ULIPs: Revised guidelines of Regulator

New guidelines were issued by IRDA to ensure fair insurance coverage and disclosures to enable policyholders to take proper decisions as they bore the risk in unit linked insurance plans and also to ensure long term nature of insurance products from 1st July 2006. As a result many private insurance companies are bringing modified schemes in place of existing ones.

The change due to new guidelines is that transactional charges while buying and selling assets have to be factored into NAV according to Ms. Keerti Gupta, Chief Investment Officer, Birla life. Mr. Nani Javeri, MD, Birla Sunlife said the new guidelines are intended to enhance transparency, provide better understanding of the product design, enlarge the insurance cover.

The ULIP offers,

• Whether the premium is regular or limited premium plan
• Minimum policy term for ULIP is now five years instead of three
• It provides higher quantum of life insurance cover which is five times the annual premium at the minimum
• Policyholders can surrender or avail partial withdrawal after three years
• Can increase his contribution by additional payment upto a limit of 25% of total premium paid
• Can switch from one scheme to another without payment
• Can exercise settlement option (except pension plans) of five years/or can retain the amount for another five years without life cover
• The insurers should compulsorily announce risk factor
• Premium is paid regularly for first 3 years to ensure availability of life cover
• Failed schemes can be terminated after three years and payment paid to investor at surrender value

These changes are bringing in more number of Tulips from almost all life insurers.

ING Visa’s retirement plan earns

ING Visa Life announced annual bonus for all its policyholders, based on the company’s earning on investment during the last financial year.

Highlight of it, is the rate of bonus for the Best Year’s Retirement Plan at 8.21%. The company has 16 Life products and non-participating term product Conquering Life. The bonus rate declared applies to the traditional products and the Best Year’s Retirement Plan.

Ranbaxy mulls entering insurance

Religare a Ranbaxy Co. has signed a MOU with Aegon, a Dutch financial major for entering the insurance and asset management market in India. Aegon is among the largest Life insurers and pension managers of the world.

Unusual spurt in Life Insurance business

PTI reports that Life insurance sector has grown by 100% in the first two months of the current financial year. The total premium stands at Rs.5869 crores for April, May 06. The premium income for same period for last year was Rs.2678 crores. LIC accounts for Rs.4,183 crores on 20 lakh policies. Private insurers have a market share of 28.73% on a premium collection of Rs.1,686 crores

New entrants in life insurance business

IRDA have given license to Bharti Enterprises to enter Life Insurance business in partnership with French major AXA. Bharti will hold 74% equity while AXA will be holding 26% in the JV. The JV Company has earmarked Rs.500 crores investment during the period of 3 to 4 years. IRDA is also going through the application from Punjab National Bank for entering Life Insurance market in association with US based Principal Financial Group and Vijaya Bank and Berger Paints. The four-way tie up will share the equity at 26% to principal financial group, 30% each to PNB and Vijaya Bank and 14% to Berger Paints Acording to Shri
K. Raghuraman, ED of PNB, and the new company is to focus on the group life insurance segment. Presently there are fifteen players in the Life Insurance Sector Bharti AXA Life Insurance will be the sixteenth. Opportunities in Life Insurance in India are huge with 80% of the population yet to be covered by insurance.

IDBI join hands with Federal Bank of Kerala and Fortis

IDBI is entering the Life Insurance market by a joint venture with Federal Bank of Kerala and Fortis Insurance International. The joint venture may be named IDBI Fortis Life Insurance. The share holdings may be initially at 26% each by Fortis and Federal Bank and the remaining 48% by IDBI. Fortis may increase its holding to 50% with the other two giving up 1% each. On getting clearance from authorities, the company might be starting operation from Feb 2007. The company is likely to offer ULIPs and endowment policies; it may include superannuation and gratuity policies, final position of which might be ready only by Dec.06. Mr.VP Shetty CMD IDBI informed that the capital initially will be Rs.100 crores to be raised to Rs.850 crores over a period of 7 years. As per Mr. Venugopalan of Federal Bank, the bank would terminate its deal with ICICI Prudential once the new company starts operations. The new company will be based in Mumbai. Fortis Asia CEO Mr. Denis Zeings told that his company with its HO in Brussels is a successful Bancassurance model with assets over Euro 700 billions.

Max New York Life’s new ‘Life Partner Plus’

Max New York Life has come out with a new product called ‘Life Partner Plus Plan’ which gives the benefits of life cover, in-built money back guarantees and bonus options flexibility. This is a limited pay endowment plan upto age 75. The policyholders are allowed to adapt their plan according to their changing needs. They can also choose the premium paying terms of 3,7,10 or 20 years according to their paying ability.

The company hopes the product will satisfy various segments of retirement money, security and also capital growth. The plan becomes more powerful because of the cash bonuses and the customization of the riders.Mr. Gary Bennet, MD and CEO of Newyork Life Insurance Company says, “We believe in delivering need based solutions and shall continue to design our products to cater to customer requirements. Our new product Life Partner Plus is designed to take care of multiple needs of customers like asset creation, investing for retirement, children’s education and marriage. We believe that the products, the name suggests is a true partner of our customer.” The company is at present having 23 products and eight riders

Highlights of the plan:

On survival to maturity: initial sum assured plus sum assured of paid up additions purchased thro’ bonuses

Guaranteed Money back: 7.5% of the initial sum assured, paid back on each policy anniversary.

On death during policy term: initial sum assured with sum assured of paid up additions purchased thro’ bonuses.

Bonus: bonuses from third policy year, which can be used to add value to the policy to: Buy paid up additions (PUA) that increase the death benefit of base policy.

Premium offset- uses it to offset future premiums.
Terminal Illness Benefit and non-forfeiture options are also applicable.

New COO for IDBI JV

Mr. G.V.Nageswara Rao would be the COO of the newly formed insurance company, which is the joint venture of IDBI, Fortis, and Federal Bank. He is at present CEOL of the commercial banking division of IDBI Ltd. This was told by Mr. VP Shetty, CMD, IDBI Ltd. It is expected that 48% equity would be to IDBI and 26% each to Fortis and Federal Bank. The bank is also having plan to promote a private equity subsidiary. It would be applying to SIBI soon. It also got the approval, to start an asset management company, from the regulator.

Sharp increase in agents’ recruitment

It is reported that presently, for the first time since year 2000 when insurance was liberalized, the fourteen private insures are recruiting double the number of agents than the mammoth LIC of India. It is also reported that attrition of agents from LIC is increasing. In the last 5 years private insurers have recruited about three lakh agents and 50% of them are with the two private sector insurers, viz, ICICI Prudential and Bajaj Allianz. It is clear that life insurers who train their agents will perform well. Bajaj Alliance plans to have 1000 offices by the end of the financial year.

India’s share of the world’s life insurance business has doubled in the five years since liberalization. This increase has lifted India’s ranking to 17 from 20 globally. At this growth rate it is expected that India may overtake many developed insurance markets.

New products from HDFC Standard Life

HDFC Standard Life have brought up three more Unit Linked Plus policies named HDFC Unit Linked i) Endowment Plus, ii) Young Star Plus, and iii) Pension Plus. These policies are modified to fit new guidelines for unit linked schemes. Because of their special provision called Investment Content Rate (ICR) by which major portion of the charges is deducted during the first year itself, beyond that, almost the entire amount becomes investible. This unique system enables considerable increase in maturity value of the instrument. Further loyalty bonus units are also added to the policyholder’s funds every year without condition. Other features are similar to any normal ULIP. The Endowment Plus ensures family’s financial independence even in absence of the policyholder. Pension Plus provides retirement income. Young Star Plus enables parents to plan a good future for their children. Mr. Nick Taket, GM and actuary of HDFCSL commenting on Plus benefits said attractions of the Unit Linked Plus Option ‘ are the loyalty units and the lowest Fund Management charges for equity funds, which help in achieving higher maturity values. This is very clearly brought out in the illustration that every customer must insist on before purchasing a policy’. Mr. Deepak Satwalekar, their MD&CEO, said that their people have clear understanding of the long-term nature of insurance contracts due to which they were not much affected by the sharp falls in the market after May 06.

Prudent’s tie up with rural banks

ICICI Prudential Life Insurance, through their Bancassurance partner Bank of India, has tied up with ten rural banks from states of UP, Maharashtra, Orissa, Jharkhand, and Madhya Pradesh. The tie up will extend their reach to rural India thro, the 1000 odd branches of these banks. According to Ms.Shikha Sharma MD and CEO of ICICI Prudential this tie up will help them in selling both savings and protection products. According to Mr. NS Kannan ED, ICICI Prudential 23% of their premium in 05/06 was thro’ bancassurance and this year they plan to raise it to 30%. During the year 05/06

ICICI Prudential Life Insurance collected Rs. 2412 crores of weighted new business premium and signed about 8.35 lakhs policies.

Canara Bank may enter Life Insurance

Canara Bank is reported to be planning to enter into life insurance business in association with partners. It may be a three-way partnership with one foreign partner. At present Canara Bank is distributing the products of AVIVA.

Bajaj Allianz ties up with Godrej for rural insurance

Bajaj Allianz Life Insurance have signed an agreement with Godrej Aadhar, agri services and retail wing Godrej Agrovet Ltd., to promote life insurance products to the rural community thro’ outlets of Godrej Aadhar. Mr.CK Vaidya MD Agrovet and Mr. Sam Ghosh CEO, Bajaj Allianz announced this at a press meet. Mr. Vaidya said on the occasion that the tie up would help Aadhar to provide additional value added service to their rural customers for their security with assurance. Mr.Ghosh told that the tie up would enhance their reach into rural and enable them to provide simple and flexible life insurance products to ensure security and wealth creation opportunity to rural population. Rural India is a large untapped market for life insurance products. Bajaj Alliance plans to offer their specially designed products like InvestGain and Cashgain in addition to Ulips to the rural markets. Godrej Aadhar is agri service cum retail wing of Godrej Agrovet, who is market leaders in animal feeds and innovative agri products, presently having 28 centers in seven states. The company is planning to open 1000 more such outlets within next five years.

Archives | Top