What is the biggest challenge before the Indian consumer of life insurance products today?
The biggest challenge is to get a proper and objective analysis of his life insurance needs. Not many people are able to get this. They need to strike a balance between the risk cover and the investment in their insurance portfolio. Most of the time, there is a skew towards investment while insurance gets neglected.
The new DTC has tried to fix that but some of the proposals are likely to hurt the industry. Do you think the DTC needs amendments?
In its current form, the DTC is certainly detrimental for the insurance industry. An insurance cover of 20 times the annual premium for availing of tax benefits appears a little too high. The reduction in the tax deduction limit for life insurance premium from Rs 1 lakh to Rs 50,000 a year and clubbing school fees and medical insurance in that limit could relegate life insurance to the list of non-essentials for the taxpayer. School fees is a non-negotiable expense. Medical insurance too is seen as a need, given the high cost of healthcare.
The individual’s life insurance will be dictated by the balance left in the Rs 50,000 limit for tax deduction. The industry has made representations and we hope the changes are incorporated before the proposal becomes a law.
Some other regulatory changes have also been inimical to the industry. What has been the impact of the 4.5% guaranteed returns clause on pension products?
The rule has effectively killed the category. It is difficult for anyone to guarantee a return of 4.5% to investors. Before the clause was introduced in 2010, all the 23 life insurance companies were offering pension products. Now, only three companies have pension plans. All others have withdrawn their plans.
The Irda has allowed life insurance policies to be sold through the Post Office. Why aren’t life insurers using the vast network of the Post Office?
It’s certainly a huge network and we are more than willing to tie up with India Post for selling our policies but it seems they are not interested. They have their own life insurance policies and don’t want to distribute policies of other companies.
Talking of distribution, the online channel has been very successful. What has been your experience?
The online channel is more of a success for renewals, not fresh purchases. Yes, it is the channel of the future. But right now, we are seeing a very limited interest in buyers of insurance.
One of the basic draws of online plans is that the premium is much lower than that of regular plans. However, your online term plan Smart Life is not very cheap compared to the regular term plan Care Plus. Why?
We are soon coming out with a new online plan that will have lower premiums. It will be launched shortly.
Many buyers think there is a catch in online plans. That there are some hidden clauses because of which the plans are so cheap and that these might come in the way when a claim is raised?
Online plans are by far the most simple, transparent and straightforward policies sold. Since there is no face-to-face interaction with the buyer, companies make sure that all the features of the product are explained very well. There is no catch and one can buy without any apprehension.
There are a lot of complaints of mis-selling against insurance companies. Is there a basic mismatch in what insurance companies are telling the customer or is the message getting distorted by the agent?
I believe that the agent is the mouthpiece of the company. If there is a complaint against an agent, then the company should also take responsibility. However, in most complaints of mis-selling, the consumer himself may not have understood the plan before buying it. At the same time it is also the duty of the agent to explain the features of the policy he is selling. That is why we make a welcome call to the buyer before we issue a policy. The caller confirms the buyer’s details and then explains the policy features to him.
Your company pioneered the concept of mallassurance. However, mall customers may not have the time to understand a long term product like a life insurance policy in a matter of 5-10 minutes. What do you think?
Mallassurance does not restrict the interaction to 10-15 minutes. We have trained personnel manning the kiosks in malls and they can take the customer through the plan in detail if he so wishes. Otherwise, the customer can just leave his contact details and be contacted later. Most of the time, mallassurance only helps us in getting leads to potential customers who wish to purchase insurance.
Via: economictimes.indiatimes.com
Rita Thakur is wiser now. After paying Rs 1 lakh as part-payment for a car accident because she did not have a depreciation rider, she has been assiduously buying a zero-depreciation rider each time she renews her car insurance policy.
“Though the total bill was Rs 3.5 lakh, the insurance company refused to pay Rs 1 lakh because my car was four years old,” says Thakur.
There are various other riders that most policyholders don’t buy because of diverse reasons. But the most important aversion is cost. Riders are additional covers bought with a policy. The Insurance Regulatory Development Authority (Irda) has crowned the premium for riders at 30 per cent of the basic policy.
K G Krishnamoorthy Rao, MD & CEO, Future Generali India Insurance, feels opting for the riders can help ensure that a customer isn’t stuck with the limitations posed by an insurance policy, like Thakur was.
Car Insurance (zero-depreciation rider): In case of car insurance, a zero-depreciation rider can be a better option. If any individual buys a comprehensive car insurance policy, fixed deductions for depreciation on particular parts like rubber, plastic and so on applies in from the seventh month of purchase of the car – older the car, higher the depreciation rate. If the car met with an accident, the insurance bears the cost when damaged parts need to be replaced.
Car Insurance (return to invoice): A return to invoice rider insures the overall value of the car. If there is an accident and the car needs to be replaced, the insurance company will be likely to pay the total cost. Amitabh Jain, vice-president – customer service motor, ICICI Lombard, says, “Buying the RTI add-on would bridge that gap, since it will ensure the customer gets paid the original amount quoted on his invoice.” The other two riders that one can demand include inconvenience cash and no-claims bonus.
The first one allows policyholders to get cash benefits when the car has gone for repairs. The other assures that if one has not claimed beyond a certain amount – usually Rs 10,000 – he/she can continue to get the benefits of no-claims bonus.
Health Insurance (accident cover): Individuals up to 35 years should opt an accident death or disability benefit. For total and partial disability, these policies provide payment of a proportion of the benefits to the insured till he recovers. A waiver of premium benefit can also be provided, if you have dependents.
A couple of other useful riders include a hospital cash rider, which allows you to claim for expenses like hospital room rent and other miscellaneous cost on hospitalisation. There is a premium waiver rider as well, that helps with children. Here, future premiums on the base policy are waived if the insured becomes permanently disabled or loses his/her income/life as a result of injury or illness prior to a specified age. A ‘family income benefit rider’ provides death benefits and a monthly income (one per cent of the sum assured per month) to the beneficiary in case of death.
home insurance (calamity and burglary): A burglary cover (for contents only) will take care of up to 25 per cent of the total content sum insured or Rs 1 lakh for some insurers, whichever is lower. Typically, the premium for home insurance is less than one per cent of the actual cost of the contents or structure covered.
Amit Bhandari, VP, health underwriting & products, ICICI Lombard, says, “You can choose to buy insurance for only the building (structure) or only the contents (belongings) or both.”
“However, some policies, specially if bought online, are cheaper but offer lesser benefits,” says Yohannan. In that case, you need to buy a burglary and fire and earthquake cover additionally.
Source: Business Standard
Mint, Hindustan Times and NDTV, bring you a personal finance show, “Let’s Talk Money”. The weekly call-in show, anchored by Monika Halan, editor, Mint Money, and Manisha Natarajan, editor and senior anchor, special programmes, NDTV, aims to answer viewers’ questions about money-related issues. Here are edited excerpts from the show that aired over the weekend on NDTV Profit and NDTV 24×7.
Karthikeyan Ravikumar, 25, IT executive, Bangalore: I have three questions regarding my financial planning.
1. Currently, we are staying in a rented house. I would like to buy a house. Is it a wise decision, given my financial position? If yes, what should I cut/add in my monthly budget to accommodate the EMI ?
2. Considering that there is going to be a need for gold jewellery for my sister’s marriage, what is the best instrument in gold that I can invest in?
3. I am currently uninsured. What kind of health and life insurance products should I be looking at? What is the best option for my pension planning? Is NPS a good option?
Halan: First question is on the house. I don’t think there is enough money to put down for a house and if you do, it will be really a small house. I think you can wait for four-five years for your career to settle down and build that corpus.
Related to that is a gold question. I understand the sentiment to do the right thing for your sister, her marriage. She is in college. She will start earning. Allow her the responsibility of putting the money together. Your resources right now are small. I would want you to conserve that—which again leads to the insurance questions. You need money to build that insurance shield and the corpus for your house and own emergency corpus. Insurance, you must buy a Rs 50 lakh term cover. Buy for the longest term you can—at this age R50 lakh policy will only cost you Rs 5,000. The larger amount you can buy at this age, the better it is. At the age of 40, this will cost you five-six times more.
In health insurance, you need covers for your mother and sister, and individual policies of Rs 2 lakh each, then later top it up with family floater and I think he does need to start in mutual funds.
Natrajan: What do you see when you see these products promising you highest NAV in unit-linked insurance plans. Most of us would believe that we’d get the highest possible return with zero risk. Nothing comes for free and we need to look at all the products that are guaranteeing NAVs under scanner. Fund manager moves your money between debt and equity to protect your capital. It reduces the returns you would get from a pure equity-linked product. Second, costs of such products are also higher.
Halan: When you think of highest NAV you think of highest equity NAV, at best you will get 5-6%. You are better off in a PPF (public provident fund).
Natrajan: Your MF portfolio is not done well at all. You need to rejig your portfolio to include one large cap name, two multicap outperforming fund and maybe one mid and small-cap fund.
source: hindustantimes.com
Insurance premium is generally an amount paid by an individual who owns a policy to the insurance company in monthly or annually mode. The policyholder pays the premium till his policy gets matured. The premium payment frequency may differ along with the coverage from one company to another. If a particular person wants an insurance for itself or for his beloved ones, he unwillingly search the best insurance plan plus with cheap premium option and with some added bonus on maturity, but for that he will search on the internet for websites which suits his needs and requirements.
Its nice thing that you actually care for yourself or for your dependents, but before getting one always go through every possible thing which you can like- the foremost thing is “comparators”!- compare your policy with other company’s plan. The main problem is that we don’t get insurance comparators very easily, even in an search engine box. There is whole lot of junk gathered around on the internet.
Normally insurance agents also advise you to compare the policy quotes with insurance companies which you feel is relevant for you. Even the agents too personally calculate your plans and guide you towards the best insurance plans.
The premium rates generally increased if the risk cover is increased of that person from the company.
The younger you are for life insurance, the less premium rate would be charged. And if you are an old person, higher premium rate would be charged-because the young age person lives long life and the older person life span is short.
Health of a person can be best described with two dimensions – quality and length of life.
You can make aware people by admitting the truth about the detrimental health effects of prescription drugs, junk foods, cold drinks and lack of physical exercise. But how you will solve the risk of upcoming problems.
Health problem is common in people and government is providing health care coverage in cheap through private health care organization.
If you consider US, health care is rapidly growing and already more than 50% people are opted by this coverage. Other hand, Taiwan, a nation is providing full health care coverage in cheap, at just $25/month. It is enough to consider how important such a health care coverage in your life.
It helps to cover families from the financial expenses for illness, sickness, injury and other health care service.
You can’t afford it in emergency cases, because health care costs are continuously rising and large opportunities exist to increase the value of health care.
Buying health insurance for individual or families will help to save tax. Health insurance is not just an insurance it is security for health care service.
Here’s the way, if you want to reduce your home insurance premium this year. Try help from your provider if they offers you discount on premium, if you practice accurate and personal home safety.
This will make you understand what they are actually interested in when getting through and fixing risk levels.
The question stands at a point that “do you smoke”? If yes, than you need to struggle with the fact that you need to kick that out of your house, as this will make your home cover company strike out the fire risk normally associated with smokers from your premium; thereby lowering your rates and making you save money.
If something occurs in your house, there is no need to rush to make claims, your may do it yourself too. You ‘ ll learn that you saved more money from the non-claim policy of the home cover company.
You may be having vigilante security service in your area where you reside? If not, why not arrange for one? Because,you will be benefited as some of these home insurance providers reduce rates up to 5 percent for members of such schemes.
It remunerates to measure your home cover policy every year. This helps you know exactly what you need and vise versa; e.g; If you do not have over active children or pets and you are not planning to make some changes or improvements in your home this year then you do not need accidental damage cover which means at least avoiding about 25% increase on your premium.
Endowment Insurance is a policy in which an assured amount is paid to the nominee in the event of insured persons death. Apart from these it also provides the insured person with the financial security in old age. This policy is mostly taken by young individuals as it provides double benefit of secure family and old age security.
Money is available at the end of the policy with additional bonus or in the event of insureds death. This policy is basically available for a term of 10-30 years. The premiums for this policy can be paid quarterly, half-yearly or even yearly whichever is comfortable to you.
The primary benefit of this insurance policy is that it provides financial protection for family as well as security for yourself in future. There are three types of Endowment insurance policies namely; Unit-Linked Endowment policy, With-Profit Endowment policy and Own-Cost Endowment policy. All these three policy have various advantages and disadvantages as compared to other. The premiums for Endowment insurance policies are much higher as compared to term insurance policy.
You can also sell the endowment insurance policy that you have opted for, but your policy needs to meet certain conditions. This policy works very similar to Life Insurance policy and has a fix maturity date. You can also get compensation if someone has mis-sold you an Endowment Insurance Policy and it is not on target to payoff the sum assured.
Day-care Treatment- The Medical disbursement through serious technologically advanced day-care surgeries with no 24 hour hospitalisation is required.
Ambulance Charges for shifting the insured patient from home to hospital are been covered up to the limits mentioned in the mediclaim policy.
Ayurvedic / Homeopathic system of medicine are covered to the extent of 25% of Sum Insured provided the treatment is taken in the Government Hospital.
Pre-existing diseases are covered only after 4 continuous and claim free renewals with the insurance company.
Exclusions:
1. Diseases contracted within 30 days of insurance.
2. Dental treatment except arising out of accident.
3. Debility and General Run Down Conditions.
4. Sexually transmitted diseases and HIV (AIDS).
5. Circumcision, Cosmetic surgery, Plastic surgery unless required to treat injury or illness.
6. Vaccination and Inoculation.
7. Pregnancy and child-birth.
8. War, Act of foreign enemy, ionising radiation and nuclear weapon.
9. Treatment outside India.
10. Naturopathy.
11. Domiciliary Treatment.
12. Experimental or unproven treatment.
13. All external equipments such as contact lenses, cochlear implants etc.
Premium:
Mediclaim Premium is based on age of the proposer and geographical area of treatment.
Features:
1. Discount in premium for family cover.
2. Loyalty Discount.
3. Good Health Discount.
4. Cumulative Bonus.
5. Cost of Health Check up.
6. Income Tax Benefit under Section 80D of IT Act.
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Investment: Unit Linked insurance plan (Ulip) is a risk cover life insurance policy which secures your share invested in the market. In fact, they are made to behave as normal insurance policy including mutual funds.
The contribution of investors get divide into specific type portfolios that one chooses. Generally, the policy pays back on investments on basis of market return, at the maturity period. Therefore, it forms an interesting savings instrument that can get good risk cover.
Following are the features of Ulip Plan:
- Usually, units under Ulip have NAV (Net Access Value)
- Investors have a choice of portfolios alike mutual funds to invest from.
- The investment can be fund through single premium or else can make payment annually.
Benefits of Ulip Plan:
- The benefits of unit-linked plans is that they are very simple, clear, and easy to understand. Because of its transparency the policyholder enjoys the entire upside on the performance of his fund.
- Besides all the advantages they offer, unit-linked plans also guide towards an efficient utilization of capital.
- Unit link insurance plan is the right step if you want to enjoy the flexibility of investing across various asset classes or if you want higher returns.
- The investment part of insurance is control by insurer because ulips gives investors a chance to pick a product which matches their risk profile.
