Bajaj Allianz launches guaranteed maturity insurance plan

Type of policy: A single premium Unit Linked Plan. The investment objective of this fund is to provide capital appreciation by investing in a mix of debt and debt-related securities.

Premium: Minimum premium is 5,000 and in multiples of 5,000.

Term of the Policy: The tenure of the policy is 10 years and you are allowed to make partial withdrawals after five years, limited to 1/3rd of the single premium.

Maturity benefit: Higher of the guaranteed maturity value of all the'guaranteed maturity certificates' held at maturity or the fund value as on maturity date. The plan guarantees 200% returns on maturity - that means your money doubles in 10 year (CAGR of 7.18%).

Death benefit: It is calculated as higher of the prevailing sum assured reduced by the value of the units withdrawn through partial withdrawals from the fund value in two years prior to the death, or fund value as on date of receipt of intimation of death.

The sum assured under the plan is five times the single premium in the first policy year and will, for subsequent years, reduce to 1.25 times of the single premium for those who enter the policy before they are 45, and 1.10 times of the single premium for those entering after 45.

Click here to apply Bajaj Allianz Life Insurance

Eligibility: The minimum age at entry in the plan is eight years and the maximum is 60 years

Charges: There is no premium allocation charge. But the policy administration charges are 1.85% per annum of the total single premium in the first five years of the policy, subject to a maximum of 6,000 and 0.70% per annum of the total single premium subject to a maximum of 6,000 per annum.

Policy administration charges and mortality charges are deducted monthly through cancellation of units. Fund management charge is 1% per annum adjusted in the unit price.

The good: It is a simple plan to understand and offers minimum guaranteed return on maturity

The bad: The policy offers reduced life cover from the first anniversary of the policy. Hence, it doesn't serve the purpose of insurance. Also guaranteed returns under the policy are less than the current 10- year G-sec yield or interest rate offered by most banks, without taking tax benefits into account.

Berkshire to enter life insurance biz in India

Seven months after debuting in India, Warren Buffett's Berkshire Insurance is now spreading its wings in the country. The company plans to enter the life insurance space in India, by launching an online term cover.

Berkshire India, a joint venture between Nebraska-based Berkshire Hathaway and Allianz, would start life insurance operations as a corporate agent of Bajaj Allianz Life Insurance Co.

“We have a corporate agency licence with Bajaj Allianz Life, and in the coming six months, we would launch an online term insurance product,” Berkshire India chief executive officer, Arun Balakrishnan, told Business Standard.

Though the product would be launched under the Bajaj Allianz brand name, its underwriting would have some imprint on the insurance behemoth.

“We would give some inputs to the underwriting team, and these might be incorporated. Whether it would sill be an exclusive product to be sold by Berkshire remains to be seen,” Balakrishnan said.

Berkshire India started its operations in India in March, as a corporate agent of Bajaj Allianz General Insurance. The company's entry into the general insurance space coincided with Buffett’s maiden visit to India.

The company is expected to increase its product suit in the general insurance space by launching a health insurance product. It already enjoys presence in the motor and travel insurance space.

The sale of online term plans is fast gathering pace in India, since an online product does not involve agents. Hence, companies are able to save on various costs to customers.

Various private life insurance companies have already launched online term plans, and these policies are more than 30 per cent cheaper than offline products (products not available online). The country's largest life insurer, Life Insurance Corporation (LIC) of India, also has plans to launch such products.

In the first month of its operations, Berkshire, through a carefully-planned marketing strategy, managed to sell 300 motor insurance policies online, in return for the chance to spend an evening with Warren Buffett, also known as the Sage of Omaha. Customers who bought motor insurance policies for $48 could secure an invite to meet him in New Delhi.

“Invites, which aren't transferable, are restricted to one per policyholder, and available on a first-come, first-served basis,” Berkshire Hathaway Inc had said in an emailed statement on the eve of its India launch. The other novelty, as the company website put it, was the fact that Berkshire had “opened an office in India by not opening an office”.

However, as the initial euphoria died down, sales dived to less than 30 a month—a tenth of the initial figure. In August, Berkshire came up with a revamped version of its website. The company claims this has improved results.

“The real launch happened only from August. Marketing activity started from August, only after we launched the revamped website. Since then, monthly sales numbers have crossed the peak of 300 policies,” Balakrishnan said.

“Customer feedback on the new version has been very good. The enquiries are increasing and sales numbers, on a monthly basis, are also rising. Internet selling requires a continuous approach. We keep on upgrading the model, based on customer feedback. Based on the data, we are trying to develop different segments in the market, and would launch products accordingly,” he said.

IRDA plans end to deceptive policies, upfront commission

The Insurance Regulatory and Development Authority (IRDA) plans to ban misleading products and staggered commission for agents to ensure that policy buyers are not shortchanged.

The insurance industry, which is still evolving a decade after privatisation, needs new rules to ensure that consumers get the best and don't get carried away by products that only promise high returns on paper, the regulator has said.

"One important problem is that what you mean by highest NAV,'' J Hari Narayan, chairman, IRDA, told ET in an interview, referring to many insurers promising highest net asset value of the policy period to holders. "In certain markets, certain products are prohibited. That may be the best way to go.''

Insurance companies, bitten by the slump in sales after new rules curbing the Unit Linked Insurance Policies, are peddling many policies that on close scrutiny could be termed deceptive. One such is the promise of highest net asset value. But what they do not publicise is the calculation behind the NAV. These policies also charge 25 to 75 basis points as additional fees. A basis point is 0.01 percentage point.

"Suppose a company had Tata in its portfolio, over time it may change,'' said Narayan. "At the time of maturity, which highest NAV are you talking about - the portfolio, or Tata. One of the major problems with the product is that how do you communicate to the policyholder. He may be thinking of the highest NAV of the Sensex. So, this is the whole issue.''

Prudential ICICI, Birla Sun Life, Bajaj Allianz, SBI Life, Reliance and Aegon Religare are some of the insurance companies that sell policies promising the highest NAV. These policies have tenure of 10 years with limited premium paying term of 5-7 years.


Though the highest NAV guarantee gives the impression that such products are pure equity products and pay the highest return during the course of the tenure, that is not always the case. When a 100 investment gains by 10-15%, a portion of the corpus is shifted to debt. At regular intervals, when there are gains, some funds are shifted to fixed income securities.

In a way, this could be a strategy where investors don't get the highest NAV they would have received if they had remained invested in equties. The portfolio manager, to avoid liabilities for the company, could actually depress returns for investors.

Another area where investors lose out, commission to agents, could also be plugged.

As high as 40% of the policy premium in the first year on traditional products while 7-12% in Ulips, are paid to agents as commisssion. But once the policy gets running, the agent loses interest in serving the policy holder. So, to ensure that customers are serviced, the commissions could be rear-ended and paid at the later stages of the policy, than in early years.

"Korea has found that front-ending commissions has led to unhealthy practices. So, the question is should we rear end it. A lot depends on the sales history and culture of the country,'' Narayan added.

Faster, cheaper trade draws insurers to direct mkt access

The facility is currently available only to institutional investors in India.

Domestic insurance companies have started using the direct market access (DMA) facility for stock market transactions to keep trades confidential and benefit from extremely low broking rates.

DMA is an electronic facility that allows brokers to offer their clients a direct access to the exchange trading system through their infrastructure, but without manual intervention. The Securities and Exchange Board of India (Sebi) had allowed DMA in April 2008. This facility is currently available only to institutional investors in the country.

DMA EXPLAINED

WHAT’S DMA? DMA is an electronic facility that allows brokers to offer clients direct access to the exchange trading system through their infrastructure, but without manual intervention. Sebi had allowed DMA in April 2008 WHO ARE ITS MAJOR USERS? At present only institutional investors are allowed to use DMA in India. Over 30 per cent of FII trades are estimated to come through this route

Foreign institutional investors (FIIs) are the major users of DMA in India, with more than 30 per cent of their trades coming through this route, according to brokers.

“Since manual intervention is not there in DMA, you can have finer broking rates, which can be as low as 25 per cent of the normal rates,” said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance. “You can monitor your trade on a real-time basis. Also, sanctity of trades is maintained as they are not disclosed,” he added. About 25 per cent of IDBI Federal Life Insurance’s trades in stock markets now happen through DMA.

The Life Insurance Corporation (LIC), India’s biggest insurer, has also shown interest in using this facility for its stock market transactions, according to brokerages officials.

The brokerage rate for DMA in the cash market is 5-6 paisa for a turnover of every Rs 100. For trades placed over phone and manually entered by dealers, institutional investors pay an 10-15 paisa per Rs 100 turnover as brokerage.

“We are using DMA in a small way at present. It works well wherever the liquidity is low, as the identity is not revealed. Also, it gives the full control in terms of execution of the orders,” said Sampath Reddy, chief investment officer (equity) at Bajaj Allianz Life Insurance. “Sometimes on smaller orders or orders with a higher monitoring level, brokers may not pay much attention in those cases DMA will be more helpful,” he added.

Bajaj Allianz Life Insurance started using DMA six to seven months ago. Less than five per cent of the company’s trade in the stock market comes through this route. “The use of DMA will keep on increasing gradually. But you can’t replace traditional broking with DMA,” Reddy added.

Use riders of an insurance plan to increase coverage

To ensure that you are adequately insured against any untoward mishaps in the future, you don’t need to buy too many different insurance policies that your agent recommends to you for earning higher commission. Be a smart investor and check out the riders or attachments offered by your insurance company to expand the scope and coverage of your insurance policy.

Riders are attached to a base policy and provide additional benefit at relatively lower premium. The premium charged for a rider is much lower compared with a standalone policy because the administrative expenses are loaded in the base plan and, hence, not loaded again for riders. This makes riders relatively cheaper.

Riders cover risks arising out of specific situations such as accidental death, critical illness and permanent disability, among others. In the unfortunate occurrence of the event covered by a rider, the insured gets the promised rider benefit. Rider benefits are in addition to insurance sum assured. Say for instance, the life insured meets with an accidental death, the insurance payout will include both the sum assured as well as the rider benefit. The rider premium will depend on the rider sum assured, age of the insured, insured’s health condition and other factors.

Rituraj Bhattacharya, head of market management, Bajaj Allianz Life Insurance, said, “Riders allow you to enhance your cover qualitatively and quantitatively. Moreover, the amount you pay for riders is small when you consider that you would otherwise have had to pay a lot more for a completely new cover for the same benefit. Most customers are usually not aware of the various types of riders available.”

Deepak Sood, chief executive officer and managing director, Future Generali India Life Insurance Company, said, “Some of the covers are generally not available on a standalone basis and, hence, availing them with a rider with some insurance policy is the only way.”

You can tailor-make your insurance policy based on your needs by selecting the right riders. Insurance companies offer a bouquet of riders. Here are the popular riders available on the shelf.

Accidental death or double accident benefit rider: In the event of death of the insured due to some accident, the insurer pays the sum insured, which is generally equal to the original base policy sum insured.

Term assurance rider /additional term benefit rider: It allows the policyholder to increase the life coverage component of the base policy so that in case of any unfortunate event, like death, his family gets a higher sum insured.

Family income benefit rider: On the death of policyholder, this rider ensures a steady flow of monthly income to the heirs of the policyholder.

Waiver of premium rider: In the unfortunate event of death or total disability of the insured, family members of the insured find it difficult to continue the insurance policies taken by the insured. This rider basically waives of the future premiums that are to be paid by the insured in case of such events.

Accident and disability benefit rider: The policyholder is provided with a lumpsum or annual payment in case he meets with an accident that causes permanent, temporary, partial or total disability. In this case, the life insurance continues for the rest of the tenure.

Major surgical/surgical care rider: This rider is helpful in cases where the insured needs to undergo a life-saving surgery. However, the rider will not provide coverage for any treatment that does not require surgery. Also, the insured should go through the list of surgeries that would be covered before opting for this rider.

Critical illness rider: The insured may opt for this rider in case he wants extra coverage for any critical illness. Sum insured is provided to the insured on first diagnosis of the critical illness. The policyholder should go through the list of critical illnesses, which will be covered in the policy. It varies from insurer to insurer.

Insurance companies are innovating and coming out with new riders for their customers. Bajaj Allianz offers unique riders exclusively for women. Under this rider, the policyholder is provided certain sum insured in case she is diagnosed with any critical illness, undergoes any reconstructive breast surgery, complications while she is pregnant or for any congenital disability of the new born. Yateesh Srivastava, chief marketing Officer, Aegon Religare Life Insurance, said, “There are a number of innovative riders that we are considering. These are in the areas of gender specificity, health and income protection. At this point of time, it would be premature to share specific details.”

Most insurance companies are offering riders to their customers to enhance protection. “Offering riders is one of the additional features we give to our customers. Over time, we have seen that persistency ratio (ratio of customers renewing their policy) is better in case of policy with a rider,” said Rajeev Kumar, vice-president, product and pricing, Bharti Axa Life Insurance.

Most companies allow you to buy a rider during the policy tenure, mainly at the start of a policy or on renewal. But some companies do have restrictions so get in touch with your company to know more. In case you have bought a rider and do not need the benefits prescribed in the policy and it does not fit your bill, you also have an option to discontinue the rider on renewal of your policy. But do think through before discontinuing with a rider from your policy, because once you opt out, opting in again is generally not allowed.

However, riders do not have any surrender benefits, as they are risk-based riders. Surrender benefit is payable only when there is a saving component in an insurance policy.

Post payment of the claim amount, the rider may continue or cease depending on the terms and conditions of this rider policy. However, the base policy continues to be in effect.

There is no limitation on the number of riders one can buy. But as per provisions of the insurance regulator, Insurance Regulatory and Development Authority (Irda), the premium in respect of all the riders put together in any policy should not be more than 30 per cent of the base premium.

If the base policy lapses, the rider cover will also lapse and both may be revived based on the policy terms and conditions. The insurer may also allow revival of base policy without riders, but riders alone cannot be revived in isolation. In other words, while the base policy is in a lapsed condition, the riders cannot be revived.

The premium rates of riders vary from insurer to insurer, depending on the definitions of the cover offered under them, the exclusions, target population, selection procedure adopted by the company and the past experience it has in respect of such or similar covers.

Suresh Agarwal, executive vice-president, Kotak Life Insurance, said, “Documents that prove occurrence of the event covered by the rider is necessary to claim rider benefit.” While making a claim, in case of term riders (which enhances life coverage), no other documentation is required, but for other riders, extra documents are needed to prove the occurrence of event. For example, in case of critical illness, documents such as hospital papers and certificate of diagnosis, among others are needed.

Riders also have a separate set of exclusions. For example, in case of an accident death benefit rider, if you are involved in frivolous life threatening activities, such as parachuting and skydiving, or death while under the influence of alcohol or narcotic substances, or you have committed any breach of law, claims won’t be paid. One must carefully go through these exclusions before opting for a rider.

Kingfisher Airlines renews air insurance policy at lower premium

Kingfisher Airlines (KFA) has renewed its annual insurance policy without much hassle as premium rates fell by 37% for its insurance policy, mainly due to the abundant capacity in the reinsurance market. The policy is insured primarily with ICICI Lombard, which is the lead insurer, while Bajaj Allianz, SBI General and IFFCO TOKIO are part of the consortium.

According to a source close to the development, premium rates have come down 37% to 43 crore ($9.5 million) in 2011-12, lower from 60 crore ($15 million) paid in FY11.

"Premium rates have not gone up. This is despite the increase in the number of aircraft during the past one year, increase in landing and increase in passengers. There were not any major claims made by the aviation company," the source revealed.

The airline has coughed up 56 crore towards aviation insurance in FY10 compared with 52 crore in the previous fiscal. The policy covers the hull of the aircraft and liability to passengers. It includes coverage for any third party damage to property or people outside the aircraft.

Aviation policies are mainly reinsurance-driven since underwriting capacity is restricted to 150 crore. The number of accidents determines the premium rates for airlines. Kingfisher had made a claim of $17 million last year for the damage caused to its turboprop ATR that flew from Bhavnagar to Mumbai.

"The capacity available in the market is twice than is required. While there is an intent to increase rates, the capacity remains abundant," said Rajiv Kumaraswamy, head of underwriting at ICICI Lombard. Insurance premium rates had hardened in 2009 with three major accidents - Air France, Yemenia and Caspian Airlines. Prior to this, rates had shot up after 9/11.

The total premium in the airlines sector globally has touched $2 billion in 2010 against $1.6 billion a year ago.

State-run Air India is in the process of renewing its annual policy.

Life insurers' new premium collection drop 31% in Feb

New business premium (for individual regular policies) collections for life insurers fell 31(%) per cent in February, one of the steepest decrease in recent months.

The continued decline comes in the wake of more strict norms imposed by the Insurance Regulatory and Development Authority (IRDA) on guaranteeing a minimum return on pension policies besides scaling down the amount of commission payable to the agents.

The public sector giant LIC saw an even more sizeable decline with its new business premium collections registering a 44(%) per cent drop compared with the same time last year.

LIC collected Rs 2,273 crore compared with Rs 4,092 crore in February last. Private players put together saw a 12(%) per cent decline, though a few players suffered much steeper fall in collections. What should be a source of worry to the industry is that such a decline has come during its peak season for fresh business. As a rule, the industry collects close to 40(%) per cent of its total new business premium in the January to March quarter of a year — the tax-saving season for investors.

Fewer pension plans

The industry launched fewer pension plans this year as the insurance companies were guarded of the regulator's condition that the former spell out a minimum return to policyholders on such plans. New insurance regulations require players to guarantee a 4.5(%) per cent return for long durations under such plans. They accounted for 25-30(%) per cent of the business last year.

The introduction of new guidelines for ULIPs in September 2010, which required insurance companies to offer a minimum guarantee on pension plans, too has seen new business premium collections decrease for private players. For 12 of the 22 private insurers, new business premium collections for February were down with Bajaj Allianz Life insurance premium collection declining 53(%) per cent to Rs 190 crore.

For the first time since the insurance regulator put in place new guidelines for unit-linked insurance plans, LIC's premium collections have declined more than the private sector.

Among the private players SBI, Max New York Life and ING Vysya Life witnessed healthy growth in the band of 44(%) per cent, 39(%) per cent and 25(%) per cent respectively.

New traditional products

However, the positive development witnessed throughout the April 2010 - February 2011 period, is that insurers have started introducing traditional products where the risk of humanity alone is covered or additionally the policy promises a lump sum amount with a bonus amount thrown in.

With traditional products chipping in, year-to-date new business premium collection for regular policies witnessed a growth of 10(%) per cent to Rs 69,297 crore. LIC's growth of 16(%) per cent in new business premium has also helped.

Another factor that contributed to the better year-to-date figures is the higher ‘single premium' business collections.

In the normal times, private insurers are wary of selling the single premium products on account of lower profit margins. But with equity market turning unpredictable and minimum lock-in for the ULIPs being increased to 5 years, insurers have preferred to take the single premium route.

On a year to date basis, private players such as India First (BoB, Andhra Bank and Legal & General) witnessed healthy growth of 241 per cent to Rs 396 crore, followed by Shriram Life and HDFC Standard Life.

Plan a wonderful cover for your wedding day

Its plain unpromising. The mere thought is irreverent. Most people do not expect anything even remotely unpleasant to occur on the big day of their lives. After all, nothing can possibly go wrong when it comes to your very own band, baaja and baarat!

But we all know that disaster strikes without warning and that is the reason why you need to be sure that in case of any unexpected situation, at least the investments made in weddings are secure. According to estimates, the size of the wedding industry is approximately between Rs 1, 90,000 crore and Rs 2, 25,000 crore. Says Anita Singh, a wedding planner, “Nowadays, weddings can cost anywhere between `10 lakh to right up to even a crore.” And, if you are spending a major part of your life savings on this one event, you would definitely welcome security. And, wedding insurance is one such product that can help you insulate the losses, if the need arises.

WHAT DOES IT OFFER?

Most of the companies sell wedding insurance as a part of event insurance. The policy broadly covers personal accident, postponement or cancellation of the wedding and the damage of the property at the wedding venue. However, these policies can be customised according to your needs. So, if you are little wary of the kind of food that you have been eating before the wedding and you see it as a risk, then you can add food poison in the cover.

Also, if any of the close relatives of the bride or the bridegroom are unwell and there is a possibility that the event could get cancelled or postponed because of their accidental death, then you can buy a cover for that as well. You can also ask for a cover against burglary of jewellery, or the event getting cancelled as either the bride or the bridegroom is unable to reach the venue on time. If the wedding gets postponed/cancelled due to damage to marriage halls, then fret not, as that can also be insured. Even a terror attack is another risk that is now covered.

WHAT’S NOT COVERED

Any wedding that is cancelled due to a dispute between the marriage parties will not be covered. However, some policies do cover cancellations if the groom does not turn up due to unpaid dowry. Also, if you have any last-minute doubts and get cold feet on your big day, then don’t expect the insurer to pick up the bill. Insurance companies also do not cover willful negligence and criminal misconduct. Most importantly, you need to read the fine print very carefully as the terms and conditions vary depending on the insurance provider.

THE MONEY TANGLE

Bajaj Allianz offers four fixed options for the sum insured — Rs 20 lakh, Rs 35 lakh, Rs 58 lakh and Rs 73 lakh. The premiums for these are Rs 2,252, Rs 4,004, Rs 6,232 and Rs 8,273 (including service tax), respectively. However, the other companies generally provide a customised cover, so “premium rates broadly vary from 0.75% -1.5% of the total sum insured, depending upon various risk parameters like safety and security arrangements at the venue, geographical area, risk management or contingency plan etc.

ICICI Pru tops private life insurers in premium group

ICICI Prudential Life Insurance topped private sector life insurers in premium collection in the first 8 months of this financial year between April and November,

According to sales data released by Insurance Regulatory and Development Authority (Irda), ICICI Prudential mopped up Rs 4,053 crore followed by SBI Life, which garnered Rs 3,952 crore.

HDFC Standard Life garnered Rs 2,150 crore, Bajaj Allianz Rs 2,033 crore and Reliance Life Rs 1,791 crore. Insurance behemoth LIC collected a total premium of Rs 55,513 crore throughout the period.

Overall, 23 life insurers in the country together mopped up Rs 76,990 crore in first-year premiums during the period, a 39(%) per cent increase from Rs 55,357 crore in the year-ago period.

The private sector, comprising 22 life insurers, collectively registered Rs 21,476 crore worth of new business during the period.

However, Reliance Life Insurance outperformed its private sector peers in terms of the number of policies sold during this period.

Reliance Life sold 13, 12,389 policies between April and November compared with 12, 61,668 in the corresponding period of previous year.

“Our wide-ranging products, catering to every section of the society, and pan-India presence with quality service helped us notch up this business milestone," Reliance Life Insurance executive director and president Malay Ghosh said.

Bajaj Allianz and ICICI Prudential sold 9, 49,183 and 8, 26,904 policies, respectively, to stand second and third.

Life Insurance Corporation of India continued to lead the pack, notching up 1, 93, 54,765 new customers in the first 8 months, but the number was down 1(%) per cent from 1, 95, 77,088 sold a year ago.

The insurance industry as a whole saw a 6(%) per cent dip in policy sales to 2, 63, 51,967 during the period from 2, 78, 91,082 in the same period last year.