Kotak Life Insurance launched unit-linked Invest Maxima

Private insurer Kotak Life Insurance today launched Invest Maxima, an investment oriented Unit Linked Insurance Plan (ULIP).

The plan offers zero premium allocation charge feature that maximises the investible component and the choice of three different portfolio management strategies which affords customers tremendous flexibility in managing their portfolio, Kotak Mahindra Old Mutual Life Insurance said in a release issued here.

Customers are given the flexibility to choose from two options, one which offers a choice of five attractive fund options, or the other that enables them to invest in the equity market in a systematic manner over a period of time or a customized combination of the two.

In the last policy year, customers can choose to exit the policy in a secure and systematic manner, by selecting the Systematic Exit Strategy option, which gradually diverts all fund balances into a lower risk money market fund, to avoid volatility and safeguard returns on maturity.

Apart from regular premium payment option, the plan also offers limited and single premium payment options.

The minimum age is 0 years and the maximum age is 65 years.

The maturity of the plan is minimum 10 years and the maximum is 75 years.

There are three premium options, in regular the minimum amount is Rs 50,000, in limited Rs 75,000 and in single premium it is Rs 1, 00,000.

Kotak Mahindra Old Mutual Life Insurance is a 74:26 joint venture between Kotak Mahindra Bank, its affiliates and South Africa's Old Mutual, which is also listed on the London Stock Exchange.

The plan will provide tax benefits to customers.

Now you have 2 years to revive a lapsed Ulip

A lapsed policy is the last thing a responsible person would want in his/her balance sheet. Imagine the scenario. A policyholder forgets to pay the premium on the due date. He/she fails to pay the premium even after reminders from the company asking him/her to renew the policy within the grace period. The reasons for not paying the premium may be a temporary financial crunch or something serious and unanticipated.

But he/she would lose the insurance cover. In the process, the policyholder's worst nightmare could come true if something were to happen (euphemism for death) to him/her during the period. The whole purpose of buying a life cover - to support the family financially when one is not around - would be entirely defeated.

However, some Ulip (unit-linked insurance plan) holders would get more breathing space now thanks to the recent decision of the Insurance Regulatory and Development Authority (IRDA) to allow policyholders to revive their policies within two years from the premium due date.

The new guideline will be applicable only to Ulips issued after September 1, 2010, when the course-altering norms for Ulips were put in place by the regulator. However, Ulips that have crossed the lock-in threshold of five years will not get any benefit from these regulations.

Relaxed rules

The revised norms, which will become effective from November 1, are aimed at making it easier for policyholders to reinstate their policies that have lapsed. "Under the earlier guidelines, one could not revive their policy once it lapsed 60-75 days after the premium due date. The policy was treated as withdrawn and the balance amount moved to the discontinued policy fund. With the new guidelines, one has the option of reviving the policy for a period of two years (but within the lock-in period of five years)," says Gaurav Rajput, director, marketing, Aviva India.

Until now, if premiums were not paid within the grace/notice period, the accumulated funds were transferred to the discontinued policy fund and remained locked in till the end of the fifth year of the policy, after which it would become payable to the policyholder.

"After this circular, once monies are moved to the discontinued policy fund in the first five years, the policy can be reinstated for up to two years. In which case, the cover will be reinstated subject to underwriting, and the client will again get a choice of investment funds," explains Andrew Cartwright, chief actuary, Kotak Mahindra Old Mutual Life Insurance. For policies more than five years old, reinstatement is not possible, as the funds become payable immediately after discontinuance.

ULIP helps get to long-term goal

Mahesh earns Rs 10 lakhs per annum. Categorized as high risk customer with work involving extensive travel, Mahesh has little time towards investment planning. Due to the risky nature of his work, he knows it is important to own a risk cover to benefit his family. He needs to save enough money to meet his children's higher education and marriage expenses.

Perhaps, Mahesh should consider a unit-linked insurance plan (ULIP). These are investment products bundled with an insurance component. These products are ideal to achieve long-term goals for investors who have little time to manage their finances.

Here are some features that make ULIPs a class apart from other instruments:

Long tenure products

Investors can systematically invest in ULIPs at periodic intervals where the investor benefits from rupee cost averaging. To ensure that ULIPs are treated as long-term insurance products, the Insurance Regulatory and Development Authority (IRDA) has increased the lock-in period for ULIPs from three to five years. The lock-in period of five years affects its liquidity coordinate.

Further, a host of charges are deducted from the premium component and also the fund value. Since these products are burdened with high quantum of front loads, it only makes sense to stay invested for longer tenures. Otherwise, these charges can eat into your returns.

Flexibility

The life cover component of ULIPs that a nominee receives is the higher of the fund value and sum assured or both, in the event of unfortunate death. The investment component of ULIP can be in debt, equity or a mix of both according to the risk appetite of the investor.

As one ages the insurance needs change and ULIPs take into account this need. Investors have the option to increase or decrease the extent of protection over the term of the plan. One can also pep up the insurance component by including critical illness riders.

You can top up the existing fund value whenever you choose to. Usually, ULIPs also allow fund houses to switch between funds at no extra fees in the form of switching costs. Since these are long-term investment products, it makes more sense to have a greater exposure to equity than debt. ULIP products with debt concentration with their relatively lower returns, can succumb to inflation risk in the long run.

Tax benefit

ULIP products qualify for tax deduction. The returns are tax-free after the five year holding period.

Choose ULIP with potential

Though ULIPs can boast of achieving long-term financial targets, you must exert caution when selecting the scheme. Nobody can truly predict the economic climate, inflationary pressures and market conditions over a distant future. Carefully select an asset mix that is not only in sync with your risk appetite but also has the potential to generate good returns in the long run.

Before buying any ULIP product, get to know the various charges and fees. Any penalty like premature redemption charges must not come as a surprise to you later. Finally, if you have good financial discipline and the time, build a portfolio of insurance cover, handpicked equity funds and retirement products such as PPF.

SBI launched New ULIP – Smart Wealth Assure

SBI Life Insurance launched a unit linked plan -- Smart Wealth Assure-- aiming to provide guaranteed fixed returns to the policyholder.

Smart Wealth Assure guarantees at beginning 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 ability 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 different customer segments.
"Our aim is to assemble a large 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 returns, 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.

Ulips to be a third of our products

With a focus on long-term savings plan and protection, Max New York Life Insurance has planned its traditional and Ulip products to suit the changing market dynamics. In an interview with FE’s Debojyoti Ghosh, the company's chief executive and managing director, Rajesh Sud, says the insurance company is looking at a healthy 33:67 mix of Ulip versus traditional over the next few years.
In the current market what kind of business do you foresee?
The year 2011 will be a year of change and adaptation for the life insurance industry. Life insurance industry will need to focus on and be sold as long term contractual savings and protection tool. It will also need to focus on providing consumers with a much more balanced product portfolio. The true value of a professional dedicated agent advisor will become truly visible since the product changes and disclosure requirements will ensure a higher seller and customer engagement at the time of the sale. Some select customer segments may also use the internet for simple products such as term plans.
Distribution trends may also under go changes. Much of the growth in life insurance is expected from increased agents' productivity.
Are you looking at a change in product mix and cost rationalisation?
A sustainable profitable growth is only possible through customer centricity. We will drive profitability in the business by reducing acquisition expenses and increasing persistency. We will enhance our focus on renewal income which obviously comes at a lower cost. For the period January to August, our product mix has been 30:70 (traditional: lips) and 85:15 for September to December. This significant skew toward traditional products has been mainly due to the limited Ulip offerings. We currently do not have pension and growth Ulips in our range which contributed 40(%) per cent in the first 8 months of 2010. We are looking at a healthy 33:67 mix of Ulip versus traditional over the next few years.
Is there any change in your investment scheme?
There has been no change in our investment philosophy. We follow a prudent investment philosophy to minimise risk.
The investments made by the company are in safe instruments – top 5 debt investments are AAA rated and majority of equity investment are in large cap, which are safe and provide good returns in the long run....

ULIPs have prospective for life insurers despite curbs'

Unit linked insurance policies (ULIPs) designed and sold under the new norms that came into effect Sep 1 have a great prospective for life insurers, said experts participating in a board discussion here Monday on "Future of ULIP".

The panellists, however, were not common on which segment of the market ULIPs were suitable for.

The board discussion was part of the 2-day seminar on "Current Issues in Life Assurance" organized by the Institute of Actuaries of India (IAI).

The Insurance Regulatory and Development Authority (IRDA) brought out new norms governing ULIPs capping different charges levied by the insurers.

The new norms kicked in Sep 1 and in the process sucked out around 250 policies from the market.

The life insurance industry had to be content with selling around 75 new ULIPs approved by the IRDA since then. This has brought down new business for life insurers.

Richard Holloway , managing director (South East Asia & India) Milliman Private Limited, said: " ULIP is a popular product throughout the world that has stood the test of time meeting the needs of customers, giving them higher returns and offering transparency."

He said life insurers complain that the new ULIP norms leave them with limited scope to reimburse the distributors as commissions have to be reduced.

In addition, the companies will not be able to enjoy high surrender profits - profits earned when a policy holder surrenders his policy - owing to lower surrender penalties stipulated in the new norms.

"The industry said the focus should be on mis-selling in general and not capping of charges," Holloway said.

Stating that ULIP has good potential, T.R. Ramachandran, chief executive officer & managing director of Aviva Life Insurance Company India Limited, said: "The product is not for middle or lower middle class segment. There cannot be a ULIP where the annual premium is around Rs.8, 000."

Such policyholders are buying the product just for claiming income tax exemption, he remarked.

Sanjiv Bajaj, managing director, Bajaj Capital Limited, said ULIPs had to be targeted at individuals as these offered them to accumulate wealth.

New ULIP by ING Life Insurance

ING Life Insurance has also launched a new Unit Linked Insurance Product christened ING Prospering Life. This ULIP promises to fulfill wealth accumulation and protection needs of its owners.

This new ULIP comes with a host of customer benefits:
•IT includes 5 fund options to choose from
•Automatic Asset allocation
•Unlimited switches with partial withdrawals free of charge.
•The product offers an annualized premium ranging between Rs 48,000 and Rs 96,000
•Competitive priced against other long term investment options
•The sum assured is an amount 10 times the annual premium at inception for those below the age of 45 & 7 times the annual premium at inception for those above the age of 45.
•The minimum top up premium is Rs 5000.

New ULIP norms – What it means?

Nearly three-quarters of the 1.6 million private life insurers have had trouble in business. Insurers are taking steps to cut costs in the wake of a dramatic reduction in charges of unit-linked insurance policies (or Ulips) by the insurance regulator, IRDA. The new norms, may push 1.2 million agents out of work, took effect from 1 September.
Ulips are: A hybrid product that combines insurance and equity investment.
They account for at least 80% of new business premiums for life insurers. The size of the agency channel, which sells policies of 23 life insurers, has grown from 900,000 to about three million since 2000. Until recently, agents were aggressively pushing sales of Ulips, earning commissions of up to 40%!
The state-run, Life Insurance Corp. of India (or LIC), alone manages at least 1.3 million agents. There are about 310 million policies in force, including traditional life insurance policies.
The insurance regulator has capped various charges including surrender charges. Till 31st August, companies were able to levy up to 100% as surrender charges from a customer if a policy was discontinued.
The regulator has also ordered insurers to offer a minimum guaranteed return of 4.5% on the fund value in linked pension plans. Earlier, there was no such norm and the value of the funds invested entirely depended on the yield of the instruments where the premium was allocated.
The new norms will benefit policyholders but will bring down average agent commissions in Ulips from 15-17% to 7-9%. The reduction in the first-year agent commissions will help curb rampant mis-selling, insurance firms will be required to underwrite more losses, infuse more capital and cut costs to sustain Ulip sales.
LIC may not need to resort to cost-cutting measures due to its highly profitable business, but private sector insurers are planning drastic cost-cutting measures to sustain their businesses in the new regime.
What measures companies can take?
• Cutting the agency channel is one of several cost-cutting measures.
• The firms plan to cross-sell products through branches of associate companies instead of opening new branches,
• Cut commission of agents retained
• Redesign new products with variable premium.
• The companies are also focusing on alternative distribution channels such as subancassurance, where the expenses are lower. According to industry estimates, the cost of sales through bank branches or bancassurance can be as low as 20% of the value of the policies sold.
• To save costs, private players are also focusing on training facilities to improve agents’ productivity.
• Some bank-owned life insurers are planning to sell insurance policies through the branches of their mutual fund subsidiaries.
Statistical analysis:
According to a recent study, existing distribution channels are almost entirely focused on Ulips. Nearly 85% of new business premium comes from sales of Ulips but the cost of sales through agency channels is very high—between 50% and 100%.
The study said the cost should be brought down to 25-30%. It also revealed that nearly 60% of the agents work part-time.
India’s life insurance industry has grown some eightfold in the past ten years, collecting a total premium income of Rs2.61 trillion in 2009-10, or which nearly Rs1.1 trillion came from Ulips. At least 310 million life policies are in force now.
The regulator has so far cleared 51 of 68 new Ulips filed by insurers. There were 230 Ulips in the market till August.

Reliance Life Insurance launched highest NAV advantage ULIP

Reliance Life Insurance Company (RLIC), part of Reliance Capital promoted by Anil Ambani , Tuesday announced the launch of a new unit linked insurance plan (ULIP).

The Reliance Life Insurance Highest NAV Advantage Plan offers guarantee on maturity with the highest Net Asset Value (NAV) per unit achieved throughout the entire 15-year policy term.

"Our new unit-linked plan fulfils the diverse needs of customers across different segments while addressing their need for long-term wealth-creation and increased life protection," said Malay Ghosh, executive director and president, RLIC.

This is the first ULIP launched by Reliance Life after the insurance regulator, Insurance Regulatory and Development Authority, came out with revised guidelines a few months ago.

The plan pays the beneficiary twice the sum assured plus total fund value in the event of accidental death for the base cover portion. The unique plan also offers the benefit of up to 100(%) per cent equity exposure throughout the policy period.

The plan, which is available for customers in the age group of 7-65 years, also provides liquidity through partial withdrawals after 5th policy anniversary and loan after the completion of second policy year and top-up option to the policyholder.

It is available under two minimum payment options. The regular option allows customers to pay Rs.20, 000 annually, half yearly, monthly and quarterly. In the single premium option, the customer pays a minimum of Rs.50, 000 only once at the beginning of the policy tenure.

SBI Life Insurance launches new ULIP product Saral Maha Anand

SBI Life Insurance has launched a new unit-linked insurance plan (ULIP) called Saral Maha Anand.

This is the third ULIP product launched by the insurer since the introduction of the new ULIP norms by the insurance sector regulator, IRDA, last September.

The two products launched by SBI Life are
1.Smart Performer and
2.Unit plus Super.

Saral Maha Anand, its new ULIP product:
• Is available at an affordable yearly premium starting from Rs 15,000 onwards and
• The product has been designed to cater to investment and protection needs of the middle-and-low-income segments.
• The product is exempted from medical-examination.

To quote SBI Life Insurance's managing director & CEO, MN Rao,
"The product offers simplicity and affordability so that a larger section of society can participate and benefit by systematically investing over a long-term horizon."

ULIP review: Bajaj Allianz Life Insurance

Single-premium unit-linked insurance products are accepted among investors due to the convenience and less fears. However, the new Ulip period has seen very few such products.

The Wealth Insurance Plan from Bajaj Allianz Insurance Company is one among the few new products. This is a single-premium whole life unit-linked insurance policy. It is a vanilla product, with the maturity age fixed at 75 years.

The insurance plan offers an inclusive basket of investment options (funds), with varied proportion of equity and debt, for one to choose from as per the risk and return appetite. For instance, the equity growth, pure stock and accelerator mid-cap options are equity-based, whereas liquid and bond funds are debt-based.

Those looking for a balanced portfolio can opt for the asset allocation fund. This plan also offers an index fund option for those who want returns that mirror the stock market.

ING Life Launched Uttam Jeevan and Uttam Jeevan SP

ING Life India has launched two new customer-centric unit linked insurance products - ING Uttam Jeevan and its single premium variant, ING Uttam Jeevan SP, are in accordance with the new IRDA guidelines.

Both the products have been designed to fulfill customers need for investment and protection. These are simple products, which will appeal to all customers, especially those who are new to ULIP. They are easy to understand and buy.

Features:
• The minimum annual premium for Uttam Jeevan is Rs 24,000, while that of Uttam Jeevan SP is Rs 48,000.
• As they are non-medical insurance products, they are hassle free and easy to buy.
• The products enable a higher allocation of premium for investments, thus getting better returns.
• The product offers customers an automatic increase of 5 % in the base sum assured year-on-year, thus keeping up with the increased financial responsibility with age of the customer. It also has in-built accidental death benefit. The death benefit is Sum Assured + Fund Value.
• The products offer flexibility to customers with charge free withdrawals as well as top ups.
• In case the policy lapses, customers can reinstate the policy within 45 days from the date of lapse free of charge.
• Customers also have the benefit of increasing their contribution by way of Top-Up, with a minimum top-up premium of Rs. 2,000.
• Four free switches are allowed every policy year, helping customer to manage their investments well.

New Ulip launched by ICICI Prudential Life Insurance

ICICI Prudential Life launched its third unit-linked insurance product (ULIP) named ICICI Pru LifeLink Wealth SP, which is also in accordance to the new Insurance Regulation and Development Authority (IRDA) regime.

ICICI Prudential Life's CEO and Managing Director Sandeep Bakhshi said, "ICICI Pru LifeLink Wealth SP is a single premium product that will save customers the hassle of remembering premium payment dates or policies getting discontinued because of non-payment within a stipulated time".

About the product:
• Minimum premium is set at Rs 40,000,
• Provides customers the flexibility of choosing between 125 % and 500 % of the premium.
• Assures a loyalty benefit of up to 2.5 % of the fund-value at the end of every fifth policy year, which will start from the tenth policy year.
• In addition to this, ICICI Pru LifeLink Wealth SP also gives tax benefits on the premium paid and Change in Portfolio Strategy (CIPS), which means the customer is given an opportunity to choose from two unique portfolio strategies.
• For passive customers, the product has Trigger portfolio strategy, which gives them the opportunity to automatically capitalize and protect gains made from equity investment based on market movement.

Higher Returns Assured – New Ulip | HDFC Standard Life Insurance

HDFC Standard Life - private life insurance player - launched a new ULIP - HDFC Standard Life Crest - which assures higher returns.

HDFC Standard Life Crest has
• a 30-day free look-in period against the usual 15 days so that investors understand the new ULIP (Unit Linked Insurance Products) better, in compliance to with the IRDA regulations which came into effect.

From now onwards all HDFC Standard Life insurance plans will carry a 30-day free look in period. This is for the convenience of an investor in case he/she feel that the product purchased is not very suitable to his/her requirement. The investor will be given a choice to switch over to an alternative product offered from the company within a year although at a nominal additional cost.

Investors can expect better Ulip products and services

Several new unit-linked insurance plans (Ulips) have started hitting the market after the Insurance Regulatory and Development Authority’s (IrDA) new strategy on Ulips came into effect from September 1. So what has changed?

Existing Ulip customers have nothing to worry as the regulations will only apply prospectively and will not affect them in any way.

Cap on charges between gross and net yields throughout the policy term that will be mostly evenly spread, and increase of lock-in period from 3 to 5 years will enable the customer to reap higher returns.

The new guidelines restrict the penalty that an insurer can levy on premature surrender. This cap on surrender penalty will ensure greater liquidity for the customer and reduce his loss even if he surrenders early.

Enhanced customer disclosures will improve transparency and drastically decrease mis-selling. Companies on their own accord can also be projected to add check layers beyond those mandated by the regulator to weed out mis-sales.

Insurance companies will invest more in better equipping intermediaries both in terms of knowledge and advisory capability.

Further, mandatory Need Based Selling, whereby insurance agents will be required to assess the customer’s exact insurance needs based on his financial and filial profile may also soon become an integral part of the sale process.

Customers can look forward to far better product and service experience. Greater customer affinity is likely towards life insurance in general and Ulips in particular and more customers can be expected to ride out the entire policy term.

As for companies, most of the old Ulips will be off-the-shelf and they will introduce a swing of products to adhere to the new guidelines. However, margins may come under pressure. Emphasis will now be on higher business volumes, increasing average ticket size and bettering persistency levels. Insurers will qualitatively enhance the customer value proposition by introducing simpler, more transparent products, better service and support during the policy term and, improving the overall quality of engagement.

Current levels of lapsation and surrender may consequently reduce. Insurers may also look at innovative platforms to rationalise cost and enhance appeal. The product mix will also change. From the current Ulip-heavy portfolio, insurers will strive to achieve greater balance between traditional plans and Ulips. However, insurance firms which had planned to list may revisit their plans, since valuations may get affected now.

ING Life banking on traditional products vis-a-vis ULIPs

Private life insurer ING Life India today said it would continue to focus on selling traditional products vis-a-vis Unit Linked Insurance Plans (Ulips).
“Traditional life insurance plans are helpful to all the stake holders, including the insured, insurer and the financial advisor,” ING Life India, executive vice-president (central and east), Syed Sarfaraz told the media here.
He informed the company already maintained a ‘healthy’ product mix with the traditional life insurance accounting for 60(%) per cent of the portfolio, while the balance coming under Ulips.
Ulips provides for life insurance, where the policy value varies according to the value of the primary assets at that time. It offers life insurance as well as an investment like mutual fund. While, the part of premium goes towards the sum assured, the balance is invested in instruments such as equity.
Recently, sector watchdog Insurance Regulatory and Development Authority (Irda) had tightened the norms for Ulips by raising lock-in-period from 3 to 5 years to provide risk safety. This has made Ulips long term financial instruments.
These guidelines followed the public spat between Irda and Securities and Exchange Board of India (Sebi) for jurisdiction over Ulips, which Sebi had claimed were equity products.
Based on traditional platform, the product guarantees the maturity value as decided by the parent, additional guarantee of death benefit to policyholder, guarantee of policy continuing in case of death of parent and guaranteed coverage for child after maturity.

Irda permission revelation in Ulip advertisements

To improve transparency in unit-linked insurance products (Ulips) and protect the interest of policyholders, the Insurance Regulatory and Development Authority (IrDA) has asked life insurers to release the underlying circumstances and elements while advertising products.
“A review of the advertisements, particularly those relating to unit-linked life insurance products, reveal the necessity to improve the content and presentation in fulfillment with the provisions of the above referred regulation and guidelines,” said IrDA.
The regulator said when an insurance advertisement is highlighting the benefit of guarantees; it obviously needs to disclose the underlying environment under which the guarantee operates, including cost of guarantee and charges.
Further, Irda said if the underlying conditions are very complex, the text, wording on guarantee must be accompanied by the phrase “Conditions Apply” in a font that is at least 50(%) per cent of the font size used to highlight the guarantee.
The advertisement will also have to clearly state the availability of underlying elements of ‘life insurance coverage’ to help identify the product as an insurance product.
It has warned against brand names of products that use terms or phrases that convey a fictional sense of security.

Returns on Ulip pension plans put to increase

As Irda refuses to move on guaranteed returns.

The Insurance Regulatory and Development Authority (Irda) has fixed to its guns on returns from unit linked pension plans. Despite several representations from the industry, the monitor has decided that insurers will have to provide guaranteed returns of 4.5(%) per cent on gross premiums until March 11, 2011.

After that, returns will be linked to the overturn repo rate or the rate at which banks deposit their extra funds with the Reserve Bank of India for a day. Investors will get half a percentage point more than the standard reverse repo rate at the end of each quarter. In a note to insurance companies, the regulator said returns will be in the range of 3(%) per cent to 6(%) per cent.
This move will result in increased returns for investors after the new rules come into result from September 1.
On group pension plans, the guaranteed return will be applicable to individual contributions made to group pension products, if the agreement has been in force for 5 years continuously. After failing to reduce the rate of return earlier, insurers had in a meeting held a fortnight back with the regulator, requested that the 4.5(%) per cent should be paid on the net premium. But Irda rejected this request.
Insurers are as expected unhappy. “Managing this return on gross premium will make the product costlier by 2(%) per cent. We wanted return to be subjected to net premium,” said an actuary of a large insurance company.
In another significant explanation to its June 28 circular, Irda has asked insurance companies to come to a formula while charging the premium allocation and premium management charges during the first 5 years of the policy contract. “The charges could change from year-to-year in a logically, orderly manner so that the difference between the maximum and the minimum charges shall not vary by more than 1.5 times,” Irda said. For instance, if the charge in the 5th year is say, 10(%) per cent, the first year’s charge cannot exceed 15(%) per cent.
In another clarification, Irda said the top-up premiums on unit-linked insurance plans (Ulips) will not be based on the entry age, but on the age at which the top-up premium is paid. “The top-up premium will also have a lock-in period of 5 years. Policyholders will not be allowed to top-up the premium during the last 5 years of the term. The contractual premium payable by the policyholder cannot be altered during the policy term,” IrDA has said.

CUP OF JOY

# Guaranteed return on unit linked pension plans to be in the range of 3-6 per cent

# Returns will be 50 bps above the average of reverse repo rate at the end of each quarter

# Charges to be evenly distributed in the first five years of the policy term

# Charges could change in evenly manner, should not vary more than 1.5 per cent

# Life cover on top-up premium to be based at the age of payment and not at the entry age
For example, if a person wants to top-up his premium under the present norms, his premium will go into the investible corpus. Under the revised norms, he will not be allowed to pay a top-up premium in the initial 5 years. After that, when he pays a top-up premium on the existing policy, he will be provided a life cover based on his existing age, not the entry age. This implies that the mortality rate would come into play and the policyholder will have to pay a higher amount.
While loans have been allowed against policies, insurers can now charge interest.

Future Generali Life launch new ULIP

Future Generali Life Insurance, a joint venture between Future group of India and Generali Group of Italy, has come out with a unit linked insurance plan (ULIP) ‘Future Generali NAV Assure’. The plan seeks to provide maximum opportunity for growth while protecting the investments next to adverse market circumstances in financially unstable times. Addressing presspersons here on Wednesday after launching the product, Balram Sarma, Chief Operating Officer, said the scheme guarantees highest NAV (net asset value) recorded on every day basis during the first seven years of the policy or NAV at maturity date, whichever is superior.
The ULIP would protect the investment proceeds and the customer could invest without waiting to time the markets whether they are cheerful or bearish. It is available for customers in the age group of 8-60 years.
The insurance plan allows flexibility to its customers to pay premiums with 4 options to select from being single, 3, 5 and 7 years. It comes with a fixed policy term of 10 years and the minimum annual premium is Rs. 39,960.
The NAV guarantee is applicable only on maturity provided the policy is in force. The premium allocation charges sort from 1-8(%) per cent depending on the premium group and the premium paying term.
According to Mr. Balram Sarma, Future Generali was working through 91 branches across 83 locations with over 44,000 licensed advisors.

Domestic ULIPs with limit on yearly fees

Last week, there was a rise in of stories in the media about how IRDA is about to unleash a wave of reforms upon ULIPs. It seems the insurance regulator has swiftly discovered a number of basic problems in ULIPs and it has decided to attach them. Of course, these intentions have only been expressed off-the-record to choose journalists.
The thrust of these ‘reforms’ seems to be to prevent ULIP investors from exiting early. Instead of 3 years, they’ll have to stay for at least 5 years to exit partially, and up to 10 years to exit completely. It seems that 7 or 8 years after ULIPs became a major product category; IRDA has exposed that when investors exit early they lose a huge chunk of their money.
I can only wonder how the regulator missed something that was common knowledge to everyone else in the financial group of people for so long.
Interestingly, some reports last week mentioned another improvement that could transform ULIPs into a truly beneficial type of investment. This would be the application of all charges and expenses uniformly through the life of the investment. If an insurance company is allowed to charge 3(%) per cent total expenses over a 10-year ULIP, it must stay within that limit every year, instead of averaging the amount over the full term.
Such an improvement would likely align the sellers’ interest with the buyers’. At one stroke, it would clear away almost all the negatives in ULIPs. I fully expect that this particular reform won’t actually happen. But if it does, no investment analyst would be uncertain to recommend ULIPs.
Of course, any of these reforms, if and when they happen, will only pertain to fresh investments in ULIPs launched after the rules are changed. Existing ULIP investors will continue to pay a heavy price because IRDA has only woken up now. Of course, it has actually not woken up yet — it has only told a few journalists (off the record) that it’s planning to wake up real soon now.