Ulip row won’t affect investor confidence: Salman Khurshid

NEW DELHI: Minister for corporate affairs Salman Khurshid on Wednesday set aside fears that the regulatory row between Sebi and Irda over

market-linked insurance policies could lead to investors losing confidence.



“Investors will have confidence that at the end of the day, even if there is disagreement between regulators, one regulator will prevail (over Ulip issue). It is only a matter of time. So investors need not worry,” Mr Khurshid told reporters on the sidelines of an Assocham event on transparency and accountability. He said regulators are new institutions and there were bound to be overlaps in their functioning.

CONFUSION AND HAVOC

Customers are clearly confused about purchasing ULIPs now. The SEBI regulated ULIPs are more customer friendly and transparent while IRDA regulated ULIPs are more of a insurance companies' oriented kind. Whatever decision is made regarding ULIPs , a mutually friendly soultion has to be made.

Every time there has been a change in the norms for Ulips — whether it is the ban on short-term plans or the reduction in charges — new customers are better placed than the old ones. It is not clear what the regulatory regime will hold in future for life companies. But if the ban on entry loads into mutual funds is any indication, Sebi appears to be keen on having lower commissions and lower first-year charges on Ulips. It is quite possible that none of the existing charge structures will change and it is also possible that the entire dispute is about regulatory turf and not about giving the customer a better deal. Even under such circumstances, a prospective buyer loses nothing by waiting.

DEMAT

To start with, you will have to open an account with a depository participant (DP) and get a unique client ID number. Various banks and brokers are DPs. You could choose one based on your comfort level. Once the account is open, you will have to fill up a Dematerialisation Request Form (DRF) provided by the DP and surrender the physical shares, which you want to be dematted to the DP.




The DP upon receipt of the shares and the DRF, will send an electronic request to the company’s registrar and share-transfer agent through the depository for confirmation of demat. Each such request will bear a unique transaction number. Simultaneously, the DP will give the DRF and the shares to the company’s registrar and share-transfer agent with a covering letter requesting the registrar and the agent of the company to confirm demat.



The company’s registrar and share transfer agent will verify the documents so received and after necessary verification will confirm demat to the depository. This confirmation will be passed on from the depository to the DP, which holds your account. After receiving this confirmation, the DP will credit the account with the shares so dematerialised. The DP will hold the shares in the dematerialised form thereafter on your behalf. And you will become beneficial owner of these dematerialised shares.

SEBI ISSUES

Sebi’s order asking 14 insurance companies to stop selling unit-linked insurance plans has turned into full-fledged regulatory battle withReviving lapsed insurance policy

the Insurance Regulatory and Development Authority issuing its own order directing the 14 companies to continue selling ULIPs.

“After due consultation with the members of the consultative committee all the 14 insurance companies which are mentioned in the order of Sebi are directed to note that notwithstanding the said order of the Sebi, they shall continue to carry out insurance business as usual including offering, marketing and servicing ULIPs in accordance with the Insurance Act 1938” IRDA said in a late evening order on Saturday signed by chairman J Harinarayan.

GROWTH IN LI

The Life Insurance Council has projected 18% growth in total premium income for the life insurance industry in the financial year 2009-10.






Although final figures, released by the Insurance Regulatory Development Authority (Irda), are being compiled, Life Insurance Council secretary general SB Mathur told ET: “During 2008-09, the life insurance segment had mopped up a first premium income of Rs 88,000 crore while in 2009-10, there was an approximately 10-12% growth, which means that first premium income in the year just gone by is expected to be around Rs 1 lakh crore.”



Mr Mathur also said the industry is estimated to have garnered a total premium income of Rs 2.6 lakh crore at the end of 2009-10, against Rs 2.2 lakh crore in the previous fiscal, which means an 18% growth. Life Insurance Corporation (LIC) is expected to have earned total premium income of Rs 1.76 lakh crore in the year under review, against Rs 1.53 lakh crore in the previous financial year

ICICI LOMBARD

ICICI Lombard has emerged as the front runner for a fresh tender that SAIL has invited for its property and terror cover. The cover,


consisting of two components — mega all-risk insurance and a terrorism cover — carries a sum assured value of Rs 12,200 crore and Rs 11,600 crore, respectively.



According to an official involved in the bidding, “The original bidding procedure had to be scrapped since the L2, L3 and L4 bidders declined to offer co-insurance support as they found the L1 bid (Future Generali’s bid) abysmally low during the first round of bidding,” said the official. ICICI Lombard will now be offered 70% of the cover and SAIL has decided to invite another tender for the rest 30%.



In insurance lingo, when more than one insurer comes together to offer a cover, it is termed co-insurance. The company that offers bulk of the cover is the main insurer while others offer co-insurance. An insurance policy is termed mega cover when the sum insured at a single location exceeds Rs 2,500 crore. The SAIL cover is one such. According to the terms of the original tender, L1 was supposed to get 50% of the cover, while L2, L3 and L4 were to take 25%, 15% and 10% of the account, respectively. This means they would have received premiums in that ratio at the rate specified by the L1 and claims — if any — would have been paid by them in the same ratio. HDFC Ergo had emerged the second-lowest bidder (L2) at about Rs 7 crore followed by New India Assurance and Oriental Insurance.

RELIANCE CAP IN NEWS

Reliance Capital is in talks with Swiss Re for a proposed foray into health insurance. The discussions for a joint venture health insurance


company are understood to be taking place alongside talks for the Swiss reinsurer’s equity participation in Reliance Life Insurance.

COMMISSION MORE THAN THE PREMIUM

In its quest to shore up premium income in a market marked by economic depression, cut-throat competition, and massive undercutting, the


general insurance segment ended up spending more on commissions and incurred higher management expenses than its proportionate rise in premium income during 2008-09.



According to latest data released by sector regulator Irda for 2008-09, the non-life cover segment saw a 16% rise in premium income while its outgo under commissions and management expenses rose by 24%. The entire segment spent Rs 19,700 crore under the head. This was around 35% of the total premium income which stood at Rs 24,411 crore.

PROFITS AFTER 10 YEARS

A decade after the life insurance industry opened up, only four companies — MetLife, Aegon Religare, Kotak Life and LIC have managed to


show profits in their shareholders’ accounts.



According to data released by the Insurance Regulatory Development Authority (Irda), total accumulated losses for the insurers’ shareholder account now stands at a whopping Rs 14,421 crore for the year 2008-09 while the total equity infused by all companies put together stood at Rs 18,253 crore till March 2009. This, in effect, means that all funds injected by promoters are yet to yield returns on investments for the promoters of these companies.

INSIGHT ON NFO'S LOW PRICING

Low net asset values (NAV) are not necessarily the best buys just because you are able to earn higher number of units. Let us assume you buy a mutual fund at an NAV of Rs 10 through a new fund offer (NFO) and your friend invests in another fund from the same AMC where NAV is Rs 100.




Both of you invest Rs 10,000, of which you get 1,000 units and your friend gets 100 units. Assuming the same fund manager generates 20% return on both funds, both of you would earn Rs 12,000 each. So, it’s the performance and the track record of the fund and not the NAV that matters. In an existing fund, you can see its track record, unlike an NFO.

REVIEW ON THE FINANCIAL YEAR 2009-10

The year was particularly significant as the market regulator Sebi acted in favour of the investors and eased norms making it easier for them to invest in mutual funds. The key changes include abolishment of entry load on purchase of schemes and allowing MFs to be traded on the stock exchanges.




"Even though these are early days, both (regulatory changes) have deep potential for a positive impact. The abolition of entry load is a significant game-changer as it completely transforms the business model of the fund distribution industry. For fund companies as well as distributors, it throws up a challenge of managing a big change if they have to flourish," mutual fund tracking firm Value Research CEO Dhirendra Kumar said.



According to marketmen, the move for introduction of MFs on exchanges as well as an improvement in the state of the economy would increase reach of MFs across the country.



With high volatility in the stock market during the year, investors looked for avenues of mutual gains and lesser risk to reap returns on their investments. This was evident with the average AUM of the industry hitting an all time high of Rs 8,07,546 crore, an increase of Rs 3.86 lakh crore at the end of November, according to latest figures available on the Association of Mutual Funds in India (AMFI) website. (

Analysts believe that the improving economic conditions and relatively good performance of the Indian stock markets show the promise that lies ahead for the mutual funds and 2010 should be a better year.

SAVING TAX BY CLAIMING MEDICAL INSURANCE

Mediclaim insurance provides a good avenue offering tax savings and medical cover. You can insure against medical expenses for yourself or your dependents. Mediclaim cover helps meet unanticipated medical expenditure.

Mediclaim policy provides insurance cover for the treatment of most ailments and hospitalisation. In addition to the basic cover, add-ons are available on payment of extra premium. In some cases, pre-existing ailments are also covered on payment of additional premium. The cover may be extended to ailments not normally covered, day care, and annual medical check-up as well.

It is tax deductible under sec 80 D. Around Rs.15000 and Rs.20000 for senior citizens.

ADVANTAGE OF THE PPF

The PPF comes under the Exempt- Exempt- Exempt category currently. This means that the amount invested gets tax benefits, the interest is not taxed and this applies for the final maturity amount as well.




The investment gets benefits under Section 80C of the IT Act. The investment however is limited to a maximum of Rs.70,000/- per year per person. This limit of Rs.70,000/- includes the deposits made in the name of any dependent children.

IT department to check tax-evaders with portable forensic labs

To outsmart tax evaders who resort to delete their financial data or hide it in password-protected devices during search operations, the

I-T department has started including portable forensic labs and experts in its team.
The department has unearthed links to more than Rs 1,000 crore money in the last few searches with the help of cyber forensics, according to sources.
The search teams now visit premises of assesses equipped with pre-wiped disks for imaging and cloning hard drives, portable labs for previewing computer hard disks, evidence bags and tags to pack, label and transport the imaged and cloned data to its labs.
Taxpayers and evaders have increasingly started using high-end softwares like 'logic bomb' which deletes all files as soon as investigators try to source information from the hardware.

SEBI'S NEW PLANS

SEBI & IRDA are in talks to iron out differences over the regulation of unit-linked insurance plans (Ulips). SEBI wants life insurance companies to sell Ulips after approval from them. Presently unit-linked plans were approved by Irda under the Insurance Act.

TERM LIFE V/S WHOLE LIFE INSURANCE

Choosing between term and whole life insurance policy really depends on the stage in life the buyer is in. For example, term insurance is best suited for an unmarried individual as he can get a high risk cover at a realistic premium amount say a cover for Rs. 10 lakh at approximately Rs. 2,500 annual premium.




Whole life insurance policy with a term rider would better suit a married person with two young kids. While a whole life plan would take care of the savings aspect of the married person allowing him to withdraw the amount as and when he requires it, the term rider would bring in the much needed additional protection cover at a reasonably low cost.



A simple whole life policy would suit a married person who is in his early 40s with grown up kids for the simple reason that it would cover him for his entire life at a low cost.

Direct Tax Proposals of Union Budget 2010-11

Broadened the Income Tax Slabs (see the revised tax slabs below).

Income tax return form, SARAL-II, to be made simple and user friendly for individual salaried taxpayers for the coming assessment year.

Allowed a deduction of an additional amount of Rs.20,000 for investment in long-term infrastructure bonds as notified by the Central Government. This would be over and above the existing limit of Rs.1 lakh on tax savings.Extended the provisions of Section 80D, that allows deduction under the Income-tax Act for contributions to health insurance schemes, to include contributions to the Central Government Health Scheme also as a deduction under the same provision.Tax Slabs for Financial Year 2010-11

Assesee Type From To Slab%

Male Upto 160000 0%

160001 500000 10%

500001 800000 20%

800001 and above 30%

Female Upto 190000

190001 500000 10%

500001 800000 20%

800001 and above 30%

Sr. Citizen Upto 240000

240001 500000 10%

500001 800000 20%

800001 and above 30%

INSURER TO PAY COMPENSATION

A Delhi Consumer Forum has directed a state-owned company to pay a compensation of Rs 10,000 to a senior citizen for the mental agony and harassment suffered by him due to delay in settlement of a medi-claim.




Finding UTI Technology Services Limited (UTITSL) guilty of deficiency in service, the Central District Consumer Dispute Redressal Forum also imposed a cost of Rs 3,000 on the company and ordered it to pay the amount to complainant M J Antony.



Anthony had approached the consumer forum as his medi-claim was rejected by the company after keeping him waiting for 10 months. He sought reimbursement and compensation for harassment and mental agony

HOW TRUE ARE TEMPTING ADS ABOUT HIGHEST NAV PRODUCTS?

Vishal Dhawan, Mumbai-based financial planner: ''These plans should not be seen as substitutes to pure equity plans that surely have a potential to give better returns over a period of seven to ten years. However, if you are a conservative investor who is looking at nominal returns while ensuring that the principal value is protected, then you may invest 10 per cent of your portfolio in these funds. But since there are a number of companies selling these products now, do compare the charges before taking the final call.''

COMING SOON:"PORTABLE" HEALTH POLICIES

Over the coming months, a majority of the population would be permitted to change their health insurer without having to lose any of the benefits that had accrued to them.




The proposed portable health insurance policy, earlier to be sold only to those between 18 years and 40 years, is to now cover individuals from three months to 65 years.

IRDA hardselling unit linked products amid spat with SEBI- Insurance news-Insurance-Personal Finance-The Economic Times

IRDA hardselling unit linked products amid spat with SEBI- Insurance news-Insurance-Personal Finance-The Economic Times: "In the midst of its spat with SEBI over regulating ULIPs, insurance regulator IRDA today sought to hardsell unit-linked insurance
policies as an alternative to regular income or pension payouts."

THE GOVT RAIDS YESTERDAY....

One of the sub-registrar was a resident of my neighbourhood. The government surely did get them by surprise....

FOR PEOPLE LOOKING OUT FOR JOBS

For all those people in the Healthcare industry who are interested in earning some extra money, you can mail me- shweta_ramnath@yahoo.co.in

HEALTHCARE INDUSTRY SCENARIO -BUDGET 2010-WISE

Mr P C Reddy , chairman of the Apollo hospitals group, told the Financial Chronicle, that "our country has 16% of the world's population, 18% of the world's mortality and yet our public expenditure on health has been stagnant at 1%of the GDP."
A huge percentage of the Indian population still needs to be educated about the importance of Health Insurance. And thus, health insurance industry has a huge potential yet to be tapped.