At a high court hearing of a public interest litigation filed by Gaurang Damani, IRDA member (non-life) stated that health insurance draft guidelines accept that the insurer and not TPA will settle or reject health insurance claims
An Insurance Regulatory and Development Authority (IRDA) member (non-life) confirmed that health insurance draft guidelines limit the TPA’s (third party administrator) role to claims processing and not settlement. The insurance company will make direct payments to the hospital and policyholder (not through the TPA). Cheques will have to be written by the insurance company and sent to the hospital (for cashless) and to the policyholder (for reimbursement). It means that cheques cannot be held by TPAs as a float.
According to Gaurang Damani, a social activist, who has filed the public interest litigation (PIL), “TPAs are supposed to process claims, instead they’re settling claims. There are no standard guidelines to settle claims and it is left to the whims and fancies of the TPAs who are in fact not entitled to settle claims but are found to be doing so in several cases.”
Interestingly, at the hearing IRDA member (non-life) M Ramaprasad admitted that even veterinarians are appointed by the TPAs in addition to ayurvedics and homeopaths to assess cases. There have been cases where specialist doctors were not able to convince the need of specific procedure to TPA doctors, who may be well qualified in their respective field but not in the specialised allopathic stream.
Another point which was agreed by IRDA at the hearing was to make the TPA send scanned claims electronically to the insurance company to speed up the process. This is followed by LIC and hence it may well be implemented by TPAs working for general insurance companies.
Moneylife had reported that United India and New India Assurance have an incentive clause in the TPA agreement to keep claims ratio within a certain range. This is completely detrimental to the interest of the policyholder whose genuine claims can also be partially paid or rejected just so that the TPA is able to get incentives from the insurance company.
At the hearing, Mr Ramaprasad said it was logically not correct for TPAs to be paid incentives. “If we find such instances, we shall take such companies to task.'” He will be taking the issue to the General Insurance Council to decide further steps.
Gaurang Damani's petition says that in addition to the incentive clause, there is discrimination in settling insurance claims of individuals and that of corporate clients. Group claims have better negotiation power with insurance companies due to the volume of business.
According to Mr Damani, “If mediclaim policies indicated the amount an insured was eligible for specific ailments, it will ensure that they have clarity on which hospitals to go; the hospitals too would know how much they would get.” The advocate for Association of Medical Consultants (AMC) agreed to indicate the amounts for 42 standard ailments. HC has directed the petitioner to send a notice to Association of Hospitals (AOH) and Bombay Nursing Homes Association to get the range of package rates for the 42 standard ailments.
The next hearing would be on 12th February. It is understood that the IRDA chairman wants to finalize the health insurance guidelines before he demits the office in mid-February.
Actively managed schemes have delivered better returns than the index in the past. However, when in doubt, index schemes would be a preferred option
India Infoline (IIFL) Mutual Fund plans to launch an open-ended index scheme— IIFL Sensex Fund. As the name suggest the scheme would invest in the securities which are constituents of BSE SENSEX Index in the same proportion as in the index. Over 95% of the assets would be invested in equity and the rest would be invested in debt and money market securities. Passive investing is ideal for those investors who feel it is difficult to outperform the market, hence they would prefer to invest in equity mutual fund schemes that follow a passive investment strategy. However, in a recent analysis of three-year and five-year rolling periods we found that actively managed schemes beat the index by an average of two percentage points. (Read: Best Equity Funds )
Index schemes are expected to deliver returns that are close to those of the index. As the fund manager does not have to put in much effort, the cost structure of these schemes is lower than that of actively managed schemes. The cost for index schemes goes up to 1.70%; for other equity schemes, the costs are capped at 2.70% (excluding the additional expense ratio depending on the inflow from the beyond 15 cities). But despite the costs, passive investing does not seem a feasible option if you are looking for high returns. There are many actively managed schemes that have consistently performed, but one has to know how to choose the right scheme.
IIFL Mutual Fund has been in existence for just about two years. At present it has just two schemes, both of which follow a passive investment strategy. IIFL Nifty ETF, an exchange traded fund based on the Nifty index, was launched in October 2011. The other scheme— IIFL Dividend Opportunities Index Fund—is the only scheme that passively invests in the stocks of the CNX Dividend Opportunities index. These schemes have tracked the returns of their respective index with a fairly low tracking error. However, both the schemes together have amassed a corpus of just around Rs45 crore.
As far as expenses are related, the IIFL Nifty ETF has an expense ratio of just 0.25%, which is much less than other ETFs. The new scheme would have as expense ratio of 1.70%, which could go up by 30 basis points depending on the inflows from the beyond 15 cities. Both the schemes are managed by Manish Bandi, who will also be managing the new index scheme.
The scheme would charge an exit load of 0.50% if the investment is withdrawn before 30 days and 0.25% if withdrawn after 30 days but before 90 days from the date of allotment of units.
Other scheme details
Minimum Application Amount
New Purchase – Rs10,000 and in multiples of Rs100 thereafter.
Additional purchase - Rs1,000 and in multiples of Rs100 thereafter
Systematic investment plan (SIP):
Monthly option - Rs1,000 per month for a minimum period of six months.
Quarterly Option – Rs1,500 per quarter for a minimum period of four quarters.
For existing/new investors: Rs100/Rs150 as applicable per subscription of Rs10,000 and above. There shall be no transaction charges on direct investments.
The returns you get from close-ended equity schemes depends a lot on when you invest and when you exit
Reliance Mutual Fund plans to launch a series of five-year and 10-year close ended equity schemes. The equity diversified scheme—Reliance Close-Ended Equity Fund—will invest in stocks from sectors and industries of all market capitalization. The allocation to the different market caps would vary depending on the overall market conditions and the fund managers’ view. The scheme would invest over 80% in equities and the remaining in debt and money market securities. The performance of the scheme would be benchmarked to the BSE 200 index. The scheme would have an expense ratio of 2.70% which could go up by 30 basis points depending on the inflows from the top 30 cities. But would Reliance Close-Ended Equity Fund be able to deliver in terms of performance? Investing in equities over a five-year period and 10-year period is a good strategy. The returns tend to be less volatile over such periods. But how good your returns are depends a lot on when you invest and when you exit even over long periods.
We did a quarterly rolling period analysis on the Sensex over five-year and 10-year periods starting from March 1991 to March 2012. The average returns over both the five-year and 10-year period was around 12% compounded annualised. Out of the 65 five-year periods, there were nine periods where the Sensex delivered negative returns and in nearly half the periods the returns were under 8%. As for the 10-year periods, out of a total of 45 periods there were just two negative periods and in 15 periods the returns were less than 8% compounded annualised. Therefore, even if you invest for a 10-year period, there is still a one-third chance that your returns could be less than 8%. This being a close-ended scheme, there is no option to invest systematically which is the ideal way to invest in equities. Therefore a lot would depend on the valuation of the market when you invest in the scheme and the market scenario at the maturity of the scheme. Your returns could vary considerably depending on these factors.
A few schemes of Reliance Mutual fund have performed well in the past. Many of its schemes were among the top schemes as per returns for CY 2012. Below are the returns of the schemes of Reliance Mutual Fund over a three-year period.
Krishan Daga would be the fund manager of the scheme. He has over 21 years of experience in the capital markets and has been with Reliance Mutual Fund for nearly five years. He currently manages the banking exchange traded fund—R*Shares Banking Exchange Traded Fund and two index schemes—Reliance Index Fund-Nifty Plan and Reliance Index Fund-Sensex Plan along with two other schemes.
Read all mutual fund research done by Moneylife, here.