IRDA is reviewing products with low or reducing insurance as it intends to enforce a certain premium-to-sum-assured ratio. Approval of Bajaj Allianz Guaranteed Maturity plan seems to be direct breach of this stated intension
The Insurance Regulatory and Development Authority (IRDA) had stated that it was reviewing products with insignificant sum assured (SA), decreasing SA and products offering SA as specific rate of return on the premium paid. This was confirmed by IRDA chairman J Hari Narayan when Moneylife asked him at CII Insurance Summit in November 2011.
According to the Mr Hari Narayan, “The Direct Tax Code (DTC) will enforce a certain premium-to-sum-assured ratio. We want to ensure traditional insurance products comply with the new requirements.”
Bajaj Allianz Guaranteed Maturity Insurance Plan, which was launched earlier this week, seems to contradict IRDA’s stand. The SA is five times the single premium for the first policy year and for subsequent years it will reduce to 1.25 times of the single premium for age-at-entry less than 45 years and 1.10 times of the single premium for age-at-entry 45 years and above.
The policy term is 10 years. In short, the SA of five times the single premium in the first year will reduce for the remaining nine years to be only 1.10 to 1.25 times the single premium. How did IRDA approve such a low as well as decreasing SA plan? IRDA intension is only on paper and no action till now. How long does it take to review the insurance component of existing products? What are the chances that IRDA will get rid of existing toxic products with dubious insurance component?
Moneylife cover story (issue dated 1 December 2011) had highlighted toxic traditional product in existence since 2003. It is HDFC Life ‘Savings Assurance Plan’. For starters, there is no real insurance component. In case of death during the first year of policy commencement, a basic benefit of 80% of the premiums received will be paid to the nominee of the life assured. How did IRDA allow such atrocious clause?
In case death after the first year, the amount payable on death will be the ‘lesser of’ (not higher of): The sum assured plus any attaching bonuses or the total of the premiums paid plus interest at 6% annually compounded. The annual premium payable for a sum assured of Rs1 lakh is Rs12,016 for policy term of 10 years. Based on the current bonus level, the customer will earn less than 2% return on investment unless there is decent terminal bonus which is not declared at this time. This is the first product HDFC Life needs to get rid off.
IRDA had also woken up to the ill effects of highest NAV product mis-selling. They were closely looking at all the highest NAV products available in the market. “We are looking at all messages around these products—how these products are sold, what the customer understanding is of the product, etc. We feel there is mis-selling in highest NAV products,” Mr Hari Narayan had said.
Moneylife has maintained all along that ‘highest’ NAV unit-linked insurance plans (ULIPs) give suboptimal results and cause confusion for customers. The most important point to understand is that insurance companies are guaranteeing NAVs and not returns! It created confusion in the minds of customers about the kind of returns which could be expected with these products. Most of the investment would be in debt instruments and the returns no better than any other similar investment.
The progress for scrapping the highest NAV plans seem to be on the back-burner after loud protests from insurance companies, who feel that more disclosure should be the solution instead of showing the door to the plans.
The Standing Committee on Finance has rejected the UID Bill, which was aimed to enforce bio-metrics enabled Aadhaar identification system on all residents of India
In a major set-back to the Manmohan Singh led government, the Planning Commission and Nandan Nilekani, the former chief of Infosys, the Parliamentary Standing Committee on Finance, headed by Yashwant Sinha has rejected the National Identification Authority of India Bill (NIA Bill).
So far, the UIDAI has issued over 5.75 million UID numbers across the country. The cumulative revised budget estimates of the Aadhaar project, which was launched in 2009, is Rs1,660 crore for FY11 and FY12. The UIDAI has already spent more than Rs556 crore on the scheme.
Considering all the overlaps, objections, and the serious differences within the government on the NIA Bill, the Standing Committee is going to call for a completely fresh legislation.
The finance ministry, the home ministry and the Planning Commission, further strengthening the committee's reservations to the big-ticket scheme, have also opposed the project.
The Parliament witnessed some tense moment while the report was being submitted. There was a spat between Congress' member of Paliament (MP) Rashid Alvi and Bhartiya Janata Party's (BJP) SS Ahluwalia. Mr Alvi accused the BJP MP of leaking a paper regarding the Bill to some reporters. Both the leaders also disagreed over the term 'residents' and 'citizens' as an eligibility for the UID or Aadhaar number.
Earlier last month, Home Minister P Chidambaram opinioned that the biometric census done by the Aadhaar project does not pass security criteria. The Home Ministry even claimed that UID number can be generated without any verification of documents, mandatory for it.
In addition, the Registrar General and Census Commissioner also categorically said that the job of collecting biometrics data should be left to them.
While the government does not have to go by the committee's recommendations, given the tense political situation, the United Progressive Alliance (UPA) government may not want to take any more chances, especially after the 10-days deadlock in the Parliament over foreign direct investment (FDI) in retail.
Earlier Bengaluru-based Col (Retd.) Mathew Thomas of Citizens' Action Forum and VK Somasekhar, founder-trustee of Grahak Shakti had filed a potential class action suit against the Unique Identification Authority of India (UIDAI).
According to the petition, there was urgency in filing the suit as the defendants (UIDAI, Union Govt, and Deputy Chairman, Planning Commission) intended to complete major part of the Aadhaar enrolment before the matter was decided by the Standing Committee on Finance and presented before the Lok Sabha so as to compel the Parliament to support the project with retrospective effect as money has already been spent.
"Every day the UID project continues, several crore of rupees of taxpayers' money would be lost. Apart from this, the continued gathering of people's data would be an unacceptable security risk both to the people and the nation its self. It is respectfully submitted that while millions are dying of hunger, starvation and deprivation be it children, women, men or aged persons, spending such huge amounts of money to benefit and make it possible for many to pocket the money at the expense of the citizen in the name of Aadhaar even without any legislative sanction is illegal. Plaintiffs are affected by the conduct of the defendants and so are many millions of Indians," said Col (Retd.) Thomas and Mr Somasekhar in the petition.
Apart from external affairs minister SM Krishna, his senior Congress colleague N Dharam Singh and JDS state unit president HD Kumaraswamy, who succeeded him as chief ministers, have been named in the FIR, Lokayukta ADGP Satyanarayana Rao informed the media
Bangalore: A first information report (FIR) was registered against external affairs minister SM Krishna and two other former Karnataka chief ministers by the Lokayukta Police today on a private complaint alleging that they facilitated illegal mining during their tenure, reports PTI.
Apart from Mr Krishna, his senior Congress colleague N Dharam Singh and JDS state unit president HD Kumaraswamy, who succeeded him as chief ministers, have been named in the FIR, Lokayukta ADGP Satyanarayana Rao told PTI.
Eleven bureaucrats have also been named in the FIR filed under various sections of the Prevention of Corruption Act, Forest Conservation Act, Forest Act and Minerals and Metals Regulation and Development Act (MMRDA) and IPC.
Admitting a private complaint filed by TJ Abraham on 3rd December, Lokayukta Court judge NK Sudhindra Rao had directed the police to investigate it and submit a report on or before 6th January.
The complainant has alleged Mr Krishna, who was the chief minister from October 1999 to May 2004, and Mr Dharam Singh and Mr Kumaraswamy permitted illegal mining for pecuniary gains.
Mr Abraham, a city-based social activist and a businessman, had submitted that his complaint was based on the report on illegal mining presented to the government by then Lokayukta Santosh Hegde in August.
With this, four former chief ministers are facing Lokayukta police probe based on private complaints. BS Yeddyurappa was released on bail last month after his arrest on a private complaint alleging irregularities in land denotifications to benefit his family members.