Aegon Religare’s ‘Rising Star Plan’ to tap child ULIPs market

This new policy is not quite different from the old schemes we saw before 1st September

ULIPs for children have long played on the anxiety of parents to ensure financial security for their kids in their absence. Now, Aegon Religare Life Insurance has launched 'Rising Star Plan'.

Like most other child plans, it offers typical features including premium waiver and income benefit. In the premium-waiver rider, the company continues to pay the premium in the event of the parent's demise. Income benefit pays an amount equal to the annualised premium to the beneficiary, at the start of every policy year following the date of death, till the end of the policy term.

But this comes at a cost and increases the mortality charges in the plan which is ultimately paid by the policyholder. The brochure does not specify the mortality charges for different ages, though it is a very important aspect especially for child ULIPs. Be sure to understand its impact, as the higher mortality charges will reduce the funds that get into investments.

Child ULIPs are not necessarily the best way to secure your child's future. The charges in the plan are in line with other new ULIPs. The new ULIP charges are equal or more than that of the old ULIPs over a period and hence there is no real reduction of charges. Which is why a term insurance cover coupled with SIPs in a diversified equity mutual fund is likely to do the job better.

One of the investment options is called 'Invest Protect', in which premiums are invested heavily in equities in the initial years of the policy and partially switched to debt funds systematically in the last three years of the policy. There is no true 'investment protection' possible with this strategy.

Premium allocation charge:
This is a percentage of the premium appropriated towards charges from the premium received. Year 1: 4.40%, Year 2-5: 3%, Year 6-10: 2% Year 11 onwards: 1%. The top-up premium allocation charge is 3%.

Policy administration charge: At the start of every policy month, from the first policy year, Rs60 will be deducted monthly through cancellation of units. This charge escalates at 3% per annum at the start of every policy year, from the second policy year. This formula remains fixed throughout the policy term.

Minimum annual premium: Rs20,000 per annum in annual mode, Rs30,000 per annum for other modes.

Policy term: 25 years minus the age of the child at entry.

Premium pay term: Equal to the policy term.

Minimum sum assured: (for age less than 45 years) is higher of 10 times of regular annualised premium or (0.5 x policy term x annualised premium); (for age greater than or equal to 45 years) higher of seven times of regular annualised premium or (0.25 x policy term x annualised premium).
Maximum sum assured: 30 times regular annualised premium.

Entry Age: Parent (life assured), minimum - 18 years, maximum - 60 years.
Child (nominee), minimum one day, maximum - 15 years.

Maturity age: (maximum) 75 years.

Premium payment frequency: Yearly, half-yearly, monthly.


Did Reliance General approach IRDA to reduce health premium?

A hefty increase of 500% in mediclaim premium led to a low renewal ratio for Reliance General. It is believed that the company approached IRDA for reducing the premium

Reliance HealthWise policyholders don't seem to be in a mood to pay a hefty 500% premium increase even if it means losing a four-year waiting period on pre-existing conditions. Following the sharp hike in the premium last year, Reliance is losing customers rapidly. It may even have approached the regulator to rollback its premiums, though the company denies it.

According to sources in the insurance industry, "Reliance General's renewal ratio for health insurance has been at 10% after the almost 500% increase in premiums last year. In recent months, after Vijay Pawar (CEO and ED) took over the charge, the renewal ratio has increased to 25%, but it is still way below the industry average of the 90% renewal ratio."

However, according to Sharad Goel, Reliance Capital Corporate Communications, "These numbers are incorrect and much below the actual figures." A source in the insurance industry said, "Reliance General approached the Insurance Regulatory and Development Authority (IRDA) recently to reduce the premiums because of its impact on business. IRDA refused to do so, saying that once the premium is hiked due to the adverse claims ratio, it cannot be reduced." Reliance, however, has denied approaching IRDA to reduce premiums.

An increase in the premium by almost 500% in Reliance HealthWise has put off customers. (Read, 'Unhealthy rise in Reliance HealthWise premiums') The full impact of the unhealthy increase in premium by almost 500% will be seen over a period. Reliance General's market share has been reducing in almost all segments. (Read, 'Reliance General market share plunges by 40%')

According to a broking house, more than 70% of Reliance customers have switched to another insurer due to Reliance's premium hike. "Due to the losses made in the past three years, Reliance had to cover up the same and revise the premium that resulted in the hike. The market reaction to the hike has led Reliance to revamp its portfolio of health policies. As a result, Reliance health insurance is not perceived as competitive in the market," said an official at another broking house.



Nagesh KiniFCA

7 years ago

It was only to happen sooner. Initially to capture market share they came out with rock bottom premiums and liberal payout of claims.When they bled red they reversed only to lose ground.
IRDA should investigate into the hefty hikes and put an immediate end to the malpractices..


7 years ago

I do not know about others. But today I got a rude shock when i tried to renew my policy which used to cost be around Rs. 5000.00. Now they are asking for Rs. 20000.00. I do not think any one in their real senses would renew the policy with Reliance. I had bought the policy keeping long term future in mind. I feel cheated by the company now! I am glad they are loosing market share. I urge people to think twice before buying any reliance product. You will be cheated or left cold some day. I have learnt my lesson the hard way.


7 years ago

Your comments on the Reliance Health Policy are great.
I myself have switched over to Apollo Munich and reduced the policy coverage from Reliance to a great extent.
Somehow or the other I am not comfortable with business practices of ADAG group. I have lost heavily in the Reliance Power IPO also. I do not invest in their stocks now.

Nagesh KiniFCA

7 years ago

INITIALLY reliance ins. entered the with rock bottom rates to capture a high market share. IRDA ought to have ascertain the veracity of the computation, whether they were viable at all. then they went on entertain claims left right and centre taking them bleeding red. the hike of 500% is an outcome of this folly.
Now that RI has come to IRDA for a reduction it should immediately call for a TOTAL due diligence ab initio from low premia, high claims, premia hikes and now lowering them. The hoax needs to be put an end to. earlier the better.

Smart tricks

SBI Life has launched a low-premium traditional plan, called Saral Life. Yearly premium starts from Rs4,000 and no medical test is needed. As with other traditional plans, this too would offer low returns and low cover. SBI Life has also launched a unit-linked insurance plan (ULIP) for children called Smart Scholar for which the premium allocation charge is 6% in the 1st year, 4.5% in the 2nd...

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