The firm, which is into ‘network selling’, has tied up with Max New York Life Insurance Co Ltd and Royal Sundaram Alliance Insurance to market insurance products via a subsidiary, through its more than four lakh distributors
AmSure Insurance Agency Ltd—a joint venture between Hollard Insurance and Amway India Enterprises—is leveraging the latter’s large distribution network across India to market insurance products. AmSure, a corporate agent of Max New York Life Insurance, started network marketing of insurance products a few years back. AmSure sells six products including life insurance, health insurance, and unit-linked insurance plans (ULIPs).
When Moneylife contacted an Amway distributor, he said that Max New York Life conducts training sessions for all distributors on a periodic basis. The company also has dedicated insurance planners certified by the Insurance Regulatory and Development Authority (IRDA). Insurance companies’ teaming up with corporate agents is not something new. Many private insurance companies have granted corporate agency licenses to numerous firms with some of the agents openly encouraging bizarre pyramid schemes.
A person who wishes to join Amway need not necessarily buy an Amway product or an insurance policy. To become an independent Amway distributor, one has to become a member by coughing up Rs995 as registration fee. The distributor can avail of 20% discount on all Amway products. The distributor has to shell out Rs495 annually to renew his membership.
The amount of premium paid by a policy holder is the business volume (BV). If a distributor attains Rs16,500 worth of BV, he gets 6% commission on this amount. Every Amway product also has denominated points. For a total BV of Rs16,500, a distributor gets 300 denominated points, which works out to the monetary equivalent of Rs55 (Rs16,500/300).
The commission on the BV can range from 6%-21%, on a graded basis. The commission is directly credited to the distributors’ bank account through the electronic clearing system. The distributors can carry on their marketing across all cities where Amway offices are situated. Unlike other pyramid schemes where the commission depends on new registrations, Amway’s commission structure is based on business volumes of its products. For instance, existing Amway distributors can buy Amway products and attain the requisite business volume to earn commission. According to Amway distributors, the commission structure is also applicable for insurance products.
“Referral fee is allowed in income-tax parlance. Many big insurance agents don’t pay any tax. One cannot prove that the person has only referred and not taken part in selling insurance,” said a certified financial planner. An email query sent to Max New York Life remained unanswered.
Amway India started its operations in 1998 and has over 450 fast-moving consumer goods (FMCG) products in nutrition, wellness, beauty, home, and commercial products on offer. These products are exorbitantly priced and sold through fat commissions and pyramid schemes. The company is a member of the Indian Direct Selling Association (IDSA). The company claims that it has 4.50 lakh independent Amway business owners. Amway officials could not be contacted for immediate comments.
As we said yesterday, the correction will continue to weigh on the market—unless the Sensex goes above 17,600
The market was range-bound in the afternoon session and ended the day with a marginal gain. The Sensex ended at 17,472, higher by 12 points (0.07%) and the Nifty ended at 5,245, higher by 15 points (0.28%). The bourse started on a higher note, taking a cue from strong Asian markets. However, gains were pared in the morning session and the index traded in a low range till mid-afternoon, when it touched the intraday low.
Although the market rebounded from there, trading was range-bound till the close. Asian stocks rose on Wednesday, as better-than-estimated results from Elpida Memory Inc and Apple Inc boosted confidence over the global economic recovery. Key benchmark indices in China, Indonesia, Japan, South Korea and Taiwan rose by 0.47% to 1.8%. Key benchmark indices in Hong Kong and Singapore fell by 0.29% to 0.52%. US stocks ended higher on Tuesday after some good earnings reports. The Dow rose 25 points (0.23%) to 11,117. The S&P 500 gained 9 points (0.81%) to 1,207. The Nasdaq rose 20.20 points (0.81%) to 2,500. Greece has started discussions with other EU members and the International Monetary Fund to chalk out a plan worth €40 billion-€45 billion for it to exit the debt crisis. The country is struggling to narrow its budgetary deficit with painful austerity measures to convince the market that it will not default on its debt.
Closer home, the prime minister said that India’s economy is expected to grow at 8.25% in the current fiscal. The Reserve Bank of India (RBI) has said that it will continue using cash reserve ratio (CRR) as a monetary tool. The central bank wants to return to the monetary policy that existed before the financial crisis. It does not want to use the statutory liquidity ratio (SLR) as a monetary policy tool, calling any increase in this measure “retrogressive” as it is a safety pool of money and not a policy instrument. On de-regularising bank saving rates—currently fixed at 3.5%—the RBI said that it has yet to take a decision over this; but it expressed its concerns that de-regularising rates would destabilise the system. Foreign institutional investors were net sellers on Tuesday of Rs156 crore. Domestic institutional investors were net buyers of Rs101 crore. The rupee was strong due to the impact of a weak dollar against major currencies.
Tata Consultancy Services (down 0.5%) will provide Rolls-Royce with a range of engineering services. Electrotherm (up 5%) plans to buy 100% shareholding of Ram Electro Cast at a consideration of up to Rs850 million. Shiva Cement (up 6%) plans to set up a 25MW power plant. Royal Orchid Hotels (up 0.6%) announced that it has opened its new 4-star hotel, Royal Orchid Central Grazia, at Vashi, Navi Mumbai. Unitech (up 2.4%) plans to merge its arms Aditya Property and Unitech Holdings with it. It will demerge its infrastructure and telecom operations into a separate company. GMR Infrastructures (up 2.3%) the holding company of the GMR Group, said that it has added GMR OSE Hungund Hospet Highways and GMR Chennai Outer Ring Road as subsidiary companies. Videocon Industries (up 1.6%) may sell up to 26% stake in the company to foreign players. It said that “many foreign companies are interested in it” and it will dilute stake “when a good price will be available.” Essar Shipping Ports & Logistics (up 3.5%) will invest Rs500 crore and handle 16 million tonnes per annum (tpa) of dry bulk cargo at Paradip Port in Orissa. After completion of the project by April 2011, the port’s total terminal capacity will increase to 30 million tpa.
The company will look beyond the power sector and plans to bid for NHAI projects
Sunil Hitech Engineers Ltd, which has been focussing on the power sector, now plans to bid for road projects. The company will target schemes from the National Highways Authority of India (NHAI) through joint ventures.
“This year we plan an executive meeting to think about venturing into other sectors. We may probably foray into the road sector,” said Sunil Gutte, joint managing director, Sunil Hitech. However, the plans are still at a preliminary stage.
Mr Gutte said that the focus was on both build-operate & transfer projects as well as contract-based road projects from the NHAI. “I think it (the road sector) is a very promising sector. This year’s Budget has given a major impetus to road projects. Also, as a sector, it provides ample and never-ending opportunities. A number of big road contracts are likely to come up for bidding,” said Mr Gutte.
In order to bid and qualify for NHAI projects, the company plans joint ventures with other companies. “We may look for joint ventures—both domestic and international—to bid and qualify for these projects,” said Mr Gutte.