MINISTRY HOPES TO MAKE PF AVAILABLE FOR ALL CITIZENS

Even as the finance minister plans to reach out to all parties and seek their support for the Pension Bill, his ministry is considering a proposal to throw open schemes floated by the public sector fund managers for government employees to all private citizens. According to government officials, the PFRDA had sought legal opinion from its advocate on the issue. “Legally, it does not pose any problems,” said PFRDA chairman D Swarup. Workers in the unorganised sector will be the biggest beneficiaries since they do not have any social security mechanism now. A finance ministry official, however, said such schemes generally become successful if backed by statute. “Ideally, the government would like to make pension funds available to all private citizens by getting the Bill passed at the earliest.”

Source: The Indian Express

FINMIN MAKES COMPROMISES TO ENSURE PASSAGE OF PENSION BILL

New Delhi: Aware of the precarious balance the UPA finds itself in Parliament and to ensure that pension reforms receive all party support, the finance ministry has compromised on four significant aspects of the Pension Fund Regulatory and Development Authority (PFRDA) Bill.

According to government officials, the finance ministry has decided to include the 26 per cent cap on foreign direct investment (FDI) in pension funds in the main Bill. This is similar to the legislation in the insurance sector that specifies the cap in the Insurance Act itself. Earlier, the ministry had proposed to relegate the FDI provision in the regulations, thus obviating the need to go back to Parliament for hiking the limit.

The second major change relates to providing subscribers the option to invest their pension fund contributions entirely in debt, making it a risk-free avenue. This has also been included in the Bill. This was done based on the recommendations of the Parliamentary Standing Committee on Finance to placate Left parties that were completely opposed to the Bill. The investment options were earlier supposed to be part of rules and regulations to be framed by the regulator once the legislation was enacted.

In allowing pension funds to invest 15 per cent of their corpus in equity (5 per cent directly in stocks and 10 per cent in equity-based mutual funds), the ministry had earlier not specified if overseas investments were allowed. Now, in an effort to find all round support, including from the Left, the ministry has proposed in the Bill that funds would not invest the corpus abroad.

The last issue relates to the choice of funds to manage the contributions of government employees who joined service after January 1, 2004. The Bill, to be introduced in the next session of Parliament, specifically says that there should be at least one public sector fund manager among the various fund managers to be appointed by the regulator. Source: Indian Express

TERRORISM IS A PART OF MOST POLICIES

Vishakha Mulye is a chartered accountant by profession and has been with ICICI Bank for 15 years. She played a major role in the merger of ICICI with ICICI Bank and was the group financial officer before she joined ICICI Lombard — a 74:26 joint venture between ICICI Bank Limited and Fairfax Financial Holdings Limited of Canada — as executive director in November last year. The shift from banking to insurance was not much of a challenge and Ms Mulye says, "I have always been in the field of financial services. The insurance segment is an extension of financial services, but a different product."

Excerpts from an interview by Yogesh Mehendale and Olga Tellis:

As the largest private general insurance company in the country, how do you see the sector today?

In India, private general insurance companies started their operations just a decade ago. So overall the industry is in a nascent stage. Ten years back, the share of the sector in the gross domestic product (GDP) was 0.5 per cent. Even today it is just 0.6 per cent of the GDP compared to four to 4.5 per cent in the US or UK. In Korea, it is 1.50 per cent and in China it is 1.20 per cent. The Indian industry has an abnormally low share in GDP. The experience in other parts of world is that the general insurance sector booms when per capita income crosses $1,000. India has crossed this, so one can say that this sector will explode in the near future.

Why has this sector been slow to grow?

General insurance is more protection based — protection of an asset. So, there is a lag in returns. People don’t think of insuring their homes and consider it an additional burden, not realising that the home can be burnt down or anything can happen. Life insurance for instance is seen as savings- based. So, life grew from one to four per cent, mutual funds from five to 15-16 per cent of the GDP and consumer loans from five to 14 per cent.

How are you meeting this challenge?

As I said, the Indian general insurance sector has tremendous scope to grow as only two per cent is spent on health, 98 per cent of the houses are not insured and even a large number of the motorcycles don’t have cover. There is demand; the question is how we cash it. We have come with several innovative products such as last minute travel insurance, insurance cover which an NRI can online gift his/her parents, cover for students studying abroad etc. We have tied up with 500 universities across the globe. So we are using technology to give better service in the form of online/mobile commerce.

What would you differentiate yourself from the other players?

Our USP is claims. In general insurance 65 per cent of the money goes back to the customer as claims settlement. How fast you settle the claim, becomes extremely important for renewal as well. For example, if our customer’s car is damaged, he can call on a toll free number and our executive will reach the spot within six hours. In this case we have a cashless option as well. We have tied up with 4,500 garages across the country.

Has de-tariffing helped the industry?

From January 2008 onwards the insurance companies have the freedom to decide the premium on the basis of the risk. Interestingly, in other countries de-tariffing led to de-growth but in India we are seeing a growth of 20 to 22 per cent.

There is a lot of expectation that the government will now permit 49 per cent FDI in insurance. Can you comment in this?

We are very excited, as the industry requires capital for growth. Currently foreign investment of 26 per cent is allowed in the insurance sector. International players are bullish on India and are interested in investing in the insurance sector.

Is there a spurt in growth for cover against terrorism considering that there have been a growing number of terrorist attacks across the country?

Terrorism is a part of most policies sold today. The Insurance Regulatory Developmental Authority (IRDA) has mandated that all general insurance companies should be allied to a common pool for terrorism insurance. As a result, the premium of terrorism insurance collected by all general insurance companies is collected in this common pool. Any terrorism related insurance claims are settled using funds from this common pool.
Source: Deccan Chronicle

MAX NY LIFE TO EXPAND DISTRIBUTION NETWORK

Ahmedabad: Max New York Life Insurance plans to expand its distribution network by opening more than 250 new offices every year for the next three to four years and increasing the number of agent advisors from the current 46,800 to 3 lakh. The growth in agency distribution will be complemented by strong growth in partnership distribution.

The capital base of the company is expected to expand to Rs 3,600 crore from the current equity base of Rs 1,232 crore. The company has clocked Rs 2,100 crore in collected premium for the January-July 2008 period, recording a growth of 81 per cent over the similar period last year.

Of this, the first year premiums contributed to Rs 1,195 crore, while earnings from renewal premium stood at Rs 905 crore. The company has acquired around 27 lakh policies since inception and is the third largest private life insurer in terms of number of policies sold till June.

The Assets Under Management (AUM) have also increased to over Rs 4,138 crore as on July 31, 2008 as compared with Rs 2,271 crore on July 31, 2007, Mr Rajesh Sud, Deputy Managing Director, said.

Focusing on customer needs, the company entered new product segments such as health insurance and retirement and better customer service delivery and claims settlement record. Between January and July, Max New York Life Insurance added more than 5,000 employees and now has over 11,000 employees. The company’s agent-advisor strength would soon be touching 50,000, he said. During 2008, the company launched more than 100 new offices and now has presence in 212 cities across the country through 311 offices.

It has a portfolio of 38 products and 8 riders for individuals and entered the health insurance segment with the launch of LifeLine Health Insurance Plans in February. Source: The Hindu Business Line

BOR MAY TIE-UP WITH BAJAJ ALLIANZ; DILUTE STAKE TO RAISE FUNDS

Mumbai: Private sector lender, Bank of Rajasthan may terminate its distribution tie-up with United India Assurance for general insurance business and is likely to enter into an agreement with Bajaj Allianz.

The agreement with Bajaj Allianz is expected to be signed this fiscal after which the existing agreement with United India Assurance would cease, a source close to the development said.

"If the alliance with Bajaj Allianz comes through, then the bank would take a decision on whether to continue with the existing tie-up or not," the source said. The bank, which is not among the top performing in the country, may also dilute 5-7 per cent of promoters' holding in a bid to infuse fresh capital of upto Rs 250 crore, the source told PTI.

The bank has been facing difficulties in raising capital from private investors owing to adverse market conditions, sources said. BoR had held talks with a host of fund houses including BNP Paribas, Max India and Avenue Capital Group for investments but it did not get positive response owing to a none-too-good performance.

When contacted, Bank of Rajasthan's Chairman & Managing Director, P L Ahuja declined to confirm or deny. Presently, the promoters hold 37.47 per cent stake in the bank and the remaining 62.53 per cent is held by the public. Source: Business Standard