Tuesday, June 17, 2008

Rel Life to launch InvestAssure plan

Reliance Life Insurance has set its eyes on the mass market segment. The company will launch the Reliance Super InvestAssure Plan (RSIP), a Ulip with minimum premium as low as Rs 5000, next week.

The plan offers guarantee contributions in case the customers remain invested for at least 10 years. They are targeting the mass-market as the product has a minimum lower premium. The plan is not ideal for high networth individuals.

Source: Insure magic

Insurance products should be simple: Chidambaram

Bangalore: Noting that India is among the under-insured countries, Finance Minister P Chidambaram today said insurance products should be simple and need to reach the rural population where penetration is low.

He was speaking after inaugurating the Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd, a partnership between two of largest nationalised banks and the Asian Insurance arm of the world's largest banking and financial service group.

Applauding the partnership between the three giants— Canara Bank, Oriental Bank of Commerce (OBC) and HSBC Insurance Asia Pacific Holding Ltd— he said the the new firm was the 19th life insurance firm to be launched in India and that there were "six more in the wings."

The growing numbers indicate that India had the capacity to support such a large number of companies and that there existed an "unmet demand" for insurance products in India, he said.

Observing that the insurance penetration in India had been low, he said India was among the under-insured countries. He said insurance products also needed to reach the rural population where penetration was low.

However, as a measure of caution and advice, he said "products should be simple." "Plain vanilla is still the best flavour for an ice-cream," he said quoting an analogy. "People in India are simple folks, who work hard and save. "I believe that simpler the product, better will be the reception.

Source: PTI

Detariffing in general insurance

Detariffing regime is an era whereby general insurance providers offering fire, engineering, mediclaim and motor insurance have been given the freedom to decide the premium to be charged. The cost for an insurance policy was earlier decided by the Tariff Advisory Committee (TAC).

This was implemented in two phases — first started on Januray 1, 2007, when the insurers were permitted to increase or reduce premium by 20% on both sides from their then existing pricing. During this phase the product terms and conditions couldn’t be revised.

In the second phase, which came into effect on March 2008, complete freedom on pricing had been granted, including customisation of product according to each individual.

So, if you are looking for insurance, be ready to be bombarded with questions in the detariffed regime. People seeking fire, engineering and motor cover would be subjected to a rigorous enquiry, before being issued a policy, especially if they have a history of claiming damages.

The premium amount of an insurance policy can be either loaded or discounted, based on several risk factors, as against the earlier norm of fixed premium prices for a particular sum assured in a category.

A Bihar resident asking for coverage against floods would be quoted a higher premium, while a person from Rann of Kutch would be given discount. The reason being, Bihar is geographically at a higher risk of flood as compared with the Rann of Kutch. Thus, the insurance company sees more chances of the Bihar policy holder claiming flood damages.

Similarly, if you want to insure your car, the policy premium would be based on the model, colour and type, apart from your claims history. The premium amount quoted to a person seeking an insurance cover in an accident-prone city is higher.

Therefore, the due diligence process for picking up a general insurance product would become more time consuming, as you would not get a fixed chart of premium amounts.

The insurance company would first ask you to answer a lengthy questionnaire and then provide a premium chart based on your answers and declarations.

Depending on five risk factors, an insurance provider would either ask you to shell out extra bucks for the cover or offer heavy discounts.

However, experts warn consumers to be careful of falling for excessive discounts. “The provider who is offering tempting discounts may later ask you to pay additional costs under the disguise of service charges or investment charges,” said an industry observer.

Instead of just going for discounts, investors should also check for the services an insurance company provides, such as a cashless claims process or a shorter claim-waiting period.

Insurance cost for a dark colour car would be a level higher because such cars are subjected to higher accident risks. Further, insurance companies would hike the premium amount for certain car models, having a low-safety record.

Earlier, you had to pay a fixed premium, but now the premium would differ, based on the model of the car, the colour and the roads that it would hit.

As a result, the due diligence process for picking up a general insurance product would become more time consuming, as you would not get a fixed chart of premium amounts.

The insurance company would first ask you to answer a lengthy questionnaire and then provide a premium chart based on your answers and declarations.

Depending on five risk factors, an insurance provider would either ask you to shell out extra bucks for the cover or offer heavy discounts.

However, experts warn consumers to be careful of falling for excessive discounts. “The provider who is offering tempting discounts may later ask you to pay additional costs under the disguise of service charges or investment charges,” said an industry observer.

Instead of just going for discounts, investors should also check for the services an insurance company provides, such as a cashless claims process or a shorter claim-waiting period.

Source:
Team DNA / DNA MONEY

Why insurance agents hate SIPs with cover

Summakant Shastri is an insurance agent. Be it the wedding of his friend's daughter or a relative's funeral, he never misses a chance to sell a unit-linked insurance plan (Ulip) or two.

Shastri has sold them for years, playing on the twin emotions of fear and greed commonly found in human beings. For those who feared the future, he sold Ulips as insurance. And, for those who wanted their money to multiply, he sold them as investments.

Mutual funds often lost out because Ulips had this liquid-like property, where they took the shape of whatever vessel they were poured into. MFs were rigid — they were purely investment products and did not provide for worldly happenings such as death.

Then, fund houses suddenly woke up. Taking a leaf out of the insurance companies' book, they started offering plans that offered insurance, too. Birla Sun Life Mutual Fund's Century SIP is the latest in that line. It is a systematic investment plan (SIP) that is optional. The plan should not be confused with a mutual fund scheme. While a scheme has a specific investment objective, an SIP is just a mode of investment that can be applied to any of the various schemes offered by a fund house. At present, Century SIP will be available on all 18 open-ended equity schemes offered by the fund house.

To participate in this plan, an investor needs to invest a minimum of Rs 1,000 every month. There is no upper limit for this investment. Under this plan, an MF investor will get insurance cover on his life 45 days after paying the first instalment. While some fund houses charge a fee for this cover, Birla MF is offering it free of charge. In the first 45 days, only accidental deaths will be compensated.

The cover will be available to the investor till he or she turns 55. So the tenure of the cover under Century SIP will be 55 years minus the current age of the investor.

For an investor aged 40 years and five months, the tenure of the Century SIP insurance cover will be 14 years and seven months. Let's say an investor starts an SIP of Rs 5,000 per month. If he dies within the first year of paying his instalments, his nominee is eligible for a cover of 10 times the SIP amount — Rs 50,000. If he dies during the second year of SIP payments, the nominee gets 50 times the SIP amount as the life cover — Rs 2.5 lakh. And if he dies any time in the third year or after that, the nominee gets 100 times the monthly SIP amount-Rs 5 lakh. Here again, the cover is subject to a maximum of Rs 20 lakh.

The cover cannot be claimed if the SIP is discontinued before the completion of three years or if the investor defaults on payments of instalments on two consecutive occasions.

Investors who can afford to set aside at least Rs 1,000 every month for equity investments can take this offer, depending, of course, on the underlying scheme's compatibility with your investment goals. Thus, if none of the Birla schemes fits your needs, you should not take one just because it offers free insurance. But if one does, the Century SIP is a good reason to make that switch.

Shastri still believes only insurance companies can offer good insurance. But, sooner or later, as the trend catches on, be sure even he will come around to seeing sense.

Source: N Sundaresha Subramanian/ DNA MONEY

PSU general insurers face mark-to-market pain

Public sector general insurance companies are feeling the heat of the stock market slide, as their portfolios contain large "fair value change" accounts or mark-to-market investments, which are vulnerable to market downturns.

Although year-end figures of the state-run insurers, which control 60% of over Rs 28,000 crore general insurance market, are yet to be finalised, their investment income might not register gains as high they expected.

Industry sources indicated that the four companies — National Insurance, Oriental Insurance, New India Assurance and United India Insurance — have huge reserves, or what they internally call "family silver," but rely upon investment return to maintain solvency margins.

In fact, their investment portfolios sometimes compensate for relatively weaker underwriting performance.

Top officials of one PSU insurer told DNA Money that solvency is never an issue for the four companies.

But sources said that with the heavy discounting of premiums, profitability of the four firms could be strained. A decline in investment income would only add to their woes.

The Insurance Regulatory & Development Authority (Irda) had expressed concern that extensive price undercutting would impact solvency margins and directed all general insurers to file solvency statements on a quarterly basis.

The idea was to make the insurers focus on capital management and ensure that capital adequacy receives adequate priority when the companies chalk out future plans.

A recent report on global insurance by Moody-Icra said, "The capitalisation levels of public entities in general remain comfortable, supported by their investment books, which have benefited from large gains in their equity portfolios. By contrast, private insurers with much smaller investment portfolios and better underwriting results are less-dependent on investment return to maintain solvency margins."

Analysing the investment portfolios of India's top six insurers, the study says public insurers have fairly strong portfolios, which provide them with considerable liquidity and adds to their financial strength.

Source: Nandini Goswami/ DNA MONEY

BAJAJ ALLIANZ LIFE TO BEEF UP CAPITAL BASE

Mumbai: Bajaj Allianz Life Insurance will receive capital infusion of around Rs 500 crore from its promoters this fiscal. Bajaj Allianz is a joint venture between the Bajaj group (Bajaj Finserv) and Allianz.

Mr Kamesh Goyal, Country Manager Allianz and CEO Bajaj Allianz Insurance, said that the company’s current capital base stood at Rs 1,210 crore which would be further hiked by around Rs 500 crore. .

The company’s focus this year is to maintain its expense ratio by curbing expenditure on hiring new agents and branches. The expense ratio stands at around 14 per cent.
“Our agency force is around 2.3 lakh and we have a branch network of 1,200. This year our focus is more on increasing the productivity of the existing agency force,” Mr Goyal said.

Bajaj Allianz Life made a net loss of Rs 19 crore in the last fiscal and the company hopes to wipe out its earlier losses by bringing down expenses. In terms of new products, the company plans to launch a pension and health insurance plan this fiscal.

On the recent volatility in the stock market, Mr Goyal said that customers in the interiors of the country may now look at switching to traditional products. ULIPs currently contribute 95 per cent of the company’s business and its funds under management stand at Rs 14,000 crore.

Bajaj Allianz Life on Thursday tied up with Thomas Cook for the distribution of life insurance policies. As a corporate agent, Thomas Cook will sell Bajaj Allianz’s products across its 160 retail branches.

Source: Business Standard, Deccan Chronicle, The Tribune, Asian Age, The Statesman, Deccan Herald

NEW IRDA CHIEF FOR THRUST ON RURAL, HEALTH INSURANCE

Hyderabad: Developing an enabling environment for the growth of rural and health insurance tops the agenda of Mr J. Hari Narayana, new Chairman of Insurance Regulatory and Development Authority (IRDA).

“While protection of policy-holders’ interest is paramount to the regulator always, we will also ensure the spread of insurance in rural and health sectors. There is lot of potential in these sectors,” Mr Hari Narayana told Business Line after taking over as the third chairman of IRDA here on Thursday.

The regulator would be happy as long as the prescribed rural and social obligations are met by the companies, he said, adding that the current scenario was satisfactory in that regard.

Various ways and means would be “carefully examined” to ensure the health and penetration of health insurance, the chairman said. “There are some high-level panels which examined various aspects on health insurance and we will take appropriate steps shortly,” he said.

Personally, he felt that one should take health insurance at a younger age itself.
Observing that the growth of insurance industry was “very good” at 13 per cent last year at over Rs 75,000 crore, he said the growth could be 18 per cent this year.

On the significant share of Unit Linked Insurance Plans (ULIPs) in insurance industry and their dependence on a volatile financial market, Mr Hari Narayana said, “There is nothing to worry as Indian investors (holders of insurance policies) are very mature. We will monitor the situation while promoting transparency.”

Source: The Hindu Business Line