No surrender fee on Ulips after 4 yrs

Irda also takes mortality, morbidity charges out of overall 3% cap You can now surrender your unit-linked insurance plan (Ulip), purchased from a life insurer, after four years without having to pay any charge. This was announced by the Insurance Regulatory and Development Authority (Irda) today.The regulator has also made some changes to the overall ceiling on Ulip charges, which were fixed at 3per cent of the gross yield. As a relief to insurance companies, Irda has decided to keep mortality and morbidity out of the overall cap on Ulip charges. At present, there is no standard norm for surrender value, which is akin to exit load for mutual funds.With this latest Irda decision, insurers will have to pay the accumulated fund value, if a Ulip-holder surrenders his/her policy after four years. At present, there are around 70.2 million Ulip-holders, of which 25.2 million deal with private players.Insurers had demanded that mortality charges should be in line with the risk they were carrying and, hence, the decision should be left to them. They had argued that capping of charges would lead to changes in the distribution model and reduction in commission and acquisition charges.As per estimates by brokerage firm Edelweiss, for a typical back-loaded policy, the difference between gross and net yields to the policyholder ranges between 2.1 per cent and 4 per cent. This difference, according to Edelweiss, is likely to be higher for high charge front-loaded policies (4-4.5 per cent). According to the revised circular, mortality and morbidity charges will be excluded in the calculation of the net yield. The difference in the net and the gross yield has been capped at 300 basis points. The modifications were made, keeping in view the concerns expressed by the industry on Irda's July 22 circular capping the charges. "The exclusion of mortality and morbidity charges from the cap will ensure that there is no compromise on growth in sales of valuable life cover. In addition, life insurers will not have to resort to cross subsidisation across age groups to meet the charge cap. The decision clearly indicates that Irda wants life insurance to be viewed as a long-term protection product," said Max New York Life Insurance CEO and Managing Director Rajesh Sud. VVaidyanathan, MD and CEO, ICICI Prudential Life Insurance, said that excluding mortality and morbidity charges would promote the core concept of insurance. It has capped fund management charges at 135 basis points for all tenures. Earlier, there were two caps -one below 10 years and the other above 10 years. At present, this charge in equity varies between 125 basis points and 225 basis points, and in debt between 80 basis points and 100 basis points. "Now people in the older age bracket seeking higher assured sum can be insured... Having one cap on fund management charge will result in better administration of the fund as insurance companies will have to manage only one fund," said Kamlesh Goyal, Bajaj Allianz Life Insurance MD and CEO, and Country Manager of Allianz. Sud added that surrender charges and quantum and gradients would need to be prudently shaped in the first four years so that it was fair to all policyholders."This allows insurance companies to continue to provide adequate protection to the policyholders, which is the core objective of a life insurance policy. Moreover, it allows companies to offer older customers the benefits of life insurance without crossing the cap," said TR Ramachandran, Aviva India CEO and MD.

Govt looks to implement new I-T law from 2011

NEW DELHI: The government on Wednesday unveiled the draft of a brand new direct tax law, which will replace the four-decade Income-Tax Act, "... to improve the efficiency and equity of our tax system by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the tax base", said finance minister Pranab Mukherjee.

The tax code makes radical changes in all areas of taxation: it lowers the incidence of tax on corporate and individual incomes but reintroduces wealth tax and capital gains tax, albeit at lower levels. It also proposes to bring a uniform pattern of taxation on all long-term savings in the form of EET—exempt at the stage of contribution, exempt during accumulation and taxed during withdrawal.

Releasing the draft direct taxes code, Mr Mukherjee said if a reasonable level of discussion happens on the code, a bill could be placed in the winter session of Parliament. The government is hoping to implement the new code from 2011.

Home minister P Chidambaram, who during his tenure as finance minister had initiated work on the Code and was intensely involved with its drafting, said this was a brand new Code written from scratch. Mr Chidambaram also said the underlying philosophy behind the Code is the philosophy of the government, which is wedded to a well-regulated free market system.

The code proposes to exempt income up to Rs 1,60,000 a year from tax. Income up to Rs 10 lakh will be taxed at 10%, 10-25 lakh at 20% and beyond Rs 25 lakh at 30%. Currently, there is no tax till Rs 1,60,000 of income in a year. However, there is a 10% tax on income between Rs 1,60,000 and Rs 3 lakh, 20% between Rs 3 lakh and Rs 5 lakh, and 30% beyond Rs 5 lakh.

But under the new tax law, an individual’s gross salary would also include perquisites such as value of rent-free accommodation, medical reimbursements and leave travel encashment. Taxpayers will also not be able to claim tax benefit on interest repayment on housing loans. However, the benefit would be available if the house is rented.

All savings schemes would also come under EET, implying that they would face tax at the time of withdrawal. However, tax exemption would be available to the Public Provident Fund and other pension fund schemes on withdrawals of amounts accumulated up to March 31, 2011.

The Code further proposes abolition of STT. Capital gains on shares and securities has been proposed to be taxed as income, added to other income after indexation with base year 2000. “The capital gains regime is proposed to be simplified by eliminating the distinction between long-term and short-term capital assets,” Vikas Vasal, executive director, KPMG.

Wealth tax provisions are proposed to be overhauled. Net wealth, which would include all wealth of an individual in excess of Rs 50 crore, will be chargeable to wealth tax at the rate of 0.25%. One of the key changes suggested by the Code includes giving supremacy to the Indian tax law in case of a dispute between provisions of a tax treaty and the Code, and introduction of a general anti-avoidance rule to combat tax avoidance.

This would help the tax authorities deal with cases such as Hutch-Vodafone, where if they infer that a tax treaty was being abused for tax benefits, those case be denied.

Besdies, a massive overhaul is suggested for corporate taxation besides slashing the corporate tax rate to 25%. The new rate would not have any surcharge or cess unlike present. Moreover, the current profit-linked tax incentives for businesses will be replaced with investment-linked incentives.

To put it simply, a company would be able to enjoy tax benefit only to the extent it invests. But, all the tax exemptions such as those available to Special Economic Zones would be given time to adjust to new regime. A minimum alternate tax on assets of companies is being proposed as it provides incentive for efficiency at the rate of 2%. It also proposes rationalisation of tax provisions for amalgamations and demerger so that tax remains neutral when businesses reorganise.

Dividend distributed by companies would be taxed at the rate of 15%.

In move that would have major impact on foreign companies or companies that have made investments in foreign countries, the code is proposing to treat a company as an Indian resident even if it is partly controlled in India. Presently, a company is treated an as Indian resident and taxed, only if full control of that company lies here. the measure is primarily aimed at preventing escape of any income from taxation.

“The thrust of the code is to improve the efficiency and equity of our tax system by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the tax base,” Mr Mukherjee said.

Source:ET

India among top 10 world insurance markets

MUMBAI: The life insurance industry might have turned in a poor show in FY09 with almost flat growth, but with the rest of the world shrinking

during this period India has for the first time moved up the ranking to be among the top 10 life insurance markets worldwide.

According to the latest sigma report on world insurance markets, India recorded an inflation adjusted growth of 0.2% in USD terms while the world market shrunk 3.5% in `08 thanks to the global financial crisis. While `08-09 was an exception on account of the crisis, the average growth of the Indian life industry post liberalisation has been very impressive. India was at No 20 at the time of liberalization in 2000 but had moved up to No 17 two years back and was at number 11 position last year.

The economic Survey acknowledges this growth. The report for the year `08-09 states that insurance sector penetration, both in life and non-life segments, has improved since the time the sector has been opened for private participation.

But India’s performance is completely overshadowed by that of China which has overtaken Italy and South Korea to become the sixth largest life insurance market. The middle kingdom has also recorded the highest growth rate among reasonable sized markets.

Indian insurers feel that India can leapfrog to a position just behind China by growing faster than other Asian countries like Korea and Taiwan which are still ahead of India.

According to V vaidyanathan, MD, ICICI Prudential, 40% of the growth in life insurance will come from Asia. Within Asia India and China will contribute to 80% of the growth. "The Indian industry will grow by 12-13% as against 5-6% global growth. India’s ranking will have to go up" he said. He adds that industry growth in India is essential since no social security exists in India.

"Factors like a stable 8 per cent annual growth rate of the economy make India one of the most promising amongst the emerging markets, with the potential to go beyond Korea and Taiwan" said Rajesh Relan, MD, Metlife Insurance India. He adds that with nearly 80% of its 1.2 billion population without life insurance, even a marginal increase in penetration would result in a huge increase in volumes.

The expected hike in Foreign Direct Investment (FDI) cap to 49% is also expected to boost industry growth.

Source: ET

New Jeevan Sathi

Times are changing and so are the needs. LIC, as an insurer, has always been sensitive to the changing needs of the people and introduced products to suit these from time to time. While we have a wide array or products to suit every Indian, we keep on adding variety to take care of the emerging needs like Health, Pension, and Mortgage etc. The innovation and the restructuring of the product portfolio are done with a view to match people’s expectations. Our latest offering is Jeevan Saathi Plus which is the first of its kind in the industry. Unlike our earlier Joint Life plan Jeevan Saathi, which was on Conventional platform, this one is on ULIP platform and offers the insured the benefits of market-linked return.

Jeevan Saathi Plus is a plan wherein the couple can take the insurance cover on their lives under a single policy. The proposer under the plan shall be called Principal Life Assured (P.L.A.) and the other life (wife/husband) shall be called Spouse Life Assured (S.L.A.).

P.L.A. may pay premiums regularly at yearly, half-yearly, quarterly or monthly (ECS) intervals over the term of the policy. The minimum annualized premium (other than monthly through ECS) will be Rs.10,000/- increasing thereafter in multiples of Rs.1,000/-. The minimum monthly (ECS) premium will be Rs. 1000/- increasing thereafter in multiples of Rs. 250/-. Alternatively, a Single premium can be paid subject to a minimum of Rs. 40,000/- . P.L.A. will also have an option to make additional investments under the policy through Top-up premiums.

The P.L.A. can choose the level of cover (Sum Assured) for both lives within the limits, which will depend on whether the policy is a Single premium or Regular premium contract, age and the amount of premium agreed to pay.

For regular premium policies, in case of death of the P.L.A. during the term of the policy, the all future premiums including outstanding premiums, if any, are waived and units equivalent to an amount equal to all future premiums, including outstanding premiums, if any, shall be credited to the policyholder’s fund provided life cover is in force. The policy, however, continues even thereafter and the risk cover on the life of S.L.A. remains intact.

In case of the death of either the P.L.A. or S.L.A. the surviving life shall have an option of not taking the death benefit but can transfer the same to the policyholder’s fund and same may be withdrawn anytime.

On both P.L.A and S.L.A. surviving or either of P.L.A or S.L.A. surviving the date of maturity an amount equal to the Policyholder’s Fund Value is payable. When the policy comes for maturity, the policyholder (i.e. P.L.A. or if P.L.A. is not alive, then S.L.A.) may exercise “Settlement Option” and may receive the policy money in instalments spread over a period of not more than five years from the date of maturity.

Q & A

Question:
How much discount I can expect from my LIC agent. I have come to know from one of my friend that he has bargained on his first premium for his first LIC premium. He had paid almost half of the actual premium. What do you offer.


Answer:
Discounts or Sharing of Commission from Agent is illegal in India under Section 41 of Insurance Act 1938 . This is quoted on each life insurance proposal form available in India.

No doubt everyone wants to save money and this is our right, but commission is the only insensitive to the agent for his services & hard work so when you are asking rebates they will always suggest you a plan in which they are getting higher commissions. And then this is very much possible, that he/she will not suggest you a plan that will be of your requirements.

Now a days there are so many other things you should demand from an agent.
That is

1. how much is he educated,
   
2. is he/she able to understand your actual needs,
3. does he/she have full knowledge of product
4. is he/she able to help you for premium deposits and other services

At last I would like to ask a simple question from the investor still willing to take discount on premium.

Let say I have paid to x% on your premium and I have not earned any thing from you now.
Will you give me back x% of your returns from LIC on maturity or death?
if your answer is no. WHY?

If you are asking discounts on premiums from insurance advisers, you are generating black money in the market.

Jeevan sathi Plus From LIC

LIC is launching Jeevan sathi Plus plan no 197 with effect from 29th june 2009.

Features

1. This is a Unit linked plan wherein Husband and wife can take insurance cover on their lives under a single Policy.
   
2. Age range to take this policy is 18 to 55 years and the Policy term choice is for 10 and 20 years.
   
3. Principal Life assured (PLA) and spouse life assured (SLA) can opt for seperate amount of risk cover.
   
4. Principal life assured can decrease risk cover of self and spouse anytime once duirng the policy year.
   
5. The policy can be surrrendered after three years. The policy fund will be paid as the surrender value and There is NO Surrender charge
   
6. Partial withdrawl permitted after 3 years . But 10% in case of single premium and 2 annual premiums in case of regual premium to be maintained in the fund.
   
7. Reinvestment of claim amount available (on Death of Principal life assured) with partial withdrawl facility without any restriction.
   
8. Option to continue risk cover without paying premiums after three years.
   
9. Four funds that are available with equity
   
   exposure. One fund is to be chosen while taking the policy.
   
10. Switching from one fund to another is permitted. Four switches in a year are FREE and additional switches done in a year carry a charge of Rs100 per switch.
    
11. Top up premiums can be paid in multiples of Rs 1000 and carry an allocation charge of 1.25% . The maximum total top up premium which can be paid is 25% of total premiums paid.
    
12. Lapsed Policy can be revived in a span of 2 years from date of last unpaid premium.

Maturity Benefit
The fund value of the policy will be paid to the PLA or SLA as the case is.
There is an option to recieve the maturity proceed in a settlement option.

Death Benefits

Death of P.L.A while S.L.A is alive	Sum assured is paide to S.L.A. and Future premiums to be paid are waived and is also credited to the policy fund as units and policy continues.
Death of S.L.A while P.L.A is alive	Sum assured is paid to P.L.A and policy continues
Death of P.L.A after S.L.A 's death.	sum assured of PLA + all future premiums to be paid + fund value of the policy is paid to the nominee or legal heir.
Death of S.L.A after P.L.A's death	sum assured of SLA + fund value of the policy is paid to the nominee or legal heir.
Simultaneous death of S.L.A and P.L.A	Both the sum assured's of SLA and PLA + All future premiums to be paid + fund value of the policy is paid to the nominee or legal heir.

Premium
Premiums can be paid in ECS-monthly, quarterly, halfyearly, yearly and in single mode.
Regular premium minimum 10,000 and multiples of 1000 annual for ECS minimum 1.000 and thereafter multiples of 250 No maximum limit for premium
Single premium minimum 40000 and multiples of 1000

Sum assured
Regular premium 5 times of annual premium is minimum and Maximum of 30 times for age below 40 and 20 times for age above 40 in multiples of 5000
Single premium 1.5 times of premium is minimum and maximum of 5 times for age below 40 and 20 times for age above 40 in multiples of 5000

Types of Fund
Bond fund - Secured fund - Balanced fund - Growth fund

Allocation Charges
single premium upto 15 lakhs - 4.25%
single premium above 15lakhs - 4.00%

Regular premium

Premium	First year	2 & 3 year	Thereafter
10,000 to 1,50,000	29%	5%	2.5%
1,50,0001 to 2,50,000	28%	5%	2.5%
Above 2,50,001	27.5%	5%	2.5%

Top up premium allocation charge is 1.25%

Mortality Charges
Life cover charges for Principal life assured and spouse life assured
Premium waiver benefit charge (for regular premium policy only)

Policy administration charge
First year Rs.60 per month.
Second and third year Rs 20 per month
Thereafter Rs 20 per month escalating at 3% Per Year.

Aila causes Rs 500-cr crop damage, but insurers to pay only Rs 7 lakh

Cyclonic storm Aila, which ravaged the eastern part of the country in the last week of May, has caused massive agricultural damage. But the claims under weather-based crop insurance may not exceed Rs 7 lakh.

According to informal estimates by government officials, the total damage in the agriculture and horticulture sectors is pegged at around Rs 500 crore.

Damages in the horticulture segment alone could be around Rs 300 crore, a senior government official confirmed.

State-run Agriculture Insurance Co (AIC), ICICI Lombard General Insurance and Iffco-Tokio are the three companies which offer weatherbased crop insurance in West Bengal.

However, the entire payout of Rs 7 lakh is likely to be made by AIC in two subdivisions (Contai and Egra) of the East Medinipore district, according to company officials.

Even though two of the worst-affected areas in North 24-Parganas (Bashirhat and Baduria) are covered under AIC's weather insurance scheme, there would not be any payout. Reason: The huge damage in the area was caused more by wind and tides, than rainfall. According to AIC parameters, weather-based crop insurance claims are given in areas with over 75 mm of rainfall, whereas in the North 24Parganas, the rainfall recorded by the meteorological department was only 62 mm.

In case of ICICI Lombard, the period of crop coverage expired on May 15, a little more than a week before Aila hit the state.

In case of Iffco-Tokio too, there were hardly any claims, said sources. No comment was offered by the company on the issue.

Also, in areas where AIC provides the facility, crop damage was the highest in case of sesame seeds, which like horticulture products, is not generally covered under weather insurance.

In most farms, paddy was kept in the field after being harvested, and insurance companies provide cover only for standing crops. As a result, a major portion of the summer season paddy crop was damaged in the fields, but was not covered under insurance.

At present, agriculture insurance is mostly based on area approach, like under the National Agriculture Insurance Scheme (NAIS), where payouts are made on yields in defined areas (unit area of insurance).

In view of long delays in claim settlement under NAIS, the government in 2003 had launched the Weather-Based Crop Insurance Scheme (WBCIS) on a pilot basis, giving insurance cover against losses incurred due to unfavourable weather conditions such as deficit, excess or untimely rainfall and variations in temperature. Risk firms escape payouts on technicalities

RIDING ON RIDERS

* State-run Agriculture Insurance Co (AIC), ICICI Lombard General Insurance and Iffco-Tokio offer weather-based crop insurance in West Bengal

* According to AIC parameters, claims are given in areas with over 75 mm of rainfall. North 24-Parganas recorded a rainfall of only 62 mm, thus no compensation

* For ICICI Lombard, the period of crop coverage expired on May 15, a little more than a week before Aila hit the state

* In case of Iffco-Tokio too, there were hardly any claims