Can Tendulkar make you buy insurance?

Don’t be surprised if your child pulls you by the hand and asks you to buy him that insurance product. Chances are he has been drawn to it by none other than Sachin Tendulkar.

Indeed, Aviva Life Insurance has not only roped in Tendulkar, but has also named its new children’s insurance policy as ‘Little Master’.

What’s more? Tendulkar was heard as saying at the launch of the product, “It is a great opportunity for forward thinking parents to secure their children’s future and gain kal par control.”

The reasoning of the company is pure and simple. At the launch, Bert Paterson, managing director of Aviva India said, “Sachin is the most popular icon in India for all age groups and his popularity transcends the boundaries of religion, caste and region. It also builds on Aviva’s association with cricket from the time we launched our operations in India.”

Several other life insurance companies have taken that line before - Birla Sun Life, Max New York Life and the now-defunct ANP Sanmar Life if one may recall.

The advantages of celebrity endorsement are all to well known, especially for first attraction. “Then, a Kapil Dev or a Tendulkar is a winner… is a brand in himself, so you try and identify with him,” says an industry official.

But why sports personalities and not film stars? Because of the cost, industry officials agree all agree. “A Hrithik Roshan would be a lot more costly than a Rahul Dravid,” says a distributor with an insurance company.

Why not mascots then? “You have to invest quite a lot in mascots. You remember Asian Paints’ mascot today after it has been publicised for so long. However, mascots have one advantage. They don’t change like celebrity endorsers do,” says the distributor.

And do celebrity endorsements work? No, says H Ansari, a former IRDA member. “Insurance is sold, not bought. Unless someone comes to you personally and tries to sell the product to you, you wouldn’t buy it. Celebrity endorsing may not to lead to buying,” he adds.

So, why aren’t mutual funds allowed to use celebrity endorsements on the ground that they could mislead, whereas insurance companies are?

At any rate, around 90% of the insurance policies sold by private sector insurance companies last financial year were unit linked insurance plans (Ulips), which are more investment than insurance products.

Indeed, “If banking can do it, insurance can do it, why not mutual funds? … It can’t be misleading for one and not misleading for others,” says Jaideep Bhattacharya, chief marketing officer of UTI Mutual Fund.

Penetration of mutual funds in the country is less than 4% today and celebrity endorsement could help improve penetration, he adds.

Waqar Naqvi, vice president of international sales & speciality business at Birla Sun Life Mutual Fund echoes the view. “Imagine Aishwarya Bachchan endorsing a mutual fund product … While performance is the predominant factor people look at while investing, there are other things that work in (a fund’s) favour as well.”

But, others feel mutual funds don’t need celebrities as performance is the only thing that counts.

“If investors do not see performance, they would not invest in the mutual fund,” says a fund manager. A P Kurein, chairman of the Association of Mutual Funds in India is also clear: “We are not very keen on celebrity endorsement and misleading advertisements.”

Article by: Khyati Lodaya for DNA

Australia's IAG in JV talks with HDFC

Insurance Australia Group Ltd is in talks to buy 26 per cent in an Indian insurance firm founded by Housing Development Finance Corp, media reported on Monday. HDFC in May bought out its partner Chubb Corp in a general insurance venture after an uneasy relationship stalled growth. IAG, Australia's top car and home insurer, is in "advanced" talks to buy the stake, media said, citing unnamed sources. Other "strong contenders" were US insurer Travelers and Munich Re's insurance unit ERGO, the paper said, adding HDFC expected to receive a premium for the stake. Last week, a source said Travelers was among several insurance firms that HDFC was talking to, and that a final decision had not been made. HDFC also runs a life insurance firm in a joint venture with UK's Standard Life.

source:Economic Times

Mediclaim cover may come in parts

Do you have a mediclaim? Get prepared to shell out a portion of the hospital bill in cash in case expenditure under certain heads crosses maximum allowable limits. This may happen even if the total bill is well below the sum assured. Kolkata-based National Insurance Company (NIC) has introduced sub-limits under different heads like room rents, surgeons, medical practitioner, and items like anaesthesia, blood, oxygen, OT charges and pacemakers. Sub-limits, basically mean an individual cannot spend more than the stipulated amount under any specific head. If spent, the individual will have to shell out excess from his/her pocket. What more? Your premium bill may be higher by anything from 5-100% as NIC has also raised premiums for almost all age brackets. The older you are, the higher you will have to shell out. The insurer has raised premiums for persons older than 25. It has, in fact, also hiked the minimum cover or sum assured from Rs 15,000 per person to Rs 50,000. A quick look at the premium hike shows that for individuals between 26 and 35 years the rise is 5%. For the 36-45 range, the rise is 30%. Individuals between 46 and 55 years will have to pay 55% more, while those between 56 and 65 years will now be required to shell out 80% extra. Citizens older than 66 years will see their premiums double. Earlier, NIC had just one flat premium rate for a new-born up to the age of 35. This has now been broken up into two categories. One includes children below one year to 25 years where premiums have in fact declined by about 20%. The other is 26-35. In the revised mediclaim policy, NIC has introduced sub-limits under three broad heads. These are room rents and the limit is 1% of sum assured to a maximum of Rs 5,000 per day. For intensive care units, the sub-limit is 2% of sum assured per day and the maximum is Rs 10,000. Overall limit under this head is 25% of sum assured per illness. The other head includes, surgeons, anaesthetist, medical practitioner, consultants, and specialists’ fee. The maximum limit is 25% of sum assured per illness. Cost of pacemaker, anaesthesia, blood, oxygen, OT charges, surgical appliances, medicines, drugs, diagnostic material & X-ray, dialysis, chemotherapy, radiotherapy, artificial limbs and cost of stent and implant will have to be necessarily 50% of the sum assured. The only relief that an individual may get is when they opt out of the cashless system where NIC may directly pay the hospitals. “We are not charging the 6% service charge on premiums if a consumer opts out of the TPA system,” said a senior NIC official. Nevertheless, a 10% discount on covering the entire family remains so does the cumulative bonus. This bonus increases the sum assured by 5% every year in case there are no claims. The maximum can be 10 years. NIC, however, will provide for free health check-up every four year provided the preceding years were claim free. The maximum limit, however, is 1% of the sum assured.

source :Economic Times

Banks may be allowed to form insurance arms

NEW DELHI: Banks are likely to be allowed to form subsidiaries to hold their stake in insurance joint ventures, according to the chairman of the Insurance regulator, IRDA. However, non-banking promoters of insurance joint ventures looking to form holding companies to fund these businesses, may find it difficult to do so. The IRDA view is significant, given the Foreign Investment Promotion Board is meeting on Friday to consider ICICI Bank’s proposal to transfer its stake in its insurance joint venture to a subsidiary holding company. ICICI Bank also wants to induct 24% foreign direct investment in the subsidiary. State Bank of India also proposes to set up a subsidiary for all its non-banking arms, including its insurance venture. “While banks are constrained due to a limit on their exposure to insurance ventures, their need to establish a holding company is justified. For all other promoters which are not banks, whether the holding company route is really required will have to be considered on a case-to-case basis,” CS Rao, chairman, IRDA said. Banking regulations will take precedence over insurance in this case, he said. However manufacturing or service sector companies, should continue to fund their insurance business without floating a holding company. Under Section 19 (2) of the Banking Regulation Act, the investment by a bank in a subsidiary company, should not exceed 10% of the bank’s paid-up capital and reserves. This would constrain a bank’s ability to expand the capital of its insurance venture. Vesting ownership of the insurance venture in a holding company that could draw funds from other investors as well is one way of getting around this constraint. IRDA regulation stipulates that an Indian promoter of an insurance company should not be a subsidiary company under the Companies Act. Banking companies are differently placed. Already, companies including Max India and Bharti have established special purpose vehicles to act as holding companies to fund their insurance ventures. Bajaj Allianz is also expected to come under a holding company - Bajaj Financial Services - controlled by an overall parent Bajaj Holdings under the proposed demerger plan. Officials at Bajaj Allianz refused to comment on the status of the proposed holding company. In a response to an email, a spokesperson said, "the decision of Bajaj Auto to form a holding company for all its financial services is a part of the demerger process and not otherwise."
On the decision of the Foreign Investment Promotion Board (FIPB) which has so far not cleared ICICI Bank's proposal to sell equity of its holding group ICICI Financial Services, the IRDA is of the view that it is more important to serve the larger interest of the industry than starving ICICI's insurance ventures of funds. ICICI has proposed to set up ICICI Financial Services as a wholly-owned subsidiary to hold its investments in insurance and mutual fund business. The bank had applied for permission from FIPB to induct 24% foreign investment in the holding company. “Rules flagged by the FIPB distinguishes between a subsidiary versus a company. Though the registration principles under the IRDA specify that a company and not a subsidiary can hold stake in an insurance venture, this difference is not spelt in the law,” Mr Rao said. Besides, approval of ICICI bank’s holding company does not mean the bank has ceased being a promoter in its insurance ventures, he clarified. The FIPB is likely to again consider the ICICI holding company proposal on July 13. The insurance division in the finance ministry and the IRDA have said the proposal does not violate foreign holding limits for the insurance sector. ICICI problem arose as it was felt by some officials that foreign investment in a holding company was intended to circumvent the ceiling on foreign equity in insurance companies. As per IRDA norms, this conflict arises only when foreign promoter of an insurance company also has a stake in the holding company apart from the joint venture

source:Economic Times

Birla Sun expects online payers to double

Birla Sun Life Insurance, which was the first life insurance company in India to enable purchase of insurance policies through its website, is expecting the number of its policyholders using the internet to pay their insurance premium to double this financial year.

The company’s website was launched in 2006 to test if insurance could be sold online in the country, and since then the company has seen more online activity for paying premiums than attracting new policy takers through the internet.

The company’s 15 per cent premiums now comes through the internet with around 15,000 policy holders using the internet service.

However, the percentage of new insurance policy holders signing up through the internet still remains close to only two per cent for the company.

“Most people in India still prefer the personal touch from the company’s side, when it comes to buying life insurance policies,” said Vikram Mehmi, president and CEO, Birla Sun Life Insurance.

The company offers products such as Birla Sun Life Flexi SecureLife Retirement Plan (without life cover) and Birla Sun Life Single Premium Bond for online purchase and intends to place only simple products online. Other players in the online life insurance segment include Bajaj Allianz, ICICI Prudential and Tata AIG Life.

Mehmi added the company was receiving 40 per cent of its revenues from its new products. Birla Sun Life Insurance now has close to 18 products in its stable and has just launched the Gold-Plus plan, which has a minimum premium of Rs 10,000 for a duration of three years and takes investment in seven fund options in varying proportions depending on an individual’s risk appetite.

In Gujarat, the company clocked a premium of Rs 53 crores for the year ended March 2007. It has developed a network of 3,000 advisors in the state.

The company recorded 1.2 million life insurance policies across the country in March 2007, and expects a further one million policies to be added in the coming few months.
source :Business Standard