Returns on Ulip pension plans to rise to 6% in FY12

Returns on Ulip pension plans to rise to 6% in य़१२

MUMBAI: Returns on Unit-linked pension products are set to rise to 6% next fiscal after the central bank raised benchmark policy rates in 2010-11 to combat inflation.

The Insurance Regulatory and Development Authority , or Irda, the insurance watchdog had benchmarked that returns on these products should be 0.5%, or 50 basis points, over the reverse repo rate, the rate at which the Reserve Bank of India absorbs funds from banks.

The re-verse repo rate is now 5.75% after a series of rate increases. The Irda had mandated a 4.5% return on unit-linked pension plans last year and had also said that rates would be reviewed annually and vary between 3-6%.

Insurance companies are unhappy with the mandated returns saying that offering a guarantee will hurt their profitability. The share of unit-linked pension products in the overall product mix of insurers has fallen sharply. For insurers such as HDFC Life , the share of pension products which contributed over 30% to overall premium income has dropped to less than 1% after September.

"The structure of the product is such that it is a debt product. Why would anyone buy a product which is offering a return of 4.5% or 6% when inflation is at 9-10 % and the economy is growing at 9%? It is not a good proposition both from the insurer and the customer's point of view," said Amitabh Chaudhary MD and CEO of HDFC Life.

Compulsory life cover with pension product and an annuity of two-third of the accumulated sum are also discouraging sales for such products ac-cording to insurance firms. In the revised structure, new offerings by private insurance companies have been restricted to only single-premium, Ulips LIC is the only insurer to have a regular premium pension product guaranteeing a 4.5% return on an annual basis.

Disasters down under may raise reinsurance premiums]

KOLKATA: Flood in Australia and quakes in New Zealand may lead to increased reinsurance premiums for Indian general firms during the renewal season, slated to start from April. The size of the reinsurance market that gets placed abroad is about Rs 3,000-3 ,500 crore.

Large reinsurers such as Munich Re and Swiss Re, and Lloyds have taken substantial hit from casualties arising out of the two catastrophes . They now want to factor that in their risk-profiling while offering covers to general insurers in India and the world over.

This may lead to higher premiums for Indian corporates renewing their covers. "Preliminary talks between reinsurers and general-cover companies indicate the reinsurance premium charged will consider global national catastrophes and that will raise premiums to some extent," a senior Munich Re official told ET. However, the Indian insurance market has not witnessed any national disaster till now in the current financial year. "This means insurers will in turn try and bargain for reduced premiums .

But, there are certain reinsurers operating in India, which did not have any exposure either in Australia or New Zealand. These companies would possibly not ask for increased premiums," he said. Established general insurers are also aiming at increasing their retention limits - the amount of the insurance that an insurer retains is the retention limit (aka net retention), and the amount that is ceded to the reinsurer is the cession.

"Alternatively, there are also instances where the reinsurers would be insisting on higher retention to increase the reinsured stake on the risk underwritten by them as a measure to increase the quality of underwriting, and to reduce their exposure," Rajeev Singh, head - reinsurance at Bajaj Allianz General Insurance said.

SBI Life launches Smart Wealth Assure Ulip plan

NEW DELHI: SBI Life Insurance today launched an unit linked plan -- Smart Wealth Assure-- aiming to provide guaranteed fixed returns to the policyholder.

Smart Wealth Assure guarantees at inception a pre-specified NAV applicable at the end of the 10-year term, SBI Life said in a statement.

SBI Life Smart Wealth Assure is a single premium plan and offers policyholders optional Accidental Death benefit and partial withdrawal facility from 6th policy year onwards.

The scheme would be available at a minimum amount of Rs 50,000, and would cover policyholders from 8 years to a maximum 65 years of age with a policy term of 10 to 30 years.

With launch of Smart Wealth Assure, SBI Life now has a bouquet of eight Ulips catering to the long-term wealth creation and life insurance needs of varied customer segments.

"Our aim is to build a sizeable and attractive suite of Simple and Smart products so as to allow our customers to choose relevant solutions that best meet their needs, aligned to their income and risk profile," SBI Life Insurance MD & CEO M N Rao said.

The fund would provide guaranteed fixed return, which provide the policy holder to choose for either of equity fund or P/E Managed Fund or Bond Fund , it added.

Usually the Return Guarantee Fund aims to provide guaranteed fixed return by investing mostly in fixed income securities, namely debt instruments.

As of January, 2011, SBI Life's market share among private life insurers stood at 18.9 per cent, while it was 5.6 per cent when it came to total market share.

More women embrace centre's health cover plan in second year

New Delhi: The government's flaghsip health insurance scheme for the poor has generated greater demand from women who tend to neglect their health because of financial reasons, a gender study by the labour ministry has showed.

In the second year of implementation of the rashtriya swasthya bima yojana, or RSBY, the number of women availing hospitalisation benefit has exceeded that by men.

The scheme provides cashless treatment up to 30,000 annually to a family of five at empanelled government and private hospitals through smart cards for a token annual premium of 30. The scheme initially targetted only below the poverty line (BPL) families, but is now being extended to unorganised workers such as coolies, rickshaw pullers and miners.

"Poor women are the worst sufferers in terms of accessing health care. There is a lot of pent-up demand for medical treatment, which is now being expressed," the director general in the labour and welfare department Anil Swarup said.

Even during the first year, the female hospitalisation ratio-a measure of those that avail hospitalisation facilities as compared to those that are enrolled-was more for women at 2.86% than for men at 2.42% in the 167 districts in 17 states that submitted data.

Although just nine districts have submitted data for the second year, the numbers show significant improvement with women hospitalisation ratio at 4.33% compared to 2.89% for men. "While much more data is to come in from various districts for the second year, the trend certainly shows a definite improvement in number of women beneficiaries," Mr Swarup said.

Women now feel encouraged to get themselves treated for ailments as healthcare can now be accessed by just swiping the health card and not paying any additional money, points out M Ramadoss, CMD, New India Insurance, an accredited insurance company for RSBY.

"We find a lot of women in tribal areas using the health cards as they now have the wherewithal for getting treatment," Mr Ramadoss said.

It is not just women, but poor in general are better off in terms of receiving health care after the implementation of RSBY, the labour ministry says. While just 1.7% of the poorest 40% in the country accessed hospitalisation facilities as per National Sample Survey Organisation data for 2004, the access improved to 2.6% as per data supplied by 167 districts that have completed one year of implementation of RSBY.

As per current data, 23 million cards have been issued to poor families in 330 districts in 27 states. "We hope to see the numbers go up," Swarup said.

Insurance cover for cricketers in IPL4 is three times higher than auction price

KOLKATA: The Indian Premier League (IPL) 2011 will see individual covers for auctioned players double this time, with Gautam Gambhir from Kolkata Knight Riders getting the highest individual insurance of 32 crore.

Last year, the highest cover went to West Indies player Kieron Pollard from Mumbai Indians who got the largest individual cover of 15 crore.

The cover, like last year, will include personal accident insurance, a mediclaim and a loss of baggage insurance, including cricketing kit for each of the players. Covers for each player were decided on a simple formula - three times the auction price any player has fetched. Last time, it was six times the auction price.

By that calculation, Gambhir, who fetched $2,400,000 ( 10.8 crore) in the auction will command a cover of $7,200,000 ( 32 crore) during the entire tenure of the tournament starting April 8. The cover will be active till the time the final is played - May 28 and will remain effective in India and abroad, wherever, IPL matches are played.

"Despite the reduction in the multiple, players are being offered higher covers because they fetched higher auction prices this time. The multiple has been reduced possibly because of a lot of changes in the rules of IPL that were introduced some time ago," a senior insurance official told ET.

Public sector insurers, including New India Assurance and Oriental Insurance , are in talks with the Board of Control for Cricket in India (BCCI) for offering a host of covers, including individual as well as terror cover.

Going by auction prices, the second highest cover of 28 crore will go to Yusuf Pathan from KKR and and Robin Uthappa of Pune Warriors. Rohit Sharma from Mumbai Indians will get a 27-crore cover. Irfan Pathan and Sachin Tendulkar will get 25 crore and 24 crore, respectively.

In contrast, during IPL 2010, Dhoni, the skipper for the Chennai Super Kings bagged a 10-crore cover followed by Andrew Symonds at 9 crore from Deccan Chargers. Tendulkar, the captain for Mumbai Indians, got a 7.5-crore policy.

However, covers during IPL 2009 were higher than the current year because matches were played in South Africa . The highest individual cover of $10.5 million ( 52 crore) was for Mahendra Singh Dhoni - the Indian skipper and the captain of Chennai Super Kings - during that year. Sachin Tendulkar, playing for Mumbai Indians had a cover of $7.8 million ( 39 crore) while Sourav Ganguly, who was with Kolkata Knight Riders, got a $7.65-million ( 38.2 crore) cover. Kings XI Punjab's Yuvraj Singh had a $ 7.5-million ( 37 crore) cover.

Premium on mega risk policies falls by up to 20%

MUMBAI: Oil rigs and aviation companies' insurance cost may fall by a fifth, following the softening of rates at reinsurers due to easing risk perception in the absence of major natural calamities or terrorist strikes.

These policies, known as mega policies, are the ones with a sum assured of more than 2,500 crore.

"Mega-risk policies are mainly reinsurance-driven. Premium rates move with global claim experiences. Not many claims have come last year," said KG Krishnamoorthy Rao, MD and CEO of Future Generali . Around 80-90% of the risk in such policies is reinsured.

Reinsurance rates across most lines of natural catastrophe have declined around the world on excess capacity and strong balance sheets of reinsurers.

Reinsurance rates depend upon two factors - claim experiences over the last one year and capacity in the market.

"Reinsurance rate depends upon demand supply. At present, there is enough capacity in the market, therefore, rates are softening," said G Srinivasan, chairman and managing director of United India Insurance .

Aviation reinsurance rates have fallen by 15% in 2010 while terrorism has seen a drop of 20%. The rates in aviation insurance segments would decrease by another 10%, said executives. General Insurance Corporation , Munich Re, Swiss Re are some of the reinsurers active in India. At present, the insurance regulator has stipulated that at least 10% of the risk has to be placed with national reinsurer GIC.

Mega risks constitute 10% of the industry's total income. This year non-life insurance companies have collected total premium of 34,507 crore during the first 10 months of the financial year.

Also, around 80% of the insurance contracts come up for renewal in April.

On the retail insurance front, policyholders are most likely to see an increase of 20-25% on motor insurance in the next six months. During the last year, insurers have lowered the discounts. Similarly, retail health insurance is likely to witness an increase in rates on medical inflation.

Bharti Axa Life to launch two new products

CHENNAI: Private life insurer Bharti Axa Life Insurance will soon launch two new products, one a traditional participating retirement plan and the other a child protection plan, to tap the potential offered by these segments.

The company hopes to cash on the increased sales of life insurance policies that happen during March when people look at various investment avenues to save their tax liability.

"We hope to earn 20-25 per cent of our total premium from the retirement product segment. We are in the process of launching our new product Wonder Years Retirement Plan," chief marketing and operations officer Mark Meehan told IANS on phone from Mumbai.

Further with its new retirement policy Bharti Axa Life plugs the gap that resulted in this product segment after the withdrawal of its unit linked retirement policy post new regulations brought in by the insurance regulator last year.

As per the new scheme, a policyholders can to choose the sum of money they would like to receive at their 60th year (the vesting age) or 10 years (the vesting term) and pay the premium till that period.

If the policyholder dies during the course of the policy then Bharti Axa Life would pay the premiums paid to the legal heir or nominee. "We will pay back the premium received plus eight per cent interest on that," Meehan said.

Bonuses declared by the life insurer will be added to the corpus to be paid at maturity.

At the end of that period the policyholder has the option of withdrawing one-third of the total savings tax free and has to buy annuity from Bharti Axa Life or from any other life insurance company and enjoy a monthly pension.

Speaking about the proposed child protection product Bright Stars Power Plus , Meehan said it has evolved out of couple of other oferings.

He said the new child protection plan is unique as it builds savings for the child's key life stages and provides the family a triple benefit of sum assured, waiver of premium, and annual income support in case something unfortunate were to happen.

Nippon Life to invest $723 mn in Reliance Life: Source

TOKYO: Nippon Life Insurance Co , Japan's largest private-sector life insurer, plans to buy a 26 percent stake in Reliance Life Insurance for about 60 billion yen ($723 million), a source with knowledge of the matter said.

Health insurance scheme for government employees

New Delhi: Health Minister Ghulam Nabi Azad Friday said a health insurance scheme will be introduced for the central government employees.

"The central government is contemplating introduction of a health insurance scheme for the central government employees and pensioners in consultation with other concerned ministries and departments," Azad told the Lok Sabha during question hour.

"The proposal is to make this scheme on voluntary cum contributory basis for serving employees and pensioners except for new joinees in respect of whom it is proposed to be on mandatory cum contributory basis," the minister said.

He, however, said that no time frame can be given for the introduction of the programme.

Calamity insurance

Calamity insurance costs to go up after Japan disaster: Insurers

NEW DELHI: As Japan suffers the jolt of a severe earthquake and tsunami, insurance companies feel the cost of catastrophic insurance for next year will move skywards.

"Since most of the re-insurance treaties in India are due for renewal in April, there may be some impact on the premium rates, especially for the catastrophic cover," Future Generali India Insurance MD & CEO K G Krishnamoorthy Rao told PTI.

A 33-foot tsunami, triggered by a powerful 8.9-magnitude quake, struck Japan today, leaving huge damage to properties and reportedly killing 26 people.

Although the extent of the damage is yet to be quantified, the re-insurers would have to take a hit while compensating for the loss.

"The Japanese earthquake or tsunami will have an effect on the re-insurance market but only next year from a rate perspective," Bharti AXA General Insurance CEO & MD Amarnath Ananthanarayanan said.

The reinsurance companies, which act as insurers of last resort for general insurers, would be making up for majority of the losses. These companies usually take up the cost associated to an event when the claim to be settled is too high.

"The estimation of losses will take time. However this can affect a few insurers and reinsurance firms operating in the region," Rao said.

The first three months of the current year saw insurance companies bearing the brunt of rising claims on account of events like floods in Australia, storms in the US and a severe earthquake in New Zealand.

Expert also said the global re-insurance companies, like Munich Re or Swiss Re , might have to enhance their natural catastrophe budget for 2011.

"In terms of the Indian reinsurance market, given that there have been fortunately no major catastrophes, the reinsurers will want to take a greater share of the Indian pie and therefore the rates will be very reasonable despite this earthquake or tsunami," Ananthanarayanan said.

Bharti AXA Life launches 2 products

NEW DELHI: Private sector Bharti AXA Life Insurance today announced the launch of two products - a retirement plan and a child protection plan.

While the retirement plan - Bharti AXA Life Wonder Years Retirement Plan - will be a traditional product and offer combined benefits of guaranteed returns and life insurance cover.

The child plan - Bharti AXA Life Bright Stars Power Plus - would have the features that protects and build savings for the child's key lifestages.

"Both the products are based on extensive consumer research and hence address the needs highlighted by customers. They have been specifically designed to provide returns at the key life stages," Bharti AXA Life Chief Marketing & Operations Officer Mark Meehan said.

Bharti AXA Life Insurance is a joint venture between Bharti Enterprises and AXA. While Bharti Enterprises hold 74 per cent stake in JV, the remaining 26 per cent is held by AXA Asia Pacific Holdings Ltd (APH).

Indian insurers taking stock of risk exposure to Tsunami

CHENNAI: Indian insurers - New India Assurance Company Ltd and General Insurance Corporation of India (GIC Re) - are taking stock of their risk exposure in Japan following Friday's tsunami that hit the country severely.

"All our branch staff in Tokyo are safe and are not affected by the tsunami. It is too early to estimate the probable loss though the branch has confirmed losses likely to be reported," Chairman-cum-Managing Director of New India Assurance A. Ramadoss told IANS.

The company has around 40 employees in Japan. According to him, the company's Japanese branch underwrites a premium of around Rs.150 crore.

India's national reinsurer General Insurance Corporation of India (GIC Re) is taking stock of its exposure in reinsuring risks underwritten in Japan following the earthquake and tsunami that Friday hit that country severely.

"We are in the process of collating information. Now we are not in a position to make any statement," an official of GIC Re told media.

The company's Chairman and Managing Director Yogesh Lohiya was not available to comment on the likely scenario that would emerge.

Industry officials do not expect any major hardening of reinsurance rates for catastrophic risks because of Japanese tsunami though they agree that the property losses is going to be high as Japan is highly insured nation.

"Such hardening of reinsurance would happen only in the case of aviation or marine/transit losses. Losses to property/life is country specific and there may not be any global hardening of reinsurance rates," an official of a private non-life insurer told IANS preferring anonymity.

Ramadoss said: "In Japan insurers may increase the premium rates or increase the deductibles - the amount of loss that the insurers would not pay."

According to him, general insurers in Asia including the Indian companies are in the process of renewing their annual reinsurance contracts.

"Normally, the Asian reinsurance contracts come up for renewal in April. However today (Friday) we are getting e-mails from reinsurers stating they would like to have some more time to quote following the Japanese tsunami," an official of a government owned insurer told IANS.

According to an industry official, the Indian Ocean tsunami did not affect the general or even the life insurers much as the properties and lives were not insured.

"But in Japan going by the television visuals lots of automobiles, refinery and other property have been damaged. This is bound to affect the primary insurers," he said.

IRDA may let insurers invest in gold and ETFs

MUMBAI: The Insurance Regulatory and Development Authority (Irda) is vetting a proposal to allow life insurance companies to invest in gold and exchange-traded funds, or ETFs. The move will provide greater flexibility to local insurers to invest in various asset classes.

A senior Irda official said the regulator is weighing the two options. "We may allow insurance companies to invest in gold and equity ETFs with a cap of 5-10%. There are proposals from various companies to let them invest in ETFs of commodities and equities," said the official.

An exchange-traded fund is an investment fund traded on stock exchanges just like stocks. Gold ETFs invest directly in gold and hence track its prices closely, eliminating the hassles of stocking up on physical gold. Equity ETF mirrors a basket of stocks such as S&P CNX Nifty or BSE Sensex, which reflects the composition of an index.

The Irda official said the regulator would, however, like to restrict the exposure of insurers to any single commodity.

After the regulatory changes in the Ulip space, insurance companies are not able to innovate products. "The charges are capped. There is not much innovation that we can bring. One product is replicating another," said a senior executive of a large insurance company.

Insurance companies are looking forward to new options for investment flexibility. "This will improve our investment choice. Whenever there is an inflow in Ulips, we can quickly allocate funds in ETFs and then take a call on where to invest," said Abhijit Gulanikar, chief investment officer of SBI Life .

There are 16 ETFs in India, including gold and equity. According to the current regulations, insurance companies cannot invest in commodities. These changes will, however, require amendments in regulations. After the Insurance Act is amended, Irda will have the power to introduce changes in the investment norms.

Japan's Nippon may buy 26% in Reliance Life for $724 mn

MUMBAI: Japan's largest life insurer Nippon Life Insurance is in talks with financial services firm , controlled by Anil Ambani, to acquire a 26% stake into the Indian company's life insurance subsidiary for $724 million.

According to a person with knowledge of the deal, the two companies have been in talks for more than six months now. " Reliance Life and Nippon Life have been in talks for more than six months. The deal was not going through because of some valuation issues. The talks got revived in the last two weeks," said the person, who declined to be identified as he is not authorised to talk to the media.

Reliance Life is the only life insurance company in which an Indian promoter owns 100% unlike many other ventures where overseas life insurers are partners. India's insurance sector laws have capped FDI at 26% although successive governments have attempted to raise the foreign investment threshold.

Reliance Life MD and CEO Sam Ghosh declined to comment on the deal.

The life insurance business is highly capital intensive and takes close to 10 years for an insurer to break-even. That would mean only companies which have a cash pile or financial muscle can last the course. There have been reports of the Indian insurer planning an initial public offering and bringing in a strategic investor ahead of the planned share sale.

Earlier, Reliance Life was in talks with Swiss Life and China Life, but failed to close the deal. The company even tried to divest its stake through a public offer last year. It had approached the government to allow companies to list after completing five years of operation against the norm which stipulates that insurers can launch an IPO only after 10 years. Insurance companies are awaiting an amendment to the Insurance Act, which will raise FDI to 49%.

Dai-ichi Life and Tokio Marine Life Insurance are the Japanese companies operating in India. Dai-ichi Life has tied up with Bank of India and while Tokio Marine has partnered with Edelweiss for India foray.

Nippon Life to acquire 26% stake in Reliance Life for $680 mn

NEW DELHI: Japanese insurance firm Nippon Life Insurance Company will acquire a 26 per cent stake in Reliance Life Insurance for $680 million.

"Nippon Life Insurance will invest an aggregate value of Rs 3,062 crore ($680 million) to acquire a 26 per cent strategic stake in Reliance Life Insurance," the Anil Ambani Group firm said in a statement today.

The transaction pegs the total valuation of Reliance Life Insurance at approximately Rs 11,500 crore ($2.6 billion), the statement said, adding that the transaction is subject to necessary regulatory approvals.

Nippon is the 6th largest life insurer in the world and the No. 1 private life insurer in Asia and Japan.

Commenting on the development, Chairman Anil Ambani said, "At this time, our thoughts are with the people of Japan, bravely facing an unprecedented natural catastrophe. We pray for strength to the country, its people and our new partners in the entire Nippon Life family, to overcome the trauma of the tragic loss of life and devastation caused by this calamity."

Reliance Capital currently holds a 100 per cent stake in Reliance Life.

"We both share the same passion and philosophy and, together, we believe we can develop a strategic partnership to help Reliance Life Insurance become a world-class insurance company in India," said Nippon Life Insurance President Kunie Okamoto.

Shares of Reliance Capital were up 5.46 per cent at Rs 538.75 on the BSE at 1116 hours.

Nippon Life buys 26% in Reliance life

MUMBAI: Nippon Life, Japan's biggest life insurance company, on Monday acquired a 26% stake in Reliance Life for a sum of Rs 3,062 crore, surprising analysts with a valuation that was higher than expected. The deal, that values Reliance Life at Rs 11,500 crore, or around $2.6 billion, is the largest foreign direct investment in the financial services industry. Shares of Reliance Capital, the financial services arm of the Anil Dhirubhai Ambani Group , or ADAG, and the owner of Reliance Life, went up by 10% to Rs 562 on the Bombay Stock Exchange as it will receive most of the money.

"Some part of the money will be raised by way of primary issuance, but a large part will be through a secondary sale," said MD and CEO Sam Ghosh . The company will infuse another Rs 30-40 crore into the business. Through this secondary sale, which will be combined with a small issue of new shares, Reliance Capital's stake will come down to 74% from 100%. Reliance Life, a subsidiary of Reliance Capital, is the only life insurance company 100% owned by an Indian promoter.

Analysts said the valuation is significantly higher than expectations. "We estimated the valuation to be $1.6-1.7 billion against $2.6 billion. But since the Japanese company wanted to enter the market, they were ready to pay a premium. India is a growing market and this gives them a presence here," said Suresh Ganapathy, an analyst with Macquarie . Manish Karwa of Kotak Securities said the valuation is 40% higher than expectations. "Inorganic way is the easiest entry for Nippon Life," said an analyst with KPMG .

Of the 22 companies that have entered the insurance market since the industry was thrown open, foreign and private investment in 2000, twenty have foreign partners, according to data on the website of insurance regulator Irda. The stake sale in Reliance Life is the first instance of induction of FDI by way of a secondary sale. The company did not require any capital during the third quarter, Mr Ghosh said, adding that it plans to break-even this quarter. The nature of the business is such that it requires regular capital infusion, said analysts.

For every policy sold, the company has to put aside extra capital as solvency margin, which is the excess of reserve over liability. One of the key yardsticks to measure the performance of a life insurance company is capital efficiency. This is assessed as the ratio of the gross written premium (GWP) with the capital deployed. GWP is the total premium income including renewal and new business. Reliance Life's GWP stood at Rs 1,447 crore at the end of December 2010 while its total capital stood at Rs 3,094 crore.

According to a report by JP Morgan , the deal valuations would impact Kotak and SBI positively as both banks have insurance joint ventures. "Aditya Birla Nuvo and would also be big beneficiaries as insurance is the largest contributor to their valuation," the report said. Reliance Life has been searching for a partner for a couple of years. The deal with Nippon Life has taken place at a time when the insurance regulator is working on IPO guidelines by private insurance companies. An amendment to the Insurance Act that, if approved by Parliament, would raise the FDI limit to 49% from 26%, is also pending.

Mr Ghosh said the company would wait for this to happen before listing. On Monday, the company said its renewal premium grew by 25% to Rs 857 crore at the end of December 2010 against Rs 686 crore for the corresponding period last year. Due to the change in policy regulations, its new business premium declined by 35.6% to Rs 593.7 crore. The number of agents stood at 215,952 at the end of December 2010, a rise of 33% compared with 162,370 a year ago. Its assets under management stood at Rs 11,700 crore at the end of December 2010. The increase in distribution force helped Reliance Life clock the highest number of polices in the private sector life insurance industry to 308,923.

Primer on Personal Accident Insurance

Personal accident insurance policies can be a good tool to manage the risk associated with accidents . Non-life insurance companies offer these products for both individuals and groups. If you are a person exposed to the risk of an accident, you should ideally buy one. For ex-ample , a cab driver , who spends most of his time driving a cab on the road where most of the accidents take place should have a personal accident cover.

Personal accident insurance policies not only insure an individual in case of a death due to accident , but they also assure monetary payouts in case of disability - both temporary and permanent nature. The buyers should run through the schedule of benefits where the insurer enlists the 'condition insured' and the 'amount payable' before he signs above the dotted line. For example, if an insured individual loses sight in one eye, he is entitled for 50% of the sum assured.

The schedule comprises a host of such conditions to the extent of 'loss of toe' . The policy also pays for medical expenses arising out of accident subject to sub limits. An insured individual is also entitled for hospital confinement allowance if he is hospitalised due to an accident . The insurance companies have also realised the need of 'family assistance' . In case of the unfortunate death of the insured in an accident, the children are also entitled for 'education assistance payouts' if the buyer has bought this optional benefit at the time of purchase of the policy.

If you are willing to pay a bit more, the insurers also offer you additional benefits such as 'house modification allowance' and 'loss of employment allowance' for the assured who have met with an accident. There is no need to go for a medical test to buy personal accident insurance policies and generally the tenure of the policies is one year.

Of course, there are options available where one can pay for longer tenures and enjoy a discount on the premium payable. The cover can be extended to your family if you are willing to pay a bit more to include them. The sum assured may vary from Rs 1 lakh to Rs 1 crore. The insurance company offers a no-claim bonus of 5% for each claim-free year.

Buy a Rs 2163 car policy and get to meet Warren Buffet

MUMBAI: Indian investors wanting to hear Warren Buffett no longer need to fly 8,218 miles across the Atlantic. They can just dole out $48 for car insurance to secure an invite to meet the "Oracle of Omaha" in New Delhi. Billionaire investor Buffett, chairman and chief executive officer of Berkshire Hathaway, will meet customers of berkshireinsurance .com on March 25 during his first visit to India, the Omaha, Nebraska-based company said on Monday in an e-mailed statement.

"It's a great experience," said NGN Puranik, MD at Enam Securities in Mumbai, who spent more than $4,000 to attend Berkshire's 2007 annual meeting in Omaha. "If people are getting an opportunity to meet him by buying a policy, they should definitely do it." The New Delhi event may give Indian investors a chance to hear Buffett's home-spun wisdom of financial success that's turned the company's annual meeting into a must-visit event, with 40,000 attending last year. Buffett also will seek to recruit affluent business leaders to his charity projects in a nation that's home to Asia's richest billionaires.

Berkshire started selling insurance to Indian consumers via the internet portal and on phone this month after forging an agreement with Bajaj Allianz General Insurance, Berkshire said March 2. Berkshire, whose insurance units include car-coverage specialist Geico and re-insurer General Re, initially will focus on the auto sector in the south Asian nation. Buffett will meet policyholders at the Taj Palace Hotel in New Delhi from 6 pm to 8 pm on March 25, according to Berkshire's website.

New policies purchased through berkshireinsurance.com will qualify for an invite, Kara Raiguel, a director of Berkshire India, said in an e-mail. The price to insure a Maruti Suzuki India 800 built in 1996 would cost Rs 2,163 ($48), according to the website. "I've always wanted to attend one of Buffett's meetings," said Monish Shah, a 27-year-old investor based in Mumbai. "If I can buy a car policy for a future date, I will definitely get one, just to meet him."

IndiaFirst launches LifeStore

New Delhi: IndiaFirst Life Insurance , a joint venture between and along with the UK's leading risk, wealth and investment company Legal & General, has announced the launch of LifeStore - a complete do-it-yourself online store for understanding and buying insurance.

LifeStore is a 'do-it-yourself' website which aims to help customers transact their insurance requirements on the back of authentic information, online advice, services and realistic expectations.

"Through LifeStore, we aim to reach out to millions of internet users - a sizable number of whom are either active and/ or potential customers - thus widening the scope of the market across the country. The core objective behind launching LifeStore is to help simplify insurance and encourage customers to make their own decisions related to insurance through the power of the knowledge anytime and anywhere," said P Nandagopal, managing director & CEO, IndiaFirst Life Insurance.

Through LifeStore, IndiaFirst will now be tapping the approximately 70 million internet users in India. "The digital medium is a growing category and still untapped. This is one of our business priority areas and we are looking at further expanding onto the mobile platform and interactive kiosks as well,'' he added.

Apart from simplifying insurance and reducing fear about the category, this will bring the concept of transparency to the fore and increase channels for the customers to reach insurance service providers.

Cloud over Buffett’s India visit

Bangalore: Warren Buffett's maiden trip to India has run into uncertainty following the tragedy in Japan. Buffett, chairman and CEO of Berkshire Hathaway and the third richest man in the world, was scheduled to be here between March 23 and 25 after stopovers in Korea and Japan.

Several media reports have said that Buffett has cancelled the Japan leg of his trip. That has led to speculation that the entire trip may have been cancelled. Some officials involved in organizing events during his visit to India said there was uncertainty. The officials did not want to be named.

Kara Raiguel, director of Berkshire India, said the company was not aware of Buffett cancelling his trip to Japan. "We are pleased that Buffett is coming to India for the first time and he is able to interact with the customers of Berkshireinsurance.com ," she said.

Life insurers' new business income falls 39% in February

MUMBAI: New business premium income of life insurance companies fell for the sixth straight month as strict regulations on sale of the once popular Unit Linked Insurance Policy took sheen off investing in insurance products. Insurers collected new business premium of Rs 3,009 crore in February 2011, down 39% from Rs 4,896 crore a year earlier, according to the latest data collated by the industry.

The drop in collection is due to a shift towards conventional insurance policies which have regulator-designed investment norms. These have lower-ticket size and not many pension products were sold either during the month. "Pension products contributed 30% of the new business premium in the period last year which is missing,'' said India First MD and CEO P Nandagopal.

"Also, ticket size has dropped as industry has moved to traditional products." State-owned Life Insurance Corporation of India's sale plunged 45% to Rs 1,296 crore in February. In the corresponding month last year, the company had collected a total new business premium of Rs 2,353 crore. Insurance company executives' said that offering a guarantee of 4.5% on pension products is not viable for the industry.

"The product is not attractive with a mandatory two-third annuitisation, return of 4.5% and compulsory life cover," said HDFC Life MD and CEO Amitabh Chaudhary. While the private players reported a drop of 33% during the month to Rs 1,713 crore against Rs 2,543 crore in February 2010. Private insurers such as ICICI Prudential and SBI Life reported a fall of 55% and 4% respectively. Generally, last quarter generates 40% of the total new business premium collected during the financial year as this is the tax season and individuals buy insurance policies to get benefit under Section 80C and Section 80 D of the Income Tax Act.

Reliance Life-Nippon

Reliance Life-Nippon deal may not be a benchmark for insurance valuation

MUMBAI: The Reliance Life- Nippon Life deal may not impact valuations of insurance majors and can not be used as a benchmark for those looking to either list their shares or offload a stake to a strategic or financial partner. Industry experts said the deal is an exception and was priced at a high premium as Nippon Life desperately wanted to enter the Indian market and Reliance Life had the business in place.

"Nippon wanted to enter the Indian market and Reliance has a quality portfolio with the ability to attain profit soon," said a senior executive of a large life insurance company. This is the first secondary sale of shares in the insurance industry. Major acquisitions have been few and far between as the industry majors have been focusing on achieving a respectable size and posting profits. Reliance Life acquired AMP Samnar in 2005 for Rs 100 crore.

Reliance sold a 26% stake to Nippon Life on Monday for Rs 3,062 crore. The deal is subject to regulatory approval. "Valuation depends on factors like business model, distribution reach, profitability and the quality of products and portfolio. A company with a bank as sponsor will command a better valuation," said an analyst.

There are no fixed standards for valuing an insurance business. Insurers at present, do the job by adding the embedded value and the New Business Achieved profit (NBAP). Embedded value is defined as the sum total of net worth and present value of future profit. A major factor of expense overrun, recurring operating expenses, is not subtracted in this method and it tends to present a misleading picture.

The Insurance Regulatory and Development Authority (Irda) is working on a standard method for valuing an insurance company. Kajal Gandhi, AVP, ICICI Securities , reckons that Reliance Life does not set benchmarks for the industry valuation as the deal was one of its kinds. Nippon Life insurance was keen to enter Indian market since past 2-3 years and was ready to pay the high premium. Unless other insurance companies get a similar opportunity such valuations look difficult.

IndiaFirst Life Insurance expects 5% business from online store

NEW DELHI: IndiaFirst Life Insurance today said it expects five per cent of its total business to come from the newly launched online store.

"With the new concept we are aiming to target the youth who are more into internet and online platforms. We expect, atleast five per cent of our business will be from LifeStore," IndiaFirst Managing Director and CEO P Nandagopal said.

IndiaFirst Life Insurance, a joint venture between public sector lenders, and , and a UK-based investment firm Legal & General, had last week launched 'LifeStore', which is being touted as a complete do-it-yourself online store for understanding and buying insurance.

"We want to reach the seven crore internet users in the country. They can now go through all our offers online and choose themselves. Besides, we have also set up a helpline for them," Nandagopal said.

Among other features, LifeStore offers live video call, product audio visuals, step-by-step comparison of products, update on company performance and investments.

"This is much more than a mere official company website. Besides, data shows that 24 per cent internet users look for financial information with insurance registering an annual increase of 33 per cent in terms of web search interest," he added.

Nandagopal said the company is now looking to develop an application specifically aimed at mobile phone users.

The Rs 455 crore IndiaFirst started operations in March 2010. While Bank of Baroda holds a 44 per cent stake in the firm, Andhra Bank, and Legal & General own 30 per cent and 26 per cent stake, respectively.

IndiaFirst currently has two lakh individual and six lakh group policies.

Insurers want to calculate solvency at fair value

MUMBAI: In a bid to enhance solvency margins and make higher provisioning for third-party motor pool, insurance companies are asking the regulator to allow them to calculate solvency margins at fair value. Currently, companies calculate solvency margins at book value. Solvency margin is the minimum surplus on the insurer's assets over their liability set by the regulator.

"We are asking the regulator to allow us to calculate solvency margin at fair value, instead of book value. Our solvency margin will go up even after making the required provisions," said National India Insurance chairman and managing director NSR Chandraprasad. The Insurance Regulatory and Development Authority (Irda) had increased the provisions made for motor pool to 153% for the last four years against 126% maintained by companies.

For this, companies will have to provide Rs 3,500 crore till March end. This is despite the regulator relaxing the solvency margin requirement. Against the required 150%, Irda has allowed to maintain 130% solvency margin for March 31, 2011. For the next three years, insurance companies can maintain a solvency ratio of minimum 137%, 145%, and 150%.

State-owned insurance companies like Oriental Insurance and National India Insurance had less than 150% solvency margin at the end of last year. At the end of the third quarter, their margins have improved, but are still below the regulatory requirement.

Also, general insurers are now reeling under underwriting losses. Providing funds to meet the increased provisions for the third-party motor pool will be difficult. The companies are not allowed to declare dividends to shareholders or give bonus or performance incentives to any person in the management without prior approval from the regulator till solvency margin reaches 150%.

Irda said the ultimate loss ratios for 2007-08, 2008-09 and 2009-10 were 172.3%, 181.81% and 194.15%, respectively. Loss ratio is the percentage of incurred losses to earned premiums. There is a peer review, which will arrive at the actual loss ratios. The actual gap between the claims incurred and the provisions made by insurance companies is expected to go up to Rs 7,000 crore.


The four public sector insurance companies - New India Assurance , National India Insurance, United India Insurance and Oriental Insurance - may approach the government if the regulator does not allow calculating solvency at fair value, said Mr Chandraprasad.

Cos want fair play

Solvency margin is the minimum surplus on the insurer's assets over liability set by the regulator Currently, cos calculate solvency margins at the book value Irda had raised provisions made for motor pool to 153% for the last four years against cos' 126% For this, Insurers will have to provide Rs 3,500 cr till March end Irda has allowed to maintain 130% solvency margin for March 31, 2011.

Govt nod must for Reliance Life to sell 26% stake to Nippon

NEW DELHI: Anil Ambani group firm Reliance Life, which recently announced selling 26 per cent stake to Japanese insurer Nippon for $ 680 million, will have to seek government nod, says insurance regulator IRDA.

Under the Insurance Act, promoters wanting to sell 26 per cent stake (maximum permissible limit), could offload their equity only after 10 years into operations. However, Reliance Life has not yet completed 10 years of operation.

Asked whether Reliance Life can sell its 26 per cent stake currently, Insurance Regulatory and Development Authority (IRDA) Chairman J Hari Narayan said it could not be done without approval of the government. "Not without the order of the Government," he told PTI.

When contacted, a spokesman of Reliance Capital, which owns Reliance Life, said, "We are confident of receiving necessary approvals from the government, IRDA, RBI for the largest ever proposed FDI of Rs 3,000 crore in financial service sector in India".

IRDA Chairman on his part said Reliance Life is in touch with the insurance watchdog over the issue and the company has to approach the Government for approval.

The company will have to do so on its own, Hari Narayan said.

Reliance Capital wholly owns Reliance Life, a business it acquired from AMP Sanmar in 2005. AMP Sanmar started operation in January 2002. Thereby Reliance Life would complete 10 years of operations in January next year.

Earlier this month, Reliance Capital announced that Japanese insurance firm Nippon Life Insurance Company will acquire a 26 per cent stake in Reliance Life Insurance for $ 680 million.

"Nippon Life Insurance will invest an aggregate value of Rs 3,062 crore ($ 680 million) to acquire a 26 per cent strategic stake in Reliance Life Insurance," the Anil Ambani Group firm had said in a statement.

The transaction pegs the total valuation of Reliance Life Insurance at approximately Rs 11,500 crore ($ 2.6 billion).

Nippon is the 6th largest life insurer in the world and the No.1 private life insurer in Asia and Japan.

Reliance Life claims to be the largest insurer amongst the 22 private life insurers in India in terms of the number of individual policies sold.

The company has sold over 7 million policies through its network of nearly 1,250 offices and over 2,15,000 advisors.

Japan tsunami may hit Munich Re profit, but no rate rise seen

KOLKATA: Reinsurance firm Munich Re's provisional estimate suggests it will have to pay 1.5 billion (Rs 9,590 crore) for the losses in Japan, as a result of which its profits will be affected, but analysts feel it may not force it to harden reinsurance rates in India.

Ravi Trivedi, executive director at KPMG, said: " Munich Re has very deep pockets and they manage country risks as a portfolio, making it easier for them to manage losses. The Japan loss may not force them to raise reinsurance rates in India."

Although for Munich Re, the first quarter of 2011 had already been marked by high losses from the earthquake in New Zealand, floods in Brisbane and Cyclone Yasi in Australia.

"Now including the projected losses from the earthquake and tsunami in Japan, the major-loss burden from natural catastrophes amounts to over 2.5 billion (Rs 15,980 crore), thus far exceeding the volume to be expected for this period. That means the profit target for the year 2011 of around 2.4 billion is no longer achievable," said Munich Re in a statement.

"It is currently still too early to discuss the implications of the Japanese catastrophe on the Indian or global reinsurance market," Munich Re media relations-Asia- Nikola Kemper told ET.

"The series of catastrophic events world over will propel reinsurers who have suffered losses in these catastrophes to look for profitable business in some other countries. India could turn into a happy hunting ground for them, simply because we have not suffered any major losses in the last four-five years. Almost all insurers will want to increase their market share," Amarnath Ananthanarayan, chief executive officer at Bharti AXA General Insurance company said.

"This initial loss estimate at Japan is based solely on modeling. Owing to the extent of the destruction, further possible aftershocks and difficult clearing-up operations, it will be many weeks before the losses are assessed and all the claims notifications from Japanese primary insurers have come in.

As many reinsurance covers do not attach until very high losses have been sustained by individual insurers, it will only become apparent at a later stage whether and to what extent reinsurers are affected by losses under particular treaties. Further uncertainties result from the impact on international flows of goods and supply chains from business interruptions suffered by Japanese industrial producers," a Munich Re statement said.

The losses for Munich Re result mainly from covers in commercial business.

Berkshire Insurance

Berkshire Insurance: Is it prudent to buy insurance on promise of meeting celebrity?

MUMBAI: The whole world knows by now that Berkshire Insurance has just opened office in India by not opening an office. That's how the company website puts it.

In another first, the company also managed to sell hundreds of motor insurance policies online for an evening meeting with Warren Buffett, the legendary chairman and CEO of Berkshire Hathaway, its global parent company.

However, as the euphoria dies down, many insurance players are wondering how prudent it was to sell a motor insurance policy on the promise of a meeting with a celebrity-the world's third richest man and the most successful investor ever.

"It is not correct. In insurance you can't give incentives. It is against the principles of insurance. It is like an insurance agent giving a Diwali gift," said a senior official at Insurance Regulatory and Development Authority.

"It's purely a gimmick, which is not known to the insurance industry so far. We are not in favour of it. It's a kind of inducement that is not permitted by concerned regulations...Moreover, in the absence of clarity about the insurance amount that qualifies for meeting the celebrity, some people might feel misled," said Kamalji Sahay, MD & CEO Star Union Dai-ichi Life Insurance.

Berkshire Insurance, Indian arm of Berkshire Hathaway, in its bid to encash on the cult status of Buffett and his much-publicised annual meal with the highest bidder for million dollars, has advertised that policyholders of the company would get a chance to listen to the Oracle in Delhi if they buy a motor insurance policy from the company.

"If we have to offer our product, we would do on the basis of our product features and services. The choice should be based on the product strengths," said Gaurav Garg , MD & CEO, Tata AIG General Insurance.

S K Sethi, vice-president, Insurance Foundation of India, also felt the same: "We are against it. Any incentive in cash or kind is an inducement. If they want to arrange a lecture or get together, it shouldn't be at such public place."

However, not all see red. "It's not completely ethica,l but then it's not against the letters of the law also," says S B Mathur, secretary general, Life Insurance Council.

Global insurance cos shy away after Japan disaster

MUMBAI: The government's plan for a nuclear insurance pool has hit a roadblock as global insurance firms are shying away following the nuclear catastrophe in Japan that has raised concerns on high financial risk and restricted inspection access to facilities in the country. State-owned Nuclear Power Corporation and General Insurance Corporation (GIC), the only domestic re-insurer in the country, are finding it difficult to go ahead with the plan due to a lacklustre response from domestic and international players, according to sources close to the development.

After the nuclear disaster in a country expected to be one of the most prepared nations in dealing with such a crisis, governments of nuclear powered states, including India, may seek to transfer more financial responsibility to plant operators. This may further increase the liability on operators and suppliers for the country's nuclear projects, said a government official. Currently, India has a nuclear generation capacity of about 4,700 megawatt and plans to scale it up to 20,000 MW by 2020, in association with global nuclear powers.

India, the world's second-largest market for new reactors, with five under construction, passed a law last year to hold atomic-power equipment suppliers partly liable for damages from accidents, even in the case of operator error. Under the Civil Liability for Nuclear Damage Act, 2010, the liability limit per operator per event is estimated at Rs 1,500 crore. It plays a major role in the hastening of financial aid to be provided to victims while operators and suppliers need an insurance cover on such unwarranted, huge losses. However, the government's initiatives have taken a backseat on account of various issues such as lack of assessment of financial risk, which has raised a hot debate after the meltdown of the Fukushima nuclear reactors.

GIC CMD Yogesh Lohiya said the situation had changed and participation in the pool was on a voluntary basis. "There are some issues with the Department of Atomic Energy, which does not allow international inspectors to inspect the area. Underwriting policies without inspecting the risk is not feasible," said Mr Lohiya . Not many private insurance companies are willing to participate in the nuclear insurance pool. "We have got some responses but because of inspection issues, players are not willing to come forward," Mr Lohiya added. Some believe that domestic insurers are less familiar with handling such products. "We do not have the expertise to underwrite nuclear risks," said a senior official of a large non-life insurance company.

There are 26 nuclear insurance pools across the world for providing cover in case of nuclear accident. The pool size varies with the size of a plant, the machinery used and the levels of radiation expected. According to sector experts, it would be difficult to form an insurance pool in a country without proper understanding of financial risk and well-placed security measures for handling such cases to avoid heavy loss. Currently, neither the Indian Atomic Energy Act nor the Environmental Protection Public Liability Insurance Act, 1991, has the jurisdiction over accidents due to radioactivity . Some insurers are also sceptical over the government's preparedness for providing adequate information required before one gets into such business. "For domestic players, it's totally a new business with hassles at various levels," said a senior analyst with a broking company.

Royal Sundaram Alliance Insurance to infuse Rs 65 cr

NEW DELHI: Private sector general insurer Royal Sundaram Alliance Insurance today said its promoters will inject Rs 65 crore into the company.

The Royal Sundaram will inject Rs 65 crore into the business, taking the total paid up capital and premium of the company to Rs 275 crore, Royal Sundaram Alliance Insurance said in a statement.

The capital infusion would be completed by the end of this month.

"This injection of the capital will support our plans of continued growth and expansion. Going forward, Royal Sundaram plans to continue keeping its focus on retail business," Royal Sundaram Alliance Managing Director Ajay Bimbhet said.

He said the company would close the financial year with gross premium collection of more than Rs 1,000 crore.

Royal Sundaram Alliance Insurance Company Ltd is a joint venture between Sundaram Finance and UK's RSA Insurance plc , where the former holds 74 per cent and the latter 26 per cent of the equity.

Software switch puts 25 lakh LIC policy holders in a fix

MUMBAI: Over 25 lakh LIC policy holders and their agents are unable to carry out transactions for the past couple of weeks because of a new software installed in the firm's branches in the western suburbs.

LIC tied up with software giant to introduce E-FEAP, a new software to improve efficiency of the organization. It was installed in mid-March in Mumbai Division Office (MDO) III that includes all the 19 branches between Bandra and Dahisar on an experimental basis.

Branch officials said customers and agents are furious. "We have to face the flak," they said. A Malad-based LIC agent said, "Officials at many of these branches are unable to process claims or receive premium towards the renewal of policy. Most of the branches are not able to approve the loans against the policy because of fault related to software."

Many are livid that the LIC management decided to choose the month of March to introduce a new concept. Another official said, "This is the month when most people rush to buy policies to save taxes. They could have introduced this software in April or May when the pressure is less on staff."

During the initial four days, work came to a complete standstill in the western suburbs. An agent said, "Even now, branches are not able to settle claims or pay commission to agents. In some cases, it takes almost 15 minutes for the software to generate a receipt because of glitches in the software."

Another agent said, "My client has given a cheque of Rs 1 lakh to avail tax benefit on March 15. However, his papers for issuance of policy remain unprocessed due to software complications."

Some agents have been advised by officials to pay premium online or by visiting branches of other divisions. "This is impractical. Many do not have the time to travel and not all policy holders are computer literate," said a agent from Andheri.

Lalit Todi, an LIC customer who had applied for loan, said, "I have been told that the cheque is ready, but is not being issued as validation of the voucher cannot processed due to software problems. In fact, the cheque that is issued in my name bears the date March 19. However, the covering letter for the loan was generated on March 25. The LIC officials now say that they will charge me interest from March 19 onwards."

Even maturity claims are not being processed. Nitin Shah (name changed) said, "My policy is maturing on March 28 and the relevant papers were submitted on January 11. Branch officials told me to come in April as they were unable to give me specific date because of glitches in the software."

An official said, "Employee unions had made representation to the LIC management about the problems being faced at the branches where this software was introduced as pilot project. They ignored their pleas and went ahead with their decision to introduce E-FEAP in MDO III and Jaipur."

Vipin Anand, chief corporate communication, LIC, conceded said, "We have sorted out the problem. All the branches have been working efficiently since Friday. Minor problems crop up when an effort is undertaken to switch to new technology."

P Dwivedi, senior divisional manager, MDO III said, "The problem has been rectified. There are bound to be some glitches when migration happens from one software to the other."

Govt push to 49% FDI in insurance

MUMBAI: Finance minister Pranab Mukherjee on Sunday said the government is talking to political parties to garner support required to push through a bill that allows 49% FDI in the insurance sector.

Speaking on the sidelines of an event to commemorate the centenary of , Mukherjee said: "We have started talking to various stakeholders which, in this case, are political parties because we do not have 272 Congress MPs. Therefore, we would require support of other political parties. I have started talking to them and I hope there will be a broad consensus in the matter."

He said the government has set up a Financial Sector Legislative Reforms Commission (FSLRC), which will have its first meeting in a few days to rewrite and clean up the financial sector laws and bring them in line with the requirements of the sector.

Later, talking to industry leaders at a conference organized by industry trade body Assocham, Mukherjee said that all the tax proposals in this year's Budget were aimed at aligning them with the Goods & Services Tax (GST). The FM also said that the GST has to align with the tax rates in different states in force now.

Mukherjee pointed out that the government wanted to undertake reforms to simplify and place administrative procedures concerning taxation, trade and tariffs and subsidies on electronic interface, which would be free of discretion and bureaucratic delays. "This would also prepare the ground for the implementation of the DTC and hopefully the GST as well, from April 2012," he added.

The FM said he was expecting companies to increase investments in return for higher margins that they enjoyed through Budget proposals like not going for any hike in excise duty. "Just as I have to meet your expectations to get you to scale new heights of productivity and growth, you also have to meet my hopes, in the process strengthening my hands."

Union Budget 2011

Union Budget 2011: Income tax exemption limit raised to Rs 1.8 lakh

NEW DELHI: Income Tax exemption limit for individuals has been raised from Rs 1।6 lakh to Rs 1.8 lakh, giving a relief of Rs 2000 to every tax payer, in the Budget for 2011-12 which widened the Service Tax net to cover more services that will raise the cost of air travel, hotel accommodation and those who drink in AC restaurants.

Presenting his third Budget in the Lok Sabha, Finance Minister Pranab Mukherjee preferred not to roll back central excise duty levels to November 2008 and kept it at 10 per cent while he levied a nominal one per cent central excise duty on 130 items that will enter the tax net.

Basic food and fuel items will continue to be exempted while the new levy will not apply to precious metals and stones. Jewellery made of gold, silver and precious metals sold under brand name would be covered by the new levy.

Minimum Alternate Tax on book profits of companies has been raised from 18 to 18.5 per cent and the lower rate of Excise Duty raised from 4 to 5 per cent.

Mukherjee's income tax sops included reducing eligibility age of senior citizens from 65 to 60 and enhancing the exemption limit for them from Rs 2.40 lakh to Rs 2.50 lakh. He also created a new category of 'Very Senior Citizens' of 80 years and above who will be eligible for a higher exemption limit of Rs 5 lakh.

The Minister estimated a net revenue loss of Rs 200 crore in the Budget. The proposal related to indirect taxes are estimated to result in a net revenue gain of Rs 11,300 crore, including Rs 4000 crore on Service Tax expansion, while the proposals on direct taxes are expected in a revenue loss of Rs 11,500 crore.

The Budget for next year pegs the fiscal deficit at 4.6 per cent of GDP for 2011-12 which works out to Rs 4,12,817 crore. Gross tax receipts are estimated at Rs 9,32,440 crore, an increase of 24.9 per cent over Budget estimates for 2010-11.

Net non-tax revenue receipts for the next financial year are estimated Rs 1,25,435 crore. The total expenditure proposed for 2011-12 is Rs 12,57,729 crore. Plan expenditure will be Rs 4,41,547 crore, an increase of 18 per cent and non-Plan expenditure will be Rs 8,16,182 crore, an increase of 10.9 per cent over Budget estimates of 2010-11.

Here are some major tax announcements:

*Tax exemption limit raised to Rs 1.8 lakh, from Rs 1.60 lakh for individual tax papers.

*For senior citizens, the qualifying age reduced to 60 years and exemption limit raised to Rs 2.50 lakh.

THE CASE FOR GOLD

THE CASE FOR GOLD

Financial planners recommend gold as an alternate asset class of investment in a portfolio and recommend investors to have 5-10 % of their portfolio in gold. They are reiterating the advice now due to the uncertainties hovering over the world economy and the trouble brewing in the Arab world. Gold is also considered a safe bet and a hedge against inflation by some. It has a very low correlation to other asset classes, making it a handy asset to diversify the overall portfolio.

WHO SHOULD APPLY

Investors who wish to build up their gold portfolio and hold gold as an asset class in their portfolio can apply. Besides this, investors who do not want to go through the trouble of operating a broking account and a demat account, could look at this mode of buying gold via SIPs.

WHY NOT TO APPLY

Being an FoF, the expense ratio here is likely to b

THE CASE FOR GOLD

Financial planners recommend gold as an alternate asset class of investment in a portfolio and recommend investors to have 5-10 % of their portfolio in gold. They are reiterating the advice now due to the uncertainties hovering over the world economy and the trouble brewing in the Arab world. Gold is also considered a safe bet and a hedge against inflation by some. It has a very low correlation to other asset classes, making it a handy asset to diversify the overall portfolio.

WHO SHOULD APPLY

Investors who wish to build up their gold portfolio and hold gold as an asset class in their portfolio can apply. Besides this, investors who do not want to go through the trouble of operating a broking account and a demat account, could look at this mode of buying gold via SIPs.

WHY NOT TO APPLY

Being an FoF, the expense ratio here is likely to be higher, compared to an exchange-traded fund. While the expense ratio for the most liquid Benchmark Gold Exchange traded fund is 1%, Kotak Gold fund will have a higher expense ratio of 1.5% per annum. Hence, investors holding a demat account, may find it marginally cheaper to buy gold through the ETF route rather than investing through this fund.

e higher, compared to an exchange-traded fund. While the expense ratio for the most liquid Benchmark Gold Exchange traded fund is 1%, Kotak Gold fund will have a higher expense ratio of 1.5% per annum. Hence, investors holding a demat account, may find it marginally cheaper to buy gold through the ETF route rather than investing through this fund.

Kotak gold fund launched

After Reliance Mutual fund, which launched a gold fund last month, it is the turn of Kotak Mutual Fund to launch a gold savings fund. With this fund, you can invest in gold without having a demat account. The issue is currently open for subscription and closes on March 18.

THE PRODUCT

Kotak Gold Fund is an open-ended fund of funds (FoF) scheme, which is passively managed and will invest primarily in Kotak Gold Exchange Traded Fund. So its returns will mirror the returns of Kotak Gold Exchange traded fund. While there is no entry load, there is an exit load of 2% if you redeem or switch out units on or before the completion of one year from the date of allotment of units, 1% if you switch between six months and one year of allotment and no exit load after one year of allotment. The minimum amount on application is . 5,000. You can also do a SIP for . 1,000 per month.

On a month-on-month basis, the new business

On a month-on-month basis, the new business premium from Unit Linked Plans (ULIPs) rose to Rs 487 crore during December, from Rs 261 crore in November-end.

"Mostly the new business premium growth was seen in the ULIP and group insurance product segment during December," Rao said.

New business premium from group insurance products grew 2-fold month-on-month to Rs 228 crore at the end of December. Also traditional products business premium rose to Rs 59 crore from Rs 36 crore and individual products to Rs 545 crore in December, from Rs 297 crore at the end of November.

For the third quarter ended December 2010, SBI Life posted over two per cent growth in net profit at Rs 84 crore.

The total premium collection or Gross Written Premium ( GWP) grew by almost 10 per cent during the third quarter to Rs 2,941 crore.

SBI Life new biz premium up 6 pc to Rs 4,699 cr

SBI Life new biz premium up 6 pc to Rs 4,699 cr



* SBI Life CEO|
* SBI Life

NEW DELHI: Private sector insurer SBI Life today said its new business premium grew by 6 per cent to Rs 4,699 crore at the end of December 2010.

The company's new business premium income was Rs 4,448 crore at the end of December 2009.

"We have seen a good growth in new business. The new business premium increased by 6 per cent on a year on year basis," SBI Life CEO and Managing Director M R Rao told PTI.

Birla Sun life Insurance sees 25bps hike in repo rate

RBI has already rendered an effective tightening of 300bps last year, taking policy rates to normalized levels & making RBI one of the most aggressive Central Banks amongst the EMs.

The current environment of stubborn inflation with rising inflationary expectations, moderating growth, high cost of funds & delay in capex cycle complicates RBI’s policy decisions. The Global and domestic financial market conditions are also very divergent. While the former have historic low interest rates and ample liquidity, the latter is grappling with tight liquidity and high rates. RBI has already rendered an effective tightening of 300bps last year, taking policy rates to normalized levels & making RBI one of the most aggressive Central Banks amongst the EMs. However, the rising pressure & political will to tame inflation which has remained above RBI’s comfort zone for over a year now may translate into a 25bps hike in repo rate in the ensuing policy, prioritizing inflation over growth. In my view, any excessive tightening may risk derailing the investment cycle which is necessary not only to sustain growth, but also to tame structural inflation. The RBI may tolerate little higher inflation for a while as monetary tightening can play only a limited role in easing supply-side inflationary pressures.

Did you know: What's the difference between sum assured and sum insured

Though on the face of it, the difference lies in only two alphabets, in principle the two terms have very different meanings. While a sum assured defines the benefit, sum insured only reimburses the insured loss. Sum assured It is a pre-defined benefit that the insurer pays to the policyholder in case the insured event takes place. For instance, in a life insurance policy, the insurer promises to pay the nominee a sum assured-a pre-decided amount-in case of the policyholder's death. For this amount, the policyholder pays a premium to the insurer. If the policyholder dies during the term of the policy, the insurer will pay the nominee the sum assured and the policy terminates. Sum insured A policy that offers a sum insured works on the principle of indemnity. By definition, indemnity means compensation for any damage, loss or injury suffered. Non-life insurance policies such as health, motor and householder's work on the principle of indemnity.

These policies only cover the losses on account of any damage to the insured asset. Let's take a health insurance policy that offers a sum insured of Rs1 lakh. If the insured person gets hospitalized and has to pay Rs. 50,000, the insurer will pay the entire amount. However, if the bill runs up to Rs. 2 lakh, the insurer will pay only Rs. 1 lakh and the insured person will have to foot the remainder. The idea is that the compensation should not result in a monetary benefit and so the policyholder should not be given more than the loss he has suffered. For this reason, the cover on these policies is referred to as the sum insured. Policies that offer both While a typical health insurance policy reimburses your hospital bills, insurers have also started offering plans that give you a pre-defined benefit on a pre-defined medical situation. These benefit policies are offered by both life as well as non-life insurance companies.

Such plans come packaged in variants such as critical illness plans that gives a one-time benefit if you suffer from any specified illness such as heart attack, cancer or paralysis. A hospital cash policy that gives a pre-defined daily cash benefit till the time the policyholder is hospitalized and surgical benefit plans pays the sum assured against a defined surgery. While for you the difference between the two terms may not hold great immediate importance, the knowledge may come handy at the time of buying a policy. If the agent offers you a sum assured on your health insurance policy, he is selling you a defined benefit plan. But what you need first is the basic health insurance plan that reimburses your medical expenses.

SBI Life new biz premium up 6 pc to Rs 4,699 cr

SBI Life new biz premium up 6 pc to Rs 4,699 कर

NEW DELHI: Private sector insurer SBI Life today said its new business premium grew by 6 per cent to Rs 4,699 crore at the end of December 2010.

The company's new business premium income was Rs 4,448 crore at the end of December 2009.

"We have seen a good growth in new business. The new business premium increased by 6 per cent on a year on year basis," SBI Life CEO and Managing Director M R Rao told PTI.

On a month-on-month basis, the new business premium from Unit Linked Plans (ULIPs) rose to Rs 487 crore during December, from Rs 261 crore in November-end.

"Mostly the new business premium growth was seen in the ULIP and group insurance product segment during December," Rao said.

New business premium from group insurance products grew 2-fold month-on-month to Rs 228 crore at the end of December. Also traditional products business premium rose to Rs 59 crore from Rs 36 crore and individual products to Rs 545 crore in December, from Rs 297 crore at the end of November.

For the third quarter ended December 2010, SBI Life posted over two per cent growth in net profit at Rs 84 crore.

The total premium collection or Gross Written Premium ( GWP )) grew by almost 10 per cent during the third quarter to Rs 2,941 crore.

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SBI Life pips ICICI Pru to become largest private insurer

SBI Life pips ICICI Pru to become largest private इन्सुरेर

NEW DELHI: SBI Life has overtaken ICICI Prudential to become the country's largest private insurer in terms of first year premium collection, garnering a new business of Rs 4,698 crore in April-December this fiscal.

ICICI Prudential collected the first year premium of Rs 4,651 crore in nine months to December, according to the data released by Insurance Regulatory and Development Authority.

SBI Life Insurance is a joint venture between State Bank of India and BNP Paribas Assurance. SBI owns 74 per cent of the total capital in the JV and BNP Paribas Assurance holds the remaining 26 per cent.

In percentage terms, new business of ICICI Prudential, a 74:26 joint venture between ICICI Bank and UK-based Prudential Plc, increased by almost 21 per cent compared to the same period last year. While SBI Life's growth was 7 per cent during the April-December period.

For December, SBI Life collected new business premium of Rs 773 crore, higher than Rs 598 crore collected by ICICI Prudential in the month. With this, SBI Life's market share increased to over 22 per cent in December, from 19.4 per cent in the December 2009.

While ICICI Prudential's market share among the private insurers, fell marginally to 17.1 per cent in the month of December, from 17.9 per cent in the year ago period. On a month-on-month basis, SBI Life's new business premium from Unit Linked Plans (ULIPs) rose to Rs 487 crore during December, from Rs 261 crore in November-end.

New business premium from group insurance products on monthly basis grew two-fold to Rs 228 crore at the end of December. Also traditional products business premium rose to Rs 59 crore from Rs 36 crore and individual products to Rs 545 crore in December, from Rs 297 crore at the end of November.

On the industry side, the 23 life insurers collectively mopped up a first-year premium of Rs 24,980.33 crore in April-December. However, the life insurance industry grew by 6.85 per cent during the April-December period.

The leading player in the life insurance industry, state- run Life Insurance Corporation (LIC) saw its market share rising to 63.91 per cent, from 63.34 per cent in December 2009. The first year premium garnered by LIC for the month of December stood at Rs 6,205.04 crore.

LIC crosses 2.5 crore policies target

LIC crosses 2.5 crore policies टार्गेट

MUMBAI: Life Insurance Corporation today said it has crossed the landmark 2.5 crore policies in the current year as of January 29.

"LIC has completed 2,52,44,846 policies and received Rs 34,137.12 crore in First Premium Income in the current financial year," the country's largest insurer said in a statement here.

The ULIP Plans under the new IRDA guidelines helped boost the figures substantially, it said adding that the new business under the new ULIP Plans as of January 29 stood at 1,098,663 policies generating a premium of Rs 5136.25 crore.

The Corporation's Endowment Plus, launched on September 20, 2010, has garnered 1,017,560 policies with a First Premium Income of Rs 4,804.12 crore, in just over 4 months, it said.

Pension Plus, the only regular premium pension plan available in the market after introduction of new rules has brought in 81,103 policies with a First Premium of Rs 332.13 crore, it added.