Dear members,

I express my deep concern over the recent floods that had lashed the state of Maharashtra and stranded the normal life of the residents in a totally unassuming way. Mumbai has been experiencing torrential rains never seen for over a decade. Every news channel is showing the city of Mumbai flooded with rain and how it has affected Bombay's normal life! Mumbai has experienced one of the highest rainfalls in India of over 900mm in just 24 hours breaking the record set in 1910 at Chirapunji, which was 830 mm!

Bad and sad news of loss of life and property is pouring from the country's commercial capital. The damage is yet to be assessed in Maharashtra. But according to sources from FICCI, the loss accounts for Rs. 700 crores which includes Thane, Pune, Raigarh, Ratnagiri and Mumbai and it is over Rs. 450 crores for Mumbai alone. The insurance companies will be the worst hit on account of this unprecedented floods and the clear picture will be known only after the rain completely stops.

The main cause of concern is the loss of life on account of this flood. The city estimates a loss of life of over 1000 and the question now is: how many of them would have been insured? How many of them would have been adequately insured? How many of them hail from the lower strata of society? Though the State Government has come forward with a compensation of Rs. 5000 for the affected families, this is only for the short run. A proper insurance would help the bereaved over the long run. It is time the life insurance companies gear up and reach the needy and educate the importance of life insurance.

Let us all pray together for the rains to stop and relieve the Mumbaites from the water-clogged day and resume their normal life soon.

T Muralidharan
MD & CEO

News

LIC – the most preferred financier for single premium segment

According to the data available with IRDA, LIC has been the preferred insurer for FY 2005, LIC has been the preferred insurer in so far as the individual single premium segment is concerned. But the private insurance companies take up top position in the individual non-single premium segment, which is due to the fact that LIC has shifted its focus from its traditional products to the single premium products. As far as the group premium segment is concerned, SBI Life dominates the stage which is, presumably on account of its housing loans that are hedged by taking term life policies.

As regards group non-single premium segment, private players such as HDFC Standard Life, ICICI Pru, Tata AIG Life and Birla Sun Life have taken a lead role. IRDA's analysis reveals that exhaustive cross-selling and the corporate relationship maintained by the private insurers have pushed their position forward in the non-single premium segment.

Unit linked policies (ULIP) accounted mainly for the single premium policies at Rs 4,940 crore while, in traditional products, ULIP constituted another Rs 3,041 crore. While the new business in FY 05 witnessed a phenomenal growth of 35.7%, IRDA estimates 40% growth of life insurance in 2005-06.

The new chief of Max New York Life is exuberant with new plans and products and is planning a face lift to the company brand. Mr, Bennett, the new MD of the company who has taken charge in the place of Tony Singh has told the press that the company has already made a strong foray with whole life policies as its core business as a protective measure. The company is planning to widen its product range with ULIPs and other new policies.

Women had a very little to do in life insurance till few years, but now women have their preference on the insurance front too. The proportion of women policy-holders has grown to 30% and is rising. The professional women in India are taking up policies specially floated for the women-folk by the life insurance companies such as LIC, Birla Sun Life and Kotak Life Insurance. Bajaj Allianz Life Insurance, is contemplating to float a new policy specially designed for women. Women get their share of concessions in insurance front too in the form of lesser premiums, critical illness cover and full life cover for a period of 3 years even in case of non-payment of premium and so on. The most attractive element is the benefits that cover pregnancy related complications.

Kotak Life Insurance also has shifted their focus on the women who claim that about 20 to 25% of their policyholders are women. Kotak charges a phenomenal 30% less premium for women as compared to other players in the market.

But ICICI totally differs in the concept. According to ICICI Pru, the differentiation is only a marketing strategy and absolute equality is maintained between men and women and hence are not in the race with other companies in specially designing for women. But Bilra Sun Life has a different view. They have come with two special policies for women – the “Woman First Plan”, a money-back plan and the “Critical Illness-Woman Rider” plan which covers illnesses such as heart attack, cancer, pregnancy complications as well as congenital anomalies in newborn child.

The Jeevan Bharti of LIC that covers critical illness, and the term insurance plan for women, a pure risk product that covers preferred lives, are some of the special schemes that target the fairer sex.

Life Insurance Corporation of India (LIC) is coming out with an initial public officer (IPO) by December 2005 with a view to comply with the requirements of IRDA on the minimum paid-up capital of Rs. 100 crore.

Formed with a paid-up capital of just Rs. 5 Crore, LIC is fully subscribed by the Government of India. Though LIC was not in favour of infusing additional capital to meet the requirement of IRDA, it has no option but to fall in line with the regulations since IRDA is an independent agency with no government intervention.

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LIC Act will be amended prior to floating the IPO and the size of the offer would be decided later, according to reliable source.

LIC would be celebrating its golden jubilee in the current financial year.

Bajaj Allianz Life Insurance Company is coming with a unique health insurance scheme that would target the senior citizens. The new product would become in vogue from August 1, 2005.

This will be a first of its kind in the country named after ‘Silver Health' for the senior citizens, says Mr Kamesh Goyal, the CEO of the company. The new insurance scheme that would cover people in the age group of 46-75 is expected to sell 20000 policies in the first year. The maximum limit of the policy will be Rs. 2 lakhs and it will be mandatory for the policy holders to declare all the illness being suffered by them.

Reliance Capital, headed by Anil Ambani has acquired the chennai based insurance company, AMP Sanmar with a 100% stake. The acquisition details are yet to be disclosed by the group.

Mr Graham Meyar, the Managing Director of AMP Sanmar told the newsmen that subsequent to the decision of AMP to exit the insurance business, the partner Sanmar group also announced exit of the business owing to lack of expertise in the insurance field. AMP Sanmar has about 9,000 agents and about 900 employees besides 90 offices across the country, he said.

Reliance Life had already applied to IRDA for renewal of its license to enter the Life insurance business with a capital base of Rs. 200 crores. Reliance is already into the general insurance foray.

Bajaj Allianz opens its 400 th office in Assam

Bajaj Allianz Life Insurance Company, the country's second largest private insurer as per IRDA figures for FY 2005, has commenced its operations in Silchar, Assam with effect from 1 July 2005. This is their 400 th office. It already has its operations in the North East region.

Bajaj Allianz can take the pride of having the highest number of offices amongst the private insurance companies.

Getting as much close as possible to the customers and convincing them about the benefit of life insurance and its advantages is the solo reason for expanding the operations in the nooks and corners of the country, says the CEO of the company Mr Sam Ghosh.

Bajaj Allianz started its Indian operations with just 60 offices in 2004.

The Shriram Group has recently entered into a JV agreement with Sanlam of South Africa with a view to enter into the Indian Life insurance industry. Sanlam Life Insurance Limited, established in 1918, is a business in the Sanlam Group and is one of the largest providers of life insurance in South Africa with 3.2 million individual policies under administration

The group has already been a leading corporate in the southern peninsula and has been a major player in the financial sector also. The R1 license has since been obtained from the IRDA by the Shriram Life Insurance, a part of the Shriram group to commence the operations. The new set up will commence is expected to commence operations from September 1, 2005.

The group already has a network of over 600 branches with a sales force of over 6500 agents catering to more than three million population in the South India.

While the private life insurance industry is showing a rosy picture with double/triple growth, Birla Sun Life insurance company with its head quarter in Mumbay has recorded a fall in premium income till May 2005 by 21.22% as per the figures released by the IRDA. The irony is that the company which wants to exit from the Indian insurance pitch, AMP Sanmar has booked a fresh premium of Rs. 14.79 crore as of May 2005 as against its earnings during May 2005 which was at Rs. 5.47 crore.

The IRDA figures for the other life insurers who have recorded a three digit growth:

Bajaj Allianz Life Insurance Company Rs97.14 crore (160 per cent),

MetLife India Insurance Company Private Limited Rs10.08 crore (154 per cent),

Max New York Life Insurance Company Limited Rs35.63 crore (144 per cent),

Kotak Mahindra Old Mutual Life Insurance Company Limited Rs21.10 crore (124 per cent-),

HDFC Standard Life Insurance Company Limited Rs77.90 crore (136 per cent)

ING Vysya Life Insurance Company Private Limited Rs11.46 crore (113 per cent).

Insight

Term life insurance: an insight

Most often than not the insurance policies are offered to the customers by highlighting the advantages like tax rebate, investment benefits and also the financial protection for the dependents in the event of death of the policyholders. But this also has one major ingredient – the agent's commission in mind topping over the suitability of the policy to the buyers!

Life insurance policies are of different nature. Some offer lifetime coverage and some for some specific period. Some come with protection as also with returns. Overall, the choice of the policy rests on the needs of the individuals and their affordability.

Term Policy:

Term life insurance policy is a pure life insurance policy only with tax benefits, which is the cheapest form of insurance cover. There are absolutely no investment benefits. This covers a person against death for a limited period or term and hence the name. The term is specified say for example, until the children are grown up, or until one retires. In the event of the death of a person within that specified 'term', the nominee of the insured gets the sum assured. In case the policyholder lives the tenure of the policy, there is no payout by the insurance company. The policy lapses as that of a home policy or a motor insurance policy.

The premium of such term policies can be made in quarterly/half yearly or annual instalments. Since this is the cheapest form of insurance it fits easily into anyone's budget.

Term policy can be used as an excellent financial planning and risk management tool. For instance, if one takes a home loan for a long duration, say 15-20 years, a term policy of corresponding value taken simultaneously will ensure that in case of the death of the primary earning member repaying the loan, the family does not lose the home as the insurance settlement will cover the mortgage repayment.

There is a growing trend of the younger generation opting for term life insurance. It provides maximum coverage at the lowest premium. As the whole life insurance premiums are expensive owing to its investment.aspxects, term life insurance becomes more affordable. Moreover, the investments can be made more prudently and judiciously by the individuals than depending on the insurance company to do the same.

Term life insurance is suitable for short-term requirements. There is little loss in case the policyholder wants to discontinue it. Term policies also have dual benefits. One can use this policy to cover the family's future, as also to cover the mortgage.

However, as any other products, term policies have their own advantages and disadvantages as below:

• Term policies provide a death benefit only for a specific period of time
• On expiry of the policy, protection also lapses
• The premium becomes high at later ages

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