Birla Sun Life launched two variants of term plans

Private insurer Birla Sun Life Insurance (BSLI) on Thursday launched protector plans in two variants.

BSLI Protector Plan and BSLI Protector Plus Plan offer flexibility to customers by giving them the option to hike their sum assured over a period arising out of increasing responsibilities and inflation, at no extra cost, the company said in a release here.

"Keeping the customer needs in mind for a term plan that can grow with growing responsibilities, BSLI has introduced Protector Plans that aim to ensure a family's financial security as per their evolving life cycle needs at affordable cost," BSLI Chief Financial Officer and Head - Institutional Sales Mayank Bathwal said.

Both plans offer customers the flexibility of opting for a constant or increasing sum assured at inception.

Customers, who opt for an increase in sum assured, will have the option of increasing it by 5 per cent or 10 per cent every year, in order to factor in growing needs and responsibilities. On every policy anniversary the sum assured increases by 5 per cent or 10 per cent, the release said.

BSLI is a joint venture between Aditya Birla Group and Canada-headquartered international financial services company Sun Life Financial Inc.

The private insurer's asset under management was Rs 19,760 crore and it has a capital base of over Rs 2,450 crore as of March 31.

Guaranteed returns only for traditional

Returns on NAV-guaranteed plans are higher than debt products

Last week, Pankaj Ramnath got a call from an insurance executive offering him a highest net asset value (NAV)-guaranteed unit-linked insurance plan (Ulip). Given the volatility in the equity markets, Ramnath felt a guaranteed plan was the perfect investment option.

Ramnath had various options to choose from. Birla Sun Life Insurance has launched Platinum Advantage Plan; ICICI Prudential has Pinnacle II; HDFC Standard Life Insurance has Crest, and the latest offering is from ING Vysya Life Insurance — Market Shield.
Investors expect to get returns based on the highest NAV in these funds. Suppose the NAV in the first, second and third year is 20, 30 and 40, respectively, the company will offer returns at 40 per cent even if the equity markets undergo a correction thereafter.
AT A GLANCE
Majority investments made in debt instruments, restricting returns
Suitable for conservative investors, uncomfortable with volatility of equity markets
An additional charge of 0.1-0.5% levied for guaranteed returns
Mostly returns given based on highest NAV only if the person stays until maturity
In most plans, nominee receives either sum assured or fund value, in case of policyholder’s death
Ramnath’s financial advisor, however, ruled against his investing in the product. Reason: the returns from such products are slightly higher than debt products or at best comparable to balanced funds. “Guaranteed return products are for investors who have a conservative approach and do not mind sacrificing the upside in lieu of downside protection,” says Rahul Aggarwal, CEO, Optima Insurance.

Like Ramnath, many investors think that in NAV-guaranteed funds, the insurance company will invest money just like any other Ulip (say 100 per cent in equities) and give back returns based on the highest NAV it achieves during the policy tenure.
In reality, NAV-guaranteed plans are not pure equity products such as other Ulips, which use different funds for wealth creation. To give the returns based on the highest NAV; these funds use an investing strategy where the majority of investments are in debt, and a minority portion in equity. “Fund managers of such plans have a free mandate and can move the entire portion of the fund to debt instruments at any given point of time, bringing down the overall return of the fund.”
Insurance companies keep increasing the debt allocation to lock the highest NAV. In the last few years, usually seventh to tenth year, the entire allocation is debt. A lower equity allocation restricts their returns.
In the last six months, Tata AIG’s Ulip — Tata AIG Individual Life Equity fund — gave 14.9 per cent returns, while its NAV-guaranteed fund, Tata Apex Pension 10-year Return Lock-in Fund, has given 11.1 per cent returns.

Charges for these products are the same as the other Ulips, after the regulatory changes, except that some companies levy an additional charge for providing the guarantee. This annual charge can vary between 0.1 per cent and 0.5 per cent (ING Market Shield) each year.
Except for ING’s Market Shield, most products give returns based on the highest NAV only if the person stays until maturity. If the policyholder exits midway, he/she would get the prevailing returns based on the prevailing NAV.

Most insurance companies had this product even before the Insurance Regulatory and Development Authority, or Irda, changed the structure and charges on all Ulips. In many of the earlier products, if the policyholder passed away, the nominee would get either the fund value or the sum assured depending on which of the two was higher. This feature exists in the new products, as well. Out of the products mentioned earlier, only ICICI Pru Pinnacle II provides sum assured and fund value, if the policyholder passes away.

The structure of this product category allows the fund to protect the capital, while capturing the small upside in the equity market. Someone looking for market-linked returns can look at the regular Ulip policy.

Two Latest Plan launches by Birla Sun Life Insurance

Leading private insurer Birla Sun Life Insurance launched two variants of its just launched savings plan, offering 20(%) per cent assured return at standard intervals.
Bachat Moneyback and Bachat Child plans follow the achievement of the Bachat Endowment Plan, launched this May, which contributed to over 10(%) per cent of overall sales in the first quarter of this financial, Birla Sun Life Insurance Chief Actuarial Officer Fabien Jeudy said.
"Our research shows that there is rising a demand for products on the traditional platform that will help consumers save for their long-term goals during regular and affordable premia. We hope Bachat Moneyback and Bachat Child plans will address these consumer needs effectively," he said.
These plans offer regular money back of 20(%) per cent of the monthly stand premia at every 5th, 10th and 15th policy year, Jeudy said.
In Q1 of this financial, the company reported a profit of Rs 9 crore against a loss of Rs 111 crore in Q1 last financial. Its asset under management grew 44(%) per cent to Rs 16,841 crore in Q1, on a total premium income of Rs 1,143 crore, up 18 per cent. Its new premium grow 7(%) per cent to Rs 473 crore while renewal premium rise by 27(%) per cent to Rs 669 crore.
Birla Sun Life, a JV between the Aditya Birla Group and Sun Life Financial of Canada, has over 2.3 million customers.
For More information about Life Insurance

Private Life insurers go on to book profit

The controversy over rule of unit-linked insurance plans (Ulips) has had modest impact on the private life insurance industry. Most companies reported profit throughout the first quarter of the financial year on the back of marginal growth or drop in new sales and decrease in expenses.
Birla Sun Life Insurance reported its maiden profit since it started operations in 2001. It registered a net profit of Rs 9 crore during April-June 2010 as against a loss of Rs 111 crore in the parallel quarter last year. The income from new business grew around 8(%) per cent. Private players recorded a 21(%) per cent increase in income from sales of new policies during the quarter.
“The profit has risen mainly because of an increase in renewal premiums by 27(%) per cent, a reduction in the operating expense ratio by two-threee bps (basis points) and an improvement in the product mix, which now includes a larger share of traditional products, reducing the strain of new business,” said Mayank Bhatwal, chief financial officer, Birla Sun Life Insurance.


UPWARD MARCH
Q1 profit/loss of life insurers (Rs cr)
Insurers 2010-11 2009-10
SBI Life 114 39
ICICI Prudential Life# -116 -27
Bajaj Allianz Life 169 68
Birla Sun Life 9 -111
Source: Companies, BSE
# Q1 2010-11 -Before accounting for a surplus of Rs 235 crore in the non-participating policyholders’ funds
SBI Life, which was at the number one position in new business income throughout the quarter, reported a net profit of Rs 114 crore as against Rs 39 crore in the related quarter last year. Its new business income fell 9(%) per cent. It was renewal premium that helped the insurer show good result.
“Our new income dropped due to group business. There was an overall increase in assets under management under the Ulip portfolio as well as non-Ulip and shareholders portfolios,” said M N Rao managing director and CEO, SBI Life.
Bajaj Allianz Life Insurance registered a net profit of Rs 169 crore compared to Rs 68 crore in the same quarter previous year. Its new business income grew marginally by 4(%) per cent to Rs 603 crore from Rs 578 crore as the company focused on profitability.
ICICI Prudential, the largest private sector player in terms of new business, reported a loss after tax of Rs 116 crore during the quarter, which will be shown as a profit of Rs 119 crore at the end of the year.
The insurer posted a profit of Rs 258 crore previous financial years. ICICI Prudential Life Insurance reported a loss after tax of Rs 116 crore, before accounting for a surplus of Rs 235 crore in the non-participating policyholders’ funds, which would be transferred at the end of the financial year based on the selected actuary’s recommendation, the bank said.
Though insurance companies have turned profitable, the shareholders of these companies, except SBI Life, will have to wait for a few more quarters for dividends as insurers are yet to wipe out their accumulated losses.

Birla Sun Life ties up with Suvidha Infoserve (P)

Birla Sun Life Insurance (BSLI) announced its tie-up with Suvidha Infoserve (P), nowadays. This tie up will allow over 2.3 million policyholders of BSLI to make their premium payments in cash/cheque at any of the 22,000 Suvidha outlets situated close to them.
Policyholders can make their premium payments in cash/cheque across all Suvidha outlets increase at convenient locations like kirana stores, mobile stores, medical stores, STD booths, cyber café’s and travel agencies, easily to hand to policyholders. The policy holder can pay his premium by handing over the amount and his policy number to the store owner who will punch in the information and amount at the kiosk and generate a payment acknowledgement receipt of the transaction.
Speaking on the association Mayank Bathwal, chief financial officer (CFO), Birla Sun Life Insurance said, ``Customer centricity is at the center of all our offerings at BSLI. A product like Life insurance is driven by repeat relations and premium payment is the most frequent and basic interaction between the client and the company. We therefore believe that convenience is key to this offering. ``He further added ``our tie-up with Suvidha Infoserve is a step in this way. Suvidha with its extensive network increase across the length and breadth of the country will particularly be useful to customers in tier 2 and tier 3 locations. We are hoping that these extra touch-points for premium payment will benefit customers.``
Commenting on the partnership, Paresh Rajde Founder managing director (MD) and chief executive officer (CEO) of Suvidhaa Infoserve (P) said, ``The relationship is a win-win situation for policy holders and Suvidhaa retailers which will provide abundant payment options and accessibility to them. We see a huge potential for growth in insurance sector and the integration of two will increase the benefit many fold for both customers and retailers. The alliance also re-iterates our commitment of leveraging the platform of S-commerce and the robust technology along with a convenience designed for our customer’s right in their neighborhood.``

Heat up on insurance agents

Life insurance agents are probable to face difficult times.
The regulator has planned to make the norms for selling policies more stringent, while insurers are planning to update their tied agent force to increase productivity as their limits have come under pressure following rule changes over the past 12 months.
The insurance regulator has projected to amend the IRDA Regulations for Protection of Policyholders’ Interests so that the policies are sold based only on the need of the buyer.
The IRDA wants to make it compulsory for agents to prepare a “need analysis document” before selling a policy. “There should be a proper monitoring of implementation of the need analysis by insurers of all the intermediaries they deal through,” the regulator said.
It also said the training set of courses for agents should give high priority to the need analysis. “The regulatory changes will shake out the 30-lakh plus agency force in the life insurance industry,” said Shekhar Bhandari, business head (tied agency), Kotak Mahindra Old Mutual Life Insurance Company. “Not all of them will find it simple to stay in the business.”
According to Bhandari, insurers are feeling the heat of the changes in Ulip charges and others. “In 2008-09, insurers have rationalised their administrative and operating costs and expenses. We’ll have to focus on increasing the productivity of distribution channels,” he said.
Tied agents — entities selling products of one company — is the costliest sharing channel for an insurer. “Agents should now understand that they need to pull up their socks and get double the business to earn the same level of commission they had been earning so far,” Bhandari said.
Birla Sun Life Insurance Company’s chief financial officer Mayank Bathwal spoke along parallel lines. “Agency productivity has to be increased. Besides, an insurer also should look for innovative distribution channels which cost lower.”
The pending Insurance Bill also does away with Section 40A of the Insurance Act that prescribes commission. At present, an insurance company, which is yet to complete 10 years, can pay a maximum of 40(%) per cent commission on the first year premium income, 7.5(%) per cent on the renewal premium income for the second and third years and 5(%) per cent thereafter.
Insurers who have finished 10 years can pay a maximum 35(%) per cent as commission on the first year premium income, 7.5(%) per cent for the second and third years and 5(%) per cent thereafter.
For single premium policies, the commission is 2(%) per cent and it is 7.5(%) per cent for pension plans.
After the insurance regulator has put a cap on Ulip charges, the commissions in an Ulip become less than in a traditional plan.

Insurance take wrath on corporate agents

The Insurance and Regulatory Development Authority (IRDA) has cancelled the licences of 4,261 corporate agents, including Housing Development Finance Corporation, HDFC Bank, Development Credit Bank, Standard Chartered Bank, after them unsuccessful to renovate their licences by March 31 this year.
The regulator has asked the people not to do any business with these entities.
IRDA chairman J. Hari Narayan said the licences would not be changed with presentation effect. There are 7,000 agents in the country selling life and non-life insurance policies.
However, Hari Narayan said the policies bought from these entities would stay valid. The insurer concerned will allocate another agent so that the policies can be converted.
Among the 4,261 agents, a famous entity is HDFC, which was selling policies of its general insurance supplementary HDFC Ergo.
The licence of HDFC Bank, which sold policies of HDFC Ergo and Bajaj Allianz General Insurance Company, has also been withdrawn.
The licences of Corporation Bank and Standard Chartered Bank for selling products of Life Insurance Corporation and Bajaj Allianz Life, respectively, have also been revoked.
Others in the list comprise Bajaj Capital Financial Services (Bajaj Allianz General Insurance and ICICI Prudential Life Insurance), Way2Wealth Consulting (Bajaj Allianz General Insurance and HDFC Standard Life), India Bulls Insurance Advisors (Birla Sun Life), India Infoline and Aditya Birla Money (ICICI Prudential Life Insurance policies).
However, Way2Wealth is planning to apply for an insurance brokering licence.
“In a corporate agency representation, one cannot sell products of more than one life and one non-life insurer. But with a brokering licence, products of different insurers can be sold,” an official said.

Low returns, but secure

Buyers of traditional insurance products — endowment and money-back policies — might soon be inundated with options.
Insurance companies, which have been incapable to launch latest investment-cum-insurance plans, better known as unit-linked insurance plans, following the turf war between the Securities and Exchange Board of India and the Insurance Regulatory Development Authority, are introduction a number of traditional products to attract customers.
Some new launches are Bajaj Allianz (BA) Invest plus Premier, Birla Sun Life Insurance (BSLI) Bachat Endowment Plan, Reliance Life (RL) Traditional Investment Insurance Policy and Reliance Life Traditional Golden Years Plan.
The RL Traditional Investment Insurance Policy is the third addition to the traditional crop portfolio of Reliance Life Insurance. Malay Ghosh, executive director and president, RL Insurance, said, “The visible cost structure of the policy is an attractive feature for customers.”
The unique characteristic of the product is that it offers a fixed rate of return – a number which will stay changing every year. This year the rate of return will be 7.75(%) per cent. The next year, a new rate will be announced depending on market circumstances and the interest rate scenario. The only assurance: The return will not fall below the savings deposit rate, which is 3.5(%) per cent at present.
In addition to guaranteed returns, the sum assured in case of RL Traditional will be 7.5 times the premium paid in the 1st year. There will also be riders that one can add by paying extra.
The sum assured, however, will be inconsequential once the accumulation account amount touches the sum assured — a common feature of all traditional insurance products.
The costs include an allocation fee of 30(%) per cent in the 1st year and 5(%) per cent in following years, which is deducted from the premium paid.
Besides the allocation fee, mortality rate (charged per Rs 1,000 of sum assured), policy administration fee (Rs 40 per month) and account administration fee at the rate of 1.25(%) per cent per annum will be charged.
Therefore, if an individual plans to invest the minimum regular base premium of Rs 10,000 this year, Rs 3,500 will be deducted as allocation and policy administration fees.
The rate of return offered is not very competitive compared to other instruments such as the Public Provident Fund, which gives 8(%) per cent and has negligible costs.
Does it make sense to invest in this or similar policies? Financial planners would most probably say no. That’s because the rate of return is quite low. Also, the sum assured is not very high. In comparison, a 30-year-old can buy a 20-year term plan with a sum assured of Rs 20 lakh for a premium of Rs 4,700.
Govind Pathak, director, Acorn Wealth, said, “For sufficient insurance, a simple term plan can be sufficient and a more cost-effective option. And for investment, one can always look for multiple options which will assure higher returns, such as the PPF on the debt side.
On the equities side, there are many more options like mutual funds and stocks. This combination would possibly give higher returns as well as a larger life cover than the Reliance traditional policy.

Birla’s financial division Forecasts business to Grow 20% in India

India’s financial services industry may grow 20(%) percent over the next few years, ambitious by the world’s second-fastest pace of economic growth, the Aditya Birla Group said.
Financial planning, wealth management, infrastructure financing and services for Indians investing overseas may lead the growth, said Mumbai-based Ajay Srinivasan, chief executive officer of the company’s financial services division.
“The economy will double over the next 8 to 9 years if it grows between 8 and 9 percent yearly,” he said. Savings, which account for about 30(%) percent of India’s $1 trillion economy, will increase at a related pace, he forecast. “The pie is huge and we are casting our net.”
About 60(%) percent of the India’s population doesn’t have a bank account and nearly 90(%) percent don’t get loans, K.C. Chakra arty, deputy governor of the central bank, said last month. Equity-related investments form 10(%) percent of savings, compared to 22(%) percent in China and about 40(%) percent in developed nations, according to Vikram Kotak, chief investment officer at Birla Sun Life Insurance.
India’s finance, insurance and real estate sectors expanded 7.9(%) percent in the quarter ended March 31, according to the Central Statistics Office. The nation plans to spend $1.7 trillion on infrastructure over 10 years, Trade Minister Anand Sharma said yesterday.
Retail Broking
Srinivasan, who joined the company in 2007 from Prudential Plc, said he will focus on building the group’s non-banking- financial-services business and might look at areas including microfinance, institutional broking, investment banking and infrastructure financing.
Srinivasan’s unit, which generates $1.3 billion in revenue, has added retail broking and private equity to the obtainable asset management, insurance and distribution businesses. It is currently raising money for a domestic real estate fund and has invested about 800 million rupees from its 8.8 billion rupee private equity fund, Srinivasan said

Insurance business grows 18% in FY10 led by 31% increase of LIC

After two months of muted growth, the industry's March 2010 WNRP grow 1.5 xs M-o-M to Rs126.4b helped by a strong 1.8x M-o-M increase to Rs69.2 billion for LIC. For private players, March 2010 WNRP grew 1.2x to Rs 57.20 billion M-o-M. On an encouraging base, on a Y-o-Y basis WNRP grew by 42% Y-o-Y to Rs 126.40 billion. LIC reported WNRPgrowth of 55% and private players reported WNRP growth of 28% Y-o-Y. For FY10, the industry WNRP grew 18% Y-o-Y to Rs 578 billion led by 31% Y-o-Y growth of LIC to Rs 283 billion.
Strong growth by big private companies: In March 2010, private players reported strong WNRP growth on a Y-o-Y and M-o-M basis led by strong growth by large players like ICICI Prudential Life Insurance (up 72% Y-o-Y and 97% M-o-M), SBI Life Insurance (up 36% Y-o-Y and 1.8x M-o-M), Reliance Life Insurance (up 68% Y-o-Y and 1.6x M-o-M) and HDFC Standard Life (up 18% Y-o-Y and 33% M-o-M). For FY`10 WNRP for SBI Life Insurance grew significantly (37%) against private playersgrowth of 8%. Reliance Life Insurance grew in line with private players. HDFC Standard Life grew slightly higher than private players. Other large private players` growth was flat to negative at 20%.
Private players FY`10 market share declines to 51% against 56% in FY09: Due to strong growth by LIC, private player’s market share declined to 51% from 56% a year earlier. In FY10, ICICI Prudential Life Insurance`s market share declined to 17.7% (19.3%), Bajaj Allianz`s market share declined to 11.1% (13.9%) and Birla Sunlife Insurance share declined to 7.8% (9%). SBI Life Insurance increased its share to 14.4% (11.3%). Reliance Life Insurance and HDFC Standard Life improved their market shares marginally to 10.9% (10.8%) and 8.7% (8.5%) respectively.

Life insurance biz report 28% increase in new premiums

After a blip in January, the life insurance industry rebounded to record a 28(%) per cent growth in fresh business premium in February, data compiled by the Insurance Regulatory and Development Authority showed. While Life Insurance Corporation of India managed to produce its fresh premiums by 32(%) per cent, the new business of private companies grew by 22(%) per cent.
The January-March quarter accounts for nearly 40(%) per cent of the total sales of the insurance industry. However, in January, post the cap on ULIP charges, the agents had taken time to adjust to the changes and as a result, sales had been adversely affected. In the same month, the life insurance industry's fresh business premium had posted a negative growth of 38(%) per cent, dragged down by the presentation of State-run LIC.
In February, most of the private players were able to post a double-digit growth. However, ICICI Prudential Life Insurance, Birla Sun Life Insurance and Max New York Life were not able to better last year's growth.
According to the February data, LIC was able to maintain its market share at 62(%) per cent.
In the 11-month period (April-February), the life insurance industry posted a 16.5(%) per cent growth. While LIC has developed at 24(%) per cent, private players grew by 5(%) per cent in the period under consideration.