Insurers want more premium in cash

HYDERABAD/MUMBAI: The reporting norms for insurers to track individuals who are using unaccounted money to buy insurance policies are up for review. The move comes less than a year after the government made it mandatory for insurers to comply with the guidelines on anti-money laundering.

Money laundering is a practice of moving illegally-acquired cash through the financial system to make it legal. Authorities in India have shifted their focus to insurance since the life industry has been driven by investment products rather than protection policies in recent times. Insurers are now required to identify income sources and also report suspicious transactions to the Financial Intelligence Unit-India (FIU-IND), a nodal government agency that tracks money laundering attempts and then probes them further.

Top FIU-IND officials met up with both general and life insurers earlier this month to take stock of their compliance levels. The results revealed a mixed bag with some insurers yet to come on board. Insurers, on their part, say there are a few glitches in implementing these guidelines. State-owned insurers, for instance, want the Rs 50,000 limit for accepting cash payments raised as rural customers do not have access to banking facilities.

According to the chairman of the insurance regulator, IRDA, C S Rao, any change in the rules will need the finance ministry’s approval. From FIU-IND’s perspective, a higher limit for premium payments in cash would mean adding more cash transactions in the economy. “Our goal is to encourage all stakeholders in the financial sector to move towards a cheque economy as this would help curb money laundering,” said a senior official.

Insurers also have to report integrally-connected cash transactions exceeding Rs 10 lakh a month to FIU-IND. Officials say there have been instances where individuals buy multiple policies and pay premium in cash. In many cases, the integrally-connected cash transactions are a tad short of Rs 10 lakh a month and thus escape from being reported.

The guidelines now in vogue require insurers to report suspicious transactions, including those which could be ‘structuring deals’. These are deals which are artificially carved into several transactions to avoid reporting requirements.

Some insurers, particularly state-owned companies, say their existing IT systems are not equipped to identify if a proposer has simultaneously made applications in various offices across the country. All insurance companies are now putting in place a software to identify multiple policies by the same customer.

“It is important to know this not just from the asset liability management guidelines point of view, but also for a company’s own risk management” says Deepak Satwalekar, MD, HDFC Standard Life. An insurer should know whether the proposal he has on hand is a single proposal for Rs 10 lakh sum insured or whether it is a part of multiple proposals that add up to Rs 1 crore on the life of the same individual, he adds.

It is tough to keep an audit trail of such transactions unless insurers report these as suspicious transactions. Indeed, some of them have done that. The regulator had, in fact, told insurers to look at lower thresholds for cash transactions when it issued guidelines for anti-money laundering last year.

A section within the government reckons that there is a case for lowering the threshold for premium payments in cash. Mutual funds, for instance, do not accept cash from investors. “If mutual funds can do it, why not insurance companies,” argues an official.

According to S V Mony, secretary-general , Life Insurance Council, the insurance industry is not opposed to anti-money laundering guidelines per se. But too many administrative procedures may be a deterrent to the sector’s growth. The photograph of the policyholders, for instance, is a must under the know-your-customer norms, though an exception has been made for micro-insurance. Insurers are finding it tough to comply with this requirement as well.

Source: Economic Times

Aviva Life plans tie-up with co-op banks

Recently in Prague

Aviva Life Insurance is planning to join hands with the cooperative banks in India to expand its reach besides augmenting its direct sales force significantly.

“Bankassurance has been one of our strongholds in India and we prefer to make cooperative banks a channel to reach the countryside in India,” Mr Bert Paterson, Managing Director, Aviva Life Insurance India, told Business Line during the International Insurance Summit held recently in Prague.

Fool-proof-strategy

The company has done lot of homework and a “fool-proof strategy” is already in place for partnering with the rural banks, he added.

The UK-headquarted company has already tied up with the Basix Group for its micro insurance product.

“In addition, banks would be a prime channel for us and the details about the partnerships would be made public soon,” Mr Paterson said.

Currently, Aviva (which holds 26 per cent stake in the joint venture company with Dabur) has tie-ups with Centurion Bank of Punjab, ABN Amro, American Express Bank, Lakshmi Vilas Bank and IndusInd Bank, among others.

Bankassurance

Bankassurance in India is becoming competitive with leading private banks and some public sector banks going on their own to tap the insurance potential.

“Aviva had pioneered the concept of bankassurance in India and we would strive to be in the lead.

“We are devising a totally different strategy in this regard,” he said.

The company will also strengthen its distribution channel.

“Currently, bankassurance accounts for 60 per cent of our distribution while remaining 40 per cent done by our direct sales force.

“We want to recruit over 3,000 personnel to strengthen our direct sales force,” Mr Paterson said.

More products

On the product front, the company, which recently launched ‘Grameen Suraksha’ a micro insurance product for BASIX customers, would add more products to suit rural customers soon.

“We will be launching more products in this segment,” he added.

The company is also willing to infuse more capital into its Indian operations.

“We had invested Rs 199 crore in January 2007 and plan to infuse more capital over the next two years,” he said while declining to disclose approximate figures.

On the relationship with Dabur Group in India, Mr Paterson said they shared “excellent” understanding.

“We have also worked out the modalities of relationship between the two companies in the likely 100 per cent FDI regime in the future,” he added.


Source: The Hindu Business Line

Bank of Baroda plans life insurance foray

As part of its wealth management initiative, Bank of Baroda (BoB) will venture into mutual fund business very soon. Bank of Baroda Asset Management Company, a subsidiary of the BoB in collaoration with the Italian company 'Pioneer' will form a joint venture for mutual fund business.

"The memorandum of understanding (MOU) has been signed and the details are being worked out", V Santhanaraman the Executive Director of the bank told Business Standard.

Of late mutual funds have become a major destination for investment. Sensing this, the bank has decided to make a foray into the business. As this required specialized expertise, the bank has gone for foreign tie up, he added.

"With the disposable income rising , the high salaried and professionals are evincing interest to invest in mutual funds", he said, adding that apart from easy liquidity, the MF instruments offer tax incentives which has become another cause of attraction.

According to him , various mutual fund products catering to different segments of people will be developed by Pioneer and the marketing of the products will be made by Bank of Baroda Asset Management Company.

The bank is betting big on this venture and expects to be among the top five within next five years. Besides, as part of diversification plan the bank will venture into the life insurance business very soon.

For this, it tying up with London based Legal and General. "A joint company will be formed with 26 percent equity participation by Legal and General", he said.

The remaining equity will be held by the Bank of Boroda, Andhra Bank and some other institutions which are to be finalized yet, Santhanaraman added.

The bank at present has 2732 branches across the country and plans to add 150 more branches and 120 offsite ATMs soon. About 31 branches are to be opened by end of July.

In Orissa the bank will open 7 more branches during the current fiscal to take the total to 49 from 42 at present. While two more branches will be opened very shortly, the bank has applied for license for the remaining 5 branches. Importantly, 25 of the bank's 42 branches in the state will be under the Core Banking Solution (CBS).

At the national level, while 80 percent of the current business is covered through CBS branches, it is likely to go up to 90 percent by March 2008.

Further, to meet the rising credit requirements of the Small and Medium Enterprises, the bank has come out with the concept of SME loan factory. The credit requirement beyond Rs.25 lakh will be provided by this outlet.

The bank has 15 such factories in the country and plans to add 16 more during the current fiscal including one in Bhubaneswar.

Bhubanesswar SME factory is likely to come up before December 2007, he announced. Besides, within next 4-5 months Baroda Vikas Sansthan (BVS), the training institute for self employment, will be functional in Orissa.

Currently, the bank is at the fourth position among PSU banks in terms of profit and third largest in terms of business. However, it aims to be number one by 2010-11.It expects the product and processes to drive its growth. However, maximum stress will be given on the customer satisfaction, the executive director said.

It may be noted, the bank achieved a business of Rs 2, 09,000 crore by March 2007 with Orissa business contributing Rs 1413 crore. Orissa has emerged as a major growth centre in the east and the bank is according top most priority to it, he said.

Source: Business Standard

NIASoM, one of the most prominent B-School: TOI

The ultimate test in MANAGEMENT


The Common Admission Test (CAT) is an all-India test conducted by the Indian Institutes of Management (IIMs) as an entrance test for the management programmes of its six business schools. It is also the entrance test for few other top B-Schools.
Around 180,000 students compete for less than 1200 general seats in the IIMs which makes it an extremely tough competition. In fact, the CAT is one of the world's most demanding entrance examinations for any graduate institute. Even with a top 1% score, a candidate must also cross the equally stringent hurdles of a group discussion and an individual interview.
The test taker is expected to excel in arithmetical problem solving, geometry, statistics, data interpretation, logical reasoning in solving complex puzzles, and English language skills.
It is neither expected, nor possible, that all the questions be answered, so the CAT also tests the candidates' ability to prioritise under pressure: a quality necessary in the competitive environment of IIMs' courses.
The test tests your skills in five broad areas viz.
Verbal ability and reasoning
Reading comprehension
Quantitative skills
Data interpretation
Analytical and logical reasoning.
CAT has evolved from a speed-based simple test into a test which demands more proficiency in concepts and fundamentals rather than just speed. Typically this test can be expected to comprise between 75 to 150 objective type questions and is usually divided into three to four sections. Each question has a question statement followed by four alternate answer choices and the candidate has to choose the best answer for each of the questions and mark it on a special Optical Reader answer sheet.
Over the years, the number of questions being asked in CAT has been decreasing steadily. While the early 90s witnessed 180 to 200 questions, the late 90s, specifically CAT 1999 and CAT 2000 had 165 questions each. CAT 2001, CAT 2002 and CAT 2003 had only 150 questions each and these 150 questions were divided into three sections of 50 questions each. There were 123 questions in CAT 2004 and only 90 in CAT 2005. CAT 2004 and CAT 2005 both had differential marks to questions. There were 0.5 marks, 1 mark and 2 marks questions.
The duration of the test is of 120 minutes. This literally translates to answering a CAT question in 48 seconds. Most successful aspirants do not attempt anything more than 120 plus questions. And quite a lot of them attempt between 70 and 90 marks worth of questions.
CAT 2006, which was conducted on November 19, was a 2.5-hour exam instead of the traditional 2-hour exam. It is speculated that this change was made by the CAT exam committee to decrease the level of predictability of the exam and to relieve the stress caused to students in a two-hour time limit.
CAT 2006 had 75 questions, 25 questions per section and 4 marks per question, making it a 300-mark paper. There was a penalty of 1 mark for a wrong answer. The paper also proved to be a break from the previous pattern in that it had 5 answer options instead of the usual 4. The English section was generally perceived as very difficult, whereas the quantitative aptitude section was relatively much easier than previous CATs as also in comparison to the other two sections.

The key to success, therefore, lies in two important parameters:



The accuracy or strike rate

While each correct answer carries 0.5 or 1 or 2 positive mark, each incorrect question carries 1/3rd of the marks allocated to it as negative marks. Hence, it is important to get a strike rate of over 85% - that is reduce the number of negatives.

Smart selection

As it is clear that you will not be generally able to attempt all 150 marks question, and you skip between 60 to 80 questions, key to success lies in selecting questions properly. Hence, there are no kudos, nobel prizes or awards waiting for attempting the tough questions. Be smart to choose, the easiest of the questions and the ones that you have practised a lot and smash them. Do not venture into unsafe territories or to questions which you only have a vague idea.
CAT and entrance tests of other top B Schools are a unique breed of entrance exams. They focus on testing some of the basic qualities essential for managers - the grit to work hard, smartness
to choose the best alternative, quick thinking and above all perseverance.
Exams like IIT JEE test the depth of your knowledge, while the Civil Services exams test your width of knowledge. CAT evaluates your presence of mind and the ability to perform under pressure. You cannot prepare for CAT during the last 10 days, as one generally does for semester exams. A minimum of 3 to 9 months of regular preparation is essential.
Other colleges accepting CAT scores Many colleges in India, other than the IIMs, also accept the CAT scores for admission.

SOME OF THE MORE PROMINENT ONES ARE:

• National Insurance Academy School of Management (NIASoM), Pune

• S.P.Jain Institute of Management and Research (SPJIMR), Mumbai

• Management Development Institute (MDI), Gurgaon

• Mudra Institute of Communications Ahmedabad (MICA), Ahmedabad

• National Institute of Industrial Engineering (NITIE), Mumbai

• International Management Institute (IMI), New Delhi

• T.A.Pai Management Institute (TAPMI), Manipal.

• Fore School of Management (FSM), New Delhi

• Institute of Management Technology, Ghaziabad

• Institute of Management, Nirma University, Ahmedabad.

Source: Times of India, 15/07/07

Health is wealth

Some dates hold special importance in our lives. In fact, we mark them in our planner, our office calendar and even on the cellphone. But sometimes, in our busy schedules, we somehow overlook them. And missing your mediclaim renewal deadline can bring more trouble than forgetting your anniversary date or your spouse’s birthday. Here’s why you shouldn’t forget the renewal date of your mediclaim policy. Mediclaim provides cover for expenses in case of hospitalisation. Not only it takes care of costs incurred during hospitalisation but also protects you from pre as well as post-hospitalisation expenses. And if you’ve kept the policy for long, it may serve you even better. For instance, a fresh policy doesn’t cover any pre-existing illness. “Not only that, the insured will lose the no-claim bonus as well. Further, his policy will be treated as fresh policy and the first year exclusions will apply again,” says Mukesh Gupta, director, Wealthcare Securities, a financial advisory firm. This is a very important aspect because if you’ve a mediclaim policy and made no claims on it for four consecutive years, you start getting covered for those pre-existing illnesses. And for every claim-free year, the sum assured will be increased by 5-10% — that too without an increase in premiums. “But most people are unaware of such benefits and that’s why they don’t attach much importance to renewal, little realising that all their hard work may go waste,” observes a senior official from New India Assurance. Thus, if the insured has a health condition existing prior to taking the policy and requiring medical treatment, the same gets automatically excluded in the policy. “To ensure that in subsequent renewals medical conditions incepting since the policy was taken don’t get excluded it becomes a must to renew the policy without any break,” he adds. Renewal of your mediclaim also becomes important since the policy terms have become more stringent. Before April this year, policies covered pre-existing diseases after four claim-free years even if the policy was held with another insurance company. Under the current terms, policyholders need to be covered by the same insurer for at least four years. There are more reasons why you should keep continuing your existing policy. For starters, the premium rates have gone up considerably. Most insurance companies have hiked their premiums by 30% to 50%. “It simply means that not only will you lose out on benefits but also will have to pay a much higher price for being insured,” says Shreeraj Deshpande, head, Health Insurance, Bajaj Allianz General Insurance. The list of diseases that are excluded from the purview of the policy has also been extended. Under the current policy, benign ENT disorders and surgeries such as tonsilectomy, adenoidectomy, mastoidectomy and tympanoplasty come under first-year exclusions. In case you’ve missed the renewal, it will require you to re-do the medical tests. “This leaves no option other than renewing your policy. Otherwise, you’ll start comparing the premium charged by various companies and decide accordingly,” adds Gupta. Apart from this, most medical insurance policies have a moratorium of about six months. This means that any claims made during the first six months of taking a fresh policy will not be reimbursed. So, if you lose out on renewing the old policy, you’ll have to start afresh. An official from National Insurance believes that around 30% of health insurance policies lapse because people forget to renew their policies. “You can’t blame the policy holders only. The insurance companies are partly responsible for that. We’re supposed to send reminders a month in advance but sometimes because of negligence or system flaws it doesn’t happen,” he adds. Most insurance companies, however, give a grace period of seven days, which can be extended to 15 days in case of extreme circumstances, under which a policy can be renewed for keeping it eligible for a no-claim bonus. “We don’t want our customers to suffer, so we make sure that if the fault is on our side, then it should be rectified immediately. If the fault lies with the policy holder, then it can be reviewed on a case-to-case basis,” says the official. So, if you still haven’t marked this important date in your calendar, do it now. For, some dates hold exceptional significance — they not only remind how beautiful life is but they also ensure it remains so as well.
source:Economic Times