PVT PFs MAY HAVE TO HIRE FINANCE GURUS

New Delhi: Private provident funds, superannuation funds and gratuity funds that manage employee savings of many a corporate house may soon have to appoint an asset management company (AMC) or investment advisor to ensure that they deploy the money efficiently.
The finance ministry is “seriously looking at” a proposal to make it compulsory for such trusts to hire such advisors. Guidelines in this regard would soon be issued, a senior government official, who did not wish to be named, said on Tuesday.
Incidentally, the finance ministry had, in September 2007, issued draft rules on the proposed investment pattern for such trusts. The plan sought to let them invest in the capital market more and less in the securities of central and state governments. The ministry suggested doubling their capital market exposure from 5% and cutting their spread in government securities from 40% to 35%. The final norms are likely soon, he said.
The rules will be applicable to trusts managing funds above a threshold, say Rs 50 crore, which is yet to be finalised. At present, there is no centralised data available on the size of the funds managed by such trusts registered with different state authorities. The government has started collecting data and the process would be completed soon, the official added.
“In these trusts, investment decisions are made by people who are not essentially professionals. These decisions make a difference in the financial health of a lot of people who are in their twilight years. Such decisions have a direct bearing on the livelihood of these people. The government is seriously looking at the proposal,” the official said.
The finance ministry is also spearheading a major change in the way financial markets are regulated to make the regulatory regime in sync with vibrant market dynamics, the official said. For this, the ministry will first push for a regulatory audit that would take stock of the result of various regulatory decisions after a reasonable period.

Source: The Economic Times

PFRDA TO ROLL OUT CUSTOMER AWARENESS PROGRAMME

With the pension sector expected to open up soon, the Pension Fund Regulatory and Development Authority (PFRDA) is gearing up to educate potential subscribers about the need for retirement planning by developing a customer awareness programme. “We are appointing an expert committee to draw up a blueprint for financial literacy,” Meena Chaturvedi, executive director PFRDA said at the Financial Planning Congress on Tuesday. The PFRDA hopes to roll it out in the next six months, she added.

The programme would work at two levels - first, to increase awareness about the New Pension Scheme (NPS) and to expand its subscriber base; and also to educate customers about various pension products being offered by the pension fund managers.

Source: The Financial Express

PENSION BODY MAY GET NOD

New Delhi: The pension reforms bill to set up a regulator and give more freedom to subscribers for investing their retirement money is likely to be tabled in the monsoon session of Parliament, the finance ministry sources said on Tuesday. "Amendments are ready. Hopefully, it would be tabled in the upcoming monsoon session of the Parliament," sources said. The Pension Fund Regulatory and Development Authority Bill (PFRDA) was introduced by the finance minister, Mr P. Chidambaram, way back in 2005 to replace the ordinance promulgated in 2004 for setting up the regulator.

The bill was referred to the Parliamentary Standing Committee after the Left parties opposed the legislation. The standing committee recommended the bill with some modifications. But the amended bill could not be tabled in Parliament due to persistent opposition from the Left. Pension reforms bill will give more freedom to subscribers to invest their retirement money and invite more players in the sector. After the Left exited as the supporting front to the ruling coalition and the government won the trust vote with support of its new allies, hopes have arisen that the PFRDA Bill along with other reform legislations would be tabled in the Parliament.

Two other bills relate to raising of the FDI cap from present 26 per cent to 49 per cent in the insurance sector, and lifting of the voting cap in the private sector banks. The finance minister had recently stated that he would seek support to reforms bills from even those who had voted against the government in the confidence motion. The government had appointed Ms D. Swarup as the interim pension regulator, PFRDA, way back in 2003.

The Centre has implemented new pension system (NPS) for its employees who have joined the government services since January one, 2004, which is now known as interim pension reforms. Under the NPS, the employee has to contribute to his pension fund, matched by employer (in this case, the government). Under the old pension system, pensioners have assured benefits, but under NPS, they have defined contribution. Most states, barring Left-ruled West Bengal, Kerala and Tripura, have also joined NPS, under which employees have been now given freedom to opt for parking five per cent of its funds in the stock market

Source: Deccan Chronicle, The Times of India, The Financial Express, Asian Age

MINISTER FOR INCREASING SDS INTEREST RATE

New Delhi: Union Minister of State for Labour and Employment Oscar Fernandes will ask the Finance Ministry to raise the rate of interest on the Special Deposit Scheme (SDS) to provide higher returns to the provident fund subscribers.

A bulk of the provident fund money is invested in the SDS at an interest rate of 8.5 per cent per annum. Talking to reporters on the sidelines of a function here on Tuesday, Mr. Fernandes said that he would make a representation before the Prime Minister and the Finance Minister in this regard.

Nearly 80 per cent of the retirement money of Employees Provident Fund of over four crore subscribers are parked in SDS. Denying that the government would investment the EPF money in stock market, he said there was a laid down policy on investment of the money. “We can only invest in government securities, State government securities and the public sector. We cannot invest in anything else,” he said.

Source: The Hindu

DIRECTIVE TO INSURANCE FIRM ON EMPANELLING OF HOSPITALS

Kancheepuram: The United India Insurance Company has been directed not to complete the process of empanelling hospitals for the Union and State government-sponsored Rural Health Insurance Policy (Rashtriya Swasthya Bima Yojana) for the families living below the poverty line (BPL) in Kancheepuram district.

Kancheepuram district has been selected as one of the two districts in Tamil Nadu for implementing the Rashtriya Swasthya Bima Yojana on a pilot basis. Tirunelveli is the other one.

As per the scheme, a BPL family, comprising five members, could avail itself of medical treatment at an empanelled hospital for a maximum amount of Rs. 30,000 a year. While the Union government would be paying 75 per cent of the annual premium of Rs.750 per beneficiary family, the State government would remit the remaining premium amount directly to the insurance provider, the United India Insurance Company.

Chairing a preparatory meeting for revenue officials for the implementation of policy, organised by the company here on Wednesday, Collector Santosh K. Misra directed the insurance cover provider to forward the list of hospitals identified by them as per the policy guidelines to the district administration before finalising it to ensure that hospitals located at a particular block or region alone were empanelled. The company should try to empanel hospitals that were located at different parts of the district so that it would be easy for the rural masses to avail themselves of the benefit extended to them under policy.

Responding to his direction, United India Insurance Company Regional Manager, Chennai, P.N. Balasubramanian said most of the private hospitals were not coming forward to get empanelled in the scheme.

However, 25 hospitals, approached by the company had agreed to sign a Memorandum of Understanding to provide healthcare services to the policyholders at the rate specified by the company.

Replying to another query on empanelling names of the BPL family members, Mr. Balasubramanian said the company would go by the list given by the district administration.

If the name of a newborn is to be included in the list of beneficiaries, then the field officer – either a village administrative officer, revenue inspector or any other suitable village-level revenue department employee – should certify that the child belonged to the BPL family.

Source: The Hindu

WIDER HEALTH COVER FOR POOR

New Delhi: With assembly elections in six states and general elections just months away, the government is planning to expand the scope of its health insurance schemes for the poor. At a marginal premium, families above poverty line (ALP) could also get the benefit of insurance cover if the proposal goes through.
The health ministry is planning to modify the scope of its yet-totake-off Rs 8,000-crore National Urban Health Mission (NUHM) for the urban poor to cover services like outpatient care, which are not covered by the Rashtriya Swasthya Bima Yojana (RSBY). Health secretary Naresh Dayal told ET that his ministry was exploring the option of modifying the proposed insurance scheme under NUHM so that the urban poor can get additional benefits.
The government is also examining the possibility of raising the cover from Rs 30,000 initially proposed. These suggestions came up at a meeting of senior government officials last week. APL families are not covered under RSBY.
NUHM was announced in March this year by health minister Anbumani Ramadoss and was to be launched in four months. However, in April, the labour ministry operationalised RSBY—announced last year —for workers in the unorganised sector. Now, the health ministry, which was all set to kick start NUHM on the lines of the National Rural Health Mission, is thinking of re-designing the insurance component of this ambitious programme.
“We are looking at a variety of options. We may either launch the programme with better reach and coverage or will modify it and cover those areas that have been left out by the labour ministry. Once things get finalised, we will take it to the Cabinet for approval. All this may take 3-4 months,” Mr Dayal told ET.

Source: The Economic Times

LOW-CAP COS MAY GET TO ENTER HEALTH INSURANCE

New Delhi/Hyderabad: Insurance reforms seem to be back on track. The empowered group of ministers (EGoM) vetting changes in the insurance Bill is considering allowing health insurance companies to be set up with a start-up capital of Rs 50 crore.
The group, led by external affairs minister Pranab Mukherjee, is scheduled to meet in New Delhi soon to give its final recommendations on the changes in the insurance legislation. This would be the first meeting of the GoM after the Left parties withdrew support and government announced its intention to bring all the Bills related to financial sector reforms during the present term of the UPA. The EGoM will forward its recommendations to the Union Cabinet. The most crucial and controversial proposal is the hike in the foreign direct investment (FDI) cap from 26% to 49%.
The finance ministry has accepted most of the recommendations of the K P N committee with modifications as proposed by the Insurance Regulatory and Development Authority (Irda), and the recommendations have been made a part of the Insurance Laws (Amendment) Act, 2006 (Insurance Bill).
According to a senior government official, the Centre has proposed a minimum capital requirement of Rs 50 crore for health insurance ventures against Rs 100 crore for life and non-life ventures. It is reckoned that a lower minimum capital requirement will attract more players in health insurance, foster competition and improve penetration in the country. The premium from health insurance stood at Rs 4,970 crore in 2007-08, marking a 55% growth over 2006-07. However, this is a minuscule proportion of the country’s GDP.
In case the paid-up capital requirement is relaxed soon, it could benefit the proposed health joint venture between Max India and Bupa of France. Max India chairman Analjit Singh told ET the two partners would be inking the agreement and incorporating the health insurance company next month following which they would seek R1 registration with Irda. “We are looking at a combo offering that will include outpatient and hospitalisation,” Mr Singh said.
Currently, health insurers are given licences under the general insurance umbrella. There are only two standalone health insurance companies, Star Health & Allied Insurance and Apollo DKV. The government has proposed health insurance as a separate category for licensing purposes.
Companies with foreign joint venture partners can operate in life and general insurance business. The prescribed FDI limit of 26% applies to each line of business as these are separate companies. The practice will continue even if the FDI cap is raised, a senior official said. Cooperative banks will also be given licences for insurance ventures. The institutions are only allowed to tie up with insurers to distribute insurance products.
Among the proposed changes, the insurance regulator is set to be armed with more powers and given greater operational flexibility. It will be empowered to clear the appointment of CEOs of public sector insurance companies. The regulator will also have wider powers in inspection of insurance companies. Operational flexibility will enable Irda to respond fast to emerging developments in the market.

The insurance council, an advisory body to the regulator which has been largely defunct for some time, is set to be scrapped. A Special Appellate Tribunal (SAT) will be the arbitrator for disputes. Insurance companies, on their part, will have to become more accountable. They will have to submit balance-sheets once in six months. Their profit-and-loss account and balance-sheets will have to be in sync with the requirements under the Companies Act.

Source: The Economic Times

ECGC TO FORAY INTO DOMESTIC BUSINESS

New Delhi: Export Credit Guarantee Corporation, insurer for the exporting firms, said it is foraying into the domestic credit insurance business. ECGC, which ranks as the world's fifth largest credit insurer, has already approached the regulator for approval of its new business.

"The domestic credit insurance product has been filed with the Insurance Regulatory and Development Authority for final approval, which is expected anytime," ECGC Chairman and Managing Director AV Muralidharan said in a statement here.

The corporation has earned a gross premium income of Rs 668.36 crore during 2007-08 as compared to Rs 617.66 crore in the previous year. It achieved recoveries of Rs 161.50 crores during the year. It has paid a dividend of Rs 162 crore for the last fiscal to the government.

It earned an after tax profit of Rs 479.43 crore for 2007-08 against Rs 369.70 crore in the previous year. As much as Rs 100 crore was added to the equity base of the corporation, augmenting the paid up capital to Rs 900 crore.

Muralidharna said ECGC would be giving a big push to its factoring business. Factoring covers from the corporation help exporters in getting post shipment finance with 100 per cent credit risk insurance protection.

Source: PTI, The Hindu Business Line

ICICI LOMBARD PORTAL FOR STUDENTS

New Delhi: ICICI Lombard General Insurance Company has announced the launch of E-Solutions portal, a unique online 24x7 initiative in the travel insurance segment. ICICI Lombard claims it is the only insurance company to have tied up with 500 universities across the US, UK and Australia to provide a solution for students travelling overseas for further education, Mr Kartik Jain, Head, Marketing and E-channel, ICICI Lombard General Insurance, told reporters.

The main objective of the portal, he said, is to provide quick and instant policy insurance and renewals. This enables students to fulfill their insurance needs instantaneously, avoiding delays. Further, students now have the option of simply dialing in their insurance requirements or clicking onto http://www.icicilombard.com/.

The travel insurance policy covers critical instances such as campus violence, terrorism, baggage loss/delay, passport loss, medical and 8 non-medical covers, compassionate visit by a family member, study interruption, personal accident, third party liability and bail bond.

Source: The Hindu Business Line

ICICI PRUDENTIAL TO LET STAFF ENCASH ESOPS

Mumbai: In An unusual effort to retain talent, the country’s largest private life insurer has opened a window to let employees of the unlisted firm encash their Esops. ICICI Prudential Life Insurance has offered employees who exercised stock options the opportunity to sell shares at Rs 400 apiece.
ICICI Prudential MD Shikha Sharma confirmed to ET that the two promoters—ICICI and Prudential—have purchased shares from employees. She added that the pricing was the same at which new capital was being brought into the company by promoters. “This is a limited liquidity option provided to employees as an exit facility since the shares are not traded,” said Ms Sharma.
The purchase price translates into a valuation of Rs 56,520 crore for the private life insurer. It also means Prudential Plc would have to pay ICICI Bank Rs 12,650 crore to acquire an additional 23% stake if the foreign direct investment cap in insurance is raised. As per the valuation, ICICI Prudential is almost a fourth the size of Prudential, and its biggest overseas operation. While Prudential has the option to increase its stake in the JV to 49%, the capital will have to be brought in at market price. Extent not known The extent of share repurchase from employees is not known. However, ICICI Prudential has earmarked 3% of the capital as the Esop pool. Of this, a small portion has been repurchased. The company had introduced the stock option programme several years ago. It was offered to employees of the rank of branch manager and above. However, the buyback would not necessarily translate into windfall gains for all.

This is because the vesting price is the same at which new capital has been brought in. Although the promoters of ICICI Prudential have brought in well over Rs 4,000 crore, the paid-up capital of the company is just Rs 1,413.6 crore. After the company was valued at over $11 billion by potential investors last year, the promoters have been bringing in capital at that price. The buyback will not result in any reduction in the company’s net worth as the shares are being purchased by the promoters. It will also not lead to any financial loss to the promoters as they would be raising their stake in the company.

Source: The Economic Times

MAX NEW YORK LAUNCHES INSURANCE POLICY FOR POOR HOUSEHOLDS

Mumbai: Leading private insurance company, Max New York Life has launched an insurance policy for the financially under-privileged people in the country. The company is planning to sell the new policy called 'Max Vijay' to one crore people, accounting for 10 per cent of the current market.

The new policy differs with the conventional policies as people can buy a policy for as low as Rs 1,000 with an assured sum, equal to five times of the premium. The policy can be purchased over the counter and will not lapse even if a premium is not paid on time that can be paid as Rs 10 per day.

Speaking to the reporters here today, Rajesh Sud, deputy managing director of Max New York Life said typically, this policy will be targeted at people who have uncertain incomes, who do not have ability to pay premiums at fixed duration and also the people who want to save but do not have access to do it.

Sud said the company will invest 95 per cent of the premium received from selling these policies in government securities, while five per cent will be invested in equities. He said the company will be investing about Rs 500 crore in the new venture and has entered into a 10-year contract for technology with IBM worth $430 million.

IBM will provide technology solutions to the company and also supply it with hand-held terminals, which will be used to give receipts for the premium paid on the spot.
The policy will be sold through telecom companies, retail stores, microfinance institutions and NGOs, he added.

Source: Business Standard, Deccan Chronicle, The Financial Express

BIRLA SUN LIFE TO PUMP IN RS 1,300 CR, LOOKS TO RANK AMONG TOP THREE BY ’10

Mumbai: Having regained its position as one of the top five life insurance companies, Birla Sun Life Insurance has lined up Rs 1,300 crore of investment into the company. The company has been the fastest growing life insurer in the current fiscal, with a 187% growth in new business during the first quarter.
Speaking to ET, Birla Sun Life Insurance president and CEO Vikram Mehmi said that the company would start publishing its valuation numbers from next year which would give an idea of how much the company is worth.
The company has set for itself a target of being among the top three by 2010, by which time it is also expected to break-even. “We are already among the top three if you see the premium in terms of individual business,” said Mr Mehmi.
The company’s assets under management stand at Rs 6,800 crore and is expected to cross Rs 10,000 crore by the end of the current fiscal. “Our current aim is to maintain our momentum and grow faster than the market and get to the top three slot as early as possible,” he said. The company has managed to grow because of a renewed thrust in distribution which resulted in an almost three-fold growth in branch network to 600 branches and a doubling of the agency force to close to two lakh agents.
“We are not worried about the equity market because we see this downtrend as a short-term thing. Also, there is so much under insurance and under penetration, there is a huge opportunity to grow,” said Mr Mehmi. According to data released by the insurance regulator, Birla Sun Life has seen its new business premium grow from Rs 174 crore in the first quarter last year to Rs 501 crore in the first quarter of the current fiscal.
Close to half the premium in the current fiscal has come in June 2008, which saw premium collections top Rs 241 crore. This has given the company an overall market share of 3.5% in the life insurance industry. Along with growing its agency force, the company is also taking measures to ensure that the productivity of this channel remains high. “Our most important parameter is how early the agent gets activated. We have a multipronged strategy for training agents, which includes tying up with schools and brining in senior advisors to train new agents,” said Mr Mehmi. He added that the company’s premium income was sustainable considering that less than 1% of new business came from single premium policies and group insurance was limited to 8-10% of premium.

Source: The Economic Times

LIFE INSURANCE SALES UP 14%

Mumbai: The life insurance industry grew by 14 per cent in the first quarter of 2008-09 despite a 12 per cent decline in the premium collected by Life Insurance Corporation of India (LIC) from the sale of new policies.

LIC earned a first year premium income of Rs 7,524.56 crore in the first quarter as against Rs 8,580.84 crore in the corresponding period last year mainly due to a fall in the sales of individual covers.

The 18 private life insurance companies reported a 73 per cent growth in the first year premium income at Rs 6795.64 crore in the quarter ended June 30 as against Rs 3930.95 crore in the same quarter last year.

The quarter also saw major changes in the league tables. While ICICI Prudential retained its second spot, behind LIC, SBI Life emerged as the third biggest player by displacing HDFC Standard Life. Bajaj Allianz now occupies the fourth position, followed by Reliance Life at five, Birla Sun Life at six, Max New York Life at seven and HDFC Standard Life at number eight.

Birla Sun Life Insurance reported the fastest growth of 187 per cent in the quarter, with a first year premium income of Rs 501.53 crore as against Rs 174.63 crore in the same quarter last year.

Bajaj Allianz lost out as it could not secure higher group corporate business, something that SBI Life managed to do successfully. Bajaj Allianz Life, however, fared well in the retail business, accounting for a premium of Rs 807.53 crore, while SBI Life registered retail business of Rs 603.97 crore.

Source: Business Standard