New Delhi: Country's largest life insurer LIC is losing business in the overseas market year after year as it has failed to attract new customers amid stiff competition.
The first premium collection from foreign operations which stood at Rs 123.41 crore in 2004-05 declined to Rs 120.8 crore in the following year and further to Rs 108.67 crore for the year ended March 2007, official sources said.
Thus, the new business in the overseas market declined by nearly 12 per cent in a span of three years, they said. The decline in the first premium income in successive years is mainly because of failure of marketing strategies to attract new customers amid stiff competition, the sources said.
The sources also attributed the decline to reduction in sale of single premium policies by LIC Bahrain for 2004-05. However, on the back of old policies, renewal premium witnessed a growth. During 2004-05, LIC's overseas operations earned renewal premium of Rs 235 crore, which increased to Rs 292 crore during the next year. Renewal premium stood at Rs 341 crore in 2006-07.
Source: PTI, The Telegraph, Mumbai Mirror
Monday, July 7, 2008
LIFE INSURANCE HITS A ROUGH PATCH
Calcutta: The life insurance business in the country is fast losing its steam. The premium income of life insurance companies from the sales of new policies in 2007-08 grew only 23.3 per cent compared with 110 per cent in the previous financial year.
Life insurers’ income from first year premiums stood at Rs 92,988.17 crore at the end of March this year compared with Rs 75,406.52 crore in 2006-07 and Rs 35,897.95 crore in 2005-06.
Since the opening up of the segment to private players and the introduction of market-linked products envisaging better return than traditional plans, the first year premium income of life insurers has been growing over 100 per cent. A large part of this growth came from an unprecedented surge in single premium policy sales, both in the group and the individual segments.
However, last fiscal saw a significant slowdown in sales of single premium policies. Individual single premium policy sales in 2007-08 grew to Rs 28,770.68 crore from Rs 23,545.99 crore in 2006-07 and Rs 10,998.99 crore in 2005-06.
A similar slowdown was seen at the group policy level, too. Group single premium policy sales in 2007-08 were Rs 11,872.17 crore, which were lower than Rs 12,422.04 crore in 2006-07. In 2005-06, group single premium policies accounted for a total premium income of Rs 4,406.24 crore.
In individual non-single premium policies, growth came from the sales of unit-linked plans only. The first year premium income from the sales of individual unit-linked policies went up to Rs 39,454.50 crore at the end of March this year from Rs 19,365.45 crore a year ago and Rs 6,248.28 crore in 2005-06.
New premium incomes from traditional policies, on the other hand, have come down to Rs 10,314.69 crore from Rs 18,544.57 crore at the end of March 2007 and Rs 13,619.27 crore in 2005-06.
Sum assured in individual regular premium policies grew 17 per cent to Rs 5,54,862.39 crore from Rs 4,74,379.10 crore at the end of March 2007. The slow growth in sum assured is attributable to a decline in the sales of individual traditional policies and riders there on.
Source: The Telegraph
Life insurers’ income from first year premiums stood at Rs 92,988.17 crore at the end of March this year compared with Rs 75,406.52 crore in 2006-07 and Rs 35,897.95 crore in 2005-06.
Since the opening up of the segment to private players and the introduction of market-linked products envisaging better return than traditional plans, the first year premium income of life insurers has been growing over 100 per cent. A large part of this growth came from an unprecedented surge in single premium policy sales, both in the group and the individual segments.
However, last fiscal saw a significant slowdown in sales of single premium policies. Individual single premium policy sales in 2007-08 grew to Rs 28,770.68 crore from Rs 23,545.99 crore in 2006-07 and Rs 10,998.99 crore in 2005-06.
A similar slowdown was seen at the group policy level, too. Group single premium policy sales in 2007-08 were Rs 11,872.17 crore, which were lower than Rs 12,422.04 crore in 2006-07. In 2005-06, group single premium policies accounted for a total premium income of Rs 4,406.24 crore.
In individual non-single premium policies, growth came from the sales of unit-linked plans only. The first year premium income from the sales of individual unit-linked policies went up to Rs 39,454.50 crore at the end of March this year from Rs 19,365.45 crore a year ago and Rs 6,248.28 crore in 2005-06.
New premium incomes from traditional policies, on the other hand, have come down to Rs 10,314.69 crore from Rs 18,544.57 crore at the end of March 2007 and Rs 13,619.27 crore in 2005-06.
Sum assured in individual regular premium policies grew 17 per cent to Rs 5,54,862.39 crore from Rs 4,74,379.10 crore at the end of March 2007. The slow growth in sum assured is attributable to a decline in the sales of individual traditional policies and riders there on.
Source: The Telegraph
UK INSURANCE MAJOR SCALING DOWN INDIA OFFICE
Upset over the slow progress on India opening its financial services to foreign investors, Lloyd's of London, the world's largest reinsurance market, has decided to withdraw its main representative from Mumbai. Lloyd's has effectively decided to "mothball" its Mumbai office because it has so far been unable to secure a licence to write insurance business locally and believes that it has little prospect of doing so in the near future.
The company will retain the services of two junior employees on the ground in Mumbai, but it has suggested that its senior representative should seek alternative employment, The Sunday Telegraph reported.
Lord Levene of Portsoken, the chairman of Lloyd's, visited India to lobby for the liberalisation of its foreign investment rules on several occasions and is reportedly unhappy that India is now the only major market in the world to block overseas companies from participating in the domestic reinsurance market.
Lloyd's is estimated to write 400 million dollars in business for the Indian market from London every year, but believes it could gain a much greater share of the reinsurance sector if it were allowed to write business locally.
"We were very heartened by the discussions between the then Chancellor and the Indian government in early 2007 that the Indian reinsurance market would be opened up to foreign reinsurers," said Levene.
"On the basis of that we appointed a senior representative, but despite the promises that were made it is now clear that there is absolutely no progress in sight. We are very disappointed," he added
Source: The Financial Express, The Telegraph
DO A SAHARA ON EPFO
One of the key sources of uneasiness that triggered the recent face-off between the banking regulator and Sahara group’s flagship finance company, Sahara India Financial Corporation Limited (SIFCL) was the hundreds of crore languishing in Sahara’s coffers as unclaimed deposits. These are funds where there is no account or trace of the original depositors.
India’s premier social security organisation, the Employees Provident Fund Organisation (EPFO), runs three schemes—a provident fund, a pension fund and an insurance scheme. Like SIFCL, it collects contributions from millions of workers except that EPFO contributions are mandatory for most industries. Like SIFCL, the EPFO has money lying in its accounts as unclaimed deposits: only the amount is much larger, running into thousands of crores.
In its June 16 order, the RBI lifted the blanket ban on SIFCL accepting deposits but set tough conditions. Apart from requiring SIFCL to ensure 100% compliance with the banking system’s ‘Know Your Client’ norms and submitting a comprehensive business plan by this August, RBI got SIFCL to promise a key governance reform during a personal hearing with SIFCL’s managing worker.
SIFCL has to reconstitute its board so that at least half of the directors are ‘independent’ in RBI’s view by July 16. While the para-banking firm would be scrambling to deliver on this promise, a few hundred kilometers from its Lucknow office, another freshly constituted board of directors meets for the first time on Saturday—the EPFO’s Central Board of Trustees (CBT).
Going forward, at least half of SIFCL’s directors would be expected to know the meaning of the term ‘fiduciary responsibility.’ The same cannot be said about the ‘new’ CBT. Its 43 members include the labour minister as chairman, 15 state government representatives, ten employee union leaders, ten employer delegates and senior officials from labour and finance ministries.
To get a point across in such a large gathering is a task, especially when employee union leaders raise their political voice on matters like the annual setting of the PF rate. A matter of simple arithmetic till the late nineties, the PF rate—which is nothing more than a ‘dividend’ based on earnings—has become a victim of political pressure.
Little is likely to change in the short run—with inflation touching 11.63% and Left union leaders demanding a 12% PF rate for the year, compared to earnings of 8.25%. That there is little hope for governance reforms in the medium-term is obvious from the fact that there are hardly any new names in the re-formed Board, notified by the labour ministry.
In fact, for the first time in the 56-year history of EPFO, the ministry has notified the Board with some slots yet to be filled up. As many as four members are yet to be named—two employee representatives and two representatives from Indian manufacturers and small scale industries.
NDA’s last labour minister, the late Sahib Singh Verma, had refused to clear the Left unions’ representative’s name for a while the last time the Board was reconstructed in 2004, but had yielded before it was notified. It’s not clear yet what has prompted the UPA to notify the Board in such a hurry. The implication—when the several sub-committees are reconstituted on Saturday, four stakeholder reps wouldn’t be available for consideration.
That the Board is more akin to a ‘jumbo’ cabinet than a monitoring force or source of direction—even Board members acknowledge. For instance, the 15 state representatives, usually the labour secretaries, almost never speak in board meetings, even on issues that directly affect their jurisdictions—like 99% of their states’ workers’ accounts being inaccurate or 90% of employers defaulting on PF contributions (recently revealed to the Board’s executive committee).
In SIFCL’s case, RBI could step in as the regulator. But the EPFO, the country’s second largest non-banking financial institution after the LIC of India, goes unchecked as it is the administrator as well as regulator of the country’s retirement funds. It’s time the government had a serious rethink and professionalised the only entity overseeing the monolith’s operations—the CBT.
Source: The Financial Express, Economic Times
India’s premier social security organisation, the Employees Provident Fund Organisation (EPFO), runs three schemes—a provident fund, a pension fund and an insurance scheme. Like SIFCL, it collects contributions from millions of workers except that EPFO contributions are mandatory for most industries. Like SIFCL, the EPFO has money lying in its accounts as unclaimed deposits: only the amount is much larger, running into thousands of crores.
In its June 16 order, the RBI lifted the blanket ban on SIFCL accepting deposits but set tough conditions. Apart from requiring SIFCL to ensure 100% compliance with the banking system’s ‘Know Your Client’ norms and submitting a comprehensive business plan by this August, RBI got SIFCL to promise a key governance reform during a personal hearing with SIFCL’s managing worker.
SIFCL has to reconstitute its board so that at least half of the directors are ‘independent’ in RBI’s view by July 16. While the para-banking firm would be scrambling to deliver on this promise, a few hundred kilometers from its Lucknow office, another freshly constituted board of directors meets for the first time on Saturday—the EPFO’s Central Board of Trustees (CBT).
Going forward, at least half of SIFCL’s directors would be expected to know the meaning of the term ‘fiduciary responsibility.’ The same cannot be said about the ‘new’ CBT. Its 43 members include the labour minister as chairman, 15 state government representatives, ten employee union leaders, ten employer delegates and senior officials from labour and finance ministries.
To get a point across in such a large gathering is a task, especially when employee union leaders raise their political voice on matters like the annual setting of the PF rate. A matter of simple arithmetic till the late nineties, the PF rate—which is nothing more than a ‘dividend’ based on earnings—has become a victim of political pressure.
Little is likely to change in the short run—with inflation touching 11.63% and Left union leaders demanding a 12% PF rate for the year, compared to earnings of 8.25%. That there is little hope for governance reforms in the medium-term is obvious from the fact that there are hardly any new names in the re-formed Board, notified by the labour ministry.
In fact, for the first time in the 56-year history of EPFO, the ministry has notified the Board with some slots yet to be filled up. As many as four members are yet to be named—two employee representatives and two representatives from Indian manufacturers and small scale industries.
NDA’s last labour minister, the late Sahib Singh Verma, had refused to clear the Left unions’ representative’s name for a while the last time the Board was reconstructed in 2004, but had yielded before it was notified. It’s not clear yet what has prompted the UPA to notify the Board in such a hurry. The implication—when the several sub-committees are reconstituted on Saturday, four stakeholder reps wouldn’t be available for consideration.
That the Board is more akin to a ‘jumbo’ cabinet than a monitoring force or source of direction—even Board members acknowledge. For instance, the 15 state representatives, usually the labour secretaries, almost never speak in board meetings, even on issues that directly affect their jurisdictions—like 99% of their states’ workers’ accounts being inaccurate or 90% of employers defaulting on PF contributions (recently revealed to the Board’s executive committee).
In SIFCL’s case, RBI could step in as the regulator. But the EPFO, the country’s second largest non-banking financial institution after the LIC of India, goes unchecked as it is the administrator as well as regulator of the country’s retirement funds. It’s time the government had a serious rethink and professionalised the only entity overseeing the monolith’s operations—the CBT.
Source: The Financial Express, Economic Times
TATA AIG & ALLAHABAD BANK OFFER NEW HOME LOAN COVER
Tata AIG Life Insurance Company Limited and Allahabad Bank announced on Friday the launch of a plan for providing exclusive mortgage term insurance facilities for housing loan customers of the Bank. As per the agreement, Allahabad Bank will extend Tata AIG Life's housing loan cover to its customers through its network of 2,154 branches across India.Tata AIG Life will offer a reducing term life insurance designed to cover mortgage loan obligation of the insured member against death during the term of the coverage. In case of an unfortunate event like death of the mortgage loan borrower, the insurance cover will provide for repayment of the housing loan, thereby freeing the property for the policyholder's family members.
Source: Deccan Chronicle
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