Bajaj Finserv Ltd. raised as much as 10 (%) per cent after VCCircle reports that Warren Buffett’s Berkshire Hathaway Inc. may invest in the Indian financial services company.
Bajaj Finserv, which denied it is in talks, jumped 8.1(%) per cent to 484.25 rupees as of 10:29 a.m. in Mumbai trading.
“We are neither in contact with anybody from Berkshire Hathaway nor are we alert of their interest in Bajaj Finserv,” Managing Director Sanjiv Bajaj said in an e-mail today.
Berkshire may buy a 5(%) per cent to 10(%) per cent stake in Bajaj Finserv from the stock market, VCCircle reported, without say where it obtained the information. Bajaj Finserv is the holding company of Bajaj Allianz Life Insurance Co. and Bajaj Allianz General Insurance Co.
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Wednesday, June 9, 2010
Tuesday, June 8, 2010
Irda to control telemarketing of insurance
The Insurance Regulatory and Development Authority (Irda) has now planned to streamline the promotion of insurance products during distance sales channels, such as the telephone and the internet.
It has said it will subject rules in this regard and these will cover selling by ‘voice mode’, which includes telephone calls, ‘electronic mode’ (e-mails, internet and interactive television) and as well the ‘physical mode’, though postal mail and newspapers.
Web-based selling of insurance products is at an emerging stage in India. Although the volumes here are low, the regulator said the rule would cover distance marketing behavior of insurers, brokers at the stages of offer, negotiation and conclusion of sale. It has asked insurers to ensure every telecaller is trained either in-house or at an institute accredited for pre-license training of agents.
Moreover, insurers or brokers will have to get ready standardized scripts for presentation of benefits, features and disclosures under each of the products planned to be sold under telephonic mode. Irda wants the name of the insurer, name of the caller the language options available and the point of approach to be clearly highlighted.
The telecaller will have to ask if the customer is interested in continuing with the subject, and the process of solicitation should proceed further only if he gives his consent in explicit terms. There should be an exit option.
In case of life insurance, pension plan and other products with savings and investment components, the regulator says wherever the investment risk in the solicited product is to be borne by the client, this should be highly highlighted in the communication. The exact nature of the guarantee such as NAV guarantee, capital protection, etc and their implications will have to be clearly explained.
In addition, insurance brokers will be given the freedom to solicit insurance over distance mode. Brokers will, however, have to avoid promoting the products of any particular insurer or a few insurers exclusively, by symptomatic of a product that fits the client’s requirements.
The regulator said price comparison charts should be up to date. Brokers will not be paid any payment other than brokerage towards policies procured over distance mode.
Insurers will have to check the quality of sales through telephonic confirmation, post-sales, under all modes of marketing, including in-person and distance modes, by calling up not less than 20(%) per cent of all the policyholders every month.
It has said it will subject rules in this regard and these will cover selling by ‘voice mode’, which includes telephone calls, ‘electronic mode’ (e-mails, internet and interactive television) and as well the ‘physical mode’, though postal mail and newspapers.
Web-based selling of insurance products is at an emerging stage in India. Although the volumes here are low, the regulator said the rule would cover distance marketing behavior of insurers, brokers at the stages of offer, negotiation and conclusion of sale. It has asked insurers to ensure every telecaller is trained either in-house or at an institute accredited for pre-license training of agents.
Moreover, insurers or brokers will have to get ready standardized scripts for presentation of benefits, features and disclosures under each of the products planned to be sold under telephonic mode. Irda wants the name of the insurer, name of the caller the language options available and the point of approach to be clearly highlighted.
The telecaller will have to ask if the customer is interested in continuing with the subject, and the process of solicitation should proceed further only if he gives his consent in explicit terms. There should be an exit option.
In case of life insurance, pension plan and other products with savings and investment components, the regulator says wherever the investment risk in the solicited product is to be borne by the client, this should be highly highlighted in the communication. The exact nature of the guarantee such as NAV guarantee, capital protection, etc and their implications will have to be clearly explained.
In addition, insurance brokers will be given the freedom to solicit insurance over distance mode. Brokers will, however, have to avoid promoting the products of any particular insurer or a few insurers exclusively, by symptomatic of a product that fits the client’s requirements.
The regulator said price comparison charts should be up to date. Brokers will not be paid any payment other than brokerage towards policies procured over distance mode.
Insurers will have to check the quality of sales through telephonic confirmation, post-sales, under all modes of marketing, including in-person and distance modes, by calling up not less than 20(%) per cent of all the policyholders every month.
Friday, June 4, 2010
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
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
Tweak commission configuration: Irda
In what may lead to lesser front-loading of insurance policies, the Insurance Regulatory and Development Authority (Irda) plans to increase the commission over the tenure of the policy.
“We are going to ask insurers to propose ways to increase persistency levels. This will happen only after they tweak the commission structure,” said a senior Irda official.
Most insurance policy is extremely front-loaded. For instance, insurance agents earn over 40(%) per cent as commission in most unit-linked insurance plans (Ulips) in the first year. Even commissions for term plan and endowment plans are 20-35(%) per cent in the first year.
The commissions refuse considerably, particularly for term and endowment policies, after the first year. The agent, as a result, loses interest in pursuing the policyholder.
In case of mutual funds, the distributor earns a commission of 1.25(%) per cent in the first year (upfront fees plus trail commission). After that, there is an annualized trail commission of 50-75 basis points every year. This, the mutual fund industry said, keeps the point interested in the investor.
By proposing to extend the commission over the tenure of the plan, Irda thinks agents will continue to follow the policyholders.
Recently, Irda had extended the minimum term of an Ulip from 3 to 5 years. It had also made other proposals, including capping the first year surrender charge at 15(%) per cent for a policy over 10 years. This surrender charge would continue declining and go away in the 6th year.
However, experts said persistence levels were already on the rise.
“Persistency levels are already improving because of the events taken by Irda in the last two years. Tenure of products has left up as the lock-in has increased to five years,” said S B Mathur, secretary general, Life Insurance Council.
The insurance industry reported 80(%) per cent persistency in 2008-09, an increase of 7(%) per cent over the previous year.
“We are going to ask insurers to propose ways to increase persistency levels. This will happen only after they tweak the commission structure,” said a senior Irda official.
Most insurance policy is extremely front-loaded. For instance, insurance agents earn over 40(%) per cent as commission in most unit-linked insurance plans (Ulips) in the first year. Even commissions for term plan and endowment plans are 20-35(%) per cent in the first year.
The commissions refuse considerably, particularly for term and endowment policies, after the first year. The agent, as a result, loses interest in pursuing the policyholder.
In case of mutual funds, the distributor earns a commission of 1.25(%) per cent in the first year (upfront fees plus trail commission). After that, there is an annualized trail commission of 50-75 basis points every year. This, the mutual fund industry said, keeps the point interested in the investor.
By proposing to extend the commission over the tenure of the plan, Irda thinks agents will continue to follow the policyholders.
Recently, Irda had extended the minimum term of an Ulip from 3 to 5 years. It had also made other proposals, including capping the first year surrender charge at 15(%) per cent for a policy over 10 years. This surrender charge would continue declining and go away in the 6th year.
However, experts said persistence levels were already on the rise.
“Persistency levels are already improving because of the events taken by Irda in the last two years. Tenure of products has left up as the lock-in has increased to five years,” said S B Mathur, secretary general, Life Insurance Council.
The insurance industry reported 80(%) per cent persistency in 2008-09, an increase of 7(%) per cent over the previous year.
Wednesday, June 2, 2010
Hurry to sell Ulips in front of July 1
Insurance companies are in a hurry to sell as a lot of unit-linked plans as possible before the new strategy force them to package a life or health cover with these popular instruments that account for nearly half of their business.
Insurance executives think selling these policies will be difficult once the new guidelines planned by insurance regulator IRDA are introduced from July 1. Once the new norms are in force, agents will have to convince the customer to buy a health or insurance cover along with pension plans.
“It was an easy product to sell since you don’t have to ask the customer too lots of questions,” said the sales head at a leading insurance firm.
Some of the insurance companies and banks have revised sales targets and initiated incentive schemes such as foreign trips, easy loans and discounts to make sales. Unit linked plans constitute 46% per cent of the total business of insurance companies.
Pension products have been the favourite unit-linked products, as insurance cover was not compulsory with the policy. These were sold as an investment product wherein customer was currently given the option to surrender his policy after a 5-year lock in.
“Given this flexibility, it was easy for a customer as old as 70-years to invest in such plans. Besides the commission from selling a pension plan was more than that of other products,” said a relationship manager with a leading private sector bank.
Traditionally, all unit-linked plans are front loaded and an agent can earn a commission up to 20% per cent by selling such policies.
“This (the new norms) will need more documentation and if the amount is high then an income proof will also be necessary, which will deter customers,” said a sales head at an insurance firm.
As per existing laws, the insurance cover should be 5 times more than the premium paid.
Further, the new law will also limit the customer from surrendering their pension plans, as they will not get the full amount on surrendering their policy. The customers will only get one-third of the invested corpus and the rest amount through annuity or monthly/yearly payments.
Ashish Kapur, CEO of Invest Shopee, feels the new laws will aid the investor from needless buying an insurance product. “There was a lot of mis-selling earlier,” he said.
Of the Rs 2, 00,000 crore-plus life insurance premium collected in the first 11 months of 2009-10, more than Rs 91,000 crore came from Ulips, according to the Life Insurance Council of India, an industry body representing 23 life insurers
For More information about unit linked plan.
ICICI Pension Plan
LIC Pension Plan
Insurance executives think selling these policies will be difficult once the new guidelines planned by insurance regulator IRDA are introduced from July 1. Once the new norms are in force, agents will have to convince the customer to buy a health or insurance cover along with pension plans.
“It was an easy product to sell since you don’t have to ask the customer too lots of questions,” said the sales head at a leading insurance firm.
Some of the insurance companies and banks have revised sales targets and initiated incentive schemes such as foreign trips, easy loans and discounts to make sales. Unit linked plans constitute 46% per cent of the total business of insurance companies.
Pension products have been the favourite unit-linked products, as insurance cover was not compulsory with the policy. These were sold as an investment product wherein customer was currently given the option to surrender his policy after a 5-year lock in.
“Given this flexibility, it was easy for a customer as old as 70-years to invest in such plans. Besides the commission from selling a pension plan was more than that of other products,” said a relationship manager with a leading private sector bank.
Traditionally, all unit-linked plans are front loaded and an agent can earn a commission up to 20% per cent by selling such policies.
“This (the new norms) will need more documentation and if the amount is high then an income proof will also be necessary, which will deter customers,” said a sales head at an insurance firm.
As per existing laws, the insurance cover should be 5 times more than the premium paid.
Further, the new law will also limit the customer from surrendering their pension plans, as they will not get the full amount on surrendering their policy. The customers will only get one-third of the invested corpus and the rest amount through annuity or monthly/yearly payments.
Ashish Kapur, CEO of Invest Shopee, feels the new laws will aid the investor from needless buying an insurance product. “There was a lot of mis-selling earlier,” he said.
Of the Rs 2, 00,000 crore-plus life insurance premium collected in the first 11 months of 2009-10, more than Rs 91,000 crore came from Ulips, according to the Life Insurance Council of India, an industry body representing 23 life insurers
For More information about unit linked plan.
ICICI Pension Plan
LIC Pension Plan
Tuesday, June 1, 2010
Reliance Life launches Traditional Investment Insurance Plan
Reliance Life Insurance, an ADAG group company, has launched a savings cum protection plan. It’s a traditional investment plan that provides life protection and regular savings with yearly guaranteed investment income. The new scheme is a regular premium plan offer guaranteed investment returns. The guaranteed return module would be confirmed at the beginning of every financial year during the product term, the Life insurance company said in a statement.
The growth rate for the 2010-11 financial years is 7.75% per cent. At any point of time, the minimum guaranteed growth rate will not be less than the savings bank deposit interest rate as confirmed by the Reserve Bank, the company added. The insurance plan is available to children aged less than 30 days and senior citizens aged up to 70 years, with monthly, quarterly, half-yearly and yearly payment option. The fixed sum assured under the plan is 7.5 times of the annualized premium. The minimum term of the policy is 10 years and the maximum is 30 years. Besides the maturity and tax benefits, it offers health-connected cover which will pay a lump sum to the customer for as many as 33 specific surgeries, including open heart, kidney transplant, and 25 critical conditions. These riders can be added by paying an additional premium.
The growth rate for the 2010-11 financial years is 7.75% per cent. At any point of time, the minimum guaranteed growth rate will not be less than the savings bank deposit interest rate as confirmed by the Reserve Bank, the company added. The insurance plan is available to children aged less than 30 days and senior citizens aged up to 70 years, with monthly, quarterly, half-yearly and yearly payment option. The fixed sum assured under the plan is 7.5 times of the annualized premium. The minimum term of the policy is 10 years and the maximum is 30 years. Besides the maturity and tax benefits, it offers health-connected cover which will pay a lump sum to the customer for as many as 33 specific surgeries, including open heart, kidney transplant, and 25 critical conditions. These riders can be added by paying an additional premium.
Insurance cos will require to protect capital
Indian insurance companies will need to save capital even with the growth potential since tools for conserving capital are not available to them, says prefessional servives firm Ernst & Young.
Speaking to ET, Ernst & Young partner Rohan Sachdev said different in the West, Indian insurance companies do not have any capital pull reduction tools such as securitisation or reinsurance of their collection. This would mean that companies have to every time provided more capital.
Mr Sachdeva said some mid-sized companies are using up nearly Rs 40 crore to Rs 60 crore a month as a few of their business models are not sustainable under the new regulatory rule and would need to be reworked. He pointed out that in capital efficiency; life insurers promoted by banks have done very well by increasing their operations with minimal staff. For new companies without their own sharing network, it was important that they have a variable distribution cost to keep expenses under check, he said.
In the last decade since the industry was opened up, promoters of life insurance companies have invested in surplus of Rs 27,000 crore into life insurance businesses. The force to get more efficient on capital will also come from new revelation norms that come into effect from July 2010.
Until now, insurance companies have been able to explain their high capital spending saying the funds require to meet the solvency norms. Insurers will be required to provide economic capital, which will provide a break-up of the capital that is required for different business and the extent of capital that they will lose under various scenarios.
According to Mr Sachdev, there are several stress points for the existing business plans of life insurance companies. “Most of the profit drivers for companies will not be there. Some companies have made important lapsation profits which cannot continue once surrender charges are capped.”
Earlier, the insurance regulator had capped all charges, including fund management charges that could be forced by insurance companies on their policyholder’s funds.
Mr Sachdev said he expects life insurance companies to continue to issue unit linked insurance plans but the share of Ulips would decline. He pointed out that the life insurance industry had centred their entire business around Ulips although the Indian markets were not older enough. At present, the life insurance penetration in India is close to 4%.
“The level of maturity can be gauged from the level of diffusion of other personal lines of insurance such as health and householder insurance, which is quite low in India,” he said.
Speaking to ET, Ernst & Young partner Rohan Sachdev said different in the West, Indian insurance companies do not have any capital pull reduction tools such as securitisation or reinsurance of their collection. This would mean that companies have to every time provided more capital.
Mr Sachdeva said some mid-sized companies are using up nearly Rs 40 crore to Rs 60 crore a month as a few of their business models are not sustainable under the new regulatory rule and would need to be reworked. He pointed out that in capital efficiency; life insurers promoted by banks have done very well by increasing their operations with minimal staff. For new companies without their own sharing network, it was important that they have a variable distribution cost to keep expenses under check, he said.
In the last decade since the industry was opened up, promoters of life insurance companies have invested in surplus of Rs 27,000 crore into life insurance businesses. The force to get more efficient on capital will also come from new revelation norms that come into effect from July 2010.
Until now, insurance companies have been able to explain their high capital spending saying the funds require to meet the solvency norms. Insurers will be required to provide economic capital, which will provide a break-up of the capital that is required for different business and the extent of capital that they will lose under various scenarios.
According to Mr Sachdev, there are several stress points for the existing business plans of life insurance companies. “Most of the profit drivers for companies will not be there. Some companies have made important lapsation profits which cannot continue once surrender charges are capped.”
Earlier, the insurance regulator had capped all charges, including fund management charges that could be forced by insurance companies on their policyholder’s funds.
Mr Sachdev said he expects life insurance companies to continue to issue unit linked insurance plans but the share of Ulips would decline. He pointed out that the life insurance industry had centred their entire business around Ulips although the Indian markets were not older enough. At present, the life insurance penetration in India is close to 4%.
“The level of maturity can be gauged from the level of diffusion of other personal lines of insurance such as health and householder insurance, which is quite low in India,” he said.
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