Irda may allow banks to sell products of multiple insurers

In order to increase insurance penetration, the regulator Irda is contemplating allowing banks to sell products of more than one insurance firm.

"The regulator is considering opening up distribution channel... The final call by Irda will be taken soon," Life Insurance Council Secretary General SB Mathur said on the sidelines a conference of CEOs of insurance companies here.

As per the current practice, a bank is allowed to sell products of a life insurance company, a general and a health insurance firm.

There has been long pending demand from insurers for relaxing bank distribution channel.

To study distribution channels–agency, bancassurance, referrals, direct sales etc, the regulator had set up a 10-member committee, headed by former LIC chairman NM Govardhan in 2007.

The committee which submitted 60-page report in 2009, suggested various measures for increasing distribution.

Mathur also said the life insurers are expecting 15% rise in new business premium in the current fiscal.

The new business premium grew 14.5% to Rs 1, 25,800 crore in 2010-11 from Rs 1, 09,894 crore in the previous year.

Despite an uncertain environment the total premium of life insurance industry increased by 8% as compared to Rs 2,86,500 crore in the previous fiscal, he said.

New policies help out life insurance companies develop 8%

Despite an uncertain regulatory environment, the life insurance industry reported a growth of 8% in total premium income to Rs 286,500 crore in 2010-11 from Rs 265,450 crore in 2009-10 mainly because of increase in income by new policies. Total income is a combination of new and renewal premium.

During the period, renewal premium went up marginally by 3% to Rs 160,700 crore while new business premium income went up by 14.5% to Rs 125,800 crore. Insurance companies took various initiatives to curtail the expenses. According to the data released by Life Insurance Council, the number of direct employees has reduced from 2.67 lakh in 2009-10 to 2.42 lakh in 2010-11.

The number of agents has also reduced by 29.78 lakh to 26.47 lakh. They have shut down 553 branches to trim down costs. In addition, commission paid to agents has come down.

After completing 10 years of opening up, eight insurance companies have reported profit, including ICICI Prudential, SBI Life, Bajaj Allianz Life Insurance, Max New York Life and Kotak Life Insurance.

The industry paid a total death benefit of Rs 10,270 crore against Rs 8,385 crore in 2009-10. Also, as on March 2011, the number of in-force policies stood at Rs 32.54 crore, arguably the highest in the world.

The industry is high capital-intensive with Rs 31,437 crore capital deployed. Net investment by insurance companies has dropped to Rs 336,684 crore in 2010-11 from Rs 61,125 crore in the previous year. The industry invested Rs 506,895 crore in equity and Rs 952,993 crore in fixed income instruments.

The Life Insurance Council expects the industry boom in the coming decade with favorable demographic structure, increasing incomes and financial inclusion.

As per UN population division projections, India's population by 2015 will constitute of 30% individuals under age 14 and a whopping 60% in the age group of 15 to 59 years, indicating a potential high-growth prospect for the Indian Life Insurance industry. Household savings constituted 23% of India's gross domestic savings in 2009-10, compared with 5% in Brazil and 15% in China.

Reliance Life, banks currently pay brokers as low as 5 bps

In an unprecedented move that could spark yet another round of rate cuts in the domestic institutional equity broking business, Reliance Life Insurance has started paying lower brokerages for its equity transactions. According to two people familiar with the matter, broking rates have been halved from 10 basis points (bps) to 5 bps of the transaction amount. Additionally, treasury departments of some banks have cut broking rates from about 15 bps to 10 bps or lower, in the last few months, said market observers.

Reliance ADA Group firm Reliance Life Insurance is the third-largest private insurer with assets under management (AUM) of over R15, 000 crore.

“We are at the mercy of decisions taken by the buyer,” said the institutional head of a broking firm empanelled with Reliance Life. Another institutional head from a different broking firm empanelled with the insurer, however, denied that his firm’s broking rates had been changed. But said it was possible rates could have been slashed for brokers not providing research support.

“Reliance Life pays 8 bps for normal trades and 5 bps for basket trades,” said another institutional broker.

All three people spoke on condition of anonymity.

About 45 brokers are currently empanelled with the insurer, said the first person quoted above. It could not be independently ascertained how many of these empanelled brokers were at the receiving end of rate cuts.

An email sent to the Reliance Group went unanswered. A senior official from a PSU bank admitted that bank treasuries had been cutting broking commissions in the past few months. “It happens in a competitive scenario. It depends on the volumes; if a bank is in a position to demand a cut in broking commissions, they will,” he said, requesting anonymity.

In the past one year, institutional broking rates have come down from 20-25 bps to 10-15 bps, said market observers. Last year in June, insurance behemoth LIC cut broking rates to 10 bps (excluding service tax). “Ten basis points has become the standard now for most domestic institutions,” said the institutional vice-president of a mid-sized broking firm, on condition of anonymity.

The fall in broking commissions is pinching brokers harder this time unlike in the period between 2003 and 2008 when the decline in broking rates were more than adequately compensated by rising turnover, say market observers. Cash volumes on exchanges have now plummeted to historic lows.

The past year saw the entry of several retail brokers into the institutional space fuelling competition. Furthermore, institutions are increasingly taking the direct market access (DMA) route for executing trades, putting pressure on commissions. Declining institutional inflows have also impacted institutional broking revenues for domestic brokerages. Domestic institutional inflows into equities in the past year have declined considerably as the mutual fund industry has faced redemption pressure and equity-linked premium collections of life insurers have plummeted following Irda’s regulatory changes.

Net inflows into equities from insurance firms declined from $7.003 billion in 2009 to $1.114 billion in 2010, while mutual fund outflows increased from $1.175 billion to $6.027 billion in the same period, according to Morgan Stanley. Domestic brokerages rely mainly on domestic institutional investors for business as most of the foreign institutional investors prefer trading through foreign brokers. Kotak, Edelweiss, IIFL and Enam are some of the larger domestic institutional brokerages...

Aviva Life Insurance launched online term plan

Private insurer Aviva Life Insurance has launched its online term plan Aviva i-life, with a minimum cover for Rs 25 lakh with no upper limit and a maximum term of 35 years.

"Our research with IMRB showed us that protection of family income in case of an unfortunate death is among the top three priorities for 52 per cent of Indians today. Hence, keeping in mind the customer need and demand, we have launched Aviva i-Life which can provide a high insurance cover at a low cost," Aviva India Director Marketing Gaurav Rajput said in a release issued here.

This company is a joint venture between Dabur Group and Aviva Group with a paid up capital amounts to Rs 2,004 crore.

Aviva i-life offers Rs 1 crore of life cover at less than Rs 22 per day and this online product also offers Accidental Death Benefit rider for enhanced protection where additional sum equal to Accidental Death Benefit Rider Sum Assured shall be payable in case of accidental death.

Birla Sun Life expecting revenue for the first time

Birla Sun Life Insurance, which is in its tenth year of operation, is expected to report profit for the first time for the year 2010-11. Changes in regulatory requirements regarding unit-linked insurance plans (Ulips), effective from September 1, 2010, have not had much impact on the company’s margins.

Life insurance business has a high gestation period and the companies do not report profit in the first few years of operation.

“The company reported profits in the first nine month period ending December 2010. Despite changes in regulations, we have done well. We do not foresee any contraction in margins in our business. We will have three to four per cent edge in margins over the industry. I can not share exact details. The company will come out with results in a few days,” said Mayank Bathwal, CFO, Birla Sun Life Insurance.

“We feel the business opportunity in life insurance is still very high. Now the product is much more attractive for customers. One just needs to find a profitable formula to adequately compensate distributors,” he added. Average commission paid to agents has fallen to 6-7 per cent of the premium post September 1, 2010 compared to 15 per cent earlier.

However, the product mix of the company has drastically changed in favour of traditional plans. Composition of Ulip in new sales has fallen to 55 per cent in 2010-11, from over 95 per cent in the previous year.

“There was a big change in regulations, but now the momentum is coming back. We see a good positive trend month after month. We are moving fairly quickly where we can start showing growth,” said Bathwal.

The company is also looking into its distribution model. At present, 70 per cent of new business is generated from its agents, 15 per cent from bancassurance (its partner banks which sells Birla Sun Life Insurance products) and the rest from brokers. “We want to increase sales from non-agency channel. It is our focus to have a much better distribution mix,” said Bathwal.

IndiaFirst Life to impart Rs 120 cr this quarter

IndiaFirst Life Insurance Company Ltd, a joint venture between Bank of Baroda, Andhra Bank and UK-based Legal & General, would go for a capital infusion of around Rs 120 crore during the current fiscal. The proposed infusion is to support its Financial Planning Centres (FPCs) in various parts of the country and to meet its solvency capital requirements.

After launching its first FPC in Chennai today, P Nandagopal, managing director and chief executive officer, IndiaFirst Life Insurance, said, "There will be a capital infusion of Rs 120 crore in this quarter to meet our solvency capital requirements and to set up the FPCs. With this, our total capital infusion will be around Rs 550 crore.”

So far, it has infused Rs 430 crore in two phases, the first of Rs 300 crore and later Rs 130 crore. The capital infusion would be from the promoter bankers, he added. Click to apply Life Insurance

Bank of Baroda and Andhra Bank hold 44 per cent and 30 per cent of the company’s stake, respectively, while UK-based risk, wealth and investment company Legal & General has 26 per cent stake.

Meanwhile, the company launched its first FPC in Chennai, and plans to set up a total of 12 centers in various major cities in the country in next two to three months.

The centre would offer a range of services including new business application processing, policy servicing request processing, advisor licensing processing, advisor and sales training, claim intimation processing and document collection and record management for business applications.

In the next two to three months, the PFCs would be set up in cities including New Delhi, Mumbai, Bangalore, Hyderabad, Kolkata, Pune, Ahmedabad, Lucknow, Jaipur, Indore and Kochi. Over a period of next four to five years, it plans to set up a total of 100 FPCs across the country.

“These centres are to explain to our customers the pluses and minuses of each product. We will ensure that each of the new customers is aware of the policies before they buy the product,” said Nandagopal.

Axis Bank buys 4% stake in Max New York Life for 72 cr

Axis Bank has acquired a 4% stake from Max India in its joint venture Max New York Life Insurance Company for Rs 72 crore, a person familiar with the development told ET. “Axis Bank has picked up the stake at par value and has entered into a 10-year strategic tieup," the person with knowledge of the matter said.

A spokesperson from Axis Bank said the bank has received necessary regulatory approval for the investment. Max New York Life Insurance is a 74:26 joint venture between Analjit Singh's Max India and US-based New York Life International.

The company, which announced the deal last year, got necessary approvals from the Insurance Regulatory and Development Authority (Irda) and the Reserve Bank of India ( RBI )), said Rajesh Sud, managing director and chief executive officer of Max New York Life. Max New York Life has a share base of 180 crore with a paid-up capital worth Rs 1,976 crore as on end-March, 2011.

The company reported a net profit of Rs 283 crore in the financial year 2010-11 compared with Rs 24 crore a year ago. "It is an economic decision by both the promoters. Axis Bank is a strategic partner so they have entered into a 10-year tie-up," said Parshant Tripathy , director-strategic planning at Max New York Life.

The deal will benefit both Axis Bank and Max New York Life, analysts said. "Axis Bank does not have an insurance subsidiary. At some point of time, Axis would like to extend activities like ICICI Bank and HDFC that get a significant part of the fee income by selling thirdparty products. This is a small investment so Axis may like to increase stake at some point," said Vijay Sarathi, analyst at BNP Paribas .

Axis Bank's fee income rose 30% YoY to Rs 3,790 crore in 2010-11 while Max New York Life's new business income from bancassurance increased to 25% in 2010-11 from less than 5% a year earlier. "Max has offered a signing bonus by giving 4% stake. Around 80% of the fee income for Axis would come by selling insurance products while Max New York Life gets the entire distribution network," said Suresh Ganapathy , analyst at Macquarie.

Max New York Life cut its employee strength to 7,000 in 2010-11 from 10,000 in 2009-10 and shut down 140 offices. "We have consolidated 60 branches and closed down 140 to increase efficiency and bring down cost," said Mr Tripathy. The company expects a single digit growth in adjusted premium equivalent this fiscal. It reported 11% YoY growth in new business income and 25% rise in renewal income in 2010-11.

Why do claims get rejected? How to avoid rejection of my claim?

According to the Insurance Regulatory and Development Authority (Irda), of the 7.62 lakh life insurance claims filed in 2009-10, nearly 15,000 were rejected by insurers. Meaning 15,000 families were denied the money that the policyholders had thought would reach them if they died! So you see numerous life insurance claims are rejected on various grounds and this articles is going to help you avoid rejection of your claim.

Firstly invest in an insurance policy and secure yours and your family’s future. You can avail of many offers available online that suit your purpose and benefit you.

The rejection ratio (rejected claims as a percentage of the total claims received and pending during the year) of some companies, especially those which started operations a few years back are very high. Namely, Aegon Religare rejected 45% of the claims, Future Generali, IDBI Federal and DLF Pramerica rejected one of every fifth claim raised (20%) whereas LIC has a rejection ratio of 1.1%.

This does not mean that one should not buy insurance from new insurance companies as claim settlement ratio or rejection ratio does not give the complete picture. Many a times the claims are rejected because the insurance company believes that pertinent facts were deliberately suppressed by the policyholder at the time of buying the cover.

An insurance company sizes up the risk of covering an individual on the basis of his health, medical history of his family, income, occupation and existing insurance cover. And based on the information disclosed the risk is properly assessed and priced accordingly. If an insurance company has reason to believe that any information pertaining to these parameters was suppressed, it can reject the claim.

Make sure you inform the agent that he is not really doing any favor if he deliberately overlooks any health problem or fills the form incorrectly as in the long run you would suffer as your claim will be rejected on grounds of non-disclosure of the pre-existing ailment.
This is especially true in case of low value insurance policies. Before they sell a policy, insurance companies subject the buyer to a range of medical tests.

Try not to rely on agents and fill the application form yourself. Ask him if you get stuck, but try and do it yourself. Just in case you are unable to fill it yourself go through the form after the agent has filled it up and then only sign it. Also retain a photocopy for your own record.

When you get the policy document and a photocopy of the form that you filled up, match it with the copy you have. This will ensure that all the information given in the form is correct.

Do not hold back any information relating to your health and family medical history.
Even disclose facts like use of tobacco and alcohol consumption.

Contrary to popular perception, a rigorous medical test actually helps the buyer. Because if a company gets the tests done, it rules out the chances of the claim being denied on account of preexisting diseases.

State correct age, occupation, income and other insurance cover. Your age defines the risk, so any inaccuracy can lead to rejection.

If your work profile involves risk, give the true picture.

Don't overstate your income so that you can buy a large cover.

Check the policy document carefully and notify the insurance company if there is any inaccuracy. In case of minor changes, the insurance company will simply send a letter confirming the new issuance terms. But if there are material changes which have a bearing on the original terms, the buyer may be asked to undergo additional medical tests to ensure that the risk cover continues.

Submit genuine documents like copies of your PAN card, identity proof, birth certificate and other such documents at the time of buying a policy.

Last, but not the least, pay your premium by the due date so that your policy does not lapse. Make use of the 15-30 day grace period for paying the premium, but don't bank on this.

Products other than term plans can be doing well

Recently there has been a lot of focus on term plans. Online term plans are a manifestation of that. Your comments.

Term plan is a very relevant product since it gives you adequate amount of protection. But given the macro environment of this country, such as GDP (gross domestic product) growth, steady rate of household savings and comfortable demographics, and given that insurance is still under-penetrated, I think there are many product propositions that can be successful. It is for the insurer to know the needs of the customers and tailor products accordingly.

Are you planning to come out with an online term plan?

We do not have an online term plan right now. I think there are many things one should look at. If you look across the world, online term plans are not tremendously popular. About 6-7% of sales actually happen online. And I guess the reason is that insurance is a high involvement product. So the quality of advice also determines the kind of insurance a customer ends up buying.

Yes, but we are talking about term, which is a simple product and what would determine that sales would be the premium.

I agree there are definite advantages of selling online products. The point I am trying to make is that besides term plan, there are many other products that a consumer needs and should have access to. While the online platform will be attractive to customers who are aware, I think insurers also need to look at conventional distribution models and figure out ways to give attractive propositions to customers.

The industry is moving to unconventional models. In fact, recently the Insurance Regulatory and Development Authority (Irda) indicated that the agency model will become a thing of the past.

The insurance industry is still new in India. Even in advanced markets, such as the US or Japan, tied agents have just not gone away. While I appreciate what Irda is talking about and there is enough scope of innovation as far as distribution is concerned, I don’t see tied agents going away. What could happen is the way agents will work in the future as compared with how they worked in the past.

Give us an example.

Look at what happened between 2001 and 2011. Many good things happened but there were also structural gaps such as poor persistency ratios and low productivity by agents. Irda has been trying to address these gaps. Moving on, you may see a reduced agent force, but these will be agents who are serious about the profession and will deliver quality advice.

You said that the market is ripe for products other than term plans. What are these?

Pure endowment products and child plans. Also unit-linked insurance plans (Ulips), even though many are shying away. Ulips as pure investment products may not work but if you combine insurance and investment, then Ulips are good products.

But traditonal plans have no real rate of return since the returns are not able to outpace inflation.

You need to look at products as a combination of protection and returns. If you look at the level of protection from these products, they are good.

But you pay a heavy price for that protection. You pay much more than compared with a term plan.

Even then I guess there is space because there are certain investor needs which will get met through traditional plans. If you look at a pure child plan, the structure ensures that there is money to fund the child’s education in case unforeseen events were to happen. There are also plans which ensure monthly income for the family. So you structure the protection cover with a fair amount of investment return bundled in and I see space for these products.

What percentage of business comes from traditional plans?

About 75% of our business comes from traditional plans.

Low Cost Life Insurance introduces by LIC Lanka

Life Insurance Corporation (Lanka) Ltd is the local arm of India’s largest life insurance company, LIC of India. Focusing on providing only Life Insurance benefits to the people. LIC Lanka recently announced launching of its new life insurance product to the market.

This product known as “Pure Life Insurance” provides abundance of life insurance benefits at a very low cost, where the customers are free to choose the period of life insurance coverage for them.

LIC (Lanka) has taken great care in ensuring that the customer gets the maximum life insurance benefit at low cost by ensuring that peripheral minor risks are excluded from the policy. LIC Lanka’s Pure Life Insurance gives the customer the option to decide on the period of life insurance coverage he/she wants.

Explaining the key features of the Pure Life Insurance product, Jagannath CEO/Managing Director of LIC Lanka pointed out that this Pure Life Insurance Policy provides financial benefits in the event of death. The primary value of Pure Life Insurance is to fulfill financial responsibilities of a person to his family members in the event of his unfortunate death. LIC Lanka Pure Life Insurance policy if taken for long period the premium is very much less.

Generally, financial advisors and other experts readily recommend Pure Life Insurance policy as a means to cover potential expenses, until such time that there are sufficient funds available from savings, to financially protect those persons whom the life insurance coverage was intended to protect. For example, an individual might choose to buy a life insurance policy which would expire close to his/her retirement age, based on the premise that, by the time the individual retires, he or she would have amassed sufficient funds in retirement savings to provide financial security for their dependents” Jagannath went on say that through the Pure Life Insurance Policy, LIC Lanka is able to offer affordable options without sacrificing quality.

“Pure Life Insurance Scheme offered by LIC Lanka is uncomplicated with benefits and services that are easy to understand. In India this product has been hugely successful.

Since the premium is very affordable, we have seen people with low income and high insurance requirements going for this product. Also high net worth clients who use their funds in risky investment like equities, real estate etc has also opted for the Pure Life Insurance policy to fulfill their financial protection needs. Corporate can also insure their ‘key persons’ under this scheme,” he added.

LIC increases stake in BHEL to 9%

Life Insurance Corporation has acquired additional over two per cent stake in power equipment maker BHEL from the market for Rs 2,205 crore to become the second largest shareholder in the PSU after the government.

LIC, which had 7.022 per cent stake in BHEL prior to this round of acquisition, bought shares during June last year to May 3 this year to take its stake to 9.052 per cent, BHEL said in a filing to the stock exchanges.

According to the shareholding pattern, the government has 67.72 per cent stake in BHEL, followed by over 9 per cent by LIC and 1.4 per cent by ICICI Prudential Life Insurance. The remaining stake in held by FIIs and the public.

BHEL shares changed hands at Rs 2,057.70 at the bourses during the trading today.

BHEL officials did not comment on the development. BHEL has announced highest-ever turnover of Rs 43,451 crore in 2010-11, registering a growth of 27 per cent over the previous year's. According to provisional figures release by the company, the Profit before Tax had increased 37 per cent at Rs 9,016 Crore, during the year.

The net profit stood at Rs 6,021 crore, an increase of 40 per cent over the previous year. BHEL secured orders worth Rs 60,507 crore in 2010-11 and expects similar order book in the current fiscal also.

The order book continues to be impressive despite many power projects getting delayed due to delay in coal block allotments, company officials had said recently.

In the power sector, the company bagged orders to the tune of Rs 46,393 crore in 2010-11, including those from NTPC, Bajaj Hindustan, Jaiprakash Power Ventures and Raichur Power Company. The company is all set to achieve a manufacturing capacity of 20,000 MW by March 2012 from the current level of 15,000 MW.

BHEL is discussing with various governments including Orissa, West Bengal and Tripura, for joint ventures with entities from respective states. It already has power generation joint ventures with state utilities in Karnataka and Maharashtra, among others.

Religare in meeting with overseas players for JV: CEO

Financial services group Religare Enterprises is in talks with two foreign insurers for a joint venture to offer general insurance services in India, and plans to more than quadruple its asset management business in two years.

The company plans to acquire five to seven boutique asset managers in the United States and Europe in 18 to 24 months to take its total assets under management to $60 billion to $80 billion from $15 billion now, Chief Executive Officer Sachindra Nath told Reuters in an interview on Friday.

Religare, which operates a life insurance business in partnership with UK-based Aegon, is awaiting the regulator's approval for offering health insurance.

"We are in discussion with a few players," Nath said, referring to talks about general insurance joint ventures.

India's general insurance sector, once an exclusive preserve of public-sector insurers, is now populated with several private and foreign players though rules limit latter's equity participation to 26 percent.

About two dozen general insurers operate in the country with several of them working in joint venture with leading foreign players such as AIG, Lombard, Allianz and Axa.

Religare Enterprises, founded by the family of billionaire brothers Malvinder Singh and Shivinder Singh, operates across multiple sectors including brokerage, lending, investment banking and asset management business and is aiming to become a $5-billion firm by 2015.

Together, the brothers rank as the 15th richest in India, according to Forbes.

Religare, looking to build a boutique asset management business, had acquired majority stakes in California-based private equity firm Northgate Capital and Connecticut-based secondary fund-of-funds Landmark last year.

"There is a huge vibrant boutique asset management industry (in U.S. And Europe). The challenge is that they have the constant pressure from LPs (limited partners) to now diversify their investment products into emerging markets. But they just don't have the bandwidth," he said. Click to apply Aegon Religare Life Insurance.

Religare aims to acquire these boutique asset managers, "who are unique in their strategies and combine them on one platform and help each one of them to launch new products for emerging markets," Nath said.

Last week, Religare acquired a 40 percent stake in Mauritius-based asset manager Ipro, which will give it access to much of sub-Saharan Africa, Nath said, without disclosing the deal value. Ipro manages about $300 million in assets.

Religare is also eyeing a banking licence in India.

The RBI is in the process of putting in place norms to issue new banking licences, sparking competitive claims from many non-banking financial services firms wanting licences.

Religare, valued at about $1.5 billion, closed 0.4 percent up on Friday in a Mumbai market that closed 1.68 percent higher.

High Court directs IRDS to provide proposal facility in motor insurance policy

In a judgement, which would help provide speedy and enhanced compensation to motor vehicle owners killed in a road accident, the Lucknow bench of the Allahabad High Court has directed the IRDA to provide nomination facility in all motor policies.

A public interest litigation (PIL) was filed in Lucknow bench of Allahabad High Court, challenging the non availability of nomination facility in the personal accident policy which is sold compulsorily along with motor insurance policy to vehicle owners.

Advocate Dhruv Kumar in his petition said that July 2002, an additional premium of Rs 50 and Rs 100 is being charged under the Indian Motor Tariff from owners of the two wheeler and four wheelers for compulsory personal accident insurance for the sum insured of Rs 1 lac and Rs 2 lacs, respectively.

The policy covers accidental death of owner of the vehicle while driving or even traveling in the said vehicle. Click to apply Car Insurance

The petitioner said that since facility of nomination is not available on the policy document, the owner of the vehicle remains unaware of the accidental cover and even those who know their beneficiary has to obtain succession certificate from the court to get their claim which is not only expensive but also time consuming.

The Insurance Regulation and Development Authority (IRDA) opposed the petition on the ground that Sec 39 of the Insurance Act mandates nomination facility in only life policies and that there is no reference to personal accident policies.

Petitioner Dhruv Kumar submitted that a personal accident policy, similar to a life policy, also insures against the death of policyholders and hence, it too requires nomination facility.

The bench comprising of Chief Justice FI Rebello and Justice DK Arora did not appreciate that IRDA was not providing the nomination facility in motor policies and directed the IRDA to enforce the mandated regulation on insurance companies.

Star Union introduces two new plans

Star Union Dai-ichi Life (SUD Life) on Wednesday introduced two new product offerings, one in the unit-linked insurance product (ULIP) segment, Dhan Suraksha Express, and another in the traditional category, Defined Growth Endowment Plan. It also announced that it has accumulated over Rs.1, 329 crore of new business premium in just over two years of its operations.

“We procured Rs.758 crore new business premium during 2010-11, registering a growth of 46 per cent over the previous year. Total premium income (including renewal premium) of the company was Rs.933 crore, which was 76 per cent up over the previous year.

“We have sold 97,730 individual policies and covered over 3.5-lakh lives under group schemes. We have also exceeded our mandatory commitments under social and rural business obligations prescribed by the regulator,” SUD Life Managing Director and CEO Kamalji Sahay told journalists here.

He said the company started business with just Rs.250 crore of capital contributed by the three promoters, Bank of India, Union Bank of India and Japan's Dai-ichi Life Insurance. However, the company has not required fresh capital infusion in spite of being one of the fastest growing companies.

INNOVATIVE OFFERINGS

“With our increasing success we have also continued to add value to our customers by providing them a bouquet of innovative product offerings.

“For SUD Life, customer satisfaction and product innovation are the two key drivers and our results for the year are reflection of our commitments to our goals,” Mr. Sahay added.

Buy insurance over Phone

Insurance Regulatory and Development Authority (Irda) has revolutionized the way insurance is bought and sold! As now it is possible to purchase a life insurance policy over the phone; so no need to fill any application form. The new Insurance Regulatory and Development Authority (Irda) guidelines on telemarketing has provided this facility which allow one to purchase life insurance policies without filling any form or signing any document provided the telemarketer furnish the transcript of your conversation with the insurance agent to the insurance company!

The guidelines state (which will be effective from 1^st October 2011):

"In all instances where a policy is issued without obtaining a proposal in physical form, insurers shall forward a verbal transcript of the voice/electronic record of the queries raised and answers thereto on the basis of which the policy has been underwritten, along with the policy bond." However, all know-your-customer (KYC) norms would have to be followed in the process of selling a policy through distance marketing.

In the general insurance sector purchasing a travel and health insurance is fairly simple already as they is no need to fill forms or sign any documents. For now, the new guidelines on telemarketing ask insurers and brokers

· To follow "standardized scripts for presentation of benefits, features and disclosures under each of the products proposed to be sold over the distance modes."

· The records of every call made and SMS sent by a telemarketer/insurance broker that materializes into a policy should be transferred to the insurer within 30 days of conclusion of the sale.

· The insurer is then required to preserve the record of the entire process beginning with lead generation/solicitation and concluding in sale of insurance, for a period of six months beyond the term of the policy or until satisfactory settlement of claim.

The new guidelines also put a cap on sale of unit-linked insurance plans, or Ulips – which accounts for over 55% of total life insurance premium collection - in its recent guidelines on distance marketing of insurance products.

· Insurers have been barred from selling Ulips with annual premium over Rs 50,000 in case of non-single policies and Rs 1,00,000 in case of single premium policies through telephonic mode (both voice and SMS).

The regulator also prohibited sale of universal life plans through telemarketers. In a universal life plan, the premium over the insurance (or mortality) charges, commission and expenses goes into a cash or savings account on which the insurer pays a guaranteed rate of interest. In case a person stops paying premium, this cash balance is used to meet the expenses associated with providing death cover and hence the policy continues as long as the cash balance lasts.

What are the costs concerned in a life insurance policy

Not all life insurance policies disclose their charges to policyholders. Traditional insurance policies do not disclose the charges. Unit-linked insurance products (Ulips) are more transparent about the charges. The various charges on an Ulip include:

Premium allocation charge (PAC): It is a percentage of the first year premium, adjusted before investing or allocating the units. It is a fee that you pay for servicing and maintaining your policy. This percentage is generally higher in the first few years and varies from one company to another. Say, your premium allocation charges are 30 per cent and your total premium is Rs 1, 00,000. Then, Rs 30,000 is first deducted as PAC and Rs 70,000 is invested.

Policy administration charge: It is levied for running or managing your policy. You could either be charged a flat fee throughout the policy term or a percentage of the premium.

Fund management fee: It is deducted for managing the funds, calculated on the net asset value of the fund invested in. The fee is charged as a percentage of the assets under management, typically anywhere between 1-1.35 per cent. It is calculated on a daily basis, which is reduced on an annual basis.

Mortality charge: It is the cost towards providing death benefit to the policyholders. It is only charged if your policy has a life cover.

The optional charges on Ulips are:
Rider charges: These are additional or supplementary benefits, bought over and above the main life insurance plan or the base plan. For example, if you opt for a critical illness rider, the charge on it will vary from one company to another.

Fund switching charges: You are allowed a fixed number of free switches in Ulips each year, after which you are charged for the subsequent switches. Most Ulips do not charge for the initial five-six, or even eight, switches at times. For more than this, they may charge anywhere around Rs 50-300.

How do you know your policy charges?
You can know about the various charges by going through your sales benefit illustration, which will tell you the various charges year by year. The policy brochure will illustrate the various charges. Your advisor can also tell you about these.

How often does one incur these costs?
PAC is deducted upfront from the premium paid by the insurer on a yearly or monthly basis, depending on the company and your premium paying frequency. Policy administration charges are on a monthly basis, where they deduct a part of the units you hold. The mortality charge (for a month) is picked up from the mortality charge table and multiplied with the net amount of risk under the policy, which is deducted from the policy account.

ICICI Prudential revenue up 3-fold at Rs 808 cr

Private insurance company ICICI Prudential Life reported an over three-fold jump in net profit at Rs 808 crore for the financial year ended March 31, 2011, helped by cost control exercise and client persistency.

During the fiscal, the company's new business premium income grew by 24 per cent to Rs 7,862 crore. Total premium income was Rs 17,881 crore, a rise of over 8 per cent.

"Effective cost and persistency management as well as commitment to growing profitably has enabled us to report profits for the second consecutive year. Effective use of technology was a key catalyst in ensuring profitable growth and helped us deliver a better product proposition to customers," ICICI Prudential Life MD & CEO Sandeep Bakhshi said.

The company's assets under management (AUM) increased by over 19 per cent in FY'11 to Rs 68,150 crore. This includes an equity corpus of Rs 43,325 crore.

"We have delivered strong results despite the structural changes witnessed in the industry on account of the new regulatory norms," he said.

The key drivers of delivering this profitability have been continued focus on expenses and persistency, ICICI Pru said in a statement.

Canara HSBC OBC Life Insurance rolls out ULIP plan

Canara HSBC Oriental Bank of Commerce Life Insurance on Monday announced the launch of a unit linked product - Insure Smart Plan.

A unit-linked insurance plan Insure Smart Plan, under the SMART solution umbrella, provides the option of NAV guarantee fund and is equipped with investment friendly features, Canara HSBC OBC Life said in a statement.

“Insure Smart Plan has been tailor—made to cater to the savings and protection needs of the customers. In addition to this, NAV Guarantee Fund provides an element of guarantee on investments to customers with lower risk appetite,” Canara HSBC OBC Life Director (Sales, Marketing & Products) Mr Mario Perez said.

The company is owned by Canara Bank (holding 51 per cent) and Oriental Bank of Commerce (23 per cent) and HSBC Insurance (Asia Pacific) Holdings (26 per cent).

The Insure Smart Plan has a premium payment term of 5 years and a 10—year policy term. The policy would allow customers the facility to withdraw from the sixth year.

“The customer can avail tax benefits on premiums paid and the benefit paid out under the policy, subject to the applicable provisions of Section 80C and Section 10(10D), respectively, of the Income Tax Act,” the statement added.

Health plan sensation may lead to wider increase for more schemes

The government is examining the possibility of turning its two important social sector programmers into universal schemes covering the unorganized sector in phases, taking a cue from the successful extension of a health insurance plan to 23 million poor families.

The labour ministry will prepare a feasibility plan together with the rural and finance ministries that run the old age pension scheme for the below poverty line people and the Aam Aadmi Bima Yojana (AABY) targeting the rural landless.

"The idea is in its conceptualization stage. We have to carry out studies and discuss all details, including funding options, with the rural development and finance ministries," labour secretary P C Chaturvedi told ET.

The insurance plan provides death and disability cover to one member of rural landless households while the Indira Gandhi old age pension scheme gives 400 to people over 65 years in the BPL category.

"We want the schemes to be extended to the entire unorganized sector, but it has to be done in phases," Chaturvedi said.

The issue may be taken up at the next meeting of the National Social Security Board, which is headed by the labour minister and has representatives from various ministries, including agriculture, rural development, urban development and housing and poverty alleviation.

The government has attained some amount of success in extending health cover to the poor through the Rashtriya Swasthya Bima Yojana run by the labour ministry that provides Rs 30,000 health insurance to poor families through smart cards. The scheme, initially targeted at the BPL population, is now being extended to various unorganized sections such as construction workers, coolies and domestic workers. In fact, it is the success of the RSBY that has been successfully extended to 23 million poor families in 330 districts in 27 states, that has prompted the labour ministry to plan an extension of the other two schemes.

"Since we have already created a database through the distribution of smart cards under RSBY and are building on it, the same infrastructure can be used for universalisation of the other two schemes," Chaturvedi said.

According to Subhash Bhatnagar from the National Campaign Committee for unorganized sector worker, extending the two schemes to all unorganized workers will help beef up the grossly inadequate social security cover available to the country's poor provided it is properly implemented. "It should not end up being a revenue earner for insurance companies, while workers struggle to get benefits," he said.

Linking the two schemes with the smart cards given under RSBY was good as the card made the scheme portable. "The card makes it possible for a migrant worker working in a particular state to move to another and continue to be part of the scheme," he said.

Under the old age pension scheme, the Centre provides Rs 200 pension per month to BPL population over 65 years of age and the states are advised to contribute the same amount.

Under the AABY, the head of a rural landless family is insured and the nominee is assured Rs 30,000 if the insured dies a natural death and 75,000 in case of death due to accident or total permanent disability. Both the state and Centre share the annual premium amount of Rs 200.