Sector Update: Insurance

Sector Update: Insurance

After 7 years wait, Indian parliament has approved long pending insurance bill. According to insurance bill, now FDI has been raised to 49% from 26% with Indian ownership control. Penalty for non compliance raised to 25 crore. It is Modi govt’s first major reform sign. Industry expert hopes that this insurance bill help bring in over Rs 50,000 crore in fresh capital which will stimulate the insurance sector.

From 1st April 2015, the premium rates for third party motor insurance cover has been raised after issuing new draft by IRDA. IRDA is also planning new investment norms for general insurance companies. According to new norms, investment limit in securities other than those approved would be now 10% earlier it was 25% of total premium collected in a fiscal. It may reduce the earning of general insurance companies.

The Bombay High Court has asked to IRDA to ensure that insurance companies should not involve TPA in the claim settlement. As per ruling of health insurance, allowing or rejecting claim should decide by insurance companies not by the TPA.

According to British Medical Journal, India’s private healthcare sector treating patients as revenue generators. Doctors get Rs 30,000 to 40,000 to refer patients for angioplasty. Unnecessary tests are being carried out and fabricated reports were generated. Large sums were paid for the same only to fill the pockets of referring doctors and pathologists. There is serious need for stringent, transparent and mandatory regulation.

IRDA said that insurance companies can appoint individual agents on their own from 1st April 2015. As per current practice, IRDA grants license to a person to become an agent of insurance company. After the new norms, whole licensing systems will go.

To bring more transparency, IRDA is planning to treat health insurance as a stand alone segment. As per current rule health insurance come under non life insurance category. Now, separate regulation will be made by IRDA for medical insurance.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Insurance Sector Update

Sector Update: Insurance

Ø       Most of the travel insurance do not cover adventure sports. Adventure sports like river rafting, long distance biking, para-gliding etc are becoming popular in India. These activities are part of the exclusions in most of the travel insurer. Bajaj Allianz General Insurance offers cover for any injury that occurs during adventure sports under a professional trainer / assistance. ICICI Lombard General Insurance do not cover it in travel insurance but the company offers it as add on cover. They insist that tour operators should be recognized and should follow all safety precautions.

Ø  Life insurance has emerged as the most preferred investment option for Indians with an income up to Rs 25 lakh, according to a survey. 75% of affluent population of the country, who hold investments other than cash, have put their money in life insurance while only 33% invest in equity mutual fund.

Ø   The IRDA is likely to revamp the Indian Market Terrorism Insurance Pool due to changing circumstances. It was formed in April 2002, after terrorism cover was withdrawn by international reinsurers after 11 September, 2001 attack on the US.

Ø    The IRDA has raised the concerns over the high attrition rate of of agent. In 2013-14, the total no. of agents appointed by life insurers was 7.25 lakh but those terminated was as high as 6.59 lakh. To tackle this issue, the IRDA had earlier reduced the pass percentage from 50% to 35%.

Ø   Crop insurance schemes are available now for farmers in Kerala. The weather based crop insurance scheme (WBCIS) and the modified national agriculture insurance scheme (MNAIS) are being extended to farmers in the state for the ongoing crop season. Paddy, plantain, cashew, sugarcane, mango and tapioca are covered under the schemes.

Ø   Union government of India’s move to increase the foreign investment cap in insurance sector will boost the finances and improve the innovation in products.

If you have doubt about any investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for seminar in your city just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Sector Update: Insurance

Sector Update: Insurance

Government of India is trying the best to pass the insurance reform bill in Rajya Sabha but the govt have no majority in Rajya Sabha and important bills in this session has stuck.

Impact on insurance industry of new insurance bill:

In new insurance bill, IRDA has to decide on the commission of insurance agents. Health Insurance entry capital for new player will remain same at Rs 100 crore. According to this bill, IRDA will free to formulate acts and rules and allowed to fix penalties.

One more important and lesser known provision in this new insurance bill which can increase the no. of rejected claim. Under the current rule, an insurance policy cannot be called into question after 2 years of policy issued. Under the new amendment in this bill this period would be 3 years now. The discrepancy in the new bill is that it holds insured responsible for any fraud conduct by the insurance agent whereas according to insurance regulation, which deems agent to be representative of the company.

Life insurance council has recommended for reduction in service tax to the government. At present at the time of getting policy mature proceed service tax levied on PAN card holder is 2% and non PAN card holder is 20% of the maturity amount whereas other financial products like mutual funds and fixed deposit do not attract service tax on maturity.

Now onwards, group health insurance cover will become more expensive for companies where hospitalization claims from employees exceed the premium paid. The IRDA will penalize such insurance companies as due to these losses individual policy holder pay more premium. The regulator has also asked insurance companies to come up with saving-linked insurance plan so that individual buyers do not need to pay more as the age grows.

More group health insurance policies are now offering OPD (outpatient department) expenses. With the growing competition, most of insurance companies have begun to cover day-care procedures in hospitals instead of the mandatory overnight stays.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for seminar in your city just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

How to Choose Best Health Insurance?

Do you have Proper Health Insurance?

Health insurance is the vital part of every individual financial plan. We also call it mediclaim policy also. In India, it comes under general insurance category. In our country the penetration and awareness of health insurance is still very poor. In metro and big cities now people are considering it. In my personal opinion, it should be compulsory for every individual as without good health all wealth have no mean.

Why it is so important?

Healthcare costs are increasing day by day in our country. The annual growth rate of increasing cost is around 15% to 20% YoY. Any emergency hospitalization due to any illness or accident makes a big hole in your pocket. I feel very surprise when people say purchasing health insurance is wasting your money as there is no return if you do not get hospitalized. Health insurance is a protection tool, it is not for investment. It should be your first priority that protect your family and yourself with proper amount of mediclaim policy.

How to choose good health insurance?

Choosing good and proper health insurance is not easy task for everyone. If you do not have enough time and resources, contact any IRDA certified and skilled health insurance planner. There are more than 25 general insurance companies exist in our countries so it becomes very difficult to choose the best one. For health insurance buyer premium would be the first criteria to judge the policy. But your focus should not be only on premium amount there is another important factor you must judge that is claim settlement ratio. You should check the claims settlement ratio of particular insurance company. There is no mean of cheap premium if company do not settle the claim in proper time. If settlement happens after a long waiting period that is also the concern.

Health insurance companies publish this data quarterly or annual basis. IRDA does not report the claims settlement ratio in its annual report whereas in case of life insurance IRDA publish the same. Choosing a health insurance is vital for your financial plan and choose it very carefully. Only cheap premium should not be parameter for purchasing the health insurance. You should consider the other important factor like settlement time taken by the company, settlement ratio etc. After all it is for you and your family’s wellness.

If you want more information regarding investment or you have any other query about investment feel free to ask us.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

www.arvindtrivedicfp.blogspot.in

Banks Role in Insurance Distribution Business

Banks role in Insurance Distribution Business

As the financial year 2013-14 is approaching towards its end. People are rushing for tax saving investment options and for tax saving insurance product is very popular among the investors. However, in my personal opinion it becomes very toxic product if you mix your insurance need and investment. Insurance mainly sell by individual agents, brokers, direct selling and banks.  

Banks are the main contributor in the sells figures of private insurance companies products. In India, people have immense faith on banks. They still prefer bank FD even the net inflation adjusted post tax return is very poor. Due to this blind faith on banks, common investors become a victim of mis-selling of these products. I met a lot of cases almost in every investor meet of mis-selling by the banks. The complaints of mis-selling by banks are increasing. Due to this mis-selling complaints, bank regulator RBI has proposed the new guidelines for selling of insurance products. The main RBI proposal as given below:

• ·         A bank’s NPA should be less than 3%
• ·         It should have made profits for last 3 consecutive years
• ·         A bank’s net worth should be at least Rs 500 crore

The government is also planning to mandate multi insurance companies sales for bank. At present banks are selling only one company’s products. The insurance regulator IRDA has also capped a bank’s sale of joint venture partner’s products at 25% of the overall.

In fact the aim of insurance sales by bank is to increase the reach among the maximum people as banks have wider branch network across the country. The above mentioned proposal by RBI, IRDA and govt are not fully implement. We hope that after implementing these guidelines mis-selling would be stop to some extent. However, insurer would not allow implement these guidelines in very smooth manner.

For more detail and any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com 

Insurance Sector Update - November 2013

Insurance Update – November, 2013

I am starting for now onward to simple update on insurance industry time to time. Insurance is very vital and critical part of any financial plan. It is our duty as an advisor and planner to inform our readers to update about this industry. A lot of regulatory activity is going on and companies come with new customized product. Every investor must know about this. Some recent update as given below:

• According to FICCI report, General insurance industry may touch gross written premium (GWP) 3 lakh crore by 2025 with a conservative growth rate of 13% CAGR. According to report that increased health insurance awareness would increase the opportunities in this sector.

• National Disaster Management Authority suggested that insurance should be mandatory for residential properties, malls, theaters, hospitals and hotels. It also be recommended that it should be applies on all urban property tax payers.

• Insurance regulator IRDA has increased investment limit in various category. Now general insurance companies are allowed to invest upto 1.50% or Rs, 3,500 crore in liquid mutual fund. It is for temporary time and can be reversed at a later stage.

• Life insurance companies now can invest upto 5% in FD schemes of promoter group bank. Earlier the limit was 3%. IRDA has also increased  invest limit to invest in information technology and industrial sector from existing 15% to 20%.
• Reliance life insurance has launched policy revival drive. In this campaign lapse policyholder can revive their lapse insurance policy without any penalty and medical tests subject to conditions. This offer will available till 30^th November, 2013 for all reliance insurance products.

• IRDA wants insures to stop giving high incentives to auto dealers. For pushing motor insurance policies sales, insurers offering high incentives to auto dealers and due to this policy holder are paying unreasonable premium.

• IRDS has also proposed to set up insurance clearing house. For smooth functioning of reinsurance and coinsurance business IRDA want to establish “Insurance Clearing House”. It would be promoted by Indian insurers, reinsurers and the authority.

For more detail and any other query related investment, you can contact me through my email

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

New Guidelines from IRDA for index link and health insurance

New guidelines from IRDA for life insurance and general insurance product

In last few days, The Insurance Regulatory and Development Authority (IRDA) has issued some important guideline to life insurer and non life insurer. According to new guidelines for traditional product, non-linked variable insurance products (index-linked products) to be treated at par with unit-linked products (Ulips). The insurers have been given time till June 30 2013 and September 30, 2013 to re-file their group and individual products respectively.

Guideline for Commissions:

The cap for first year commissions has been put at 15% for the first year for a 5 year term, 30% for 10 years and 35% for 12 years or more. The insurer in industry less than 10 year this cap would be 40%. In the case of polices are procured by direct marketing, there would be no commission allowed. According to new guideline the shareholders will get at 10% of the surplus and the policyholders would be entitled to 90% share of the surplus.

Guideline for surrender value:

The minimum guaranteed surrender value would be 30% of the total premiums paid less any survival benefits paid, if policy is surrendered in the second and third year. If surrendered in the fourth year, it would be 70% of the total premiums paid less any survival benefits already paid. If surrendered during the fifth to the seventh policy year, it would be 90% of total premiums paid, less any survival benefits already paid.

Guideline for death benefit:

According to new guidelines for death benefit Irda said the minimum death benefit at highest of 125% of the single premium or minimum guaranteed sum assured on maturity or any absolute amount to be paid on death, for single premium products. For other products, it will be highest of 10 times the annualised premium or 105% of all premiums paid on date on death, or minimum guaranteed sum assured on maturity or any absolute amount to be paid on death.

Norms for pension product:

For pension products, it said that upon surrender of pension products, one-third can be commuted and balance can be received only as annuity upon superannuation with the same insurer. The same option is available upon vesting with additional option of extension of deferment period if aged less than 55 on vesting.

New norms for health insurance:

IRDA has allowed to general insurance companies to launch 3 year health insurance policies. Now insurer cannot refuse the renewal without any sufficient reason. Longer period health insurance is good for customer as till 3 year renewal done automatic and also get the cheaper premium than current they are paying.

If you have any other query related investment and financial planning feel free to ask.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

New guidelines for Health Insurance

IRDA has come up with momentous regulations which will change the health insurance industry workings if the draft is implemented without watering it down. TPAs' role will get marginalized and hence they may try to scuttle the implementation in its current form

Insurance Regulatory and Development Authority (IRDA) has finally issued draft health insurance regulations addressing several areas of concern. The draft covers product design, renewability, portability, file and use procedures, protection of policyholders' interest, servicing of health insurance policy, third party administrators (TPA), contract between insurer and hospitals and so on.

The important points in IRDA guidelines are related to following:

• Entry and exit age - All health insurance policies shall provide for entry age at least up to 65 years. All health insurance policies shall not have an exit age for renewal of the policies, once the proposal is accepted, provided the policy is continuously renewed without a break.
• Cumulative bonus to be mentioned in the policy document
• Mediclaim denial grounds to be given in writing
• Reward a favourable claim ratio
• Refund on pre-insurance med check-ups - A proposal resulting into a policy shall reimburse at least 50% of the medical exam cost.
• Separate grievance cell for senior citizens
• Increase in premium must be in writing and must be justified
• Claims independent of multiple fixed benefit policies - The insurer shall make the claim payments independent of payments received under other similar polices.
• If two or more policies are taken by  an insured during a period from one or  more  insurers,  where the  purpose  of  such  policies  is  to  indemnify  the  treatment costs, the insurer shall not apply the contribution clause but the  policyholder shall have an option to chose insurer with whom the claim is to  be settled. In all such cases, the insurer shall be obliged to settle the claim without insisting for contribution clause.
• Insurers  may  provide  coverage  to  non-allopathic  treatments  provided  the treatment has been undergone in a government hospital or in any institute recognized  by  the government.
• Any  product  that  is  being  offered  in  the  market  by  insurance  companies shall not be allowed to be withdrawn  in respect of the existing customers of  the  product,  unless,  the  existing  customers  are  given  an  option  to switch to a similar product under specific written consent.
• Uncomplicated one page customer information sheet to cover key benefits, exclusions and grievance mechanisms.
• Renewal cannot be denied randomly
• Waiting period for pre-existing diseases (PED) be clearly specified
• Claim settlement within 30 days
• Insurer to make direct payment to the hospital and policyholder (not through TPA). Cheques will have to be written by the insurance company and send to hospital (for cashless) and policyholder (for reimbursement). It means that cheques cannot be held by TPAs as a float.
• ID card to have logo of the insurance company. In  case  the  policy  is  renewed,  provisions  to  be  established  by the  insurer  to  ensure  there  shall  not  be  any  need  for  re-issue  of  fresh cards provided there is no change in the details of the policyholder. It means auto-renewal of same ID cards.
• Agreement between the TPA and insurance company to be registered with IRDA
• Seamless transfer of policies services by an existing TPA to the new TPA
• Claim settlement - Specific ground of settlement and denial of claim must be mentioned
• All insurers shall have an agreement directly with the hospitals to establish the list of network providers. The insurer  shall  be  responsible  for  carrying  out  an empanelment  process  of  hospitals  or  health  care  providers  to  provide  cashless facility to the policyholder. The TPA role is effectively marginalised.

Regards,

Arvind Trivedi

Certified Financial Planner

Welcome step of IRDA

As we are aware of mis-selling of insurance product like ULIP. These products are often sold for 3-5 years horizon by false promise of cunning agent. Now the insurance regulator –  Insurance Regulatory and Development Authority (IRDA) whose role has been protecting policyholders' interests along with its role of developing the insurance industry. But at a time when policyholders are being lured to buy insurance products or marketing gimmicks undertaken by the insurer; the insurance regulator - IRDA has expressed its discomfiture and brought out a number of changes to protect the interests' of the policyholders.

In the last few months the IRDA had  expressed many times its uneasiness with the ‘highest NAV guaranteed products' at several forums. The regulator's argument was that such products lead to systemic risks with the way funds were managed, and also pose a risk of a heavy sell-off in equities when stock markets fall. Thus, in order to protect policyholders' interest, IRDA has asked life insurers to stop selling highest net asset value (NAV) guaranteed product.

Highest NAV-guaranteed products are those that promise to pay the highest value the fund achieves during a certain period, like five or seven years. However, to maintain that NAV consistently, insurers have to take risks by investing in stocks aggressively, which could lead to undue risks, as per the IRDA. It is notable that, these products had become the largest selling

Some of the other actions undertaken by IRDA to uphold policyholders' interests' are:

·         Single premium policies to be issued only under special categories

·         A minimum death benefit of at least 10 times of the annualised premiums in case of traditional products

·         New guidelines for traditional insurance products

·         Approval of new insurance products to be restricted to those following the framework suggested for new product design

From the above steps undertaken by the IRDA, policyholders are set to benefit in a number of ways. With the ‘highest NAV guaranteed products' being squashed by the IRDA, there would be less mis-selling under the name of highest NAV guarantee. Increasing the minimum life cover will help policyholders as in case of any unforeseen eventuality the policyholder's family receives a sizable amount. We believe that though the IRDA is taking stern actions in order to safeguard the policyholders' interest, it should have adopted a proper clearance process, thereby discarding at the very first stage itself, by providing sufficient explanation in the public domain, thus making policyholders' aware as well. It would be wise for the IRDA to be proactive rather than reacting with policy changes in its role of protecting the interests' of the policyholders who have already been victim by mis-selling

Dear readers if you have some query regarding any financial products, feel free to ask.

Warm Regards,

Arvind Trivedi

Certified Financial Planner