if you have medical insurance from your employer, especially if you are well-settled in your job. If you intend to switch jobs, you may need to buy a medical insurance plan on your own so that there is no break in the cover when you change jobs.
Covering against disability
The roads are full of idiots. Unfortunately, even the best tyres can't avert accidents. According to the World Health Organisation, India is the road accident capital of the world. The National Crime Records Bureau statistics show that every three minutes, an Indian dies in a road mishap. An equal number of people is grievously injured. An accident can leave a person bed-ridden for months. Worse, he may be disabled for life. Why only extreme road mishaps? You can get hurt even at home—miss a stair, slip in the bathroom, trip in the garden. Are you covered against the income loss due to a disability even if it is partial or temporary?
    A personal accident and disability cover is inexpensive but very critical. You can choose the extent of the cover you want. While the basic policy will cover death due to accident, you can enhance the scope of the policy to include permanent disability or even a temporary one. The wider the cover, the higher it costs (see table). Incidentally, the cover comes bundled with a comprehensive home insurance policy.
    The size of the cover depends on your income. The New India Assurance Company, for instance, restricts the cover to 72 months' income. Also, the disability must result in loss of income. If you break your leg and proceed on paid sick leave from office, you can't make a claim.

Centre mulling universal health insurance scheme

2011-10-24T21:43:00.001-07:00

New Delhi: India may get a universal health insurance scheme, to be partially funded by the government, which would allow those registered under it to avail healthcare facilities in both public sector and privately-run hospitals.

    According to Montek Singh Ahluwalia, deputy chairman of the Planning Commission, such a scheme could be developed on the lines of Rashtriya Swasthya Bima Yojna (RSBY), which is restricted to the poor and for select groups.
    "Having a universal health insurance to cover all citizens is one of the ideas the government is working on. The modalities are being discussed," said Ahluwalia. He was addressing the India Heart Conclave, recently organized by The Times of India in association with Abott Vascular in New Delhi.
    Ahluwalia said the expenditure on health is likely to be increased to 2-3% of the GDP in the 12th Five Year Plan to fund various schemes and speed up infrastructure development. At present, public spending on health is less than 1% of the GDP, which is among the lowest in the world. He stressed the need for public-private partnership (PPP) to augment affordable healthcare.
    Delhi health minister A K Walia, Cardiological Society of India president-elect Dr Ashok Seth, chief cardiologist and chairman of Medanta Medicity Dr Naresh Trehan, cardiologist Dr KK Aggarwal, Fortis Healthcare MD Shivender Mohan Singh were among those who attended the heart conclave to deliberate on necessary actions to tackle cardiological disorders that are growing to epidemic proportions.
    "In Delhi, 7-8% of the urban population is suffering from cardiac disease. We are opening more super-specialty hospitals to tackle the increased burden," said Walia.

A Non-life Plan is the Best for Accident Cover

2011-10-18T21:59:00.001-07:00

Life cos give a limited protection. General insurers offer higher cover, health benefits with an accident plan

Shopping for an accident cover is not an easy task. Most individuals, faced with several plans and too many optional covers, find it difficult to zero in on a cover that would be ideal for them. Add to that the confusion about accident covers from life insurance companies and non-life insurers, and most people are ready to call it quits.

According to experts, the problem can be tackled if individuals spare a little time to understand what they really need from an accident policy and what the policy really offers.
"In case of an accident, an individual may be exposed to three important risks – loss of income, loss of health and loss of asset. Your insurance policy should take care of these losses," says Sumeet Vaid, founder and CEO, fFreedom Financial.
Here is a scenario to bring home the point quickly: say an individual meete with an accident while driving a car and is hospitalised for a couple of weeks. Naturally, it means loss of income and spending money on the treatment of injuries. Then, of course, the car may need repairs. The motor insurance policy will take care of the car. And the individual's accident cover should take care of treatment as well loss of income. So, now, get into your car and start shopping for the cover.
COVERS WITH LIFE POLICY
"Under the current regulatory framework, life insurance companies cannot sell accident cover as a standalone policy. But they offer it as a rider with the life insurance policy at a nominal cost, making it easier to purchase," says Aneesh Khanna, senior vicepresident – head, marketing and product management, IDBI Federal Life Insurance Company. However, the stipulation that the premium payable for riders other than health insurance benefits cannot exceed 30% of the premium payable towards the basic sum assured limits the amount of accident insurance you can buy. Consider the example of an individual with a life insurance cover of . 1 crore and an accidental death cover of . 20 lakh. If the person meets with an accident and dies, his survivors will get . 1.2 crore as death benefit. The biggest drawback, as you can see, is if you live to tell the tale of the accident, you will not get any money for hospitalisation expenses or to compensate you for your loss of income.
GENERAL INSURANCE – GROUP
POLICIES
Most individuals get to know about personal accident insurance for the first time when their employer offers it to them as an additional benefit. Many companies, banks and credit card companies are increasingly buying group personal accident insurance from insurers these days.
"Buyers can pick and choose the benefits and link them to variables such as annual salary or credit limit on the credit card," says Sanjay Radhakrishnan, zonal vice-president, west, Bharti Axa General Insurance Company.
For example, a bank may give a personal accident insurance to all its credit card holders or bank account holders. Sometimes it is a fixed sum payable on the death of the credit card holder and sometimes it can be variable, say three times the credit card limit. In some cases, it is an optional benefit available to customers of the bank, and customers can buy it by paying a premium.
"Group personal accident insurance plans are customised as per the needs of buyers – employers or banks — and not as per the needs of the covered – that is you. The terms and conditions that govern the policies are also not communicated in detail to the insured person in many cases," points out Sumeet Vaid.
INDIVIDUAL PLANS FROM NON-LIFE INSURERS
There are many options that cater to your specific needs. It starts with a basic cover that offers a fixed sum if the insured person dies in an accident. It also offers money if the insured loses limbs. For example, if the insured loses a hand, he/she is entitled to get 50% of the sum assured. The comprehensive insurance package also covers temporary total disability, pays for broken bones, allows modification of house, etc (see table). A word of caution, though. There are no standardised solutions here. Each company will have different benefits and different definition of each cover. It is essential to read through the policy wordings to understand it better.
HOW TO CHOOSE
As you can see, accident cover benefit with a life insurance plan can't be your total solution to problems arising from an accident. "Life insurance companies offer limited sum assured for an accident cover as an additional benefit with the life cover. But general insurance companies offer far higher cover with many health-related benefits in a single policy," says Sumeet Vaid.
Also, it is always better for you to buy an individual cover even if you have a group cover from your employer. An individual plan would rescue you if you meet with an accident when you are in between jobs. Your group cover will be over the moment you leave the organisation. And you will get the benefit of the group cover offered by your new employer only after you join the new company. There is also another compelling reason to go for an individual cover separately. "Being a benefit policy, even if you have two covers – the first, a group cover, and the second, an individual cover – both personal accident insurance policies will pay in case of an unfortunate event," says Sanjay Radhakrishnan.
As you can see, your decision should solely depend on your needs. For example, a young employed executive who typically takes public transport may want to buy a cover that pays in case of a terrorist attack and offers double the sum assured in case of an accidental death while travelling in a public transport. A salesman, who has to travel a lot, may want to buy comprehensive cover as he is exposed to higher risks. "You may choose to purchase additional benefits such as hospital bills' reimbursement arising out of an accident and hospital cash benefit," says Sanjay Radhakrishnan. These can be looked as supplementary covers, when you are young and have a small sum assured under your medical insurance policy.
TOMORROW Factors You Need to Look Into While Choosing a Home Loan

In insurance, moment of truth comes at the time of settling claims

2011-09-22T21:53:00.001-07:00

BHARGAV DASGUPTA MD | ICICI Lombard

Career | Began with erstwhile ICICI in 1992; has held key leadership positions in diverse business areas; set up ICICI Bank's international ops; took over his current role in May 2009
Achievements | Made ICICI Lombard a key player in govt's universal health insurance programme
    The general
insurance
business
m ay b e
rocky but
it's alsoon a roll.Even after 10 years, few companies are making money
in itbutthathasn'tstopped
the industry from growing
at a very he a lth 30%.Not bad
since most sectors are currently facing a slowdown. Despite that growth, the general or non-life business is only a tenth of the life insurance industry. Also,unlikelife,it never got good valuations because it was felt that you could only lose money in a business where the biggestd r i v e r s —he a lth and motor—were still unprofitable.
    So when we met up with the ICICI Lombard head honcho Bhargav Dasgupta, referred to as BDG, the comparisons were bound to capture a good part of the initial conversation. In keeping with ICICI group's philosophy, the current size of the industry is never seen as a constraint, and so naturally Dasgupta is quite gung-ho about his business.Theoptimism perhaps is also driven in equal measure by its position as the market leader – it's the largest non-life and he a lth insurer. With he a lth insurance portability around the corner, it is well placed to draw customers from PSU insurers,butDasgupta is non-committal abouthisstrategy.Hedoes talk about another strategy though. He is not that focused on increasing topline or increasing profits as he is on growing the industry itself. Besides, he also feels that by bargaining down prices with healthcare providers, thehe a lth insurance business can become profitable.
    Dasgupta, a sports enthusiast (plays tennis to keep fit), opens up quickly enough, much like the open-space architecture of his newly purchased office in CentralMumbai'sPrabhadevi—now the company's headquarters.Butitcouldbe a bittooopen for some people as we notice executives facing job interviews and prying eyes within that architectural theme.
    The 45-year-old banker, who has been with the ICICI group from the start, suggests that the non-life industry is still in its early stages. "Although the industry was opened up 10 years ago, liberalization happened only three years back when companies were granted the freedom to design and price products. This has resulted in competition and innovation," he says. He forecasts a 20% growth for the Rs 40,000-crore non-life industry.
But is the business feeling the slowdown heat? He replies in the affirmative and describes how he got to see it coming much before it became a reality when the engineering insurance slowed down—a sign that new projects were not taking off. Slowdown in car sales could also be a bit of a dampener, but he also feels that it's unlikely that people are going to take less he a lth insurance. His theory being people seldom ignore education of their children and the family he a lth.
An optimist, he feels insurance will gain popularity when customers see companies paying on time. "The moment of truthiswhen itcomestoclaims," he says. Dasgupta is a big believer in universal he a lth insurance where he sees technology as a tool to provide cover to the poor. As part of that belief, ICICI Lombard has come up with a portable device for issuing biometric smartcards. The device enables the company to issue group policyholders cards which not only provides a photo identity but also stores information about the policyholders. Naturally,when thebusiness revolves around service, an executive's success is also bound to be measured in terms of the difference they make to the life of a consumer. So one of Dasgupta's earliest successes came when he was heading international business in ICICI Bank where the bank managed to improve efficiency by offshoring most of its operations to India. Thisenabledthebankto provide a better return to depositors. He believes speed and accuracy of claim payment along with employeeengagementwouldbethe determinant of growth of an insurance company.

Better late than never- Plan for Health Insurance Policies for your parents, if you have not already

2011-09-13T04:44:00.000-07:00

Mediclaim policies are not a luxury anymore; it has become a necessity in today's world. With inflation more than 9% in India, middle class Indians are finding it very difficult to make both ends meet. And the cherry on the cake is the rising medical expenditure, which has increased more than 10% in the last 4 years. And now with 5% service tax on health care introduced in finance minister Pranab Mukherjee's Budget, the burden of medication and treatment will toll heavily especially on the middle class.

The average Indian spends about Rs 117-Rs 120 per month on medicines etc. It might seem to be a small amount of money to us, but for a person from the lower middle class family, this amount may become a huge burden, especially if it tends to rise. It might constitute about 20-30% of his income. Then invariably, the health care is sacrificed and proper treatment and care is not taken.

Thus, to ensure proper treatment and a healthy lifestyle, a comprehensive health policy needs to be taken. Most of us either has a health insurance policy from our company or is contemplating purchasing one. But have you thought about your parents? They are the ones who would need maximum health care and has highest chances of hospitalization. Hence caring about them is of utmost importance.

Thankfully there are some insurance companies who have thought about them and have designed special health insurance policies for the Senior Citizen.

There is National Insurance Varistha Mediclaim for Senior Citizen. This plan is a very good plan for the senior citizen from 60 to 80 years of age and it takes care of all hospitalization expenses till an extended age of 90 years. This is a specially designed plan for Senior Citizen and hence it covers for pre-existing diseases just after one year of claim free renewal. You need not wait for 3-4 years for it to be covered like in normal health insurance policies. Pre-existing diseases like Hypertension and Diabetes will be covered from the inception on payment of additional premium. There are other benefits in this plan as well like Cumulative Bonus and cost of Health Check-up is also available on claim free years. This plan also covers Critical Illnesses.

Another popular Senior Citizen Health Insurance Policy is Star Health Senior Citizen Red Carpet Plan for 60 to 69 years of age but can be continued forever. This plan also covers pre-existing diseases from the second year of operation and it also covers major surgeries and other treatments. Some diseases are however covered from second and third year of operation and there is no requirement for pre-medical tests in this plan.

There are other plans like Max Bupa Heartbeat Health Insurance Plan which can be availed for your parents as well and it has no age limit. In this plan, both your parents can be covered together under a family floater and can be taken at any time and can be continued till death. In fact, you can avail Max Bupa Heartbeat Family First Health Insurance Policy for each and every member of your family irrespective of their age under the same plan. In this plan, even your parents-in-laws can be included.

Thus, like it is never too late to plan for your house, car or umpteenth honeymoon, it is never too late to plan for your health insurance policy as well. Since health is wealth; its proper care is of extreme importance. And now, it is in your control to en sure that you take the best efforts to take care of the people who matter to you, especially since your parents have done their best to take care of your health; it's your turn to pay them back by doing your bit the best!

INDIA MEDICLAIM: Insurers must reveal non-PPN hosps

2011-09-04T21:42:00.001-07:00

Mumbai: All public sector health insurance companies will have to disclose the names of hospitals that are not part of the Preferred Provider Network (PPN)—introduced in July 2010—for cashless services and they will also have to cite the reasons for taking them off the old list.     The Central Information Commission passed such an order recently, saying under the Right to Information (RTI) Act, insurance firms will have to reveal all hospital names as people might have bought a mediclaim policy before the PPN system was introduced and going by the list provided by the insurance company at that time, they might still hope to avail of the cashless facility in places
that have since been deleted.
    Four public sector insurance firms, New Indian Assurance Company, Oriental Insurance Company, United Indian Insurance and National Insurance Company, started the Preferred Provider Network system on July 1 last year. Under it, the companies offer a fixed rate for 42 kinds of treatments covered under the cashless mediclaim policy. A hospital under PPN will have to offer treatment to a policy holder according to rates fixed by the companies. The new system was implemented to prevent over-billing by hospitals, which the insurance companies claim, was a major reason behind huge losses suffered by them on health insurance portfolio. 'It's appellant's right to know all hosp names'
Mumbai: Citing the reason behind asking public sector health insurance firms to divulge the names of hospitals which are not part of the Preferred Provider Network (PPN) for cashless services, information commissioner Deepak Sandhu said the firms' obligation could not be restricted to merely specifying the premium amount required to be collected from a policy-holder. Insurance companies, working in a non-transparent fashion, do not divulge all the facilities available to a policy holder by deleting some of the names from their old list of hospitals providing cashless facility. "But it is the appellant's right to know the names of all the hospitals available to them as well as the reason for deleting some of them from the cashless facility list," Sandhu added.
    RTI activist Chetan Kothari, whose plea brought about the order on July 27, said, "A year ago, I filed an application at the public information office of the New Indian Assurance Company's Tardeo branch, asking why hospital names were not published and the reason behind excluding certain clinics from the facility. Instead of replying, the PIO transferred my application to the first appellate authority and that too, after 30 days. The appellate authority directed the PIO to provide me with the information, but he did not conduct any hearing as prescribed under the RTI Act. Finally, when the data was given out, it was incomplete."
    Kothari than filed a second appeal before the CIC. "The public sector insurance company had not even provided names and addresses of the chief PIO and the appellate authority on the notice board in its office. Taking strong exception, the CIC ordered the firm to take corrective measures."

Ayurveda, unani under mediclaim umbrella

2011-07-25T20:28:00.000-07:00

Till some time back, health insurance policies used to cover only allopathy treatment while ayurveda, homeopathy, naturopathy and unani treatments were left out. Despite having a comprehensive heal th insurance plan in place, individuals who preferred such systems had to pay out of their own pockets.

    These policyholders can now breathe easy as some insurance firms have started including such alternative forms of treatment under their cover, especially ayurveda. "Ayurveda being the most prevalent of the alternative systems, we have designed a product to cover treatments under ayurvedic hospitalization," says S S Gopalarathnam, managing director, Cholamandalam MS General Insurance.
    While some insurers only offer it under their group policies, others have started offering the facility to individuals. PSU insurer New India Assurance and standalone health insurance provider Star Health and Allied Insurance are some of the companies that have started covering ayurvedic treatments under individual policies. ICICI Lombard General Insurance covers it under government scheme and Future Generali Insurance offers it to corporate group insurance buyers.
    "Our policies do not cover any other line of treatment other than allopathy. However, in group policies, if requested, we do offer tailor-made packages to corporate clients to cover ayurvedic treatment subject to certain conditions," explains Shreeraj Deshpande, head,health insurance, Future Generali. BOOSTER SHOT No standalone cover for alternative treatments
    Some insurance firms have started including alternative forms of treatment like ayurveda under their cover. How did this need to cover alternative forms of medicine in health insurance arise? Gopalarathnam, explains, "During various focus group discussions with customers and agents, we found that for chronic ailments like spondilytis, arthritis and epilepsy, many people preferred alternate streams of treatment such as ayurveda, siddha and homeopathy etc."
    Though the coverage has been expanded, there are curbs on the amount and situations under which it can be claimed.
    New India Assurance's extends cover to individuals undergoing treatment with the help of Ayurvedic, homeopathic and Unani systems of medicine. "Such claims will be covered only to the extent of 25% of sum insured. Also, they need to have availed of the treatment at a government hospital to be eligible for the claim," informs Segar Sampathkumar, deputy general manager, New India Assurance.
    Similarly, Star Health also covers non-allopathic treatment, except Naturopathy, costs under its Unique Health Insurance Policy, "up to 25% of sum assured or a maximum of Rs 25,000 per occurrence, per year."
    Chola Individual Health line Insurance policy provides coverage for ayurveda during hospitalization, prior and post hospitalization. A policy holder can get treated in any of the government registered ayurveda hospitals across the country and claim if hospitalized for more than 24 hours.
    Naturopathy treatments are excluded in all policies, while few cover unani and homeopathic. This is because other forms of treatments have no standard treatment protocols and highly varied costs thus making it difficult to actuarially compute the cost to be covered. Even under ayurveda, select procedures are covered to ensure people do not misuse a policy for a basic rejuvenation procedure.
    "We do not cover the unani system of medicine. Under ayurveda, hospitalization for panchkarma (five actions) meant to purify the whole body by eliminating accumulated toxins, is covered on a case to case basis," explains Deshpande.
    It is important to note that there is no standalone cover available for covering alternative treatments. You will have to buy a standard health insurance cover from these select insurers and others who start offering the non-allopathic coverage.
    Before you head for alternative treatment and make a claim, see whether the treatment is listed in the insurance policy document. Insurers are particular about the specific treatments covered. "Snehan and Swedan are payable only when these procedures are done as a part of pre-panchkarma preparation. Comfort treatments involving steam bath/ sauna/oil massages are excluded," Deshpande adds.
    Similarly Gopalarathnam says, "We have identified about 40 common ailments for which ayurvedic treatments are prevalent and widely used, which we cover for treatment across any government registered hospitals."

Fwd: Insurer to pay despite ‘delay’

2011-06-25T22:27:00.001-07:00

JEEP THEFT CLAIM

Mumbai: A district consumer forum has reprimanded Cholamandalam MS General Insurance Company Ltd in a case where the company repudiated the claim of a Bhiwandi resident whose jeep was stolen.

The forum recently ordered the company to pay the insurance amount of Rs 4.95 lakh with 12% interest from 2009.The forum rejected the company's explanation that there was a 'hyper technicality delay' in filing the complainant's claim, saying that the company was being unjust. The complainant, Abdul Shaikh, will also receive Rs 30,000 for mental harassment and Rs 10,000 towards the cost of the litigation. Shaikh took the insurance firm to task in 2009. He had insured his jeep with the company and the policy was valid from February 2009 to February 2010. On March 25, 2009, Shaikh parked his jeep at Vikhroli. When he returned to pick it up the next day, it was nowhere to be found. On March 27, 2009, he filed a complaint at the Vikhroli police station. Shaikh continued to look for the jeep over the next fortnight. However, when the search yielded no results, Shaikh filed his claim before the insurance company on April 13—18 days after the theft. When Shaikh filed the claim, the company made no reference to the delay and made several requests for the submission of the required papers, all of which Shaikh submitted. The police attempted to trace the jeep but were unsuccessful. In October 2009, the company repudiated the claim. Shaikh filed a complaint with the forum in June 2010. The company argued that Shaikh kept it in the dark about the theft for 18 days instead of informing it. As Shaikh delayed informing both the police and the company, the insurance firm stated that it was a violation of the policy conditions. The forum, however, held the company guilty of deficiency in service.

Regards

Akbar

Consumers are set to benefit as Irda’s draft guidelines for insurance

2011-04-03T21:50:00.001-07:00

ONLINE AGGREGATORS

Irda's directive, your gain

Consumers are set to benefit as Irda's draft guidelines for insurance websites assure more accurate information and restrict the use of clients' personal details.

PREETI KULKARNI

    If you've been planning to buy life insurance but can't zero in on the product with the least premium, your best bet would be the Internet. A few clicks of the mouse across aggregator websites and you can have all the information you need, ranging from the policies' features to their cost. Such websites broaden the choice for the buyer by allowing him to compare products from different insurers. The customer is bound to get the best deal, right? Well, not always.
    "Many portals are not making the effort to update the policy details, resulting in outdated information being passed on to the users," says Rahul Aggarwal, CEO, click2insure.in. For consumers, it means that what they see isn't necessarily what they will get. They may be latching on to the wrong product.
    This, besides several other problems related to aggregator sites, has led the Insurance Regulatory and Development Authority (Irda) to come out with draft norms for these outfits. Another major issue is that some of the aggregators pass on clients' or even visitors' contact details and other vital information to brokers and service providers for a fee. In fact, most web aggregators merely act as lead generators, who pass on this information. For instance, if the visitor has expressed his or her preference for some product after comparison, they pass the information on to the insurance company. If the aggregator site sells your personal details to a third party, your name could land in a database. This could mean that you are flooded with a lot of spam: calls, SMSes and e-mails.
    "Many aggregators simply sell the information to insurers, who then contact the customers to make their sales pitch," says Aggarwal. Concurs Mahavir Chopra, head, ebusiness, medimanage .com, a health insurance aggregator: "Today, some websites sell leads to anyone who wants to buy them. The regulations regarding privacy of the customer are not very clear. How the contact information of the customer is used is also not clear," he adds.
    To begin with, all aggregator sites will have to register with Irda. This will mean closer scrutiny by the regulator and it will also help protect the rights of the consumer. Secondly, all sites will have to provide the latest information on features and premium rates. "The price comparisons shall have to be up to date and reflect a true picture of the products," states the Irda circular proposing the draft guidelines. The insurers will also have to provide information on all policies from all insurers in a particular segment. So, an aggregator will not be able to push only those policies that earn it a fatter commission. The Irda has also placed a ceiling on the commission itself. It cannot be more than 25% of the total commission paid on the policy in the first year. Also, it will be payable only on actual sales, not for providing leads. There is also a restriction on the number of brokers and insurers with whom the aggregator can share information on potential customers. After all, it's important that the aggregator transmit your personal details to other agencies in a responsible manner. "If the guidelines are implemented, the fee will
    be linked to actual sales and, thus, they will pass on this information to fewer insurers," says Aggarwal.
    "The norms could help filter out aggregators who lack credibility. At the same time, it could regulate the quality of information being provided to the customers who are trying to analyse options, as well as the data that is being passed to lead buyers," says Chopra.
    Once these norms are implemented, you could buy insurance products with the satisfaction that comes from dealing with regulated entities. "For a customer, it is a win-win situation. It's a free service; you can compare price and features; it's non-intrusive, and the decision need not be taken under pressure from an agent trying to coax you into buying," says Deepak Yohannan, CEO, myin suranceclub.com. Adds Karanvir Singh, director, sales and distribution, Max Bupa: "Buying health insurance, especially for the first time, calls for research on the available products and their suitability." To that end, web aggregators play an important role of providing objective information. Now, under Irda's supervision, they will become better.

King of Reinsurance

2011-03-23T23:13:00.000-07:00

Orissa-born Ajit Jain is the key lieutenant of legendary billionaire investor Warren Buffett, the Oracle of Omaha, report Sruthijith KK & Shilpy Sinha

Afew years after Ajit Jain went to work for Warren Buffett, the legendary investor wrote to his parent in New Delhi, asking if they had one more son like him at home. "Of course I knew the answer before writing. There isn't anyone like Ajit," Buffett recalled in his annual letter to shareholders in 2007.
Jain's parents were naturally overjoyed. "To my absolute embarrassment, they framed that letter and put it right in the middle of the living room. I had to put my foot down and get that out because it was so awkward," 59-yearold Jain, among the most successful business executives to be born in India, told ET.
Buffet, the world's most successful investor and third-richest man, has been showering high praise on Jain in his famous letters to investors year after year. "Even kryptonite bounces off Ajit," he wrote in 2010, describing the outsize achievement of the Orissaborn executive, who heads Berkshire Hathaway Reinsurance Group, a giant business that is at the heart of Buffett's sprawling empire.
Jain, the Superman of Buffett's world, has been for years been considered a leading contender for the ultimate prize at Berkshire Hathaway, indeed anywhere in the business world today—the job of the CEO of the diversified $136 billion group, succeeding 80-year-old Buffett.
"I truly believe I have the best job in the world," says Jain, whose friendly and unassuming manner can fool people into underestimating his wisdom, stature, and achievement.
If little is known about Jain in his home country despite his stellar achievements, it is because he is reluctant to talk about himself. "The real story is about Berkshire and our insurance business, but ok…" he hesitatingly said, relenting to ET's repeated probing about the life and times of a towering business figure.
He says he has been extremely fortunate to be working with Buffett. That is why he hasn't budged from the reinsurance division he joined in 1986. "The opportunity to work for Warren is like winning a giant lottery. Quite honestly, no amount of money can substitute for working for a boss for whom you have the utmost respect, almost to the extent of worshipping him; who has treated you more than fairly; who you have learned a lot from," he said, letting us in on why nobody in America has been able to poach away Buffett's prized warhorse.
How does he react to the praise the world famous investor heaps on him? Does it distract him, and does it spawn jealousy among his peers? "He is very kind with his words. I wish I do something to deserve it some day," Jain says, meaning every bit of it.
But Jain says there is no jealousy among other CEOs of the group or his peers. "That is certainly not the Berkshire culture. We are a collegial group. Each one runs his group with no interference from others. On the contrary, I certainly see a lot of my colleagues celebrate and genuinely compliment me in terms of what Buffett has to say."
Jain was born in Orissa, but his roots are in Rajasthan. He graduated from IIT Kharagpur in 1972. Having the IIT name on his resume opened a lot of doors initially, he says. For his first job at Tata Steel Company, and then in securing admission at Harvard Business School for an MBA.
But he says he wouldn't recommend any 16-year-old spends five years growing up at an IIT. "It's tough work, good discipline to train your mind early on," he says. But IIT Kharagpur was a godforsaken place in those days, with no women and terrible food," he says, laughing.
Subsequent to HBS, Jain worked at McKinsey, where his boss was one Mr Goldgerg, who subsequently moved to Berkshire Hathaway. "Buffett told him to find some people to join the new insurance business he was planning to enter. Goldberg, being a lazy guy, instead of doing a proper search, called his flunkey at McKinsey who had been useful in carrying his bags. That's how I went to work at Berkshire," Jain says. That operation would grow to become one of the largest insurance businesses in the world.
Jain says Buffett, his boss of quarter of a century, is an easy and flexible person to work with. "You get what you see. He is a very simple, down-to-earth person with very simple tastes. He loves what he does, enjoys his work, loves where he lives… He is just happy where he is."
Buffett looks for managers with a solid track record, Jain says. "He is looking for managers who love their businesses and love their work more than they love the money. People who have delivered over a meaningful period of time." Buffett especially watches out when he buys companies, Jain says. "When he buys businesses, he looks out for this. Because when someone sells a business to him, he gets a big cheque. If he loves the cheque more than the business, that manager is gone, and Buffett is not getting what he thinks he is buying." Jain says he doesn't worry about the succession issue one bit. "If you watch Buffett, he has more energy at his age than I have now. So I don't worry about the succession issue because I don't think about it at all," he says.
If a marquee building like the Sears Tower, once the tallest building in the world, wants to buy insurance, an insurer has to take on a huge deal of risk. Or if a massive sporting event, like the 2002 Winter Olympics wants to buy insurance, a year after 9/11 , you need to structure an extraordinary policy. If a high-profile baseball player wants to insure his health for the next ten years, days after signing the biggest contract in the history of the sport, you need to master the idea of risk to be able to write out a policy.
It's an esoteric world inhabited by the elite few of the financial services industry. The risks are enormous, and so are the rewards. Ajit Jain is the emperor of that world.
"From a standing start in 1985, Ajit has created an insurance business with float of $30 billion and significant underwriting profits, a feat that no CEO of any other insurer has come close to matching. By his accomplishments, he has added a great many billions of dollars to the value of Berkshire," Buffett wrote in 2010 in his letter to investors. With that kind of a track record, and impressive recommendations from a man admired by investors and businessmen, Jain seems set to take on any job, and any risk, in the world.
Board to Support Ajit for CEO: Buffett
NEW DELHI Berkshire Hathaway CEO Warren Buffett said directors would support Ajit Jain as the company's next head if the reinsurance executive decided to seek the post. "He loves what he does, he's not looking to take my job," Buffett said yesterday at a news conference in Bangalore. "If he was, the board of directors would probably put him in there in a minute." "Ajit has probably made a lot more money for Berkshire Hathaway than I have," Buffett said in his response to a question about whether Jain, 59, would succeed him. "I really feel about him like I would a brother or a son." — Bloomberg

MAN WITH MIDAS TOUCH: Ajit Jain, CEO, Berkshire Reinsurance

Policyholders Across India Picking Cashless System Of Claiming Insurance Over Reimbursements In Currency

2011-03-03T02:12:00.000-08:00

Policyholders preferred the cashless system of claiming health insurance last year to cash reimbursements, making a deeper dent in the coffers of insurance companies, a study recently released by the Insurance Information Bureau (IIB) shows.
In 2009-2010, insurers had to fork out an average of Rs 25,384 per medical claim under the cashless system in comparison to the average of Rs 13,865 paid through cash reimbursements. The difference of 83%, some say, is a clear indication of what policyholders favour.
"More and more people are preferring to go for the cashless form of settlement. Nobody wants to pay from their pockets when such a facility is available," said Sudhir Sarnobat of Medimanage Insurance Broking, adding that that "the expenses involved today are huge".
Another reason for the disparity, Sarnobat explained, is that "these days, policyholders do not want to waste their time and energy on recovering money through the lengthy procedure of reimbursements".
Interestingly, the difference in the two forms of settlement has risen significantly in recent times. In 2008-2009, insurers disbursed an average of Rs 25,736 through the cashless method, although the figure for the reimbursement system stood at Rs 19,033—a disparity of about 35%.
Dr Dinanath Vedpathak, an insurance analyst, said: "The huge jump in the cost of cashless claims in the last one year has justified the introduction of Preferred Provider Network by public sector insurance companies. The figures show that earlier…there were no checks and balances to curb the fraudulent practices adopted by some health service providers."
According to the IIB, the preference for the cashless procedure extends across all 22 types of diseases considered for its study. In the case of arthropathic and mental disorders, the claims settled through the cashless system was more than double of that paid through reimbursements. For 11 other diseases, it is more
than 50%.
A senior official from an insurance company said, "Cashless may be the preferred form of settlement, but it comes at a price for the policyholder. Many hospitals have different rates of treatment for cashless and reimbursement insurance policies. If the cost of treatment is higher under the cashless procedure, the consumer has to pay for it in the long term as insurance firms increase the annual premium."
Significantly, the study shows that the highest number of medical claims in 2009-2010 originated from hospitals that fall under Category A; meaning, from hospitals that have more than 25 beds and possess super-specialty facilities. During this period, a total of 47,374 claims were filed through Category A hospitals, for which insurance companies paid Rs 191 crore at an average of Rs 40,504 per claim.
Meanwhile, the average claim doled out for Category D (less than 15 beds with single specialty facility) and B (15-25 beds with multi-specialty facilities) hospitals was higher—Rs 41,602 and Rs 41,491, respectively. The number of claims originating from these two types of hospitals stood at 8,094 and 19,614, respectively.
Note:
All claims paid in rupees
Hospital A: More than 25 beds and super-specialty facilities B: 15-25 beds and multi-specialty facilities C: 15 beds with single or multi-specialty nursing home D: Less than 15 beds with a single specialty facility E: Single specialty or day-care hospital

IRDA norms for new life schemes

2010-11-26T17:48:00.000-08:00

Mumbai: Insurance regulator IRDA on Tuesday said that all universal life products, a new kind of insurance which entered India recently and gives greater flexibility to customers, will not have any unit-linked component in them.
    IRDA also said that from now, all such products will be named variable insurance products (VIPs) and have a lock-in period of at least three years.
    The regulator prescribed that all VIPs should provide death benefits equal to the guaranteed sum assured plus the balance in the policy account while the maturity benefit should equal the balance in the policy account together with a terminal bonus, if any, as applicable. It also said that the sum assured under these policies should be at least ten times the annual premium.
    As of now, no group insurance is allowed by IRDA to operate under these policies. Single premium or limited premium structures are also not be allowed for VIPs.
    Specifiying on the cost structure, IRDA said that the maximum expense, including commission, should not be more than 27.5% of the premium, while for the second and the third year, this will be capped at 7.5%. From the fourth year onward, the expense is capped at 5%. The regulator also said that the minimum policy and premium payment term shall be five years.

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Revive your lapsed policies, the easy way

2010-08-12T19:06:00.000-07:00

Policies may get lapsed for a number of reasons. But you can revive them without too much of a hassle. Dhruv Agarwala & Kartik Varma offer some suggestions

MANY of us are often unable to continue paying premiums towards our life insurance policy, causing the policy to lapse. Policy lapsation can be dangerous as you or your financial dependants/beneficiaries may not get any benefit, which was the reason for buying the insurance cover.
    One needs to know the reasons behind the policy lapsation and how one can revive it, if need be, at a later date. An insurance policy may cease to exist due to various reasons. It could be because of carelessness or because one doesn't see value in continuing with the policy, or because of a financial crisis and can't afford it any longer. Here are some basics on policy lapsation and revival that all policyholders must know.
How does a life insurance policy lapse?
As long as you pay your premiums regularly, your policy will remain alive. If something happens to you during this period, the insurance company will honour its commitment and pay you or your beneficiaries, depending upon the type of policy you hold. However, if you stop paying your premium, then the insurance company will no longer be obliged to continue providing an insurance cover on your life. In this situation, your policy is said to have lapsed. The insurer might not provide any monetary benefits (the sum assured under the policy) to you or your beneficiaries if something were to happen to you.
    Before your policy lapses, you still have a limited time period during which you can make good on a delayed premium payment. If you are late on your premium payment, the insurer will send you a reminder and give you a grace period within which to pay your premium. This is usually 15 days when you pay your premium monthly and 30 days in all other cases. If you fail to pay the premium even after this grace period, your policy will lapse. The insurer will send you a letter informing you about the same.
Can I revive a lapsed policy? Will the benefits be the same after
revival?
Most traditional policies (like term, whole-life and endowment plans) can be revived, subject to certain criteria that your insurer might impose on you.
    Revival can happen at any time, but the conditions for revival might depend upon how long the policy has been lapsed for. Under the insurance laws, if the policy has been in force for at least three years, the insured gets up to two years to revive the policy. Some insurers like LIC have special schemes under which policies can be revived for up to five years from being lapsed.
    If you revive the policy within six months from the date of lapsation, the process might be as simple as paying the overdue premium (and interest) to catch up on the delay on your part.
    If you revive the policy after six months from the date of lapsation, you might be required to pay the overdue premium, penalty fees, as well as interest payment that could be up to 12-18% of the premium payment, depending upon the type of policy and the date of purchase.
    At the time of revival, the insurer might impose a lot of conditions or even decline your request for a policy revival if the company is not convinced about the integrity of your application on grounds of suspected fraud or the like. It can be very likely that the insurer will ask you to appear for a medical test before the policy can be revived to ascertain whether you have developed a new medical condition during policy lapse that might expose the insurance company to a high risk in insuring your life.
    At the time of revival, usually, full benefits that you or your beneficiaries are eligible for will be reinstated. However, if after revival, the insured commits suicide within one year, the insurer can deny the claim. Similarly, if the insured passes away within two years of the revival, the insurer has the option of conducting an inquiry before they decide to pay the claims to the beneficiaries.
Can one still file a claim on a
lapsed policy?
If a policy is less than three years old but lapses, and if something happens to you after the policy lapses, and a claim is filed, the insurer will not pay you anything. At best, the insurer might be willing to give you or your dependants the premium payments that you have made. But, this is also totally at the insurer's discretion.
    If a policy is more than three years old, but lapses, and if something were to happen to you, under the existing insurance rules, your dependants can still get some benefit. However, the insurer will pay only a reduced sum assured based on a pre-set formula (for those who are technically inclined, it's the number of premiums paid to the total number of premiums payable).
What if I am facing a cash crunch and can't pay my premium?
One choice you have is to review your insurance contract and change the terms. For instance, you can reduce your sum assured and your premiums will go down accordingly, perhaps making it more affordable for you to keep the policy in force.
    Life insurance is a necessary financial instrument that every person with financial dependants must have. Don't let your policy lapse, otherwise your financial dependants might end up facing financial hardship when you are not around to provide for them.
    www .iTrust .in

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Take extra cover for sake of your health

2010-01-06T06:53:00.001-08:00

Take an additional health cover even if your employer covers you with a group mediclaim. In many cases, claims can be made under both the policies, says Preeti Kulkarni

WHILE spiralling healthcare costs have awakened people to the indispensability of health insurance, the concept of corporate group mediclaim has led to many employees avoiding buying a standalone health cover. A large number of organisations in the organised sector cover their employees as well as their immediate families under corporate mediclaim, resulting in independent health insurance slipping out of their priority list. However, financial planners and health insurers caution against adopting such a lax attitude towards the health of your family as well as your own.
A CASE FOR INDEPENDENT HEALTH COVER
The reasons are multi-fold. Your corporate medical cover is contingent upon you being employed with the organisation — the moment you decide to switch jobs or happen to face a lay-off, it will cease to exist. You may be entitled to the group health cover offered by your new employer, but it will not come into force during the transition period, leaving you exposed to the risk of having to foot your own bill, should any medical emergency arise then. A personal health cover ensures continuous coverage.
    Besides, adds Sanjay Datta, head of health and accident of ICICI Lombard General Insurance: "Group mediclaim coverage is decided by the employer and is often inadequate in terms of coverage limits and does not cover the entire family." This apart, the prospect of having a critical illness with little or no earning capability also makes a very compelling case for buying personal health cover.
    Health cover provided by the employer does not extend to post-retirement years — the period when you would need it the most, as ailments start taking their toll. This is also the age when individuals find it difficult to obtain a standalone cover at a reasonable premium, making buying health insurance at a younger age imperative.
MAKING A CLAIM UNDER TWO POLICIES
Many policyholders tend to assume that they can file a claim under any of the policies they have signed up for, which may not always be the case; whether the individual can make a choice to claim depends on the provisions made in the policies taken. Also, whether the individual can make a choice to claim, depends on the provisions made in the policies taken. "Typically, there is a declaration sought from the customer on the policies under which s/he is covered, and the total liability is shared by the insurers," informs Mr Datta.
    The contribution clause in the policies states that claims can be made under both the policies, in the same ratio as the sum insured. For instance, if you are covered under a corporate policy with a sum insured of Rs 2 lakh, in addition to a personal cover of Rs 1 lakh and make a claim for Rs 1 lakh, the insurer servicing the former will contribute around Rs 66,000 while the balance will come from the other insurer. However, according to Pawan Bhalla, CEO of Raksha TPA, in India, policyholders are not legally bound to disclose the details of any existing policy or make a claim under both the policies. Hence, they can file a claim under any of the two policies they are covered under.
CLAIMS PROCEDURE
The swiftness with which a third party administrator (TPA) processes a claim plays a role in fulfilling the objective of buying health insurance. If your mediclaim policies are serviced by the same TPA, the process becomes simpler, as the documents need not be transferred from one TPA to the other. In cases where the TPAs are not common, a certificate needs to be obtained from one TPA mentioning the claim amount being settled and that original documents have been retained. The insured can submit the photocopies along with this certificate to the other TPA.
    preeti .kulkarni @timesgroup .com

WISH YOU ALL HAPPY AND PROPEROUS NEW YEAR

2009-12-31T23:32:00.001-08:00

LIFE IS BEST FOR THOSE WHO WANT TO LIVE IT,
LIFE IS DIFFICULT FOR THOSE WHO WANT TO ANALYZE IT,
LIFE IS WORST FOR THOSE WHO WANT TO CRITICIZE IT,
OUR ATTITUDE DEFINES LIFE...
ENJOY YOUR LIFE,
LAUGH SO HARD THAT EVEN SORROW SMILES AT YOU,
LIVE LIFE SO WELL THAT EVEN DEATH LOVES TO SEE YOU ALIVE,
FIGHT SO HARD THAT EVEN FATE ACCEPTS ITS DEFEAT...

TO HAVE A SPECIAL FRIENDSHIP
IS SUCH A WONDERFUL THING,
JOY, HAPPINESS AND LAUGHTER
AREN'T ALL THAT IT WILL BRING.

ALONG WITH IT WILL COME SADNESS,
SORROW AND PAIN,
BUT HAVING SPECIAL FRIENDS
CAN MAKE YOU SMILE AGAIN.

SPECIAL FRIENDS WILL HUG AND COMFORT YOU
IN YOUR HOUR OF NEED,
THEY TAKE YOU BY THE HAND AND GUIDE YOU,
SOMETIMES TAKE THE LEAD.

SOME PEOPLE WON'T BELIEVE IN YOU;
THEY WON'T ENCOURAGE YOU
TO FOLLOW YOUR DREAMS,
BUT YOU MUST ALWAYS BELIEVE IN YOU,
NO MATTER HOW LONG THE JOURNEY
AHEAD SEEMS.

SOME PEOPLE WILL BE JEALOUS OF YOU;
THEIR WORDS WILL BE SHARP AND UNKIND,
BUT YOU MUST CLOSE YOUR EARS
TO SUCH WORDS,
AND NEVER ALLOW THEM TO CHANGE
YOUR DIRECTION OR YOUR MIND.

I'LL ALWAYS BELIEVE IN YOU
AND ENCOURAGE YOU
TO FOLLOW YOUR DREAMS,
AND I'LL TRY MY BEST TO SHOW YOU
THAT THE ROAD IS NEVER
AS LONG AS IT SEEMS.

I'LL ALWAYS CHEER FOR YOU;
MY WORDS WILL BE WARM AND KIND,
BECAUSE I TRULY TREASURE YOU.
YOU OWN A PART OF MY HEART,
AND YOU'RE ALWAYS ON MY MIND.

NO SHADOW TO DEPRESS YOU

ONLY JOY TO SURROUND YOU

MANY FRIENDS TO LOVE YOU

GOD HIMSELF TO BLESS YOU

THESE ARE MY WISHES FOR YOU

TODAY, TOMARROW ,

AND EVERY DAY TO YOU

SWEET THINGS ARE EASY 2 BUY,
BUT SWEET PEOPLE ARE DIFFICULT TO FIND.
LIFE ENDS WHEN U STOP DREAMING, HOPE ENDS WHEN U STOP BELIEVING,
LOVE ENDS WHEN U STOP CARING,
FRIENDSHIP ENDS WHEN U STOP SHARING.
SO SHARE THIS WITH WHOM EVER U CONSIDER A FRIEND.
TO LOVE WITHOUT CONDITION... ......... .........
TO TALK WITHOUT INTENTION... ......
TO GIVE WITHOUT REASON...... ......
AND TO CARE WITHOUT EXPECTATION. ......IS THE HEART OF A TRUE
FRIEND.......

LIC Jeevan Saral – Review

2009-12-28T03:01:00.001-08:00

December 9th, 2009Amar RanuLeave a commentGo to comments

Being a disciplined investor pays off in the long run. For example, those investing in equity mutual funds through Systematic Investment Plans (SIPs) or debt instruments such as post office or bank deposits through recurring plans reap richer benefits in the form of higher growth and returns. However, maturity benefits in these plans remain limited to the returns assumed and to the total instalments paid in case of the unfortunate event of death. 'LIC Jeevan Saral' – an innovative offering by Life Insurance Corporation of India – takes care of this point. The endowment assurance plan provides not only financial protection in terms of death benefit throughout the term but also long-term capital growth. One of the unique features of the scheme is it provides risk coverage to the extent of 250 times the monthly premium. No wonder, it helped LIC win the Golden Peacock Innovative Product/Service Award 2009.

Highlights

LIC Jeevan Saral is tailor-made plan for those looking for periodic savings along with risk cover
It offers higher cover, decent return, liquidity, considerable flexibility and tax benefits
Policyholders can choose the premium they want to pay

Product highlights/benefits
• An endowment assurance plan that provides death benefit up to 250 times the monthly premium plus loyalty additions, if any
• Flexibility to choose premium amount which will in turn decide maturity sum assured
• Minimum monthly premium of Rs. 250 and Rs. 400 for entry age up to 49 years and 50 years and above, respectively. There is no cap on upper investment limit.
• Option to add Death Accident Benefit rider at a very nominal cost
• Loyalty additions if the policy is in force for a minimum of 10 policy years along with guaranteed maturity benefits
• No surrender penalty after 5 policy years; partial withdrawals allowed
• Premiums are payable yearly, half-yearly, quarterly, or monthly.

Looking for Life Insurance products- Click Here

Analysis
LIC Jeevan Saral is a unique investment option which cushions one's investments against the dual risks of death and volatile market conditions and at the same time provides much-needed liquidity. Let us see how this works for a 35-year-old individual.
Suppose the person buys LIC Jeevan Saral policy for an annual premium of Rs. 4,704 for 25 years, with his basic sum assured coming to Rs. 1 lakh. His guaranteed maturity benefit as per LIC benefit illustration will be Rs. 1,35,296, which will further increase to Rs. 2,00,296 and Rs. 3,46,296 if we include loyalty additions and guaranteed maturity benefit at a projected investment rate of return (PIRR) of 6 per cent and 10 per cent, respectively. The net yields at different projected levels are presented in Table 1.

The net yields under LIC Jeevan Saral at the PIRR of 6 per cent and 10 per cent come to 4.16 per cent and 8.05 per cent, respectively.

Equating with other products
Apart from insurance cover, 'Jeevan Saral' provides tax benefits and liquidity, so we will compare it with products like recurring deposits (RDs) by post office/banks or PPF (periodic investments) that offer similar benefits. Table 2 depicts how LIC Jeevan Saral and recurring deposits fare against each other.

Ways to Smarter Insurance planning- Click Here

Now, we will turn to Table 3 which analyses the performance of two products, RDs and PPF, in comparison with Jeevan Saral. Here, we have assumed that PPF and RD investments continued for 25 years, i.e., returns reinvested throughout the term.

• In case of Jeevan Saral, a 25-year old with an annual investment of Rs. 4,704 at a projected growth rate of 10 per cent (which may or may not be achievable) will earn a net yield of 8.05 per cent, higher than RD (5.94 per cent) and PPF (8.00 per cent).
• In case of RDs, we have considered investors in the tax bracket of 20 per cent. The returns may come down or go up for those in the 30 per cent or 10 per cent tax bracket.
• For PPF investments, the tax-free return comes to 8 per cent. Nevertheless in terms of death benefit, with its inbuilt risk cover Jeevan Saral scores over the other two.
• If the same individual buys a term plan at a premium of Rs. 4,704 for a period of 25 years, he would get an insurance cover of Rs. 16 lakh. But note that there won't be any maturity benefit, but only death benefit of Rs. 16 lakh.

Tax benefits
• Premium payable for Jeevan Saral and PPF is eligible for tax benefits under Section 80C.
• Maturity proceeds of Jeevan Saral are tax free under Section 10(10D).
• Investments in RDs are not eligible for tax benefits.

Read Life Insurance guides – Click Here

Things to look into
• Returns in LIC Jeevan Saral as shown in Table 3 are calculated at a projected growth rate of 6 per cent and 10 per cent, which may or may not be achievable.
• Loyalty additions or bonuses are not guaranteed.
• RDs or PPF investments do not provide risk cover.

Recommendations
• For whom: Conservative investors willing to put money for a longer period
• Risk: Capital safe, but loyalty benefits linked to market returns
• Investment horizon: 5 -25 years
• Returns: Moderate in line with FDs/PPF at different conditions
• Beats inflation: No, it won't be able to beat inflation at assumed growth rate of 6 per cent
• Tax bracket: Preferable for all tax brackets
• Alternatives: Recurring deposits, PPF (periodic investments), mutual funds (SIPs)

Read Life Insurance Faqs- Click Here

Summing it up
LIC Jeevan Saral will always remain in demand considering that periodic investment schemes have never been out of fashion for small investors. The other draws would be LIC's proven track record of paying out loyalty bonuses and the decent net return at a projected rate of return of 6 per cent besides the risk cover. However, those looking for a guaranteed return can choose RD or PPF along with a term plan which will provide risk cover at a very nominal premium.

Rel Life plans Rs 50 per month premium insurance cover

2009-12-02T19:55:00.000-08:00

COVER FOR ALL

Mumbai: Nano seems to be the perfect vehicle for India Inc to reach the 'bottom of the pyramid' of this vast economy. After the Tata car and a planned SIP option in one of Sahara's Mutual Fund schemes, Reliance Life Insurance is now in the process of rolling out a unit-linked insurance plan with premiums as little as Rs 50 per month.

Structured for the rural market and the urban population who mainly live on daily wages, Reliance Jan Samriddhi Plan is a group plan which is being sold through micro-finance institutions (MFIs), NGOs and self-help groups (SHGs). Since it is targeted at those at the lower income level, the life insurer will guarantee returns at the start of the policy. "The guaranteed return will be linked to the yields on government securities at the beginning of the year,'' said Malay Ghosh, president, Reliance Life Insurance. The scheme is part of the insurer's social and rural sector obligations that every insurer has to meet.
Under the Jan Samridhhi scheme, an insurer can pay a premium as low as Rs 50 per month. However, Ghosh said that for a large number of people in India who are daily wage earners, paying Rs 50 at one time could be a difficult proposition. To address this, the MFIs, NGOs and SHGs have devised ways to collect Rs 2 or more everyday from these people. Once the money is collected from the insured group, it will be transferred to the insurance company. Not only is the money guaranteed to the insured, the scheme does not have a surrender penalty. "It is a savings product which has an in-built accident insurance cover,'' Ghosh said.

A Cover For Your Life

2009-11-22T18:21:00.001-08:00

FINANCIAL PLANNING

As the headline suggests, whole life policies provide life coverage and also offer some returns which make it a better option compared to term policies. But it comes at a higher cost

PALL AVI M U L AY ET INTELLIGENCE GROUP

TERM insurance policies are recommended to meet one's insurance needs. However, they are unpopular largely because the periodic premium payments over the life of the policy do not earn any financial return if the policyholder survives through the policy term. Moreover, it is available for specific term ranging from one year to 30 years. This leaves out senior citizens just when the need for financial security is the highest. To address these shortcomings of term insurance policies, the industry has designed Whole Life Insurance.
    Whole life insurance combines a term policy with an investment component. Like term policies, it is actually meant to secure financial future of one's family in the absence of the breadwinner. But the similarity ends there. These polices offer life coverage till very old age or even till 100 years unlike term policies which typically cover the working life of the policy holder which ends at 58 or 60 years of age (it differs from policy to policy). Also, along with the sum assured, additional returns are paid to the nominee in case of the death of the policyholder. One more feature that differentiates a whole life policy from a term policy is that it does not lapse even though it remains unclaimed during the policy term. Once the policyholder lives up to the specified age till which the cover is provided, maturity proceeds are paid to him/her.
    The maturity proceeds or survival benefits differ from policy to policy. Some policies offer either recurring bonus or terminal bonus or both. Some policies offer guaranteed returns every year. Few companies also provide whole life unit linked plans or whole life with additional benefits. In short, the varieties of whole life insurance policies with various options of premium payment-single, limited period or regular-are made available in the market to attract customers. Such well-catered whole life insurance seems to be a good deal compared to term insurance policies.
    But there are no free lunches in this world. The premium for these policies is far higher than for term policies. The premium of any term policy with sum assured of Rs 5 lakh and policy term of 25 years would be around Rs 2,000 per annum for a 30-year-old male. Whole life policies with sum assured of Rs 5 lakh will cost around Rs 11,800 per annum to a policyholder of same age.
    In whole life insurance one is paying not only for insurance coverage for an extended period, but also for the investment portion. So the moot question is if the promised return is worth the extra cost?
OPTION I: For example, Mr A, 30-year-old person, purchases LIC's pure whole life insurance policy. He pays an annual premium of Rs 11,852 for life cover of Rs 5 lakh. He is supposed to pay this premium till the age of 80. If Mr A survives till he attains 80, the maturity proceeds will be around Rs 36 lakh (The calculation of maturity proceeds is based on the bonus and additional bonus rates announced for the year 2007-08. However, it keeps changing every year. The bonus rate depends on the duration of the policy and it is higher for longer term policies. Hence the actual realisation at the time of claim settlement or on maturity may differ from the amount mentioned here).
OPTION II: Let's assume a case wherein Mr A uses the same amount, i.e., Rs 11,852 (per annum) to buy term insurance and invest the rest in PPF. The annual premium for the term insurance policy of Rs 5 lakh will be around Rs 2,000 per annum. He invests the rest, i.e., Rs 9,852 in PPF, then the accumulated investment will be around Rs 64 lakh at the age of 80 (adjusted for higher insurance premium in later years). However, he will not avail any life coverage after the age of 65 and has the option of
investing the entire amount, i.e., Rs 11,852, in PPF annually. In an ideal situation Mr A may survive till 80. But in case he dies at the age of 67, his nominee will receive almost Rs 21 lakh as a claim settlement of whole life policy (it is the summation of accumulated bonus and terminal bonus, if any, along with sum assured).
    If he had opted for option II the accumulated investment would be around Rs 22 lakh without life cover, higher than the returns earned on whole life policy. Critics of selfinvestment however say that it's tough for individuals to maintain an investment discipline all through their working lives. But this may not be too tough for salaried professionals; they can raise the voluntary contribution to their EPF account by an equivalent proportion.
    So it is up to an investor whether to be financially disciplined and earn better returns by purchasing low-cost term life insurance and investing the difference in other investment avenues. Or else go for forced saving through whole life insurance policy to accumulate some money for the heirs with the life coverage till the very old age.
EXTRA COVER
Whole life insurance combines a term policy with an investment component
Unlike term policy it earns some financial returns on the premium paid during the policy term
Premiums are higher than the premium paid for term plans
Various options of premium payment-regular, limited period and single premium-are available
Few companies offer whole life policies with additional benefits like guaranteed survival benefit during policy years. These policies are available with additional riders

Insurance :RBI breather likely for HDFC, ICICI

2009-11-03T19:41:00.001-08:00

Control Must Also Be Considered While Deciding Foreign Ownership: RBI Writes To Govt

Arun Kumar NEW DELHI

THE RESERVE Bank of India (RBI) has untangled a knot which could have jeopardised the ownership of the insurance business of home loan major HDFC and the country's largest private lender ICICI Bank.
    The RBI has told the government that control of a company, not just its ownership, should be taken into account while determining foreign investment, particularly in the financial services sector.
    Such an interpretation will mean that investments by ICICI Bank and HDFC, both majority foreign-owned but controlled by Indians, will be regarded as domestic investment. This will enable them to retain their investments in their businesses in insurance, a sector where foreign ownership is capped at 26%.
    "More particularly in the financial sector, the concept of control should include qualitative parameters and percentage of resident directors," the RBI wrote in an October 12 letter to the department of industrial policy and promotion (DIPP).
    DIPP, an agency in the ministry of commerce and industry, sets foreign investment guidelines.
    The RBI also said it wants the government to clearly define terms such as "control," "equity interest" and "beneficially owned" before operationalising the new foreign investment guidelines that were announced in February.
    The guidelines said investment through companies owned and controlled by Indians would not count in the calculation of foreign investment. But it also said investments by companies that are majority foreign-owned are counted as foreign investment, putting HDFC and ICICI Bank in a fix. New norms led to confusion over FDI in forbidden sectors
UNDER the new guidelines, all direct and indirect overseas investments were counted as foreign investment, putting the foreign ownership of ICICI Bank at 65% and HDFC at 74%.
    ICICI Bank operates a life insurance JV with Prudential of the UK and a general insurance business with Lombard of Canada. HDFC has partnered Standard Life and Germany's ERGO.
    The February guidelines have created confusion and led to concerns that it could allow indirect foreign entry into forbidden sectors such as multi-brand retail through layered corporate arrangements where the initial foreign investment is kept below 50%.
    "Since the existing sectoral regulations on FDI, including sectoral caps, are not in conformity with the inclusive definition, the same need to be redefined to include all nonresident investments under a single head," the RBI wrote. The central bank is also of the view that a decision on the requests by HDFC and ICICI Bank seeking exemption from the new guidelines may have to be taken after the government clarifies issues so that foreign investment does not travel a circuitous route and enters sectors where it is not allowed.

Road mishaps: Insurance cos pay out Rs 4,000 cr/yr

2009-10-25T19:35:00.001-07:00

Mumbai: The high death toll on India's highways is bleeding its insurance firms. This is evident from the fact that public sector general insurance companies have consistently paid out a whopping Rs 4,000 crore every year since 2007 to settle compensation amounts awarded by the Motor Accidents Claims Tribunal (MACT).

    It is estimated that the insurance firms had earned a measly Rs 15 lakh in premium from the policy holders on whose behalf it made the payouts. This is because the premium for third party insurance policies is extremely low. For a commercial vehicle, it is not more than Rs 1,500, for private cars it is only Rs 600.
    In effect, the public sector insurance firms have dished out a mindboggling Rs 12,000 crore in compensation to road accident victims during the last three financial years. What's more, this is only the tip of the iceberg as companies settle only one lakh cases every year and more than 11 lakh claims are still pending before the MACT. The major portion of the general insurance market is with the public sector, with private firms which are recent entrants,now controlling 40% of the market. Interest on claims hurts insurance companies
Mumbai: Motor insurance firms have been hit hard by the spate of accident claims in recent years. "Road accident cases remain pending before MACT for nearly a decade before the final order comes. The insurance firms then have to pay the principal amount plus interest on it from the day the claim was filed. It is the interest that forms a major portion of the payout and that hurts the companies,'' said Mukesh Thakkar, a senior development officer with New India Assurance. MACT orders interest to be paid at the rate of 9% and it accumulates over the years.
    Industry experts said that some of the insurance firms are getting so desperate that they have started hiring private surveyors to approach families of accident victims and convince them to settle cases out of court. "It's a terrible situation for the insurance firms as on one hand the compensation claims are bleeding them and on the other, 70% of vehicle owners don't even buy insurance policies to add to their coffers,''said Mahendra Durve, president of the All India Institute of Insurance Surveyors.
    Nearly 40,000 people are killed in road accidents in India every year and one and a half lakh are injured. Most of these cases end up before the MACT which orders insurance firms to make payments under the solatium scheme, introduced by the central government in 1989 to deal with the modalities of payment of compensation to victims of hit-and-run cases.
    "There has been a 20% rise in third party claims cases, but the motor insurance premium is not growing. In fact it has come down after the insurance sector has been de-tarrifed this year,'' said a senior insurance official.
    A majority of the accidents occur on state highways and involve commercial vehicles. "In the MACT, cases go on for 8 to 10 years on an average with some even taking up to 14 years to be disposed of. Many victims are poor people who cannot afford the lawyers' fees but are forced pay a part of the compensation amount to the advocates who fought their case,'' an official said.
    Industry experts say the government will have to take steps to ensure cases for compensation do not get bogged down in the judicial process for years. "Insurance firms simply cannot afford to pay thousands of crores in compensation every year,'' said Durve. "We would like to see a robust judicial infrastructure that disposes of claims quickly, so that the interest component comes down,'' said Thakkar.
    The government says it is taking steps to reduce road accidents. It points out that road safety norms are now an integral part of design at the planning stage of all national highways and expressways. The ministry of road transport and highways also claims it is running publicity campaigns, introducing new road furniture and road signs and providing ambulances to state governments to bring down the death toll on the country's highways.

MONEY MATTERS

Term Insurance at Best terms

2009-10-04T21:08:00.001-07:00

LIC may be the biggest name in insurance, but its policies are pricey. ETIG suggests that private players offer pocket-friendly polices when it comes to pure term insurance plans

PALL AVI M U L AY ET INTELLIGENCE GROU P

INVESTOR'S Guide has always advised to readers to buy at least one insurance policy. Life is full of uncertainties and risks. So an insurance policy is a must.
    The primary objective of an insurance policy is to secure the needs of one's family in an unfortunate event of death of the policyholder. So the amount received has to be big enough to enable the dependents to maintain their lifestyle.
WHY TERM PLANS?
The rule of thumb in financial planning says that life cover should be worth 6-7 times of your current annual income.If your current annual income is 5 lakh then the insurance policy should provide a cover of Rs 30 lakh. This calls for a pure-risk policy, which offers an extensive cover at minimal cost. Hybridinvestment products, with moiney back option cost several times more for the same amount of risk cover. A term plan is the best option when the purpose is life cover.
WHICH TERM PLAN?
The next question is which policy. The first name that comes to mind is LIC. The staterun Life Insurance Corporation of India is the oldest and largest insurer in the country and all its liabilities carry an implicit government backing. But then, there are equally credible players in the private sector. There's no harm in shopping around for the best plan available in the market.
    While selecting a term policy, one should consider the cost (the amount of premium), the maximum term offered, the additional benefit in terms of different riders and the additional cost to avail these riders.
    ETIG's analysis of policies offered by LIC and major private players suggests the policies offered by LIC are costlier. LIC loses against its private counterparts on account of high premium, no discount on premium paid and lack of riders. LIC's Anmol Jeevan and Amulya Jeevan are just plain vanilla traditional term insurance policies.
    As it is commonly known, term plans simply cover the life of the policyholder and do not provide any maturity or survival benefits. The amount of life cover (sum assured) is payable only to the nominee in case of unfortunate demise of the insured during the policy term. Where the insurer survives the policy term, he/she is not entitled to any benefits from the insurance company. The premiums paid throughout the policy term may thus be treated as a cost to cover one's life. So it is better to minimise the cost.
    LIC charges an annual premium of Rs 9,500 for Rs 25 lakh policy from a 30-year-old person while private players like SBI life, HDFC Standard Life etc, offer similar cover for an annual premium in the range of Rs 6,200-7,500. (See the table.)
    Private players also offer rebate on premium for female policyholders or for high sum assured. LIC do not discriminate on this count. It has a single premium for all of age groups.
    The pure term plan in its traditional form offers the benefits only in cases of natural death; the policy is considered null and void if the death is accidental or due to some critical illness, etc. This is one of the major reasons for it being unpopular amongst people.
    Private insurers address this limitation by offering riders, or additional benefit, along with the policy for an additional fee.
    The common riders available are accidental death benefit, critical illness benefit, accidental disability/dismemberment benefit, hospital cash benefit, etc. LIC in contrast only offers traditional products without any rider.
    Despite these better offers from private insurance companies, there is higher demand for LIC's products. It is largely because hassle-free settlement of claims after the unfortunate event of death of the insured, which is very important. It is a fact that LIC has the highest claim ratio over 95% (that is 95 out of 100 claims are settled successfully) for the year ended March 08, which is very much in line with its historical record. Nevertheless, major private players have the claim ratio higher than the industry average, which is noteworthy.
CONCLUSION
The moral of the story is that one needs to do a cost benefit analysis before buying life insurance policies and not to go with the tag as the 'market leader' or the 'oldest player'.
    pallavi .mulay @timesgroup .com

New rural cover scheme does away with health checks

2009-09-20T19:15:00.001-07:00

PEOPLE living in rural parts of the country will soon be able to buy insurance cover without being subject to mandatory health checks, as is the norm for life insurance policies. The department of posts is set to launch an ambitious micro life insurance policy that will not require insurees to disclose their health condition or existing diseases at the time of buying the plan.

    The proposed insurance scheme, meant for economically weaker sections and particularly women, will provide a risk cover up to Rs 25,000, said an official in the ministry of communications and information technology. The department aims to cover around one-tenth of Indians and become a major player in the domestic insurance sector by easing out the procedural formalities that precede the purchase of a life insurance policy.
    While the new scheme has been designed to be customer-friendly, the postal department will put in place systems and processes to prevent fake claims. For instance, a claimant will have to file a death certificate issued by a government doctor on a deceased's cause of death before claiming the insurance amount, the official said. If the medical report says the insuree was suffering from an ailment that existed prior to the purchase of the policy, the postal department will have the option to reject the claim.
    The policy premium will vary according to the age of the insuree and the tenure.
    India Post expects to cover around 100 million Indians by the end of 2011 under the scheme. The move is part of India Post's initiative to expand its insurance services and ensure a strong presence in the sector, especially in rural parts of the country, the official added.
    Since the launch of the rural postal life insurance scheme in 1995, 8 million lives and a sum of Rs 40,000 crore have been insured under various policies offered by India Post. The department also plans to tweak its investment norms for life insurance policies to pump in a part of daily collections in revenue-generating instruments, including stocks, a move that is likely to begin from October 1, 2009.
    With a huge presence in the country through 1.55 lakh post offices, the postal department is slowly developing itself as a centre for offering diversified services such as the National Rural Employment Guarantee Scheme, life insurance and financial solutions to its customers, apart from the mail delivery system.

Norms for insurance IPOs soon

2009-09-20T00:54:00.001-07:00

Mumbai: Insurance regulator IRDA will come out with disclosure norms for IPOs to be launched by insurance companies by month-end, its chairman J Hari Narayan said on Friday. "We will be ready with the disclosure norms by the end of this month,'' Narayan said. Insurance companies like Max New York Life and Kotak Insurance are planning to launch IPOs. IRDA thinks proper disclosure norms will make the process transparent and consumers aware of thehealth of the company.

    "There are few (insurance) companies which have shown interest for IPOs, and IRDA is working with market regulator Sebi to come out with guidelines,'' Narayan said. The route towards an IPO would have three milestones — finalisation of the red herring prospectus (RHP) requirements, disclosure normsand valuation of insurance companies, he added.
    "The first milestone towards IPO will be finalisation of the RHP. The design, structure and disclosure required in consultation with Sebi. The second milestone would be the pattern of disclosure, which IRDA would mandate to insurance companies for IPO,'' he said. "We have worked and standardised it (calculation of valuation). The Indian Institute of Acturial will bring out a guidance note on it. And once the guidance note is ready, we will make it mandatory for the insurance companies,'' Narayan said.
    "The disclosure norms are under our jurisdiction and they would be ready by the month, he said. The other milestones may take few more months as there are several other players involved in the process,'' he said.
    IRDA also expressed concern over the increasing underwriting losses in the nonlife insurance industry. "Due to increase in competitive pressure post detariffing, underwriting losses in the Indian non-life space is increasing which is not a healthy sign,'' Narayan said. "We do not have actuarial capabilities in non-life industry which is a matter of regulatory concern.'' There is also a shortage of skill-sets with respect to evaluating a product and risk factors before fixing the rate, he said.
    Hari Narayan further said that the bancassurance model used to distribute policies by insurance companies in the country is weak at the moment. "We find from observation and examination that the bancassurance model is weak at this point.'' It (bancassurance model) is certainly robust at the time of settlement of credit claims but poor at the time of settlement of claims of personal line products,'' Hari Narayan said. With competition, the fastgrowing insurance industry may witness a consolidation among smaller players, and see the emergence of some big companies, a report said.

HOW ABOUT MAKING COMMISSIONS OFFICIAL?

2009-09-08T19:18:00.001-07:00

The best way to bring down distribution charges in insurance is to increase price competition among agents by legalising rebates. Dismantling the agency structure could have unintended consequences, says Mayur Shetty

  THE global financial crisis has left Indian banks largely unaffected. With the central bank releasing Rs 4.2 lakh crore of liquidity support, banks are awash with funds. The ratios for bad loans are better than their average for this decade. The assets of other players in the financial sector have also not been impacted. But what appears to be changing is the war on charges by regulators across the board.
    Banks have been asked to waive charges on the use of ATMs. Mutual funds have been told to remove load from August 2009. Life insurance companies have been subjected to a cap whereby the difference between gross yield (the return had there been no charges) and the net yield (return net of charges) is no more than 300 basis points over 20 years. These are all positive developments for consumers. The reduction in charges is expected to improve the return.
    But that appears to be only the beginning. A consultation paper titled 'Minimum Common Standards for Financial Advisers and Financial Education' has said that all financial products should go 'no load' with effect from 2011. The consultation paper is the work of a panel constituted by government. It is headed by D Swarup, chairman of Pension Fund Regulatory and Development Authority, and has members from the ministry of finance, ministry of corporate affairs, RBI, IRDA and Sebi. Other suggestions include a system for improving financial literacy and creating a self-regulatory organisation for financial intermediaries who will work for fees from the customer.
    The insurance industry has reacted by saying that the views of the major constituents has not been taken into consideration. The industry says that the view of life insurers was not taken into account, neither do the views of insurance regulators find any place in the parts of the report that was made public. The existence of insurance agents' association was not also acknowledged. An investor meet to discuss the report and the industry's response will be held on Wednesday and a clearer reaction of the industry may emerge from the meeting.
    Selling insurance products without any commission is not a unique concept. Many of the grandiose schemes announced in the earlier budgets were aimed at covering large sections of the population under schemes administered by state-owned insurance companies. But the schemes were targeted at those at the bottom of the pyramid who had no knowledge of financial services and, therefore, few sought to get enrolled. Some companies have been selling car insurance online where rates are much cheaper than those available with auto dealers, but sales remain modest.
    "Buying a third-party insurance cover for a vehicle is a legal requirement. But agents do not want to sell standalone third-party cover, as there is no earning for them. Despite the legal requirement for the cover, the number of motor policies are half the number of registered vehicles," says Kamesh Goyal, CEO, Bajaj Allianz Life Insurance. He adds that insurance penetration of householder policies is low because commissions in these products are very low.
    Clearly, what is required is not a demolition of the distribution structure but more competition among the distribution channels. In the developed markets, term insurance cover in life and auto insurance in non-life is available at very cheap rates, thanks to the presence of online aggregators. These online aggregators are websites which get quotes from various companies and allow the customer to choose the most competitive one. The aggregators work for a commission from the insurance companies. In the absence of aggregators, it will be almost impossible to compare quotes across a dozen companies.
    Similarly, the one thing that everyone acknowledges in private, but feigns ignorance about in public is the rebating of commission. In many financial services this happens openly. But in the case of insurance, rebating is always in cash because rebating of commission is illegal. This is not the case in developed markets like the UK where the agent can use part of his commission to buy additional benefits for the policyholders. Companies such as Aviva had earlier made a case for legalising rebating of commissions in India. Legalising rebates benefits all. The company gets higher premium, the policyholder gets better returns and the agent can claim the rebate as an expense like in the West.
    If the life industry has turned a blind eye to the high acquisition costs, it is largely because topline growth has been its only yardstick of success. In a way, the regulator has also kept the spotlight only on the topline by reporting only premia from sales of new policies without focusing on assets under management or persistency ratios. In the absence of other parameters, the topline numbers have been used by agents to assign fancy valuations to life insurance companies.
    One of the positive aspects of the Indian economy is the balance between savings and investment. To a large extent, savings of the salaried have been driven by tax breaks on instruments such as life insurance, provident funds and small savings schemes. The new tax code proposes to reduce the tax breaks and bring down the rate of income tax. If this is the direction of future policy, then there will be very little incentive to save. And if there are no distributors, there will be nobody going out to sell retirement savings products. Globally, there is a debate on whether financial services should be treated as utilities, which should be allowed to function within a narrow operating spread. But in India banks and telephony companies have shown that it is possible to build a pan-Indian distribution network and sell low-margin products.
    mayur .shetty @timesgroup .com

Insurance agents may’ve to come clean

2009-08-20T20:32:00.001-07:00

   INSURANCE agents will soon have to disclose the commission they earn on various policies to clients before selling a product, if a high-level panel of financial regulators has its way.
    The panel, set up to suggest ways to increase transparency in the way investment advisors function, hopes this will ensure brokers do not woo people away from customer-friendly products to those yielding more commission, one of its members said.
    The panel, comprising officials from RBI, finance ministry as well as the regulators of insurance, provident funds and capital markets, will submit its proposals in September.
    Insurers offer up to 40% of the first year's premium of a policyholder as commission to the agent, the panel member said, requesting anonymity.
    Agents get their commissions mostly without the knowledge of policyholders.
    According to Sashwat Sharma, directorinsurance of consultancy firm KPMG, most insurers offer 20-60% of the first year's premium as commission on life endowment and unit-linked policies.
    Many financial advisors are luring potential mutual fund customers into insurance policies to pocket high commissions, after the capital market regulator lifted the entry load on mutual funds, government officials said.
    Recently, Sebi replaced the commission system in the mutual fund industry with a fee negotiated between the broker and the customer.
    This may lead to mutual funds and the New Pension System (NPS) losing investments to insurance products in the short term as, except in metros, a lot of people depend on intermediaries for investment advice, Mr Sharma said. This will change in about 10 years, he added.
    NPS, which was opened to all citizens on May 1, has fixed a commission of Rs 40 for initial costs and Rs 20 for subsequent transactions and, therefore, may be discouraged by brokers.
    Brokers can be checked to an extent by making it mandatory to reveal their commission for each product to customers upfront, a finance ministry official said.
    But experts feel that it may be difficult to monitor if brokers are playing by the rule, particularly in small towns. A better solution, they say, will be to remove or fix commission on insurance policies. "It is difficult to remove the commission on insurance products completely as it is provided in the insurance law itself," said the finance ministry official.
    He, however, said the merits of mutual funds will attract customers. "If the equity market does well, investments will invariably come to mutual funds. If the market doesn't, then there will be less interest in mutual funds anyway. If mutual funds do well, there will be pressure on other segments of the market to reduce commission."

‘Ease FDI in insurance, retail to boost growth’

2009-07-04T19:22:00.001-07:00

The government should go for sweeping reforms and increase FDI limit in the country to push growth, the Survey said.
    While FDI should be allowed in multi-brand retail, its cap should be increased in sectors like insurance and defence, it said. In sectors like health insurance, 100% FDI should be allowed, the survey noted.
    Opening of retail will drive economic growth, it said, although this subject did not find favour till last year because of pressure from the government's allies. It was also being argued that the opening up of retail will affect the future of mom-andpop stores, which employ millions of people.
    The survey said a beginning could be made in food retailing. Initially FDI could be allowed—subject to setting up a modern logistics system, perhaps jointly with other organised retailers. "A condition could could also be put that it must have (for say five years) wholesale outlets where small, unorganised retailers can also purchase items (to facilitate transition),'' the Survey said.
    India at present allows 51% FDI in single brand store like Nokia and Nike. It also allows 100% FDI in wholesale cash & carry model, but has not allowed FDI in multi-brand retail. A recent Parliamentary Standing Committee report had also opposed FDI in retail. The committee had even opposed the entry of big domestic players to protect the unorganised sector.
    In insurance, the survey suggested an increase in the limit to 49% from the current 26%. The government has already proposed this in the Parliament, but because of strong opposition from the Left parties it could not be passed. In weather insurance, it recommended 100% FDI.
    "Raise foreign equity share in insurance to 49%. In addition, consider allowing 100% foreign equity in a special category of insurance companies that provide all types of insurance (health, weather) to rural residents and for all agriculture-related activities including ago-processing,'' it said.

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‘Pre-existing illnesses’ holding up mediclaims

2009-06-21T18:46:00.001-07:00

Mumbai:Disputes over medical insurance claims are on the rise in consumer courts across Mumbai and Thane, an increase attributed primarily to the fact that insurance companies are rejecting claims citing 'pre-existing illnesses'.
    Insurance companies agree that there needs to be more clarity on the term, but add that they have enough evidence to back their findings when they reject a claim. "The problem is mainly at the applicant's end when he does not disclose fully what medical problems he has and then we get medical evidence to prove that he was in the wrong,'' said a senior official with New India Assurance.
    According to the Insurance Regulatory and Development Authority (IRDA), applicants must submit medical records, details of ailments, diseases, diagnosis and hospitalisation for the last four years when buying medical insurance policies.
    But consumer activists say that many private sector insurance firms provide medical insurance without even a simple checkup for people below the age of 45. "The insurance firms are out to capture the huge market and hence do not realise that they may get many false claims,'' Rajan Alimchandani,a consumer activist, said.
    Consumer activist Jehangir Gai pointed out that the insurance companies' claim that the policy holder has been suffering from a disease for a long time is "proved wrong in the consumer court as they do not have solid evidence to deny the policy holder.''
    The IRDA has now decided to introduce a uniform definition of 'pre-existing illnesses' binding on all companies.

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Postal life insurance policies offer high returns with low premium.

2009-06-21T18:12:00.001-07:00

SECURING THE FUTURE

Though not available to all, the eligible among us should grab the opportunity

POSTAL Life Insurance (PLI), a 125-year-old life insurance scheme run by the department of posts, is a good option for people eligible for it as it charges lower premiums and offers higher returns than comparable policies of life insurers.
    The policy, started in 1884 for the employees of Posts & Telegraphs Department, has since been extended to cover all central and state government employees and those working in staterun companies, or about 70% of organised sector employees in the country. In 1995, the department launched Rural Postal Life Insurance to take the benefits to all villagers who account for 60% of India's population.
    It offers better returns than other comparable products. For example, Postal Life Insurance has announced a bonus of Rs 70 per Rs 1,000 sum assured on its endowment policy – where the insured gets the sum assured plus annual bonuses when the policy period is over – irrespective of maturity since 2003.
    In contrast, average bonus announced by the Life Insurance Corporation (LIC), India's largest life insurer, for endowment policies was in the range of Rs 30-48 in past five years.
    Let's take the example of a 30-yearold government employee.
    If he buys PLI's endowment policy called Santosh for risk cover of Rs 1 lakh for a period of 20 years, he will be paying a premium of Rs 400 every month. For a similar policy offered by LIC, the Endowment Assurance Plan, the monthly premium is Rs 442.
    At the time of maturity, after 20 years, he will receive a total of Rs 2,40,000 at the current bonus rate of Rs 70 per Rs 1,000 sum assured. His net earnings, if subtracted total premium paid during the policy, will be Rs 1,44,000.
    In the case of LIC Endowment Assurance Policy, the proceeds could be Rs 2,04,000 (sum assured + accrued bonus + terminal bonus) at the current bonus rates.
    The rate of reversionary bonus is Rs 42 per Rs 1,000 sum assured, while terminal bonus is Rs 200 per Rs 1,000 sum assured. Thus, the net earnings in the LIC scheme will be much lower at Rs 98,000.
    The next obvious question is its tax treatment. Investment in PLI gets all tax benefits any life policy is entitled for. The returns are tax-free and premium payment is subject to tax exemption under 80c.
    A policyholder can pay the premium at any post office across the country. Some selected government departments have the facility of recovering premium from salary. But it is better to take a premium passbook.
    Postal Life Insurance, however, is not for investors who are looking for new-age products like unit-linked insurance policies (ULIPs) and pension plans. The postal department offers six plainvanilla plans: Suraksha (whole life assurance), Santosh (endowment assurance), Suvidha (convertible whole life insurance), Sumangal (anticipated endowment assurance), Yugal Suraksha (joint endowment) and Children's Policy.
    These policies just offer death cover while LIC and other insurance companies offer accidental death benefit with extra premiums. So, if you are interested in a plain vanilla insurance and if you are eligible for it, then Postal Life Insurance is a great value proposition.
pallavi .mulay @timesgroup .com

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Why insurance cos prefer young customers?

2009-06-13T21:46:00.001-07:00

Fears of Lifestyle Change At Later Stage Force Insurance Companies To Find Young Customers

WHEN insurance companies say that it makes sense to start buying life cover early, they highlight how lower mortality charges enable you to buy a cheaper cover or how the power of compounding helps you earn better returns. But there is another reason why buying early makes sense. A little known section in the insurance Act makes it difficult for life companies from hiking rates for those whose life style changes subsequently or those who acquire harmful habits such as smoking or drinking later in life.
    In other words, any individual who buys a policy at age 20 and starts smoking at say 23 would continue paying the rates for a non-smoker. This is because according to Section 45 of the Insurance Act, an insurer cannot call in question any policy claiming that statements made were false or inaccurate after two years of the policy being taken out. This will make huge difference in the premium that the policyholder has to pay since the rate for smokers is almost 30% higher than what non-smokers pay.
    This holds for any person who later in life acquires a drinking problem as well. "But if it comes to our notice later that the proposer was suffering from clinical depression at the time of buying the policy, but did not disclose the same and took to excessive drinking later, we will not pay," said Andrew Cartwright, appointed actuary of Kotak Life Insurance, which had introduced a plan targeted specifically at non-smokers.
    Insurers say the rates are determined on the condition of the insured at the time of proposal, and continue to be in force later, despite any changes in the insured's lifestyle. According to Gorakhnath Agarwal, chief actuary at Future Generali Life Insurance, if any policyholder starts smoking or drinking after buying the policy, it is unlikely to result in a life threatening medical condition within two years of purchase - the time frame within which the proposal can be called to question. This is the practice followed by insurance companies world over because if insurers were not restricted from calling into question policies they would question every death claim on the grounds that it was because of a change in lifestyle which was not reported to the company.
    While nicotine content in the blood is the key indicator of the proposer's smoking/tobacco habits, flawed liver functioning as determined by blood tests would point to alcohol abuse. Alcohol consumption in excess of four units per day is also considered as abuse. "Though there is the possibility of some policyholders objecting to medical tests, the objections will be highest among clients with something to hide and hence, medical examinations are crucial," reasons Mr Cartwright.
    While buyers are not penalised for subsequent change in lifestyle, they are also not rewarded for more responsible behaviour. So even if a buyer chooses to give up smoking or drinking after buying a policy he will end up paying higher rates all his life. "At the time of issuance of policy, the company assesses the risk based on relevant medical and financial information provided by the customer. Thereafter the contract will continue between the company and the insured, irrespective of the change in the policyholder's financial or medical situation," explains Fabien Jeudy, chief actuarial officer, Birla Sun Life Insurance.

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Insurance biggies play on HNI fear

2009-06-13T21:45:00.001-07:00

ICICI Prudential, HDFC Standard Life, Max New York Life & Birla Sun Life Widen Portfolio, Launch New Products

IT'S a classic case of cashing in on people's psyches. With High Networth Individuals (HNIs) in the country being fearful of the erosion of wealth during the slowdown, many large insurance companies and banks have used this period to draw the interest of this premier segment.
    This would explain why many of the insurance biggies such as ICICI Prudential, HDFC Standard Life, Max New York Life and Birla Sun Life have widened their HNI portfolio and launched a slew of ULIPs and guaranteed return products. With most of these having a minimum premium of least one lakh rupees, the impact on their annual premiums hasn't been small either.
    In fact, insurers say that like retail investors, HNIs too seem to be showing a penchant for ULIPs and guaranteed return products. The predominant reason is that many of them have been portrayed as capital protection plans. With HNIs having a low risk appetite post the slowdown, they have largely seen these insurance products as an opportunity to hedge their portfolios in equity.
    Birla Sun Life, for instance, launched a ULIP in March 08 called the Platinum Plus 1 which had a minimum premium of 1 lakh rupees per year, but assured guaranteed returns based on the highest NAV in the first 88 months or at the 120-month maturity, whichever was higher. According to Vikram Kotak, chief investment officer at Birla Sun Life Insurance, the product was conceived at a time when the markets were high and aimed at protecting the interest of high networth clients if the markets took a downward turn. The success of the endeavour soon led to the launch of a similar product in September 08 and a slightly modified product in May 09, to the extent that HNI policies contributed about 6% of their annual premium.
    Tarun Chugh, chief of alternate distribution at ICICI Prudential Life Insurance agrees that ULIPs seems to have become the flavour among HNIs this year. Many HNIs have shown renewed interest in their existing Premier Life Gold Policy, which had a minimum premium of Rs 1 lakh. "In fact, about 1/3rd of the total premium of Rs 15,356 crore at ICICI Prudential was from HNI policies," says Chugh.
    Keeping in tune with market dynamics, even the relatively new entrant Future Generali Life Insurance, launched a product called Future Freedom targeted at HNIs in December 2008 which contributed nearly 30% of their revenue in 2008-2009. The company has announced plans of launching more products targeted at the same segment in the near future.
    However, the latest product targeted at HNIs seems to be the Unit Linked Wealth Multiplier, which was launched by HDFC Standard Life on May 15, with a minimum premium of Rs 2.5 lakh. Speaking of the reasons behind this, Sanjay Tripathi, executive vice president and head of marketing at HDFC Standard Life says, "Our research has indicated that the HNIs segment exhibits tremendous growth potential. Keeping in tune with this segment of population's requirements, we have launched Unit Linked Wealth Multiplier, providing an opportunity to multiply their wealth in the long-term."
    Even banks have begun to take the HNI mantra seriously. ING Vysya Bank, for instance, launched a wealth management solution combining banking conveniences, online wealth management and personalized services for mass affluent customers about six months ago. This product has single-handedly contributed about 25% to their monthly volumes.
    However, while most insurers argue that they have not relied exclusively on the HNI segment during the slowdown, many agree that the tangible fear amongst HNIs has made a lot more open to taking exposure to insurance products. In fact, the interest in many of the products which were initially launched for HNIs are now driving companies to look at launching similar products for other segments. Sonalee Panda, head of products and marketing at ING Vysya Bank agrees that the need to meet the constantly evolving needs of the HNI segment drives many innovations in the financial services industry.
    lisa .thomson @timesgroup .com

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Is it so ‘Saral’, after all?

2009-06-07T17:48:00.001-07:00

LIC's Jeevan Saral, with features such as low monthly premium and liquidity, is comparable with recurring deposits (RDs). But in terms of returns, a traditional instrument like RD has an edge

"BOOND Boond se sagar banata hai" If one goes by this saying, small but periodic investments can grow to a large sum at maturity. This is the basic investment logic behind recurring deposit schemes. Banks and post offices have been offering such schemes in India. LIC, the largest life insurance company in the country, has now joined this club. LIC launched a special plan called Jeevan Saral a couple of years back to cater to such investor needs.
    Jeevan Saral is nothing but an endowment assurance plan where the policyholder simply has to choose the amount and mode of premium payment. The plan provides protection against death throughout the plan term to the extent of 250 times of the monthly premium. For example, anyone opting to pay a monthly premium of Rs 1000 will get a risk cover of Rs 2,50,000 during the policy period. The policy term varies according to the age of the policyholder.
    The death benefit includes the total risk cover and loyalty bonus, if any. LIC also promises return of premiums, excluding first-year premiums and extra/rider premiums. This scheme also offers an accidental death benefit. In real life, it's rare for a policyholder to die during the term of the policy. Even LIC accepts that over 95% of its policyholders survive the policy period and for most policyholders, insurance becomes just another investment. However, unlike pure investment, in case of insurance policies, one would have to wait till end of the policy term to get back the amount assured. This may be as long as 20-25 years. Early policy surrender involves costs in terms of penalty. But this does not hold true for Jeevan Saral.
    The policy offers high liquidity to the policyholder. After five years of active policy (premium paid without default), which corresponds to the term for which premiums have been paid under the policy, one may receive 100% of the Maturity Sum Assured (MSA). (These MSA values are given by LIC). However, one can withdraw partial or full MSA amount after the 10th year.
    Moreover, this is a with-profits plan. Loyalty additions (i.e. bonus) are payable from the 10th year, along with guaranteed maturity benefits. Loyalty addition is nothing but terminal bonus, which actually depends on the profits of LIC's life insurance business. Thus, it is variable return that cannot be estimated at the beginning of the policy.
    Jeevan Saral as an investment option needs to be compared with other avenues such as recurring deposit (RD) offered by banks and post offices or periodical investments in Public provident Fund (PPF). Recurring deposits enjoy liquidity but no tax benefits, while PPF carries tax benefit minus liquidity. Since Jeevan Saral offers both the benefits, it is necessary to compare its returns with other schemes.
EXAMPLE
Suppose 30-year old Mr A opts for a policy involving monthly premium payment of Rs 1000 for 20 years. The total premium paid will be Rs 2,40,000 at the end of the 20th year, which assures maturity sum of Rs 2,73,500 and loyalty addition at the rate announced for the corresponding year. (The average rate at which the bonuses were offered for the past five years was around 5-6%). So if we assume that 6% loyalty will be paid in the 20th year, the total lump-sum earnings at maturity will be around Rs 3,48,000. Thus, the net earnings will be around Rs 1,00,000 in 20 years.
    Instead, Mr B opens a recurring deposit with a PSU bank for 20 years. (The maximum RD period offered is 10 years, but we have assumed RD of 20 years to make it comparable). The deposit rate offered by most banks for 10 years is 7% per annum compounded quarterly. So, the amount receivable after 20 years will be around Rs 5,21,000. Thus, the interest earnings will be Rs 2,81,000, much higher than the guaranteed returns on Jeevan Saral. But one should not forget that the interest income on RD is taxable. Assuming Mr B is in the highest income tax bracket, the total tax paid will be Rs 87,000 and the net interest earned after tax adjustment will be Rs 1,94,000, which is still higher than the returns offered by Jeevan Saral. But not all investors need to pay the highest applicable rate of income tax as RDs don't attract TDS.
    Now consider Mr C, who opts to make monthly investment of Rs 1000 in PPF account for 20 years. He enjoys tax benefit under sec 80c similar to Mr A. At the end of 20th year, he receives almost Rs 5,93,000. Thus, the net earnings for Mr C will be Rs 3,53,000, which will be absolutely tax-free. Moreover, these assured earnings may be much higher than the receivables of Mr A.
    To sum up, if one is looking for a pure long-term investment with periodical payout, traditional fixed investment avenues such as RDs and PPFs score for insurance based investment plans. As for risk cover, one may go for pure-term policies which have very low premiums.
    (With inputs from Bakul Chugan Tongia)
    Pallavi .mulay @timesgroup .com

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This is a good time to invest in ULIP

2009-06-06T22:27:00.001-07:00

This is a good time to invest in ULIPs, combining benefits of a life insurance policy & reaping the best from market upswing, says

IT'S OFTEN hard to take a decision, especially when it includes forking out large sums of money towards investing in a market, which could take a downward turn any day. After all, you do not want to end up digging your own grave. So a couple of months ago, when financial experts began saying that people should look at buying stock at good valuations, you may have pushed the thought to the back of your mind.
    But now, with the semblance of stability returning to the government and the markets slowly inching their way up, the desire to invest has begun to set in. However, with many still wary of direct exposure to the market, investors have begun showing an interest in Unit Linked Insurance Plan (ULIP), which combines the benefits of a life insurance policy with possibility of reaping the best out of upward movement in the markets. But is this a good time for the retail investor to buy a ULIP? SundayET has the answers.
THE RIGHT TIME
If you're wondering whether you've missed up on the right opportunity to invest in ULIP, rest assured that your fears are unfounded. According to most financial planners, every time is a good time to invest in a ULIP, including the current scenario where markets are in recovery mode. In fact, Veer Sardesai, CEO of Sardesai Finance, says that on a psychological level, it is easier for an investor to park his funds now than earlier. "It is difficult for the lay investor to muster the courage to invest in equities at the bottom of the bear cycle (although that is the best time). Hence, today is a good enough time to commit to long-term equity investments," he points out.
    To a large extent, however, the choice of whether you want to invest in a ULIP or not, actually depends on your expectation from the product. Most financial planners reiterate that a ULIP is predominantly an insurance product with linkages to the market and should not be used to time the market. If your priority is to make short-term profits, then you are more likely to realize this goal by investing in a mutual fund or fixed deposits than a ULIP. According to Manik Nangia, corporate vice-president and head of product management at Max New York Life Insurance, "The sure shot way to get good returns from the ULIP, is to remain invested in the market for about 10-20 years, if not more." The rationale is simple and works on the basis of averaging. The longer you remain invested, you have the benefit of leveraging the losses of bear runs against the gains made during the bull runs.
    However, if you are comparing investing in a ULIP with investing directly in the market or in mutual funds, Sardesai warns that the initial charges of investing in a ULIP are fairly higher and may not be the most efficient way to invest in stock markets. For instance, up to 30% of your premium in the first year could go towards premium allocation charge and administration charges but this decreases in the subsequent years. In a mutual fund, however, the charges are extremely low in the initial phases. "Also, if you were looking purely at insurance, then it would make more sense to invest in a term insurance plan than a ULIP," adds Zankhana Shah, founder and owner of Money Care, Financial Planning.
THE ROSY PICTURE
However, you cannot deny that ULIPs give you the benefit of two birds in one shot: the security associated with the insurance component and the flexibility and the transparency associated with investments. ULIPs have a range of options available for customers ranging from the most aggressive to the extremely conservative products and give customers the benefit of being able to change their debt to equity ratio depending upon their risk appetite. In fact, most insurance companies allow individuals between four and eight switches a year without any charge. "However, these switches should ideally coincide with life-stage milestones. As a person gets closer to retirement, he could accordingly increase the allocation to debt within in his/her portfolio," says Nangia. For an extremely conservative investor, there is even the option of adding a capital guarantee clause in some cases. Also, if you buy a ULIP, then you can claim a tax deduction under Section 80 C of the Income-Tax Act.
WATCH OUT
According to most experts, the fundamental decision that people need to take while buying a ULIP is whether this in line with your risk appetite and complements your other investments. Evaluate factors such as your current income, your dependents and your lifestyle in mind. "If an investor has already bought sufficient insurance then going for ULIP may not be a good idea," warns Shah. Also you need to have a good understanding of the various charges that are levied and need to keep a track of the performance over a couple of years. If you have this information, you will easily be able to field yourself from the pitches of unscrupulous sellers who are likely to show you only the data pertaining to periods when the stock market was at its peak.
DOUBLE BENEFITS

• Combines security of life insurance with investment options

• Gives good returns over 10-20 years

• Allows you to choose debt & equity exposure according to risk appetite

• Allows 4-8 switches in the debt/equity ratio free of cost

• Gives tax deductions under Section 80 C of the I-T Act

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Why you should read the fine print of your insurance policy

2009-06-01T20:58:00.001-07:00

State Consumer Disputes Redressal Commission sets aside compensation to businessman who suffered losses during July 26, 2005, saying his policy did not cover flood damage since July 2004

This will serve as a warning bell to those who opt for insurance policies without paying attention to details.
    A Kalyan businessman – awarded Rs 2.25 lakh compensation from an insurance company after he suffered losses in the July 26, 2005, floods by the Thane consumer forum – will now no longer get that amount. The State Consumer Disputes Redressal Commission set aside the compensation, observing that floods were not covered by the policy, which was signed way before 26/7.
FLOOD DAMAGE
Yusuf Hussain Khan, who ran his plastic goods factory at Kalyan, availed the cash credit limit facility (a working capital loan) from the Kokan Mercantile Co-operative Bank. To secure their cash credit facility, the bank took an insurance cover from the Oriental Insurance Company. The bank would debit the insurance premium from Khan's cash credit account.
    From 2004, the insurance cover did not cover flood damages. However, during the July 2005 floods, Khan suffered damages worth Rs 2.5 lakh and requested the bank to give him a flood victim's benefit, which was turned down. Khan's plea to the insurance company was also rejected on the grounds that risk due to flood was not covered under the policy.
    Khan filed a complaint with the Thane consumer forum, which asked the insurance company to compensate him with Rs 2 lakh towards goods damages, and Rs 25,000 towards mental trauma. The insurance company challenged the order before the Commission, which set aside the Thane forum's order last week.
    The commission held, "The forum on its own has drawn a conclusion that… the policy documents had been tampered with [to remove the flood cover from the initial policy]." The commission held that the Thane forum, "committed a serious error to infer accordingly."
    The commission also observed that neither Khan nor the bank, had at any point, objected to the exclusion of the flood cover in the policy in 2004. The insurance company's rejection of the claim "is proper and cannot be faulted with," the commission ruled.

The compensation was denied to Yusuf Khan as the policy did not cover damage due to floods

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Insurance roars back to life in Apr, riding on LIC growth

2009-05-26T18:02:00.001-07:00

AFTER suffering a 6% decline in first premium income (FPI) in fiscal 2008-09, the life insurance industry is back on the growth path. The first month of the current financial year (2009-10) saw a 29% growth in FPI, thanks to Life Insurance Corporation (LIC).
    LIC, whose FPI dipped 10% during the previous fiscal, recorded a 69% growth during April 2009. However, private players, which witnessed a 1% growth in first premium during 2008-09, saw a 3% fall in the same month.
    Data compiled by Irda showed that LIC managed to increase its marketshare by as much as 14% during April 2009. The public sector behemoth managed to corner about 59% marketshare during the period under review against 45% in the corresponding period previous fiscal. On the other hand, private insurers' marketshare slipped to 41% from 55%.
    According to a senior LIC official, the rise in premium income was mainly attributed to the thrust on selling more of conventional products as well as the stock market boom in April 2009, which made unitlinked policies popular. "The stock market performed better during April 2009 than in April 2008, hence unit-linked policies sold more," said the official.
    Interestingly, the single premium adjusted FPI figures for April 2009 are yet to show growth. Adjusted FPI for the life insurance segment witnessed a 14% decline while for private players, there was a 26% drop. LIC, however, managed to show a marginal 4% growth during the period.
    Adjusted single premium considers just 10% of single premium policies and FPI for individual non-single policies. Going by this definition, Max New York Life managed the highest premium income among private players during April 2009, followed by SBI Life and ICICI Prudential. According to this method of calculating premiums, the private players have lost about 8% marketshare to LIC during the first month of the current fiscal. Marketshare of all private players stood at 52.6% during April 2009 against 60.9% in the previous corresponding period.
    Figures show LIC managed a six-fold increase in FPI group non-single policies during April 2009 while group single premiums rose 3.6%. Individual single premium registered a 16% rise during the period.

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