1. LIC will bring out an online policy purchase option.
2. IRDA will allow agents to sell/promote policies from more than one Insurer.

My understanding is this: Some journalist would have asked this question from a Top Management guy in the IRDA/LIC on the sides of a seminar/conference/press conference and the top management would have used such words as “likely to do this” or “not ruling out this”

Read the full post

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1. Medical Insurance Portability come in: Now you can switch your mediclaim policy from one insurer to another, without losing the benefits of coverage due to exclusion from pre existing diseases. This should lead to improvement in service levels of the Insurers providing mediclaim insurance.

2. iMaximize ULIP plan from Aegon Religare: Life Insurers have charged very heavy premium allocation charges initially. And when some Insurers advertised zero premium allocation charge, they tricked the investors by charging a heavy administration charge and not disclosed properly.

However AEGON Religare iMaximize Plan offers to maximize your investment by charging you zero premium allocation charge.

3. More updates on Insurance

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It is a unique initiative and readers have called it an innovative product.

RupeeCamp is not just about education and financial literacy. It’s totally outcome oriented where you will take financial decisions and set up your financial plan. Check out the website for more details

RupeeCamp details are embedded below and you can download the details. I will be happy to answer questions.

I would be delighted if you decide to attend the first RupeeCamp at Mumbai. Please send me a mail to me on ranjan@ranjanvarma.com for a special discount coupon code. Thanks.

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(Source: The Indian Express, July 19)

Latest set of regulations by IRDA will definitely make ulips better. But separate life and investment products still make more sense If you are financially savvy or have a financial advisor who you trust, it is better to go in for a term plan for insurance and equity mutual funds and PPF for investment

SANGEETA,42, walked into my office with a newspaper in her hand. The paper had a story on unit-linked insurance plans (Ulips). “Should now that the con I invest in ulips now that the controversy surrounding them has settled?” she asked.

I smiled. “The new regulatory amendments totheulipschemes areexpectedtomakethemmore investor friendly. But to understand whether you should invest in ulips or not, let us first understand what is a ulip?,” I said.

WHAT ARE ULIPS?
“Ulips are financial products that offer the convenience of both an insurance policy and a mutual fund. Conceptually, this appears like a good product as it offers the comfort of an insurance policy, which will protect you against any unfortunate event, and at the same time, investapartofyourmoney.Therefore, such a policy will protect you and also take care of your financial goals such as a comfortable retirement,” I said.

“Are there any other options?” she enquired.
THE ALTERNATIVE “Yes. Instead of paying for a ulip policy, you can buy life insurance through a term plan and make investments through equity mutual funds. This arrangement is likely to benefit you more. A term plan is a pure life insurance policy that offers only insurance cover.Itcanalsobepurchasedat a very low cost to provide a large sum assured. For example a 30year old could buy a life insurance cover by paying as little as Rs 2,500 per annum. Rest of the savings can be pumped in vari ous instruments like mutual funds, PF or PPF accounts. The allocation between equities and providentfunds,however,would depend on the investor’s risk profile.” I said.

“But this option appears far more cumbersome that just subscribing to a ulip,” Sangeeta said.

ADVANTAGES OF ULIPS “That is true. Ulips have some other advantages too. Let’s examine some of them. Ulips now offer a lock-in period of 5 years during which you cannot withdraw your capital. Since wealth is created through long-term in vestments in stock markets, this clause will discourage investors to withdraw money from ulips.
As a result, it makes investors remain invested and enjoy the compounding effect of money and create wealth. Ulips also use a part of your contribution to provide you with an insurance cover. Since it provides an insurance cover and is sold by insurance companies, the lay person feels a sense of comfort of having bought an insurance policy.

Investing in equities directly or via equity mutual fund does not providethesamedegreeofcomfort for most people,” I said.

“To sum up, ulips offer a feeling of safety and help investors remain invested. If this is so, why will anyone choose to use the more complicated route of buying a term plan, equity fund and PPF?,” asked Sangeeta.

DISADVANTAGES OF ULIPS “Good question,” I replied.
“First, there are many financially literate investors who are not bothered by market fluctuations and hold stock investments for the long term. Therefore, they find little benefit in the lock-in period that ulips offer. Second, ulipshavehighexpensesinterms of marketing and distribution costs. Front-loading of costs and high charges eat into the returns.

Third, ulip investors lack the freedom that comes with direct equity and mutual fund investments.Onecanbuyorsellanequity fund at any time.

Consider this. Salim, 34, had bought a term plan to cover his life and also invested in equities with the long-term view.

Favourable market conditions swelled his capital to almost three times within three years.

He thought of registering his profitsandsoldapartofhisportfolio to buy a plot of land for his brother. He could take this decision as he was not bounded by any contract. However, had he invested in ulips, he would not havebeenabletoliquidatehisinvestments. This means that he had more money to invest in other avenues and therefore his capital had grown more.”

CONCLUSION “So , if you are financially savvy or have a financial advisor who you trust, it is better to go in for a term plan, equity funds and PPF,” Sangeeta said.

“That is correct. Ulips are meant for investors who have limited exposure to the world of investing. For financially-savvy investors, there are better options,” I said.

Sangeeta needed a few days to decide if she was a financiallysavvy investor or not. She knew that if she applied her mind she could certainly be one. She said goodbye and left.

The author is a Pune-based certified financial planner.

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Such a process will be cumbersome and arbitrary. And it does not resolve the fundamental problem of hospitals inflating bills and making business unviable for insurers.

Scrapping cashless treatment and allowing only reimbursements is not the answer and goes against the interest of consumers. Ideally, there will be no incentive to inflate bills if the hospital and the insurer are the same.

But this is not always the case. The healthcare industry should, therefore, devise innovative models to lower the costs of medical care and make it available widely.

More work has to be done to make quality healthcare accessible and affordable using economies of scale. Institutions like the Narayana Hrudayala in Bangalore have shown the way, pruning costs of cardiac care by changing processes and negotiating creative partnership deals.

Sure, insurers and hospitals have to recover the economic cost of capital. A low-cost model driven by high volumes is, therefore, worth replicating.

The insurance regulator should also ensure that all stakeholders respect and maintain the integrity of the system.
For long, public sector health insurers have been straddled with losses as their pricing is not commensurate with costs.

Whereas private insurers have managed their claims better. Either premiums have to be adjusted to cover costs or costs have to be lowered. Today, top-end hospitals charge significantly-higher rates for the same procedure compared to the small ones and seldom accept rates proposed by the insurer.

Costs can be lowered if these hospitals offer discounts to insurers based on volumes. In the long run, we need more hospitals and better quality of services in low-end hospitals.

But the fundamental reform in healthcare is to have a base cover for every citizen, whether through functional state delivery or PPP models such as Andhra Pradesh’s Arograyasri scheme.

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The insurers and the healthcare industry need to evolve a symbiotic relationship

Insurance is a subject matter of solicitation. Medicine is not. This lies at the heart of the standoff between corporate hospitals and health insurers over alleged gilding of medical bills.

Private healthcare desperately needs the Rs 9,000-odd crore Indians spent on health insurance premiums last year to ramp up scale and improve quality of service. The four state-owned general insurance companies that control 70 per cent of this business have enough heft to be able to keep a lid on claims.

The cat-and-mouse game with high-end dispensers of medical services in the metros over cashless treatment is the latest expression of their collective bargaining power. But this is a blunt tool to keep healthcare costs at bay. Health insurance and private healthcare are relatively recent phenomena in India and both industries could learn from the international experience where co-payment-in which the insurer and the person insured pay out predetermined shares of the total bill -has emerged as the preferred policing mechanism for inflated hospital bills.

Along the way, Indian insurers need to watch out for their own health as well. Medical insurance premiums make up for a fifth of the total business of the 21 general insurance companies plying their trade here. The intense competition keeps premiums low, so insurers have relied excessively on their trading desks to limit the claims ratio to 80 per cent for individual policyholders.

In group insurance, medical claims were contained at 110 per cent of premiums. Unfortunately for the insurers, the financial market meltdown put paid to this business strategy; claims are now again half as much as premiums, with the biggest drain being in the metros. Stateowned insurers are learning the hard way that they cannot get by on investment profits and need to address their bloated costs. Most importantly they must refocus on their principal business: underwriting risks.

Private healthcare spending in India is today thrice that of State expenditure and its share is climbing. Consulting firm McKinsey & Co reckons spending on health could rise to 8-10 per cent of the GDP by 2025 and the country’s health insurance business has the potential to grow to Rs 35,000 crore by 2015.

The stakes are, thus, high for India’s insurers and its healthcare industry. They need to put their heads together to evolve a symbiotic relationship. Costs can be kept lower even without engaging in an adversarial relationship. That would involve spreading the insurance risk over a greater slice of the population, redirecting healthcare towards prevention and by putting in place safeguards against unnecessary diagnostics and medication.

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The insurance cover includes company’s assets in India and abroad, employee benefits and business interruption. The cover had come up for renewal from July 1.

For renewing its cover, Infosys paid a premium of Rs 29 crore including a Rs 4-crore premium for the business interruption cover, an insurance company official confirmed. Last year, it had paid Rs 25 crore in premium including a Rs 3.5-crore premium for business interruption.

This is the fifteenth consecutive year in which National Insurance has managed to retain the account of the software major.

The policy provides insurance cover for all assets of Infosys, located in India as well as abroad. Infosys’s assets in India are located in centres such as Bangalore, Mysore, Chennai, Pune, Hyderabad, Bhubaneshwar, Mohali, Jaipur and Thiruvanthapuram.

Besides the asset cover, employee benefits such as health insurance for employees and their family, and personal accident cover have also been renewed. Infosys has around 1.10 lakh employees on its rolls in India. While National Insurance will provide the lead cover, ICICI Lombard General Insurance is the co-insurer.

Hospital network

A preferred network of hospitals, defined benefits for named illness and employee participation in claims has helped Infosys keep a check on the insurance costs. The hospital network is chosen by National Insurance and Mediassist, the claims administrators for Infosys taking factors such as quality of treatment, cost efficiency and transparency in procedures and billing into account.

The rise in the premium is commensurate to the increase in the sum assured. With Infosys’ employee count going up, the sum assured has also gone up, said the official.

The travel insurance cover, provided by Tata AIG General Insurance and the group life insurance cover provided by LIC were also renewed.

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At a meeting with Finance Minister Pranab Mukherjee here, Subbarao raised issues concerning the role of the central bank in the light of the Ordinance.

“I have come to meet the Finance Minister in connection with the Ordinance that they have issued regarding settlement of dispute on regulatory jurisdiction. RBI has certain reservations and concerns, which we have expressed in the letter,” he told reporters after the meeting.

Fearing that the Ordinance would dilute the central bank’s role as financial sector coordinator, the RBI has reportedly requested the finance ministry to let the Ordinance lapse and not covert it into a law.

“He (Mukherjee) will take a final view because passing the law is a prerogative of the government,” Subbarao added.

The government last month ended a two-month long turf war between insurance regulator IRDA and capital market watchdog SEBI through an Ordinance that made it clear that the ULIPs would be regulated by IRDA.

The Ordinance also sought to create a high-level panel, chaired by Finance Minister Pranab Mukherjee, that will sort out all issues of jurisdiction regarding hybrid products.

Ordinances are in the nature of law and are promulgated by the President when Parliament is not in session. They need to be ratified by Parliament within a stipulated time.

Unless the government seeks the approval of ULIP Ordinance in the forthcoming Monsoon Session of Parliament, it will lapse and cease to be a law.

RBI’s contention is that the new arrangement will dilute the role of the existing High Level Coordination Committee on Financial Markets, which is headed by the RBI governor and acts as the nodal authority for coordination among regulators.

The members of the HLCC include chiefs of financial sector regulators including SEBI and IRDA, besides Finance Secretary and Chief Economic Advisor.

The tussle war between the two regulators had begun with SEBI in April taking the market by surprise when it banned 14 life insurance firms from issuing fresh Unit-linked insurance product (ULIP) schemes.

IRDA later asked the life insurers to ignore the SEBI order and the matter then went to the Finance Ministry, which advised them to move the court and in the meanwhile had asked them to maintain status quo.

Unit-linked insurance products or ULIPs account for more than 50 per cent of the life insurance business and the money collected is invested in equities.

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A very friendly and upcoming option is e-filing. Now there are very intuitive tax applications which offer you live chats and help/tutorials in helping you to file your taxes online. It also gives you an opportunity to learn a bit of your finances yourself. I mean by doing it by yourself, you learn a lot about your finances and how you can improve upon it.

I am happy to inform that InvestmentYogi’s tax application TaxYogi has been specially white labeled for my blog/website readers. Take a look

You can experience an intuitive and step by step process for preparing and e-filing your return. The tax filing online also gives you tips for tax planning for the future.

<a href=”http://mintmoney.livemint.com/tax/2010/07/e-filing-your-tax-is-easy-do-it-now/”>Bindisha Sarang, LiveMint</a> has reviewed all the tax filing applications in India and she rates the Taxyogi application “Excellent”. <a href=”http://www.investmentyogi.com/content/LiveMintJul9.pdf”>Check out Bindisha’s review here</a>

All you have to do is:
Register yourself
Prepare your Tax Return online
File your Return online

You do not need to know any tax laws, sections etc. It is as simple as filling up any online form!And as Bindisha says, “The biggest advantage of doing it yourself is that you get involved in your own financial life”.

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