In a judgement that could lead to hassle-free settlement of insurance claims, the Supreme Court has held that an insurance firm is liable to compensate for any damage of goods till it reaches the final destination.
The judgement would give relief to shipping companies engaged in imports as they can claim compensation for the stock destroyed before reaching the consignee at the final destination.
This means insurance coverage was valid till the goods were delivered to the consignees’ warehouse or other final warehouse.
A bench comprising Justice A K Mathur and Justice Tarun Chatterjee in a judgement delivered last week said the extended insurance policy would cover goods till they reached the destination in any part of the country.
The apex court dismissed United India Insurance Company’s appeal that challenged National Consumers Disputes Redressal Commission’s judgment asking it to pay Rs 4.94 crore in compensation to Great Eastern Shipping Company which lost 12,000 metric tons of sugar imported from China in 1994.
“When the coverage was extended on same terms and conditions, it would mean that the goods were covered till the same reached in any part of the country in India,” it stated.
The judges held that “while interpreting the policy the courts should keep in view the intention of the parties as well as the words used in the policy. If the intention of the parties subserves the expression used therein then the expression used in that context should be given its full and extended meaning.”
Source: PTI
Friday, July 27, 2007
Ulip managers fare poorly in Sensex test
It's a cover drive that has worked well for the insurance industry. When the captain and the vice-captain of the country's cricket squad teams up with a former captain and ask you to buy insurance, you are most likely to be bowled over.
And if this campaign has helped insurers in raising a lot of money, especially through their Unit-linked insurance plans (Ulips), no one's going to be surprised.
Good beginning. But the story's changing as the innings progress.
Though Ulips have raised more than Rs 30,000 crore as new business premium in the last financial year, a study by DNA Money shows that most of the equity Ulips failed to beat the returns generated by the Sensex in the last one year (July 25, 2006, to July 24, 2007).
Of the 23 equity Ulips from 10 private life insurance companies that the study compared, only seven managed to generate returns higher than that of the Sensex's 51.6 per cent. The average return generated by an equity Ulip during the period was 49.4 per cent.
Equity-linked savings schemes (ELSS), better known as tax-savings scheme, scored a much better 57.8 per cent.
In fact, even in a two-year period, none the 16 Ulips that have been in existence have been able to beat the Sensex return of 45.1 per cent per annum. The average return delivered by Ulips over this period is a much lower 38.8 per cent. Before you jump into any conclusion at this juncture, let's hear the Ulip side of the story.
"It is too early to compare Ulip returns with mutual funds' (MFs) as Ulips have been launched only for 3-4 years now," says Sanjay Tripathy, head, marketing, HDFC Standard Life.
Point.
But then, one should remember that individuals hand over money to insurance companies on the belief that experts handle their investments better.
An expert is deemed to have done well when he generates returns that are greater than the broad market. The Ulips, clearly, seem to have floored the experts.
Some plans, indeed, did beat the Sensex - but just by a whisker.
The pick of the lot over a one-year period has been Tata AIG's Equity Fund, with a return of 64.4 per cent. Coming close was Kotak Life Insurance's Aggressive Growth Fund, which generated returns of 59.7 per cent. Five other funds, which managed to beat the Sensex, did it by 1-2 per cent.
"We have beaten our benchmark BSE 100 by 2-3 per cent over the past three years. Not all managers have been able to do over time," says Bryce Johns, development actuary and chief investment officer at Kotak Mahindra Old Mutual Life Insurance.
Why did others fail?
"As your portfolio gets bigger, it gets difficult to beat the market. Also we can invest for a longer period, as we have no redemption pressures that mutual funds have. People save for a 20-year time horizon," he added.
What one needs to be kept in mind here is that the returns we are talking about are the returns earned on the portion of the premium that is invested and not on the entire premium paid.
Most Ulips have a premium allocation charge in the first year of the policy, which varies from 15-71 per cent of the premium paid, depending on the Ulip chosen. In the second year, this charge is around 15 per cent of the premium paid. The amount that remains after paying this charge is invested. Hence, the actual return for the investors is a lot lower.
"Most investors aren't aware and, more importantly, aren't made aware of the high upfront expense. By the time they find out, it is too late. These expenses directly eat into returns," says Sandeep Shanbhag, director, A N Shanbhag NR Group, a tax and investment consultancy.
"The damage done by high costs in the initial years by Ulips is very high. This, along with the MFs' out performance of Ulips, ensure that there is a huge lead in the initial few years in terms of the corpus," says Amar Pandit, who runs My Financial Advisor.
Insurers do not agree with this. "The entry load for an Ulip is in the range of 10-25 per cent, which is fully refunded in the form of loyalty bonus to the customer who stays for the duration of the contract. In fact, the loyalty bonus in our case can go as high as 100 per cent, if the customer stays on for 20 years," says Rajiv Kumar Gupta, senior vice-president, retail and corporate agency, SBI Life. Those cricketers don't seem to believe in one-dayers.
Source: DNA Money
And if this campaign has helped insurers in raising a lot of money, especially through their Unit-linked insurance plans (Ulips), no one's going to be surprised.
Good beginning. But the story's changing as the innings progress.
Though Ulips have raised more than Rs 30,000 crore as new business premium in the last financial year, a study by DNA Money shows that most of the equity Ulips failed to beat the returns generated by the Sensex in the last one year (July 25, 2006, to July 24, 2007).
Of the 23 equity Ulips from 10 private life insurance companies that the study compared, only seven managed to generate returns higher than that of the Sensex's 51.6 per cent. The average return generated by an equity Ulip during the period was 49.4 per cent.
Equity-linked savings schemes (ELSS), better known as tax-savings scheme, scored a much better 57.8 per cent.
In fact, even in a two-year period, none the 16 Ulips that have been in existence have been able to beat the Sensex return of 45.1 per cent per annum. The average return delivered by Ulips over this period is a much lower 38.8 per cent. Before you jump into any conclusion at this juncture, let's hear the Ulip side of the story.
"It is too early to compare Ulip returns with mutual funds' (MFs) as Ulips have been launched only for 3-4 years now," says Sanjay Tripathy, head, marketing, HDFC Standard Life.
Point.
But then, one should remember that individuals hand over money to insurance companies on the belief that experts handle their investments better.
An expert is deemed to have done well when he generates returns that are greater than the broad market. The Ulips, clearly, seem to have floored the experts.
Some plans, indeed, did beat the Sensex - but just by a whisker.
The pick of the lot over a one-year period has been Tata AIG's Equity Fund, with a return of 64.4 per cent. Coming close was Kotak Life Insurance's Aggressive Growth Fund, which generated returns of 59.7 per cent. Five other funds, which managed to beat the Sensex, did it by 1-2 per cent.
"We have beaten our benchmark BSE 100 by 2-3 per cent over the past three years. Not all managers have been able to do over time," says Bryce Johns, development actuary and chief investment officer at Kotak Mahindra Old Mutual Life Insurance.
Why did others fail?
"As your portfolio gets bigger, it gets difficult to beat the market. Also we can invest for a longer period, as we have no redemption pressures that mutual funds have. People save for a 20-year time horizon," he added.
What one needs to be kept in mind here is that the returns we are talking about are the returns earned on the portion of the premium that is invested and not on the entire premium paid.
Most Ulips have a premium allocation charge in the first year of the policy, which varies from 15-71 per cent of the premium paid, depending on the Ulip chosen. In the second year, this charge is around 15 per cent of the premium paid. The amount that remains after paying this charge is invested. Hence, the actual return for the investors is a lot lower.
"Most investors aren't aware and, more importantly, aren't made aware of the high upfront expense. By the time they find out, it is too late. These expenses directly eat into returns," says Sandeep Shanbhag, director, A N Shanbhag NR Group, a tax and investment consultancy.
"The damage done by high costs in the initial years by Ulips is very high. This, along with the MFs' out performance of Ulips, ensure that there is a huge lead in the initial few years in terms of the corpus," says Amar Pandit, who runs My Financial Advisor.
Insurers do not agree with this. "The entry load for an Ulip is in the range of 10-25 per cent, which is fully refunded in the form of loyalty bonus to the customer who stays for the duration of the contract. In fact, the loyalty bonus in our case can go as high as 100 per cent, if the customer stays on for 20 years," says Rajiv Kumar Gupta, senior vice-president, retail and corporate agency, SBI Life. Those cricketers don't seem to believe in one-dayers.
Source: DNA Money
Now, pay for insurance through a simple SMS
New Delhi: You could be soon buying insurance and other financial services with the touch of a finger. Paying the premium for your life insurance cover is now as simple as typing a text message.
ING Vyasa life insurance has tied up with Paymate India to provide the first of its kind premium payment service through a mobile SMS. The company feels, this mode of payment, will help them reach out to more customers.
"Now you can pay insurance premium via SMS. The entire base of mobile customers is very high in India and is going up rapidly. This will make it easier for customers to pay premium,” said Rahul Agarwal, Vice President - Customer Services, ING Vysya Life.
However this service is currently available only for those who hold an account with Citibank or corporation bank."We already have two banks in the kitty and we are looking forward to adding another 3-4 banks in this quarter. Very soon at least half a dozen bank customers would be able to pay their insurance premiums using the SMS service on their mobile phones,” Ajay Adiseshann, Founder & MD, Paymate said.
And while ING Vysya life insurance has gone ahead to facilitate SMS payment, others are making a start to provide financial advisory on SMS.
Aviva life insurance has tied up with Affle to enable people to get in touch with an Aviva agent, through an SMS. They plan to introduce a host of insurance guidance services over a mobile phone. Just through an SMS you can know how much damage you will do to your pocket by delaying your retirement planning.
No more cutting cheques and standing in queues to pay your premium. and no more appointments with the agent for your financial planning. Life insurance companies are now looking at innovative methods to reach out to a larger younger customer base.
SOURCE: IBNLIVE.com
ING Vyasa life insurance has tied up with Paymate India to provide the first of its kind premium payment service through a mobile SMS. The company feels, this mode of payment, will help them reach out to more customers.
"Now you can pay insurance premium via SMS. The entire base of mobile customers is very high in India and is going up rapidly. This will make it easier for customers to pay premium,” said Rahul Agarwal, Vice President - Customer Services, ING Vysya Life.
However this service is currently available only for those who hold an account with Citibank or corporation bank."We already have two banks in the kitty and we are looking forward to adding another 3-4 banks in this quarter. Very soon at least half a dozen bank customers would be able to pay their insurance premiums using the SMS service on their mobile phones,” Ajay Adiseshann, Founder & MD, Paymate said.
And while ING Vysya life insurance has gone ahead to facilitate SMS payment, others are making a start to provide financial advisory on SMS.
Aviva life insurance has tied up with Affle to enable people to get in touch with an Aviva agent, through an SMS. They plan to introduce a host of insurance guidance services over a mobile phone. Just through an SMS you can know how much damage you will do to your pocket by delaying your retirement planning.
No more cutting cheques and standing in queues to pay your premium. and no more appointments with the agent for your financial planning. Life insurance companies are now looking at innovative methods to reach out to a larger younger customer base.
SOURCE: IBNLIVE.com
Thursday, July 26, 2007
IRDA balking at migration to new solvency norms
Bangalore, July 19 Implementation of Solvency II guidelines prescribed by the International Association of Insurance Supervisors (IAIS) is likely to be delayed in the country.
The Insurance Regulatory and Development Authority (IRDA) made it clear that it was no hurry to implement Solvency II guidelines.
Its Chairman, Mr C.S. Rao, said: “We are in no hurry to immediately implement the guidelines.”
The IAIS final guidelines released in February this year address material risks that insurers face — underwriting risk, market risk, credit risk and operational risk.
Solvency margin is the excess of the value of assets and capital that non-life insurers have to maintain over the insured liabilities. Solvency regime
Under the current solvency regime, insurers are expected to maintain a 150 per cent margin over the insured liabilities. Solvency II however, does not imply any change in the margin. The new guidelines make the solvency margins dynamic.
But according to industry sources, the regulator’s balking at migration to Solvency II guidelines has more to do with the ground situation in the country. This implies that some of the insurers are simply not ready for migration. The situation is somewhat identical to the situation faced by the banking sector’s migration to the Basel II capital standards. Solvency II is the insurer’s equivalent of the Basel II.Step-by-step approach
Instead, the insurance regulator has opted for step-by-step approach. As the first step, life insurers are now expected to file their audited reports on solvency compliance on a quarterly basis effective from this financial year. For the non-life sector, the IRDA has indicated that the reporting would be done on a half-yearly basis, though this is likely to begin only after the completion of tariff deregulation.
However, the public sector Oriental Insurance Company Chairman and Managing Director, Mr M. Ramadoss, said: “We are ready for moving into half-yearly reporting. This is not an issue. It is up the regulator to decide the timeframe.”Complete transition
The migration though would still be short of a complete transition to Solvency II. This is because the asset valuation is currently done on a year-end basis. A half-yearly solvency regime would imply that the asset valuations would also have to be on similar terms.
“Yes valuation of investments would have to be done on a half-yearly basis. Equities could be done on a half-yearly basis. For Government securities we need a regulatory direction,” Mr Ramadoss said.
Government securities are still valued on a book value basis by the insurers.
Moreover, some of the western countries that have implemented advanced management information solutions (MIS) are also yet to fully accept the IAIS guidelines, the sources added.
The absence of such MIS in the Indian insurance industry is a major stumbling block for migration to new solvency guidelines.
Only the private sector is in readiness for the migration, though they account for only about 30 per cent of the domestic market.
source:Business Line
The Insurance Regulatory and Development Authority (IRDA) made it clear that it was no hurry to implement Solvency II guidelines.
Its Chairman, Mr C.S. Rao, said: “We are in no hurry to immediately implement the guidelines.”
The IAIS final guidelines released in February this year address material risks that insurers face — underwriting risk, market risk, credit risk and operational risk.
Solvency margin is the excess of the value of assets and capital that non-life insurers have to maintain over the insured liabilities. Solvency regime
Under the current solvency regime, insurers are expected to maintain a 150 per cent margin over the insured liabilities. Solvency II however, does not imply any change in the margin. The new guidelines make the solvency margins dynamic.
But according to industry sources, the regulator’s balking at migration to Solvency II guidelines has more to do with the ground situation in the country. This implies that some of the insurers are simply not ready for migration. The situation is somewhat identical to the situation faced by the banking sector’s migration to the Basel II capital standards. Solvency II is the insurer’s equivalent of the Basel II.Step-by-step approach
Instead, the insurance regulator has opted for step-by-step approach. As the first step, life insurers are now expected to file their audited reports on solvency compliance on a quarterly basis effective from this financial year. For the non-life sector, the IRDA has indicated that the reporting would be done on a half-yearly basis, though this is likely to begin only after the completion of tariff deregulation.
However, the public sector Oriental Insurance Company Chairman and Managing Director, Mr M. Ramadoss, said: “We are ready for moving into half-yearly reporting. This is not an issue. It is up the regulator to decide the timeframe.”Complete transition
The migration though would still be short of a complete transition to Solvency II. This is because the asset valuation is currently done on a year-end basis. A half-yearly solvency regime would imply that the asset valuations would also have to be on similar terms.
“Yes valuation of investments would have to be done on a half-yearly basis. Equities could be done on a half-yearly basis. For Government securities we need a regulatory direction,” Mr Ramadoss said.
Government securities are still valued on a book value basis by the insurers.
Moreover, some of the western countries that have implemented advanced management information solutions (MIS) are also yet to fully accept the IAIS guidelines, the sources added.
The absence of such MIS in the Indian insurance industry is a major stumbling block for migration to new solvency guidelines.
Only the private sector is in readiness for the migration, though they account for only about 30 per cent of the domestic market.
source:Business Line
Saudi Minister of Commerce Dr Hashim Yamani has approved the establishment of a Saudi-Indian cooperative insurance company.
Saudi Minister of Commerce Dr Hashim Yamani has approved the establishment of a Saudi-Indian cooperative insurance company.
The joint stock company is being floated with a base capital of 100 million Saudi riyals.
The founders of the Riyadh-based company have so far subscribed for 6 million shares. It will be managed by a nine-member board of directors, appointed by the company's general assembly.
The approval of the establishment of the company comes in line with the state's policy which aims at broadening the economic base and enabling the private sector to positively contribute to the process of economic development in the country
source:Financial Express
The joint stock company is being floated with a base capital of 100 million Saudi riyals.
The founders of the Riyadh-based company have so far subscribed for 6 million shares. It will be managed by a nine-member board of directors, appointed by the company's general assembly.
The approval of the establishment of the company comes in line with the state's policy which aims at broadening the economic base and enabling the private sector to positively contribute to the process of economic development in the country
source:Financial Express
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