In a move that can impact the premium rates of the unit-linked insurance products, the Insurance Regulatory and Development Authority (IRDA) has said second year premiums should not be less than 75 per cent of the initial year’s premium.

“IRDA has noticed that the first-year premium payment is very high compared with very low premium paid by the policyholders from second year onwards,” the insurance regulator observed in a circular sent to the life insurance companies on Monday.

The insurers who had offered more than 25 per cent reduction in premium over the first year’s premium should treat the difference in premium as a single premium, the circular said.

The tightening of the premium norms would prevent companies from bringing down premium significantly from the second year onwards, said an official of IRDA.

Getting ready to kickoff the New Pension Scheme for private citizens in another five weeks, the Pension Fund Regulator and Development Authority has approved 23 points of presence that would collect pension contributions and also sell pension products.

The country’s largest public sector bank—State Bank of India and the biggest life insurer—Life Insurance Corporation of India have been appointed as points of presence for the new pension scheme that is scheduled to be launched from April 1 this year.

All in all 17 banks have been chosen, including SBI and its six associates.

THE finance ministry has decided to make a permanent account number (PAN) card mandatory for buying all insurance policies that have an element of investment in the capital market and the premium exceeds Rs 1 lakh per year.

The ministry along with the insurance regulator, Insurance Regulatory and Development Authority (Irda), is working to make the use of PAN mandatory for buying such insurance policies. Insurance products with investment element means all unit-linked insurance policies (Ulips) would come under the new provision.

“Making use of PAN card compulsory will really help. This way, the government can keep track of all financial transactions. It will be useful even for security purposes. These days by tracking financial transactions one can solve many cases,” said Tarun Bajaj, joint secretary, insurance, ministry of finance.

Irda has already started working on the initiative and say they will notify it soon to ensure compliance. Insurance companies say making a PAN card mandatory will affect their business only initially. A senior official of Bharti AXA Life Insurance, who did not wished to be named, said, “The PAN is now an integral component of any financial transaction - from opening a savings bank account to purchasing a house or applying for a credit card. Thus, the urban Indian consumer is now fairly accustomed to the use of PAN cards in buying financial solutions. For these customers buying Ulips, mandatory declaration of the PAN may be a new development that they would need to be accustomed to.

It may take some time for PAN declaration at the time of buying an Ulip to become a practice.” Last year, former finance minister P Chidambaram had announced in the budget that that the PAN would be made mandatory for all financial transactions. However, now the finance ministry has put a floor of Rs 1 lakh of premium per year.

Last year in his budget speech, Chidambaram had proposed “to extend the requirement of PAN to all transactions in the financial market subject to suitable threshold exemption limits.” However, the action taken report presented in the Parliament on Monday says, “It is proposed to mandate PAN for such insurance products that have an investment element in them, with exemption granted in cases where the contracted premium payable on such insurance policy does not exceed Rs 1 lakh.”

Initially, there was talk of the PAN becoming mandatory for insurance policies, post office savings accounts or its savings certificates which did not require record of the 10digit alphanumeric taxpayer identification number.

LIC has always been sensitive to the changing aspirations of its customers and thusbrings out different products from time to time to cater to those needs . Close on the heels of Jeevan Aastha, whichwas a runaway success, our latest offering is Jeevan Varsha, a Close-endedGuaranteed Additions plan. The Planprovides guaranteed benefits on death as well as maturity and has a few uniquefeatures. The Plan would be open for sale from 16th February 2009 to 31st March 2009 .

It is a Money Back Plan with only 2 Policy terms i.e., 9 years and 12 years , withPremium paying term restricted to only 9 years for both . This has been done keeping in view thepreference of the people for short duration policies. Further it offersattractive Guaranteed Additions of Rs.65/- per thousand S.A. peryear for 9-year term and Rs. 70/- per thousandS.A.for a policy of 12-year term.

For the first time in any Money Back Policy, the Survival Benefits are payable every 3 years. This means that for a 9-yearterm policy, the payouts would be at the end of 3rd,6thand 9th years and for a 12-year term policy, the payouts would be atend of 3rd,6th,9th and 12th years. This provision makes Jeevan Varsha aplan with periodical payments (Survival benefit) and helps the buyer in meetingvarious expenses during the course of the policy , while enjoying fullinsurance coverage for the entire policy term .

Any person who has completed 15 years of age can buy this policy so that firstSurvival Benefits becomes payable to him only after he attains majority. The maximum age at maturity has been peggedat 75 years which means that the maximum age of entry for 9-year term would be66 years and for the 12-year term it would be 63 years.

This is a regular premium plan where all modes of payment Yearly,Hly,Qly and monthly (ECS mode only)are allowed.

The minimum Sum Assured for ECS monthly mode is Rs. 75000/- and Rs. 50,000/- forother modes, there being no limit on the maximum Sum Assured.

The Loyalty Additions are also payable depending on the experience of theCorporation with regard to interest rate assumed, expenses and mortality.

The plan has provisions for Loan, Surrender and Revival. Usual conditions regarding Grace Period andCooling-off are also applicable to this plan. Tax Benefits as per the existingIncome Tax Rules are also admissible.

The plan is ideally suited for a person who wishes to plan for his future needsarising at different intervals, ensuring complete safety of his capital andwith assurance of a reasonable rate of return. In other words it is a key toopen the doors of enjoyment & happiness for the buyers.

The IT/ITeS employees in Chennai, Bangalore and Hyderabad seem to have very poor financial and tax planning, a survey conducted by an investment advisory firm has found. The annual tax survey, done by Right Horizons among 1,169 salaried individuals in the age group of 22-54 in these three cities has found that 70% did not fully use the benefits under section 80C, 82% of respondents did not have any medical insurance while only 13% had medical insurance cover provided by their employers.

The survey said that 36% of the respondents in Chennai, many of them in the age group of 30 years, did not have any life insurance policies. Among the various tax saving options, 20% of the respondents in the city used only provident fund (PF) investments, which anyway was mandatory in many corporates and therefore does not require any effort on the part of the individual towards tax planning.

“Investments under Sec 80C earn tax breaks for investors upto a maximum limit of Rs one lakh. It therefore comes as a surprise that more than 75% of those surveyed had not fully utilised the limit and many of them actually went on to pay income-tax which could have been saved through better financial/tax planning. In Chennai, 24% of the respondents completely used the Rs one lakh limit,” according to the survey.

Anil Rego, CEO, Right Horizons, said, “At times like this, when the financial markets themselves are in turmoil, there is a greater need for paying attention to one’s finances.”

The study also found that even though majority of the respondents were in the age group of 25-30, traditional or safe instruments like PPF, NSC, Life insurance, dominated the investment profile with 58% of those surveyed using these as the only modes of investment. Only 35% had equity Linked savings scheme (ELSS) in their tax saving portfolio while 5% respondents had more than 50% exposure to mutual funds as part of the 80C investments. Also low on the list was the exposure to home loans with only 12% of those surveyed featuring it in their portfolio of tax saving instruments.