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

Is Endowment Plan with guaranteed return good for you?

Endowment Plan with Guaranteed return…!!!!

I have discussed in my earlier blogs about endowment policies. In fact these types of policies failed both purpose insurance coverage and return. Neither it provides proper insurance coverage nor gives the good return. I get query about almost on daily basis regarding guaranteed saving insurance plan. We Indian investor always like “guaranteed “ word and often trap with this word. We pay a very high price for this word.

One of my blog reader has asked recently whether he should purchase ICICI prudential guaranteed saving insurance plan. In my opinion, never invest in those product which provide insurance and investment opportunity both. The selling pitch of these products often so attractive that investor do not resist themselves from such type of product.

The realty of these products that it do not give the proper coverage and it also not give the good return. This particular product gives only 5% return on your paid annual premium and provide only 20-25 times insurance cover of your annual premium. If you go with term insurance you can get up to 700 times insurance cover of your annual premium.

For return point of view if you have conservative risk approach and invest in other debt product like debt mutual fund, PPF, bank FD and others the you will get easily return between 8% to 10% return. If you want to lock your money for more than 10 year then equity investment can give you average 15% return. Many mutual fund schemes like ICICI prudential dynamic fund, Birla SL 95 ELSS has given more than 20% return also.

In endowment product 5% return is not good return according to me after 15-20 year investment. In endowment scheme who guarantee the fix return have many types of expenses and hefty agent commission like 15% to 20%. It badly affects your return on investment. Endowment guarantee plans are only beneficial to agents who are selling this product through emotional sales pitch.

I would like to advise all of my reader that they should avoid such type of products and invest in those avenues which are capable to beat the inflation and provide good return also. Liquidity is also the crucial factor at the time investment.

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

Beware of your bank representative

Beware of your bank representatives..!!!

It is seen, we Indian have very much trust with our banks. Fixed deposit in bank gives us peace of mind and a sense of greater safety. We give much importance to safety of our capital than real return. As we enter in bank branch, we totally surrender ourselves to the bank representative. A bank representative with skilled communication push to the other financial products like insurance, ULIP, endowment, money back policy and many more other products for complete their monthly target.  

I tell you here, a true event which happened today inside the bank branch which is very famous brand in banking industry. Although it is very common in our country but I still want to share it with you. I was in Axis Bank branch in the morning to make a demand draft. I have submitted the request for the same and waiting for collecting my DD. The process to make DD takes 10 - 15 minutes usually. A 25-26 year approximate age girl in the banking counter was explaining a fix deposit plan to a client. She was promising 24% fix return from a mutual fund scheme if he deposit money for 3 years and repeated it thrice with very confidant and smiling face. The surprising thing was that customer had got convinced from that girl who was representing the bank for invest in that scheme within 30 seconds. I was shocked that the customer had not asked any question about the risk associated with that scheme. When customer asked about the tax benefit in that scheme, she had smiled with moving her head and said “No, Mutual Funds me koi tax benefit nahi milta hai” (There are no tax benefit in mutual fund at all).

I was very shocked and surprised for that the witty communication by that bank representative. It was a clear example of mis-selling by that bank employee. In realty, a bank customer was cheated by that bank employee. A thousands and millions bank customer was cheated by such representatives of the banks. I am not against any bank or and bank representative but yea I am against their faulty communication with the bank customer. Anyway, I am giving you below some points which every investor should always keep in mind when they make an investment decision.

• In mutual fund, there is no assured and fixed return. The return is totally depends on many factors like market movement, interest rate, inflation rate GDP growth and many more.

• The promise of 24% is unrealistic return in such current economic condition when govt bond offer around 8%. I am not saying it is impossible but you cannot commit it to anyone.

• There are tax benefit exist in mutual funds scheme which I have written in my past articles. When you promise such a high return, you should also talk about risk associated with such schemes whether mutual fund or any other asset class.

• As an investor, it is also your responsibility before making any investment decision understand the risk and return properly.

• Do not believe on any agents, bank representative do your own research from many other sources. The agents are not your friends. They also have some sales target. So next time, beware from such agents and representatives.

 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

www.arvindtrivedicfp.blogspot.in

Are your   investment agent cheating you?

Yesterday, I was my in area’s neighbor shop for my hair cut. He had narrated one incident with happened with his relative who is not educated and never went school. His relative’s main profession is agriculture. One agent had come to him before 5 year’s back and promised him 2 times return whatever amount he deposit. He had trusted him and deposited Rs 45,000 with the hope that after 5 year he would get Rs 90,000. After completing 5 years when he had contacted his agent, the agent was not available. After contacting to the concern office when he had knew the value of his investment. It was shocking experience for him. Can you guess the value of his Rs 45,000 invested after 5 years? The value was only Rs 17000 !!! only. Such huge wealth destruction he had never imagined. His agent has cheated him by making false promise and hot informed about the investment product. 

Till now many of you may guessed, yes it was ULIP product. A product designed by mixing insurance and investment called ULIP.

I am sure that you also here such type of cheating incidents regarding investments. I always write in my blog and during the meeting with investors that never mix your investment with insurance need in one product. Avoid such products.

I think insurance product sold by more in emotional sense and less in real need sense. The agent finish conversation in very hurry and their large focus on sign the document quick. They only tell you what you want to hear like “promise” and “guarantee” type words. They often do not talk about product in detail never tell you about the risk of that financial product. My friends keep in one thing in your mind that there is not a single financial investment product designed in the world without risk. Every investment product comes with a type of risk. Now the question how to avoid yourself being mis-sold. I suggest you some point here.

• ·         Do read carefully before sign any form or documents.
• 
  
• ·         Understand about the product which offered by your agent.
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• ·         Contact the company’s call centre and cross check your agent.
• 
  
• ·         Never give and bank cheque or sign the form in first meeting.
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• ·         Collect all detail about agent like his office address, contact, employee ID, job tenure, some little background about him and cross check by calling his office
• 
  
• ·         Use internet to know more about the offered product
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• ·         Focus on real return after cut taxes and expenses.

There are many more points worth discuss which we will discuss again sometime.

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

www.arvindtrivedicfp.blogspot.in