After ensuring that all the beneficiaries under the National Rural Employment Guarantee Act (NREGA) have access to formal banking system through banks and post offices, the Centre has decided to extend insurance cover to all 2.11 crore workers under the United Progressive Alliance’s flagship wage employment programme.
Recently, the finance ministry has given its nod to cover all the workers under the NREGA in the rural poor category so that they could be covered with Janashree Bima Yojana (JBY). The finance ministry has approved the proposal prepared by the rural development ministry, which is nodal authority to implement NREGA in the country.
JBY provides for life insurance protection to the rural and urban poor persons below poverty line and marginally above the poverty line. Launched in 2000 and administered by Life Insurance Corporation of India (LIC), the group insurance scheme is designed for people below the poverty line and targeted at persons engaged in occupations such as rickshaw pullers, auto drivers, construction workers, farm labourers, handloom weavers etc.
The premium under the scheme is Rs 200 per annum per member. While half of the premium will be contributed by the member or the state governments and the balance will be born by the Social Security Fund. The families of the insured persons will get Rs 75,000 in the event of death due to accident or permanent disability while the beneficiary will be eligible for Rs 30,000 for partial disability. Incase of permanent partial disability, due to accident, the beneficiary will get Rs 37,500.
However, the workers who will be included under such insurance programme has to fulfil certain criteria before being enrolled in the insurance programme. The workers must need to put in a minimum period of 15 days in a year for being eligible for the insurance cover. According to rural development ministry, the insurance cover will be reviewed each year.
However, a worker person will not be eligible for insurance cover under JBY scheme if she/he has already been covered by any other insurance schemes for life and disability sponsored by any other ministries or departments.
Recently, the ministry of rural development had made payment of wages under NREGA to be made through banks and post offices. The ministry stopped cash payment of wage for ensuring transparency, delay and stopping pilferages in NREGA wage payment..
In the last one year, more than 98 lakh rural poor people have been provided access to formal banking facilities through opening postal savings bank account and another 56 lakh saving accounts with state owned or cooperative banks have been opened in the rural areas. During 2007-08, Rs 10,738.47 crore was paid as wages under NREGA to more than 3.3 crore households out of the total expenditure of Rs 15,856.89 crore.
Under the memorandum of understanding earlier signed with department of post and ministry of rural development, the payment of wages to the workers under NREGS must be done within the statutory time of 15 days after the work is done. The rural development ministry will pay an advance of Rs 50 per account prior to the opening of account.
Sourc: The Financial Express
Monday, July 21, 2008
INSURERS SET TO TAKE A BIG MARK-TO-MARKET KNOCK
Mumbai: The life insurance industry stands to lose several hundred crores this year on account of the rise in interest rates. A recent directive from the insurance regulator, IRDA, requires companies to mark-to-market all investments made from their technical reserves in government securities.
Besides the policyholders’ funds that they invest, insurance companies invest in government securities the money they bring in to meet minimum net worth requirements. Until last year, these securities were valued at their acquisition price and insurers were required to mark-to-market only securities purchased from policyholders’ funds.
Since most of the policyholders’ funds come from sales of unit-linked policies, the loss in the value of securities bought from policyholders’ funds is reflected in the lower net asset value of the schemes and does not affect the company’s own profits.
But with the new guidelines, the balance sheets of life insurance companies are set to take a hit as well. Life insurance companies have brought in several thousand crores to meet the solvency margin requirements. These solvency margins prescribe the minimum net worth that a company is required to maintain in relation to its overall business and is somewhat similar to the capital adequacy ratio for banks.
A portion of this net-owned funds is invested in government securities, which have fallen sharply in value because of the rise in interest rates.
“Even a start-up company, which has a paid up capital of Rs 100 crore would have Rs 60-70 crore invested in government securities. The value of these securities would have fallen by Rs 6-10 crore in the last quarter and would have to be booked as provisions for depreciation and would add to the losses,” said an industry official. He added that losses would be much higher in the range of Rs 20-80 crore for larger players.
The insurance companies are likely to make a representation to IRDA that the valuation guidelines be brought in line with the valuation guidelines issued by the Reserve Bank of India. The banking regulator allows banks to classify their investment in government securities in three categories — ‘held-to-maturity’, ‘available for trading’ and ‘available for sale’.
Banks have taken advantage of this dispensation and classified most of their government securities holdings in the held-to-maturity (HTM) category. Once securities are transferred into the HTM category, no further provisions for depreciation are required.
But they can only transfer the securities into the HTM category at market value, ie after booking a loss. Anticipating sharply lower profits because of this provision, banking stocks have been hammered in the capital markets.
Source: The Economic Times
Besides the policyholders’ funds that they invest, insurance companies invest in government securities the money they bring in to meet minimum net worth requirements. Until last year, these securities were valued at their acquisition price and insurers were required to mark-to-market only securities purchased from policyholders’ funds.
Since most of the policyholders’ funds come from sales of unit-linked policies, the loss in the value of securities bought from policyholders’ funds is reflected in the lower net asset value of the schemes and does not affect the company’s own profits.
But with the new guidelines, the balance sheets of life insurance companies are set to take a hit as well. Life insurance companies have brought in several thousand crores to meet the solvency margin requirements. These solvency margins prescribe the minimum net worth that a company is required to maintain in relation to its overall business and is somewhat similar to the capital adequacy ratio for banks.
A portion of this net-owned funds is invested in government securities, which have fallen sharply in value because of the rise in interest rates.
“Even a start-up company, which has a paid up capital of Rs 100 crore would have Rs 60-70 crore invested in government securities. The value of these securities would have fallen by Rs 6-10 crore in the last quarter and would have to be booked as provisions for depreciation and would add to the losses,” said an industry official. He added that losses would be much higher in the range of Rs 20-80 crore for larger players.
The insurance companies are likely to make a representation to IRDA that the valuation guidelines be brought in line with the valuation guidelines issued by the Reserve Bank of India. The banking regulator allows banks to classify their investment in government securities in three categories — ‘held-to-maturity’, ‘available for trading’ and ‘available for sale’.
Banks have taken advantage of this dispensation and classified most of their government securities holdings in the held-to-maturity (HTM) category. Once securities are transferred into the HTM category, no further provisions for depreciation are required.
But they can only transfer the securities into the HTM category at market value, ie after booking a loss. Anticipating sharply lower profits because of this provision, banking stocks have been hammered in the capital markets.
Source: The Economic Times
GENERAL INSURERS BOUND TO DEDUCT TAX ON INTEREST ON COMPENSATION: HC
Chennai: General insurance companies engaged in motor vehicle insurance business are bound to deduct income-tax at source (TDS) on interest paid on compensation awarded by Motor Accidents Claims Tribunal in respect of claims under Section 194-A of Income-tax Act, the Madras High Court has ruled.
The stand taken by these companies was that interest was paid because of delayed payment and ordered by the Tribunals, and if TDS was applied, it was the beneficiaries who would be put to great loss, and in view of that, companies were not deducting tax so far. However, the only question now remaining was whether for the past period, their non-deduction was wrong and whether they were liable to pay the said amount.
The petitioner, National Insurance Co Ltd, a Government of India undertaking, contended that since Section 194-A had since been amended with effect from June 1, 2003, they were deducting TDS on interest payable on the compensation.
Referring to non-deduction of income-tax on compensation for the earlier period, the petitioner submitted that the Central Board of Direct Taxes, through a circular dated September 5, 2003 had clarified, inter alia, that no deduction of tax at source need be made in cases where the interest awarded on compensation did not exceed Rs 50,000.
Mr Justice K. Chandru, who heard the petition, said there was no escape from liability for deducting tax on interest on compensation.
The Income-tax Department had said that if the petitioner sent any representation in this matter, it would always be received and will be given due attention. Except recording the same, no relief could be granted in this writ petition, and the same was dismissed.
Source: The Hindu Business Line
The stand taken by these companies was that interest was paid because of delayed payment and ordered by the Tribunals, and if TDS was applied, it was the beneficiaries who would be put to great loss, and in view of that, companies were not deducting tax so far. However, the only question now remaining was whether for the past period, their non-deduction was wrong and whether they were liable to pay the said amount.
The petitioner, National Insurance Co Ltd, a Government of India undertaking, contended that since Section 194-A had since been amended with effect from June 1, 2003, they were deducting TDS on interest payable on the compensation.
Referring to non-deduction of income-tax on compensation for the earlier period, the petitioner submitted that the Central Board of Direct Taxes, through a circular dated September 5, 2003 had clarified, inter alia, that no deduction of tax at source need be made in cases where the interest awarded on compensation did not exceed Rs 50,000.
Mr Justice K. Chandru, who heard the petition, said there was no escape from liability for deducting tax on interest on compensation.
The Income-tax Department had said that if the petitioner sent any representation in this matter, it would always be received and will be given due attention. Except recording the same, no relief could be granted in this writ petition, and the same was dismissed.
Source: The Hindu Business Line
LIC TAKES ULIPS TO MIDDLE EAST
Kolkata: The appetite for unit-linked insurance plans (Ulips) seemed to have caught on in the Middle East. State-run Life Insurance Corp will retail Ulips through its subsidiary LIC International. The plan, fortune builder, will be sold across the Gulf. Sudhin Roy Chowdhury, CEO and managing director, LIC International, told DNA Money, “Our target is to sell 15,000 Ulips in the current year. The total premium from all plans, including Ulips, is likely to be around $80 million this year.”
The Gulf countries - Bahrain, Kuwait, UAE, Saudi Arabia, Oman and Qatar - are home to almost 5 million expatriate Indians. The insurer retails around 19 policies, mostly traditional, in these markets.
LIC had also recently tied up with Doha Bank, which will market the firm’s insurance products globally. These new ventures could boost LIC’s premium income from overseas operations, which has not been very forthcoming in recent years.
The company has gone on record about increasing overseas presence. LIC is also planning to open offices in Southeast Asia and the US through the subsidiary and is weighing broking arrangements in Southeast Asia. LIC also operates a separate company in Saudi Arabia for selling co-operative insurance.
Source: Nandini Goswami
Daily News & Analysis
HC FLAYS INSURANCE FIRM FOR DENYING RELIEF TO ACCIDENT VICTIM
New Delhi: The Delhi High Court condemned the National Insurance Company Limited (NICL) for being inhumane to road accident victims. In a recent judgement, the Court said that the insurance company should have a sympathetic approach towards those 'unfortunate' victims and should not misuse the legal provision and process to avoid compensation to them. "The Government undertaking (NICL) must have a human approach in such matters and should not indulge in the jugglery of legal provision so as to deprive the unfortunate victims of their legal dues," Justice VB Gupta said while dismissing a petition filed by the NICL challenging the Motor Accident Claims Tribunal (MACT). In 2007, the tribunal has asked the insurance company to pay Rs 50,000 as interim compensation to a road accident victim.
"Being a Government undertaking NICL should have taken a sympathetic view in the matter and should not left files of the present appeal blindly so as to deprive the dependants of road accident victim solace and little comfort by way of meager monetary compensation which they are entitled to under the law," Justice Gupta said and noted that the present appeal was nothing but an abuse of the process of law.
The bench also directed NICL to deposit Rs 5,000 to the Register General of the High Court as fine within four weeks and said, "It is hoped that the appellant (NICL) would take special care in such matter and would not file appeals on frivolous and flimsy grounds so as to deprive the victims of road accidents of some compensation who had lost their sole bread earner," the court said in the order.
Rattan Singh, a resident of Gurgaon, died in a road accident while traveling in a Tata 407 on October 20, 2006 with others. The vehicle involved in the accident was insured with the NICL. The legal representatives of deceased approached the MCAT saying that the accident took place due to rash and negligent driving on the part of driver of the insured vehicle.
Source: Parvaiz Sultan
The Pioneer
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