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INSURANCE-
The Need
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Make it a policy to have
an Insurance Policy LIC Policies and NRIs: FAQs Related Links |
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Insurance is no longer a mundane source of protection from life and
accidents. Innovative products are offering investment
opportunities. Money saved is money earned.
Companies offering general insurance products-like medical, housing, motor, and industrial insurance-have more than 150 products to sell. But awareness is even lower than for life insurance products. Complains M. Chainani, 61, Managing Director, Mavich Insurance Service: ''General insurance companies have failed to educate the customer about its products, and agents have little incentive to market them aggressively because of the low commission rates.'' It is obvious that companies like the General Insurance Corporation (GIC) lack the requisite marketing skills. Claims S.K. Mahapatra, 58, General Manager (Marketing), GIC: ''GIC will shortly, for the first time, launch savings-linked insurance products as a strategic intervention to market personal insurance products coupled with the purpose of mobilising small savings within the country.'' Don't hold your breath. |Whether the public sector companies like it or not (they don't), change is round the corner. In fact, it has been in the air since 1993, when the R.N. Malhotra Committee on insurance sector reforms was set up. Without going into the policy flip-flops, it does appear that the general insurance sector will soon be opened up to private-and foreign-competition. It goes without saying that the potential is immense: life and non-life premiums add up to a paltry 2 per cent of India's Gross Domestic Product-well below the global average of 8 per cent. Bridging that gap excites insurance companies. Says Dalip Verma, 45, CEO, American International Group: ''Indians have a high savings rate, and insurance companies have immense potential to tap savings through a combination of products. The LIC is going to face more competition than the GIC in terms of offering new products.'' What does this mean for you-the consumer? BT examines what lies in store for the insurance mart in the future. And how you can maximise your returns. PRODUCTS. Insurance companies will introduce more term-policies. These policies provide protection for a specified time-frame, and do not offer any returns. Says M.N. Gopalakrishnan, 35, Associate Vice-President (Insurance), Business Consultancy Group: ''New firms will aggressively market term-assurance policies which will cover the simple requirements of the investor.'' In effect, term-policies translate into a low premium outgo for the consumer. Which frees money for other investment vehicles. Currently, term-assurance constitutes only 1 per cent of the total number of policies issued by the LIC versus 15-20 per cent in the developed countries. Apart from the plain-vanilla term-assurance policies, the insurance firms will also offer consumers a choice of products with low premiums. In the US, for instance, the Principle Financial Group offers a First-To-Die Policy. Under this policy, a couple pays 1 premium for covering the lives of 2-and the survivor receives the claim. The end result: the premium is low. Says Principle Financial Group's Sachdev: ''The introduction of new products, and competition will bring down premium rates.''
The dismantling of the fixed-returns regime will also usher in an era of the judicious balancing of the portfolio of an investor through a combination of risk-cover and investment products. For instance, the GIC is planning to offer a savings-linked insurance scheme. According to the plan, the GIC will collect an additional premium on personal insurance policies-such as motor insurance, burglary insurance, or holder insurance-whereby the insured will get a return at the end of a specified period. Predicts Kamesh Goyal, 33, Manager, KPMG Peat Marwick (KPMG): ''In future, insurance companies will offer policies to match the policy-holder's risk-profile.'' Another significant window of opportunity is the pension contract. Although these are a part of the life insurance business, the LIC's pension business is negligible. The Indian market needs a variety of choices. For instance, the options could range from indexed annuity (the returns are linked to certain indices targeted to beat inflation) through immediate annuity (the investor makes a lumpsum payment for future returns) to deferred annuity (the investor chooses his own repayment schedule for retirement or old-age pension). The potential is immense: the annuities business is $725 billion (Rs 3,081,250 crore) big in the US. Like their counterparts abroad, the new insurance firms will offer specialised products for niche segments: disability products, workers' compensation insurance, renters' coverage, and employment practices liability insurance. The policy offered by general insurance companies covers merely 100 weeks of disability, which is inadequate. Insurance companies estimate that 1 out of every 6 individuals is expected to face some sort of disability for 3-5 years in a lifetime. Warns KPMG's Goyal: ''The prospects of an individual facing permanent disability at the prime of his age are more gruesome than death.'' Indeed, the trend of buying assets, instead of hiring or leasing them, translates into a rich potential for non-life insurance products, where the current penetration is low. The scope of new products is also immense in the general insurance category. Says Anthony Jacob, 39, the CEO of the Royal & SunAlliance Insurance's India Liason office: ''With the opening up of the market, the entry of joint venture partnerships, increased marketing activity, and tapping of new customer segments, the general insurance industry could witness a compounded growth of 25 per cent over the next 5-10 years.''
CHANNELS. Insurance companies will get savvy in distribution. They have to if new companies are to compete with the armies of agents deployed by the LIC and the GIC. Like banking, insurance too is moving towards a round-the-clock mode globally. In fact, banking and insurance will, eventually, merge, as the banks have greater retail reach and higher contact with the consumer than insurance companies. Points out Priya Suri Dhawan, 31, Assistant Vice-President (Insurance), 20th Century Finance Corporation (TCFC), which has a tie-up with Canada Life Assurance Co.: ''Banks with large retail networks will be able to service the customer in each district, including the rural areas.'' Another eventuality is the rise of specialised insurance intermediaries, which will represent the insured rather than the insurer.
What will help is technology. In fact, it will be the cutting-edge. Smart cards will store information about an individual's policy, which could be retrieved by, for instance, a hospital, a doctor, or by a motor-repair garage. Reasons TCFC's Suri Dhawan: ''The backbone of success will be technology, customer service, and innovation.'' Adds Mavich Insurance Service's Chainani: ''Despite innovation and easy storage of information, the real test for insurance firms will be in technological development. The service-provider needs to be technology savvy.''
The Malhotra Committee has estimated that the average penetration level of life and non-life insurance in the country is about 22 per cent, indicating that a vast majority of the rural population is not covered. While 52 per cent of the LIC's total business comes from rural areas, through a variety of products like the New Janraksha, and mandatory life insurance cover through bank loans, the GIC offers as many as 26 products out of its portfolio of 150 products through a combination of cattle policy, crop policy, silk worm policy et al, specifically for the rural areas. The reasons for the low insurance coverage lie in the high level of population-48 per cent-falling below the poverty line. Additionally, the operational costs in rural area are higher compared to urban areas. Despite this, the new insurance entrants are hopeful of covering the vast tract of rural masses. Says Suri Dhawan: ''There is tremendous potential for growth in rural areas. The new companies will tap these areas too because that makes sound commercial sense.'' All this will, eventually, increase the comfort-levels of the consumer vis-a-vis insurance. Long relegated to being a seller's market, the insurance sector will, hopefully, be driven by buyers. And the greater flexibility and options that lie in store will encourage the investor to plan for that, God forbid, rainy day. ( source: business-today) LIC Policies and NRIs: FAQs
How can an NRI pay the premium under the policy ? The manner of payment of premiums under the policy is as follows. a) For Rupee Policies on NRI's *By direct remittance from abroad through Banking Channels in approved manner (preferably by Indian Rupee drafts drawn in favour of LIC of India) or by remittances through postal channels like Foreign Money Order. * By payment out of funds held in Non-Resident (External) Account or Foreign Currency (Non- Resident) Account with a Bank in India. * By cheques drawn by Non- resident policy holder on Bank Accounts held in India in his own name (either solely or jointly with another member of the family) whether or not the account has been designated as non-resident. * By cheque drawn on account maintained by resident parent or spouse of policy holder in their own name or joint names with other close relatives. * By the absolute Assignee in India wherever such policies have been absolutely assigned to a resident in India. * By the employers in respect of policies issued to their employees who have been deputed abroad by them. Premiums can be paid in cash by a resident parent or spouse of the non-resident policyholder subject to his / her submitting a letter stating the relationship with the policyholder. * Premiums due on policies issued to Indian students who have gone abroad for higher studies may be collected in Rupees out of the Resident Bank Account in India or any of their representatives in India by cash or cheques. Note: In respect of premiums collected in cash from sources mentioned in iii) to viii), it should be noted that the policy moneys cannot be paid abroad in foreign exchange but has to be paid in India only. b) For policies held on foreign register of LIC Premiums on foreign currency / Rupee policies issued by overseas of LIC and held on their foreign register should be collected only in foreign currency. What are the pension plans of LIC ? LIC at present , markets the following Annuity plans in India. Jeevan Dhara : A deferred Annuity Plan with a Gross Insurance Value Element (GIVE) embedded into it. The premium remains constant throughout the premium paying term and after vesting the Annuity remains constant. However, while there is provision for lumpsum payment on the annuitant’s death, there is no provision for dependent’s pension. Jeevan Akshay : An immediate Annuity plan with Guaranteed Insurance Sum (GIS) payable on death of the Annuitant . Like Jeevan Dhara, Jeevan Akshay does not have provision for dependent’s pension. Jeevan Suraksha : This plan has a provision for dependents pension. For Salient features and details of the above mentioned plans kindly send us your mailing address to enable us to forward the plan literature or check on web-site www.licindia.com. Related Links: Life Insurance Corporation General Insurance Corporation United India Insurance Company New India assurance Company Oriental Insurance Company National Insurance Company |
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