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Friday, 30 January 2015

Life insurance most preferred investment for affluent Indians

Life insurance has emerged as the most preferred investment option for Indian households with an income up to Rs 25 lakh, says a survey.

Seventy per cent of affluent population of the country, who hold investments other than cash, have put their money in life insurance, while 64 per cent among them have gone for fixed deposits, according to the DSP BlackRock India Investor Pulse Survey.

It is followed by their investments in other financial instruments like shares (46 per cent), equity mutual funds (33 per cent), fixed maturity plans (27 per cent), tax-free bonds (25 per cent) and so on, it said.

"Even though the larger current ownership is in insurance and fixed deposits, there is a growing awareness among the educated affluent category of investors in the country to move more money from cash and deposits to other form of investments like mutual fund and bond," said DSP BlackRock Executive Vice President, Head (Sales) and Co-Head (Marketing), Ajit Menon, while unveiling the survey report here today.

People living in the country invest 25 per cent of their monthly take home pay, which is higher than the global average of 17 per cent, it said.

When it comes specifically to asset allocation, Indians are more likely to invest in property than the global average, it added.

Equities and bonds are also important asset classes accounting for 13 per cent and five per cent of the total value of saving and investment products, the survey said.

Majority of Indians (56 per cent) feel their economy is getting better, way ahead of the global average of 22 per cent. The huge margin of positivity extends to their financial future with 81 per cent of Indian respondents feeling positive as compared to 56 per cent globally, it added.

A large proportion of Indian respondents also feel that they are in control of their finances (75 per cent) as compared to the global average of 55 per cent, second only to China (84 per cent).

Source: Times of India.

Friday, 23 January 2015

Life insurance claims to be settled within 60 days

The insurance regulator is looking to make it mandatory for companies to settle life insurance claims within 60 days, as against the earlier six month time frame.
Following the implementation of new rules, if a claim is not settled within 60 days, the beneficiary can take the insurer to court.
On its proposal to reduce the claim investigation time, the Insurance Regulatory and Development Authority (Irda) has sought the response from life insurers.
According to life insurance companies, most of the cases are resolved within a couple of weeks. However for 15 per cent cases the lack of required documents or disputes, pose problems. For such cases such claims can then stretch beyond the mandated timeframe.
The Union Cabinet had on December 24 approved promulgation of an ordinance on the Insurance Laws (Amendment) Bill, 2008, just a day after the Winter Session of Parliament concluded with finance minister Arun Jaitley announcing that the “country can no longer wait”.
The insurance reforms initiative by the government, which will attract more foreign capital into the sector, will also have stringent penalty provisions on companies found compromising on consumer interests. The Ordinance will also provide more teeth to the IRDA.

Wednesday, 21 January 2015

Double gain: How life insurance benefits you

Life insurance is a contract between an insured and an insurer, where the insurer pays the designated beneficiary, a sum of money in exchange of premium, upon the death of the insured person. Life insurance provides the dual benefits of savings and security. So, prepare for the unexpected by buying life insurance.

The obvious reason for buying life insurance is that it takes care of loved ones. If anything happen to you, the life insurance you have purchased is in place to protect and provide financial relief for those who must carry on without you. It's about them; simple!

Why do you need life insurance?

Risk cover

Life today is full of uncertainties; in this scenario life insurance ensures that your family continues to enjoy a good quality of life against any unforeseen event. If you have a family that is financially dependent on you, then you definitely need to insure yourself. The most common reason to buy life insurance is it provides protection to your family in case of any unforeseen events.

The life insurance proceeds can be used to support your family members with the expenses.

Compulsory saving-cum-investment

A life insurance policy could be used as a compulsory saving-cum-investment avenue. Proceeds from the insurance policy could be used to fund future expenses such as child's higher education or retirement funds or even a well-deserved holiday.

Protection against rising health expenses

Life insurers through health insurance plans offer the benefits of protection against critical diseases and hospitalisation expenses. This benefit has critical importance given the increasing incidence of lifestyle diseases and escalating medical costs.

Assured income through annuities

Life insurance is one of the best instruments for retirement planning. The money saved during the early life span is utilised to provide a steady source of income during the retired phase of life. It is never too early to begin planning for retirement.

Facility of loans without affecting the policy benefits

Policyholders have the option of taking loan against the policy. This helps to meet unexpected needs without adversely affecting the benefits of the policy. Term life insurance can be used to pay off outstanding mortgage balance.

Partner in a firm or self-employed

It is highly needed by people who are partners in a firm or have their own proprietorship firms. Business owners need insurance for: income replacement and to protect the future of the company. If a partner, owner or key employee is suddenly dead, the business can deteriorate very quickly.

With the right insurance in place, the surviving business partners will have enough capital to keep the business going while looking for a replacement for the deceased partner, or to buy out the heirs of the deceased partner.

Builds the habit of thrift

Life insurance is a long-term contract wherein a policyholder, have to pay a fixed amount for a defined period. This builds the habit of long-term savings.

Safe and profitable long-term investment

Life insurance is a highly regulated sector. It ensures that the safety of the policyholder's money is the primary responsibility of all stakeholders and also ensures that the life insurers focuses on long term returns and do not take risky investment decisions for short term gains.

Tax planning

Life insurance policies can be useful tax planning tools, because the policyholder is eligible for tax benefits under the Income Tax Act 1961 (Act). Though there are multiple modes for saving tax, life insurance is one of the most effective tax planning instrument.

With our life insurance plans individuals can not only save tax but also look at achieving their long term goals.

Here are a few advantages of tax planning by using life insurance policies:


Deductions allowable from income for payment of life insurance Premium (Section 80C):

Benefit is available to individuals and Hindu Undivided Family

  • In case of individual -- himself/herself, spouse, children of such individual
  • In case of HUF -- any member of HUF.

Premiums paid under a life insurance policy are eligible for deduction under Section 80C* of the Act, subject to the provisions of the said section.

Contributions to a pension plan are eligible for deduction under Section 80CCC* of the Act, subject to the provisions of the said section.

*The aggregate amount of deduction under section 80C and 80CCC shall not exceed one lakh fifty thousand rupees.

If the amount of premium paid in a financial year for a policy is in excess of 10 per cent of the actual capital sum assured, then deduction will be allowed only for premiums up to 10 per cent of the actual capital sum assured.

With these benefits, we can say that life insurance insures death of a policyholder. It protects our family during unforeseen situations.

Always keep this one thing in mind: THE OLDER YOU GET, THE MORE INSURANCE COSTS


Saturday, 17 January 2015

Hope rises for cashless insurance beneficiaries

A solution to the problem of cashless facility for medical insurance is likely in a week. Union minister for environment and forests Prakash Javadekar, on Friday, who met representatives of hospitals' associations, consumer bodies and insurance companies, said a finance ministry expert will be roped in to clear the issue.

Public sector insurance companies have asked private hospitals in Pune and Pimpri Chinchwad to stop offering cashless treatment facility to individual policy holders, but big hospitals have been asked to continue with the facility for corporate policy holders.

"An expert from the finance ministry will meet the stakeholders and find a solution . At present, cashless facility for medical insurance offered by public sector insurance companies is available only at 40 hospitals in Pune. We will see how we can expand its base and involve more hospitals," Javadekar said at a news conference after the meeting.

Orthopaedic surgeon Nitin Bhagali, president of the Association of Hospitals, Nursing Home and Clinic Owners of Pune, and a member of the hospitals' committee of the Indian Medical Association, Pune chapter said, "We are opposed to the idea of classifying hospitals on the basis of infrastructure. Instead, expertise, seniority and the bio-data of doctors should be given more weightage in deciding the rate list for various procedures."

The association is also opposed to the current practice of offering different rates to different hospitals for the same procedures, he added.

"There should be uniformity in the rates and the rate list should be finalized in consensus with the stakeholders. The whole process should be absolutely transparent. The Union minister was surprised when we told him about the rates disparity. He said experts from the All India Institute of Medical Science (AIIMS) should be roped in to finalize the rate list," Bhagali said.

When the minister asked an insurance company representative how the rate list is prepared, he was told public sector insurance companies study the reimbursement claims and prepare the rate list without involving experts from government hospitals, he added.

An insurance company official said Pune was among 11 cities where the preferred providers' network is implemented to keep a check on unnecessary expenses that hospitals charge when a patient is insured. "The current uproar in Pune is uncalled for. The system is running smoothly in other cities. The rates are different in metros and non-metro cities. Pune is under non-metro category, hence the rates are lesser than what they are in metro cities," he added.

Public sector insurance companies like New India Assurance Company, United India Insurance Company, Oriental Insurance Company and National Insurance Company, under the banner of General Insurance Public Sector Association (GIPSA), sell nearly 80% of the health insurance policies in the country. They had floated fixed rates in metros three years ago and are now extending it to Pune and other two-tier cities.


Wednesday, 14 January 2015

Indian rich warm up to art insurance

The Indian rich are warming up to insuring their art and valuable collections thanks to the value-added services provided by insurers and their flexibility in accepting 'agreed value' covers. Besides paintings and antiques, there are instances of a high-net-worth customer insuring 350 pairs of shoes. But extraordinary covers are nothing compared to what AIG insures in the US. Valuables include $13 million worth of shrunken heads, a 15th Century book written on human skin and a frozen art installation made in the artist's own blood.

The capability for underwriting art insurance was brought to India by AIG, which has a joint venture general insurance company with the Tata Group. What is now prompting the rich to insure their collection is the availability of 'agreed value' policies based purely on expert valuation and the willingness of insurers to provide cover without calling for invoices or other such proof. Also, most buyers are choosing to insure their valuables not because they cannot afford the loss but because of the support they get in restoration or replacement of the valuables.

In the last four years, Tata AIG has been covering art and other valuables collection of hundreds of rich Indians and has a sum insured of over Rs 500 crore. Customers include ultra high-net-worth businessmen to film stars and the insurer has already paid out a handful of claims for theft.

Speaking to TOI, Ronald Fiamma, global head of private collections at AIG, said the company was offering products that were never before available and the mainstay of its offering was the risk management services that came along with the policy. The company manages to provide expert advice because of the talent it has recruited from the art world. For instance, Rand Silver, global director of art collection management, is an art expert formerly with British auction house Christie's.

"There is a misconception that what keeps us awake is the risk of theft. But it is actually accidental damage that is the bigger risk," said Silver. While the company asks the client to get the collection valued through an independent valuer before the cover, the subsequent free services includes advice on the right service providers for packing and transportation, preparing staff with the drill in the event of a storm or fire and a list of conservators in the event of an emergency. It is also not just about providing a monetary compensation. Silver says that AIG helps clients in replacing valuables, restoring damaged art and has even got Ferrari to reconstruct a limited edition Ferrari Enzo that was totalled in a crash. In another instance, the company hired scuba divers to recover a bracelet that had fallen overboard because of the heirloom's value.

What makes art insurance different from other property insurance is the higher level of good faith. According to Fiamma, AIG has paid out claims where paintings were damaged in a bout of marital discord. "We have had a case where a lady went skiing and wore a diamond brooch over her skiing suit and lost it. We paid the claim," said Fiamma. He adds that claims are paid even if they arise out of negligence unless it is a blatantly intentional act.

-Source: Times Of India 

Sunday, 11 January 2015

LIC to soon insure third of the country, says Arun Jaitley

The total assets of state-owned Life Insurance Corporation (LIC), which amounts to Rs 17.69 lakh crore, is almost equal to India's annual Budget, according to finance minister Arun Jaitley.

He has urged the organisation to grow as the economy and opportunities grow. "The market is going to be more competitive," he said, adding that the best of LIC is yet to come.

He was speaking to LIC officers after his visit to `Yogakshema', the corporate office of LIC in Mumbai, on Friday. Jaitley was accompanied by Hasmukh Adhia, secretary, department of financial services, finance ministry.

After partnering with the Jan Dhan Yojana, one-third of the country will soon be insured by LIC, he said.

"LIC is a role model of how a public sector institution can. While maintaining an arm's length distance, LIC takes prudent commercial decisions," he said.

According to him, claims performance of LIC is much better than the private sector.

Jaitley said that millions have built their houses with LIC's support. It has channelised people's saving and invested in infrastructure. LIC also has generated employment directly through employees and agents and indirectly by investing in the economy, generating employment and development.

S B Mainak, managing director, welcomed the FM in the meeting. SK Roy, chairman, LIC of India, made a presentation to the FM highlighting the achievements and concerns of LIC. He said in spite of 23 private life insurance companies and 14 years of competition, LIC had a market share of 84.44% in number of policies and 75.3% in first premium income in 2013-14.

Usha Sangwan, managing director, made a mention of the social service message produced by LIC on three aspects -- such as 'Housing for all ', 'Swachh Bharat' and 'Beti Bachao, Beti Padhao'. The finance minister inaugurated the message that LIC proposes to launch on the electronic medium.

Adhia, secretary (department of financial services) said the LIC contributes significantly to GDP and has over the years developed as a robust organisation. He further complimented the huge market share of LIC.

In his address, the minister gave reference to his speech made in the Lok Sabha while the Insurance Bill was being tabled, wherein he had expressed his concern for other forms of insurance in India, but had reposed confidence in LIC about life insurance needs of the country.

Friday, 9 January 2015

Google to Reportedly Start Selling Auto Insurance in the US

Google Inc may be moving into the U.S. auto insurance market with a shopping site for people to compare and buy policies, an analyst said on Thursday, as it continues to shift its attention to the automotive industry.
The search giant is planning soon to pilot its new Google Compare auto insurance comparison shopping site, wrote Forrester analyst Ellen Carney in a note. According to Carney, the company has been pitching the service to insurance providers for more than two years.
Google, which currently offers a service in the UK for users to compare over 125 auto insurance options, takes a cut when a user buys insurance online or by phone.
Industry experts say the Mountain View-based company has increasingly been exploring online searches tailored towards specific industries or markets. Google already offers its users a site to compare travel destinations and find the cheapest flight fares, for instance.
Google in past years has begun to expand beyond its home turf of Internet search and advertising, seeking to extend its technological dominance to fields as diverse as self-driving cars and robotics.
Carney expects the California pilot for the new service to begin in the first quarter of 2015. Google is already licensed to sell auto insurance in 26 states and is working with a handful of insurers including Dairyland, MetLife and others, she said.
In addition, a Google employee is licensed to sell insurance on behalf of CoverHound, a San Francisco-based company that pulls insurance options from the largest carriers.
Google said it does not comment on speculation.

Monday, 5 January 2015

Norms Tightened for Agents Appointment by Insurers

To prevent multi-level marketing frauds in the sector, the Insurance Laws (Amendment) Ordinance, 2014, promulgated last month, prohibits multi-layered agent structure for sale of insurance products.

It has also barred offers aimed at inducing people to buy or renew policies through mutli-level marketing schemes.

Interestingly, as per the Ordinance, insurers will be held responsible for all the acts and omissions of its agents and in case of any violation of code of conduct, they will face a penalty to the tune of Rs 1 crore.

Payment of any commission to the agents or insurance intermediaries would need to be in accordance with the applicable regulations of IRDA.

“No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance policy through multi level marketing schemes,” the Ordinance says.

The move aims at checking mis-selling of insurance products by agents in a bid to earn high commissions.

As per the newly promulgated Ordinance, insurers cannot appoint any principal agent, chief agent and special agent,” neither they can transact any insurance business through them.

The Ordinance also provides that no person can act as an insurance agent for more than one life insurer, one general insurer, one health insurer and one of each of the other mono-line insurers.

Based on the Ordinance, the insurance regulator IRDA will frame necessary rules to ensure that there is no conflict of interest when an agent represents two or more insurers, across segments such as life and general insurance.

Besides, a minor person can not be appointed an insurance agent and others disqualified to become an agent include those with unsound mind or those having found guilty of a crime including forgery, provided five years have lapsed since completion of the sentence.

Saturday, 3 January 2015

Ordinance impact: Govt can dilute stake in PSU insurers

The government is now in a position to dilute its equity stake by up to 49 per cent in five public sector general insurance companies following the promulgation of the Insurance Laws (Amendment) Ordinance, 2014 by the President last week.

However, the clauses in the ordinance have made it impossible for foreign partners to get management control in India, but it has paved the way for the entry of Lloyds of the UK, the world’s largest reinsurance market, into India and empowered Securities Appellate Tribunal (SAT) to hear appeals against insurance regulator Irda’s orders.

The government has added a new section —  Section 10B — to the General Insurance (Business) Nationalisation Act (GIBNA) which says “General Insurance Corporation (GIC) and insurance companies may raise their capital for increasing their business in rural and social sectors to meet solvency margins and such other purposes as the Central government may empower in this behalf.”

However, the ordinance has specified that the shareholding of the government should not fall below 51 per cent at any time. It has not indicated any privatisation plan for LIC though a section of India Inc was lobbying for the same.

KK Srinivasan, former member, Insurance Regulatory and Development Authority (Irda), said, “thus partial privatisation of GIC, Oriental Insurance, National Insurance, New India Assurance and United India is enabled. If the equity is allowed to be raised from the open market, registered FIIs who are permitted to trade in our stock markets may also perhaps be allowed to acquire stakes in PSU insurers.” At present, these five PSU general insurers are fully owned by the government.

Any person aggrieved by a decision by the regulator, Irda within 30 days of receiving the order can appeal to the existing SAT which will have a member from the insurance industry. At present, SAT only hears appeals against capital market regulator, Securities and Exchange Board of India (Sebi).

SAT, after being appealed by the insurer and after hearing to Irda, can cancel any order made by the insurance regulator or direct the acceptance of such a return which the regulator has declined to accept, if the insurer satisfies SAT that Irda has wrongfully passed an order.

The government has, however,  virtually made it impossible for foreign partners to get management control in insurance companies in India. Section 2.7A of the ordinance defines an Indian insurance company as “which is Indian owned and controlled in such manner as may be prescribed”. Explanation under Section 2.7A.b further elaborates Indian control.

It states that “control shall include the right to appoint a majority of the directors or to control the management or policy decisions by virtue of their shareholding or management rights or shareholders agreements or voting agreements”. Thus, if the foreign partner looks for management control, it will no longer be possible, he said.

The ordinance also provides for permitting foreign reinsurers like Lloyds to open a reinsurance branch in the country. Such a branch is now defined as an ‘Indian Insurance Company’.

The government has amended the definition of ‘Indian Insurance Company’ in Section 2 to include “a foreign company engaged in reinsurance business through a branch established in India”.

The explanation clause states: “For  the purpose of this sub-clause the expression ‘foreign company’ shall mean a company or body established or incorporated under a law of any country outside India and includes Lloyds, established under the Lloyds Act 1871 (UK) or any of its members.”

Though ordinance has been issued, foreign investment is unlikely to come any time soon as the process to implement the proposals will take many months.

“Now Irda has to amend or bring in regulations to align the regulations to the Ordinance. That is a three tier process involving consulting the Insurance Advisory Council, making draft regulations, getting the regulation passed by the Irda board and the government  notifying the regulations in the Gazette. Companies will  have to wait till the process is completed which may take a few weeks to a few months,” Srinvasan added.

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