Gold consumption is part of India's culture and tradition and the country is the world's largest consumer of gold, followed by China
India's innate fascination with gold continues as Indian households hold gold worth over 950 billion which in turn is around 50% of the country's GDP in dollar terms, says a report. Gold consumption is part of India's culture and tradition and the country is the world's largest consumer of gold, followed by China.
Indian households hold 18,000 tonnes of gold which represents 11% of the global stock and worth more than 950 billion, around 50% of India nominal GDP in dollar terms, says global research firm Macquarie.
According to Macquarie, 7%–8% of India's %329 billion in household savings was held in gold in 2009-10. With gold evolving as a store of value more than an adornment, rising gold prices have also contributed towards increasing Indian households' "perceived wealth".
Macquarie used the term "perceived wealth" because most Indian households are reluctant to part with their gold jewellery and other gold holdings, even at times of crisis, as doing so is considered a stigma, it said.
Notwithstanding the 64% cumulative rise in gold prices, (in rupee terms) between January 2010 and September 2011, gold consumption in India in volume terms (including jewellery and net retail investment) is still holding strong.
During the first three quarters of 2011, there has been a 5% year-on-year increase, on the top of 72% year-on-year growth registered in 2010, Macquarie said. Although during the quarter ended September, 2011, gold demand in volume terms declined 23% over last year largely owing to sharp depreciation in rupee, high gold prices and inauspicious times according to the Hindu calendar.
However, in value terms "India still remains the world's largest consumer of gold as of September, 2011, in tonnage terms," Macquarie said. The report further noted that rising gold consumption is one of the reasons for a depreciating rupee.
"Gold imports alone have contributed nearly 40 basis points to the 130 basis points widening in India's current account deficit between FY'08 and FY'11," Macquarie said. Gold imports are the third-largest of India's merchandise imports after crude oil and capital goods. In 2010, about 92% of the supply of gold in India was met through net imports and the rest through recycled gold and other sources.
One of the factors behind the weakness in rupee is the high current account deficit of India, while most other Asian countries have a current account surplus. In addition, it is running a very high fiscal deficit and domestic growth is slowing, Macquarie said.
"We expect the current account deficit to remain high at 2.8% of GDP for FY2011-12," Macquarie said.
Bajaj Allianz’s plan offers partial withdrawal after 5 years and life cover throughout the term of 10 years
Bajaj Allianz Life Insurance has launched a new unit-linked plan—Guaranteed Maturity Insurance Plan (GMIP)—that provides at maturity at least 200% of the amount invested along with a secure life cover. With the minimum single premium of Rs5,000, the product is the lowest single premium ULIP available in India, thereby making the product affordable for all income segments.
GMIP is a simple to understand plan in which the single premium invested will be kept in denominations of Rs5,000 each called as “Guaranteed Maturity Certificate (GMCs)”. The provision of GMCs facilitates liquidity and preserves guarantee since partial withdrawals can be made only in units of GMCs i.e. in multiples of Rs5,000. Thus, the investor will not have to compromise on the guarantee of other GMCs which he/she holds till maturity.
The plan does not have any allocation charge and 100% of the single premium paid by the policyholder goes into the unit account. The plan offers partial withdrawal after 5 years and life cover throughout the term of 10 years.
Premium Paid are eligible for tax benefits under section 80C and maturity benefit , death benefit, and surrender value are eligible for Tax benefits under Section 10(10)D of the Income Tax Act subject to the provision stated therein. A maximum of 1/3rd of the GMCs taken at inception can be withdrawn during the whole of the policy term.
In case of death benefit, higher of prevailing sum assured reduced by the value of the units withdrawn through partial withdrawals from fund value in the last 2 years prior to death or fund value as on date of receipt of intimation of death.
Mediclaim portability started in October 2011. While the response has been lukewarm, there are early trends that poaching of young and healthy customers will be the strategy. Who is winning on that score?
As expected, despite newspaper advertisements from the Insurance Regulatory and Development Authority (IRDA) extolling the ease and benefits of mediclaim portability, the insured are not biting the bait so far. Private insurance companies, who have the most to gain, have got less than 100 proposals each. Insurers are targeting the young and healthy segment and are using their ‘right to underwrite’ to refuse old and unhealthy customers.
Moneylife investigation shows that the frontrunner in portability race is Apollo Munich. According to one private insurer, “Out of the total requests for policyholder medical and claim history, 90% are from Apollo Munich, which is surprising.”
The same sentiment is shared by one government-owned insurer. According to it, “Apollo Munich is targeting our young customer segment. They are working through agents who work for both the insurance companies.”
According to another private insurer, “We have a few customer requests trying to go out from our company; many are going to Max Bupa.” Moneylife has found that Star Health has also received good number of portability proposals. Only a few of Max Bupa’s customers are trying to go out when compared to the decent number of portability requests to join this company.
The question is why are standalone health insurers gaining? IRDA allows general insurance agents to also work for one standalone insurer. It means these agents are now diverting business from a general insurer to a standalone insurer. What could be the reason for agents to deflect the business? The commissions are same for renewal or new business; is there some other incentive offered by the standalone insurers? We don’t know. It could also be ex-agents of the insurance company who have details of clients and are using it for luring them with the portability bait.
It has also to do with company strategy to gain business from portability. Apollo Munich homepage has a link at the top to a portability guide, portability form, application form, etc. It has free portability reminder link on the homepage. Apollo Munich will send you a reminder email 60 days before your renewal along with a helpful guide on portability. In short, the company has taken proactive steps to gain from portability, which is a smart business strategy.
This nudge in business comes at a time when bancassurance exposure draft from IRDA brings cheer to standalone insurance companies. At present, one bank can sell products of any one insurer in the life and non-life segments. The draft allows one bank to tie up with one life, one non-life and one standalone health insurance company. This is a paradigm shift for standalone health insurers like Max Bupa, Apollo Munich and Star Health.
Interestingly, Moneylife has found some murmurs among private insurers about delays in getting medical and claim history from government-owned insurance companies. Some are saying it is just few days delay, instead of seven days it is taking 10-12 days. Others are saying that it is taking some about of follow-up to ensure government insurers are giving the information in timely manner. One insurer points out that it is taking longer than expected and they are handling it behind-the-scenes by talking with IRDA.
The volume of portability requests is low and hence the issues related to getting information from existing insurance companies have not reached a level of alarm. Once portability requests grow, it will be interesting to see if the delay in getting information from existing insurers leads to chaos. You can bet on it.
Some insurers have been tight-lipped about portability and did not want to divulge anything to Moneylife.
According to Fali Poncha, insurance industry veteran and executive chairman, IRICS Insurance Broking, “Despite best intentions on the past of the IRDA and a long journey of over a year, portability is likely to be more illusory than a reality. The need for portability is very real and IRDA’s recognition of the same is a step in the right direction. The real hurdle to making portability a success lies in the fact that the terms and conditions relating to pre-existing diseases (PED) and time-bound exclusions are not common to all insurers.”
Be prepared for a bumpy portability ride. It will work for simple and straightforward cases especially for young with no PED. For others, it is just an illusory offer from IRDA.
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