Life protection has become far more affordable. The cost of life insurance has come down by up to 40%, with Insurance Regulatory and Development Authority (IRDA) reducing the capital that insurance companies need to sell term policies. For the second time since the liberalisation of the insurance industry in 2000, there has been a dramatic reduction in term-insurance rates, making life protection a great deal cheaper. Term policies are purely life covers as against endowment policies, which have a sizeable savings component. While the premium for endowment policies will also soften, the benefit will be more apparent on term covers. Among private life insurance companies, Kotak Life has announced new rates, while newcomer Aegon Religare has announced term rates, which, the company says, are the lowest in the industry. Largest private life insurance company ICICI Prudential Life Insurance is in the process of lodging new rates. The chief of Life Insurance Corporation of India (LIC), the largest insurer in the country, said the Corporation may review its term rates.
Life Insurance managing director Gaurang Shah said: “Two developments have led us to reduce our rates. First, we had the opportunity to review our own claims experience, since we introduced preferred term for non-smokers six years ago. Also, the revised solvency margin requirement introduced by IRDA in March has brought down capital requirement by almost two-thirds, which has helped bring down rates.” Aegon Religare Life Insurance, which launched operations earlier this month, has decided to use competitive pricing on term rates as an edge. “We had decided to introduce a product with the lowest rate, which is also supported by our campaign. Given our pricing, it is possible for a 30-year old to get a Rs 10-lakh cover at only Rs 166 a month,” said Aegon Religare Life Insurance CEO Rajiv Jamkhedkar. When contacted, LIC chairman TS Vijayan said LIC was constantly reviewing its term rates to retain its competitive advantage and any improvement in mortality was always passed on in the form of lower term rates. In a statement issued here, Kotak Mahindra Old Mutual Life Insurance said the new rates were almost 40% lower than the old rates. “The rate reduction is partly as a result of the reduced solvency margin requirements laid down by IRDA. A key player in both the group term life and individual term life businesses, Kotak Life Insurance is among the first life insurance companies to pass on this benefit to the consumer,” the statement said. However, agents of insurance companies said it is not always possible to get the standard rates. It is very rare for a person to get standard rates above the age of 40 with a few private companies, since these companies have a very narrow range for various parameters defining good health. These parameters include weight, blood pressure and abdominal girth, among other things.
Friday, August 29, 2008
Life cover for 40% less
DELAY IN OPENING PF OFFICE HITS PENSIONERS
Nagercoil: A sub-regional office of the Employees’ Provident Funds Organisation is a long-cherished dream of the provident fund pension account holders of Kanyakumari district. According to sources, after much protracted correspondences by various trade unions, political parties, different members of Parliament and a follow up struggle by the present member of Lok Sabha, A.V. Bellarmine, the EPF organisation accepted the demands of the working class and a year ago on August 28, 2007, when the people of the district were celebrating Onam, a grand function was organised by the EPF organisation at Raja Towers near Ozhuganaserri here to inaugurate a service centre of EPF organisation as a first step towards opening of a sub-regional office.
A host of officers from EPF organisations also attended the programme. The member of the Central Board of EPF trustees, who advocated the sub-regional office at Kanyakumari on behalf of the working mass, was also present on the occasion. The Minister of State for Labour, Oscar Fernandez, who inaugurated the service centre said the centre would be upgraded to a sub-regional office within the short span of the time. The Central Commissioner of EPF in his address announced that the service centre, which started functioning would have the facility of claim processing and within a period of two months, it would have the facility to issue cheques and within a period of one year the office would be converted into a full-fledged sub-regional office. A year later, nothing happened. No facility was provided in the already existing district office except to know status of the claim applications.
A host of officers from EPF organisations also attended the programme. The member of the Central Board of EPF trustees, who advocated the sub-regional office at Kanyakumari on behalf of the working mass, was also present on the occasion. The Minister of State for Labour, Oscar Fernandez, who inaugurated the service centre said the centre would be upgraded to a sub-regional office within the short span of the time. The Central Commissioner of EPF in his address announced that the service centre, which started functioning would have the facility of claim processing and within a period of two months, it would have the facility to issue cheques and within a period of one year the office would be converted into a full-fledged sub-regional office. A year later, nothing happened. No facility was provided in the already existing district office except to know status of the claim applications.
Source: The Hindu
EXEMPT FUNDS PLAY SAFE, SETTLE FOR LOWER RETURNS
New Delhi: Here’s an interesting revelation about exempt pension funds: it may not just be the negative attitude of the EPFO board against investment in the capital markets that held them back thus far from such investments. Investment in private sector bonds was permitted for exempt fund, for instance, as far back as 1998-99.
However, they had to carry an investment rating from at least two credit rating agencies. Despite the freedom to invest in bonds of the private sector, exempt funds did not choose to do so and government guaranteed bonds were considered safer. After the closing of the SDS, investments shifted towards securities of state governments and government enterprises.
A majority of exempt fund investment is still held in PSU bonds and central government securities. Exempt and excluded pension funds together account for Rs 110,000 crore; of this, pension sector observers peg exempt funds at Rs 70,000 crore.
Exempt funds have a smaller corpus but are more in number. Excluded funds, on the other hand, may be fewer but are much bigger in size. Company-run excluded funds, which are not EPFO regulated, but are set up with the approval from the resident income tax commissioner, look after all investments and the fund management themselves; also, they are not required to follow the government-mandated investment pattern. These funds have so far been able to pay out reasonable returns to their employees.
In 2006, however, the Finance Bill proposed that unless excluded funds were recognized by the EPFO, they would not be recognized by the IT department. In short, for claiming tax exemptions or benefits, excluded funds would have to be recognized by the EPFO. But the moment they apply for recognition, they become EPFO-governed funds and lose their excluded status. Thus, swelling the EPFO numbers and increasing its deficit.
The investment preferences of exempt funds against the riskier private sector are obvious in the trends of the 1994 and 2003 period. Investment of exempt funds in Central government securities grew from only 11% of the gross investment to as high as 25% in 2003. There was an exponential jump in percentage of investment in this category in 2000, when it went up to 22.5% compared to only 17.8% in the previous year.
Annual reports of the EPFO disclose that investment in state government securities in the same period went up from only 3.5% in 94 to 25.17% in 2001 and then dropped to 21.11% in 2003. The closing down of the Special Deposit Scheme (in which Rs 53,570 crores of EPF funds are deposited) and falling yields of central government securities created problems for these funds, both in the private and public sector,with regard to meeting the declared payout rate to employees as they did for organizations governed by the EPFO.
The percentatge of investments in this category dipped from 85% in 94 to 17.21% in 2003. In tandem, the investment in the PSU bonds went up from 16.99% in 97 to a high 36.79% in 2003.
Consequently, the number of organisations that failed to credit the declared interest rate went up over the period although, overall, those who paid out less than the statutory rate fell. By and large, studies show, exempt funds too managed to credit the declared rate of interest to employees only by dipping into past surpluses. Some India Pension Research Founda tion studies also indicated that some exempt funds invested in junk bonds or those with lower credit ratings to pay out high rates, impacting on their viability Being exempt from the EPFO alone, clearly, has not guaran teed better returns on invest ments. Overall, exempt funds account for 0.8% of the total es tablishments and around 35% plus of the EPF funds. Close to 40% of exempt funds, about 2,600 (2,589 up to March 2007 countrywide out of a total of 471,678 establishments, are concentrated in Maharashtra Karnataka and West Bengal Tax benefits on withdrawal of money from exempt funds are the same as in the case of those under the EPF Act. But the real benefits, in the case of in-house managed funds, are that these are processed much quicker Exempt funds must go through a strict procedure to earn that exemption.
However, they had to carry an investment rating from at least two credit rating agencies. Despite the freedom to invest in bonds of the private sector, exempt funds did not choose to do so and government guaranteed bonds were considered safer. After the closing of the SDS, investments shifted towards securities of state governments and government enterprises.
A majority of exempt fund investment is still held in PSU bonds and central government securities. Exempt and excluded pension funds together account for Rs 110,000 crore; of this, pension sector observers peg exempt funds at Rs 70,000 crore.
Exempt funds have a smaller corpus but are more in number. Excluded funds, on the other hand, may be fewer but are much bigger in size. Company-run excluded funds, which are not EPFO regulated, but are set up with the approval from the resident income tax commissioner, look after all investments and the fund management themselves; also, they are not required to follow the government-mandated investment pattern. These funds have so far been able to pay out reasonable returns to their employees.
In 2006, however, the Finance Bill proposed that unless excluded funds were recognized by the EPFO, they would not be recognized by the IT department. In short, for claiming tax exemptions or benefits, excluded funds would have to be recognized by the EPFO. But the moment they apply for recognition, they become EPFO-governed funds and lose their excluded status. Thus, swelling the EPFO numbers and increasing its deficit.
The investment preferences of exempt funds against the riskier private sector are obvious in the trends of the 1994 and 2003 period. Investment of exempt funds in Central government securities grew from only 11% of the gross investment to as high as 25% in 2003. There was an exponential jump in percentage of investment in this category in 2000, when it went up to 22.5% compared to only 17.8% in the previous year.
Annual reports of the EPFO disclose that investment in state government securities in the same period went up from only 3.5% in 94 to 25.17% in 2001 and then dropped to 21.11% in 2003. The closing down of the Special Deposit Scheme (in which Rs 53,570 crores of EPF funds are deposited) and falling yields of central government securities created problems for these funds, both in the private and public sector,with regard to meeting the declared payout rate to employees as they did for organizations governed by the EPFO.
The percentatge of investments in this category dipped from 85% in 94 to 17.21% in 2003. In tandem, the investment in the PSU bonds went up from 16.99% in 97 to a high 36.79% in 2003.
Consequently, the number of organisations that failed to credit the declared interest rate went up over the period although, overall, those who paid out less than the statutory rate fell. By and large, studies show, exempt funds too managed to credit the declared rate of interest to employees only by dipping into past surpluses. Some India Pension Research Founda tion studies also indicated that some exempt funds invested in junk bonds or those with lower credit ratings to pay out high rates, impacting on their viability Being exempt from the EPFO alone, clearly, has not guaran teed better returns on invest ments. Overall, exempt funds account for 0.8% of the total es tablishments and around 35% plus of the EPF funds. Close to 40% of exempt funds, about 2,600 (2,589 up to March 2007 countrywide out of a total of 471,678 establishments, are concentrated in Maharashtra Karnataka and West Bengal Tax benefits on withdrawal of money from exempt funds are the same as in the case of those under the EPF Act. But the real benefits, in the case of in-house managed funds, are that these are processed much quicker Exempt funds must go through a strict procedure to earn that exemption.
Source: The Economic Times
NOW, BUY GENERAL INSURANCE COVER AT KIRANA SHOPS
Chennai: A small photo studio in T Nagar, Chennai, sold more than 50 general insurance policies in the last months alone. All that a person had to furnish was his name, address and the nominee’s name. The policy document will be issued in 15 minutes, shop owner M Raju Mani said.
With the general insurance penetration at a dismal 0.60 per cent (measured as a percentage of GDP), many companies feel that selling the policies through photo studios, grocery stores and even telephone booths would help improve the figure.
“We need to think outside the box and need alternative channels. If telecom companies are able to use grocery stores, petty shops and other small outlets, why not insurance companies?” said an Irda official.
The Committee on Distribution Channels, headed by LIC ex-chairman N M Govardhan, in its report recommended that one of the biggest challenges for the general insurance companies was getting agents to sell their products. The report noted that people are not interested in becoming general insurance agents as the commission is quite low.
In 2005-06, around 40,551 agents were licensed by the general insurance companies compared to 7,21,696 agents employed by the life insurance companies. The committee was constituted by the Insurance Regulatory and Development Authority (Irda).
Private insurers have already gone ahead and started exploring such channels. Bajaj Allianz General Insurance Company has introduced point-of-sale concept on a pilot basis to sell its products.
The point-of-sale concept started in Delhi, where the company’s agent will go to the customers’ homes along with a handy gadget like a blackberry to issue policies on the spot, said Swaraj Krishnan, chief executive officer, Bajaj Allianz General Insurance Company.
The company is also talking to some medical pharmacy chains to sell its health and home insurance products. For motor insurance, the company is in talks with oil companies to sell its products through their retail outlets across the country, he added.
The gadget costs about Rs 50,000. The company wants to supply the gadgets to all its branches, but there is shortage of these machines since there are only two Korean suppliers.
Similarly, ICICI Lombard General Insurance sells its health and motor policies through photo studios and malls. The photo studio in Chennai is selling both the policies.
With the general insurance penetration at a dismal 0.60 per cent (measured as a percentage of GDP), many companies feel that selling the policies through photo studios, grocery stores and even telephone booths would help improve the figure.
“We need to think outside the box and need alternative channels. If telecom companies are able to use grocery stores, petty shops and other small outlets, why not insurance companies?” said an Irda official.
The Committee on Distribution Channels, headed by LIC ex-chairman N M Govardhan, in its report recommended that one of the biggest challenges for the general insurance companies was getting agents to sell their products. The report noted that people are not interested in becoming general insurance agents as the commission is quite low.
In 2005-06, around 40,551 agents were licensed by the general insurance companies compared to 7,21,696 agents employed by the life insurance companies. The committee was constituted by the Insurance Regulatory and Development Authority (Irda).
Private insurers have already gone ahead and started exploring such channels. Bajaj Allianz General Insurance Company has introduced point-of-sale concept on a pilot basis to sell its products.
The point-of-sale concept started in Delhi, where the company’s agent will go to the customers’ homes along with a handy gadget like a blackberry to issue policies on the spot, said Swaraj Krishnan, chief executive officer, Bajaj Allianz General Insurance Company.
The company is also talking to some medical pharmacy chains to sell its health and home insurance products. For motor insurance, the company is in talks with oil companies to sell its products through their retail outlets across the country, he added.
The gadget costs about Rs 50,000. The company wants to supply the gadgets to all its branches, but there is shortage of these machines since there are only two Korean suppliers.
Similarly, ICICI Lombard General Insurance sells its health and motor policies through photo studios and malls. The photo studio in Chennai is selling both the policies.
Source: The Hindu Business Line
IFFCO-TOKIO PLANS TRAVEL INSURANCE PRODUCT
Kolkata: Iffco-Tokio General Insurance (ITGI), was planning to come up with the first of kind product in travel insurance for the domestic market and could move to seek the Insurance Regulatory & Dvelopment Authority(IRDA) in about three month's time.
ITGI, a joint venture between The Indian Farmers Fertiliser Cooperative (IFFCO) and its associates and Tokio Marine and Nichido Fire Group, already had a travel insurance product for the international traveller called the ITGI Travel Protector Policy.
The travel business accounted for around 2 per cent of ITGI's net premium collection, said Prantik Mitra, business head, ITGI. Its net premium revenue for 2007-08 was Rs1254 crore. The new product would also have a built-in health cover component during travel like the old one.
ITGI sold its current travel insurance product mainly through corporate tie-ups and recently tied up with Kaizen Leisure & Holidays Ltd (KLHL), an associate company of the Peerless Group, to sell its products.
It already had a tie-up with the Peerless Group to sell its health, motor, shop and home insurance policies and did business worth Rs2.5 crore last fiscal through the tie-up. "We would make it mandatory for all travellers to take a travel insurance", said Jayanta Roy, director, corporate planning and strategy, KLHL.
He could not share the details of the total number of tourists KLHL had handled last year.
The company enjoyed a 34 per cent market share in the East where the travel & tourism market was pegged at Rs460 crore.
KLHL announced three more tie-ups with Make My Trip travel portal, Budget Rent a Car Systems and Emergency Rescue Card (ERC). Through the strategic tie-up with ERC, KLHL would offer the service of transferring the customer to a better medical facility in case of an emergency during travel.
KLHL registered a turnover of Rs9 crore last fiscal and was eying a revenue of Rs15 crore this year with all the four tie-ups in place.
ITGI, a joint venture between The Indian Farmers Fertiliser Cooperative (IFFCO) and its associates and Tokio Marine and Nichido Fire Group, already had a travel insurance product for the international traveller called the ITGI Travel Protector Policy.
The travel business accounted for around 2 per cent of ITGI's net premium collection, said Prantik Mitra, business head, ITGI. Its net premium revenue for 2007-08 was Rs1254 crore. The new product would also have a built-in health cover component during travel like the old one.
ITGI sold its current travel insurance product mainly through corporate tie-ups and recently tied up with Kaizen Leisure & Holidays Ltd (KLHL), an associate company of the Peerless Group, to sell its products.
It already had a tie-up with the Peerless Group to sell its health, motor, shop and home insurance policies and did business worth Rs2.5 crore last fiscal through the tie-up. "We would make it mandatory for all travellers to take a travel insurance", said Jayanta Roy, director, corporate planning and strategy, KLHL.
He could not share the details of the total number of tourists KLHL had handled last year.
The company enjoyed a 34 per cent market share in the East where the travel & tourism market was pegged at Rs460 crore.
KLHL announced three more tie-ups with Make My Trip travel portal, Budget Rent a Car Systems and Emergency Rescue Card (ERC). Through the strategic tie-up with ERC, KLHL would offer the service of transferring the customer to a better medical facility in case of an emergency during travel.
KLHL registered a turnover of Rs9 crore last fiscal and was eying a revenue of Rs15 crore this year with all the four tie-ups in place.
Source: Business Standard, The Financial Express
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