Insurance
IRDA bans ULPs it cleared a year ago!

IRDA has finally woken up to the ill-effects of ULPs, which we again highlighted four days ago. The question to ask is why these products were even allowed in the market? It gave insurers ample time to make a killing by charging 80% premium allocation charge in the first year as in the case of Reliance

One would think that 80% premium allocation charge in the first year would ring alarm bells with the regulator, but the Insurance Regulatory and Development Authority (IRDA) had approved one such universal life policy (ULP), launched less than a year ago. It is Reliance Super InvestAssure Plan which had 80% premium allocation charge for the first year premium.

But ULPs, which were being promoted as an alternative to unit-linked insurance plans (ULIPs) had a field day for a year. Yesterday IRDA announced an overnight ban on all ULPs. In the past IRDA gave advance notice to insurers, but companies have taken undue advantage of this and have pushed these products by positioning them as a "limited period offer".

"After examining the complaints, the authority is satisfied that universal life products need a better regulatory framework for protecting policyholders' interests," IRDA said. Interestingly, Moneylife had reported just four days ago on 18th October that IRDA will go after toxic ULPs; Reliance will be hit the most. (See: http://www.moneylife.in/article/76/10112.html).

ULPs come mainly from four companies - Max New York Life, Aviva Life, Bharti Axa Life and Reliance Life. Companies had built in high commissions into these plans. In a way, they contain the shortcomings of both traditional plans and ULIPs - high costs and pathetic returns.

Reliance Super InvestAssure Plan had 80% allocation charge for first year premium while Max New York Life Secure Dreams plan had 30% of the same. There are additional charges like policy administration charge and fund management charges that eat into investor premium.

According to industry sources, insurers anticipated that IRDA would order ULPs to be wound up effective from the end of year. This anticipation only prompted them to go all out and push this toxic product with even more vigour. It happened for ULIPs and now for ULPs. It will happen again in the future unless IRDA is proactive and not reactive.

User

COMMENTS

Melvin Joseph

7 years ago

If you look at regulators, they are very slow in coming out with regulations which will protect the customers.They will first do enough for the industry to grow and then regulate! After Mutual Fund, Life Insurance was taken up(to some extent) by the regulators. Now lot of things are happening in Micro finance sector.Lot of things to be done in several areas like MLM companies selling Life Insurance in bulk!Poor customers are taken for a ride.

gerard

7 years ago

The solution to ban comm has not worked for the retail/ small investor in the case of MFs, as proven with the limited partispation in this rally by retail.
Instude institute a fair payout that will be good to all stake holders. insist on the education qual of the agents to be atleast grad + spl couse level. this will strength the system and make it more robust.

B V Jagtap

7 years ago

The sinners of mis selling are not only be prohibited but they should have to be punished for waging with the hard earned money of the common men in society, in which they live and enjoy.

Roopsingh

7 years ago

@DJ-friend-everything is of demand and supply-people are paying 50k for a mobile phone which gives hardly 50 rs when sold to Bhangarwala(scrap)-people know it very well but still they are paying it so huge price for its some superior features-people pay price of Rs one lac for one sq feet of space in mumbai-with same facilities which are available at 1k in smaller towns-This is all demand and supply-when supply gets ample prices will cool down-so this is all to be bothered by consumer and seller-even putting price controls do not work bcos people tend to pay more prices in black market when supplies are short-so there is no remedy for every product to be controlled-see the wickedness of IRDA-they banned ULIPS when people got fully aware of lootings in ULIPS plans-before that when ULIPS were populkar IRDA did not object to its misselling-this is all INTELLIGENT MARKETING GAME-AGAR AAPKO DAARU NAHI CHAHIYE TO AAPKO WINE JARUR PILAYENGE-par jeb jarur khali karenge-in last "customer be aware "bcos u are pray to many wolfs in this jungle"and one has to care of himself-

REPLY

Ravindra Shetye

In Reply to Roopsingh 7 years ago

We are not talking about a product to be used for a couple of years (or Months?) and then to be sold to Bhangarwala.
'Jeb jarur khali karenge' is exactly what the regulator is supposed to prevent.
The whole comparison is totally unrelaterd in terms of the type of product, sales methods, utility or any other aspect.

shankar

7 years ago

All the commission should be banned from insurance product as is done in Mutual fund.The insurance companies,the illiterate/idiot MBA's working as Sales Manager in Insurance companies and the dull agents are looting the illiterate people by selling all those nonsense product....Very good IRDA

arun khera

7 years ago

From its inception the so called structured exotic products like ULIPs , ULPs or any other hubrid investment products have targetted the financial illiteracy of the investors and more often than not, the issuers have succeeded in that. The sad part is that what becomes known to a person of ordinary prudence remains unknown to regualtors. Why did IRDA take so much of time to ban this. It seems that the regulatory authority is also hand in glove with the issuers for reasons best known to them. There is a need for a super autonomous regulator fo regulate the regulators

REPLY

Ravindra Shetye

In Reply to arun khera 7 years ago

The secret lies in the abnormally high commissions paid, which temps the agents to sell such a product of dubious benefits as an insurance as an excellent Insurance AND Investment product. I believe it is only an Investment and little insurance, if any.

Arun Khera

In Reply to Ravindra Shetye 7 years ago

I do agree with you that the high commissions is the reason that the agents push these schemes, but the issuers need to be aware that such un ethical acts will adversely affect their reputation and ultimately their business. IRDA and issuers, both should introspect and ensure that in a country like ours where ordinary public is not aware of intricacies of such products, it puts additional responsibility on Companies to rise above their commercial interests and practise ethical values.

Melvin Joseph

7 years ago

IRDA has proved once again its inability to judge a plan, at the time of approval. Long back, it stopped its own approved acturail funded 'toxic' ULIPs. Now it is the turn of ULPs.This has really helped agressive companies to market these products and maximise sales within the available time.
Now my question is why IRDA silent on Traditional plans, where companies offer around 40% as first year commission.The customer is getting peanut bonuses on maturity!If some changes can happen in this segment, lot of customers will be benefited by this. But the so called LIC agents will be the most affected and so is LIC.

REPLY

Harsha

In Reply to Melvin Joseph 7 years ago

I would like to point out the surrender value in the case of an endowment plan. If a customer pays a premium of Rs.10,000/- for 3 years and request for surrender, he will be getting 30% of the premiums paid excluding the first year. After paying 30,000/-, he will get back 30% of 20,000/- ie. 6000/-!!
Please calculate the entry charges in this policy?Is it 100%??
The regulator should protect this wonderful product till all our customers are fooled again.

Ravindra Shetye

In Reply to Harsha 7 years ago

I suppose IRDA is unaware of this loot???? Or made unaware?????

Roopsingh

In Reply to Harsha 7 years ago

I fully agree to you and Naina about whatever has been written about LIC-to add further LIC is biggest LOOTER which has become so TAGADI(POWEFUL)because it has sucked blood and sweat of poor man bcos they were unabale to pay premiums for policies which were sold to them by agents who have lied for gettin HEFTY 40% commission-LIC became TAGADI bcoos it has been guaranteed by GOI and given tax benifiits for premiums(policies have been sold only due to tax benifits since inception of LIC and not bcos of insurance needs)-so its beyond doubt that our so called welfare govt is biggest LOOTER of peoples hard earned money-and GOI has contributed most in rise in inflation -bcos lot of tax revenues have been misused ex-CWG and various other white elephant projects-i also agree that ML has been always reluctant to write against govt departments which are symbols of corruption and incompetency-so i will ask Sucheta madam to be clear spoken on these matters-govt is not GOD sent which are to be worshipped for every negligence and corruption-this country will prosper onluy if we remove BRASTACHAR from govt deptts and peoples money remains with people and tax burden is reduced which is 5 times of real earnings in hands-service tax,education cess etc etc-some day our govt will levy AIR INHALATION SERVICE TAX-bcos it is a commodity which can generate huge tax collection-MERA BHARAT MAHAN(BRASHTACHAR ME)_BAKI SAB ME BARBAD no.1-

Naina

In Reply to Harsha 7 years ago

Harsh Ji, precisely that is my point.After paying 30,000/- in three years the surrender value is so .Now compare it with earlier"avtaar" of ULIPs and ULPs.This is despite the fact that there is no "flexibility" and "liquidity" and GROWTH of investments component.

Jyoti

In Reply to Melvin Joseph 7 years ago

If ULPs are "toxic" then TRADITIONAL PLANS are poison.Which has serious side-effects in "financial" health.This is "DADAGIRI" of IRDA and stepmotherly treatment to these 4 companies.

Ravindra Shetye

In Reply to Jyoti 7 years ago

The traditional plans are at least Insurance. They do not pretend to be anything supernormal.

Yogesh

In Reply to Melvin Joseph 7 years ago

Melvin Sir IRDA will not make any changes because LIC is dependent on these types of plans.These types of policies are "DAY LIGHT ROBBERY".If IRDA is indeed serious they should first ban Traditional plans. By the way if this sort of banning spree continues we will be left only with Term plans[and that too will be sold ONLINE only].This is a classic case of hypocrisy on part of IRDA and Media.

K sudhakaran

7 years ago

sir,I have nothing to comment except to repeat the conclusion of your article."It will happen again in the future unless IRDA is proactive and not reactive."

oriental

7 years ago

irda fought & won the war based on false ego, false assumptions and falsified data at that time.

better late than never!

Rachit

7 years ago

Such are our national level insurance regulators. I do not think these are qulified .... doesnt seems to have passed tenth standard? Forget qualification these guys doesnt even seems to have common sense. Who selects these fools? these bloody chutiyas.

Sorry to use such harsh words.

Ravindra Shetye

7 years ago

It only goes to show that it is really difficult to decide who is worse, IRDA or SEBI.

shankar

7 years ago

Very good IRDA....... The insurance agents who have no knowledge of any financial things /products will now go to hell..They only see big money now what will they see....great job IRDA..
the IRDA should also make it mandatory that good people with more knowledge about financial products join Insurance industry and the fees of exam should also be made high as is done in AMFI.Then only the genune people will come to the industry

REPLY

DJ

In Reply to shankar 7 years ago

Shankar - Sir why do u feel that raising fees for exams will ensure only genuine people will come to the industry. I find this argument flawed.
The issue here is about IRDA permitting & later retracting permission for these products. They are the guys who need to be answerable in the first place.There is no need to malign the poor insurance agent in the process. yes no doubt all insurance agents are not all white & clean but they will sell whatever they are allowed to sell by law
Why is it only that people think about morals & selling togetther when it comes to insurance & financial produts. Why is no noise created when market yard dalals get 200% margins betn the farmer to the end user or your TV cos charges you 50K for a TV set which costs 10K to manufacture. What about genuine people in these industries or about customer loss & welfare here

Roopsingh

In Reply to DJ 7 years ago

@DJ-friend-everything is of demand and supply-people are paying 50k for a mobile phone which gives hardly 50 rs when sold to Bhangarwala(scrap)-people know it very well but still they are paying it so huge price for its some superior features-people pay price of Rs one lac for one sq feet of space in mumbai-with same facilities which are available at 1k in smaller towns-This is all demand and supply-when supply gets ample prices will cool down-so this is all to be bothered by consumer and seller-even putting price controls do not work bcos people tend to pay more prices in black market when supplies are short-so there is no remedy for every product to be controlled-see the wickedness of IRDA-they banned ULIPS when people got fully aware of lootings in ULIPS plans-before that when ULIPS were populkar IRDA did not object to its misselling-this is all INTELLIGENT MARKETING GAME-AGAR AAPKO DAARU NAHI CHAHIYE TO AAPKO WINE JARUR PILAYENGE-par jeb jarur khali karenge-in last "customer be aware "bcos u are pray to many wolfs in this jungle"and one has to care of himself-

Foreign fund inflows up despite Vodafone tax issue: CBDT

Mumbai: The tax dispute with telecom major, Vodafone, has not impacted foreign fund inflows into the country which, on the contrary, has increased substantially, reports PTI quoting a top income tax official.

"The issue (Vodafone tax liability) has not impacted foreign funds inflow," Central Board of Direct Taxes (CBDT) chairman, S S N Moorthy, told reporters on the sidelines of an event here today.

"Foreign funds inflows have increased in 2009-10 as compared to 2008-09," the official said.

Mr Moorthy's assertion came in the wake of a section of India Inc voicing apprehensions that the huge tax liability raised against Vodafone could discourage multi-nationals from investing in India.

The income tax (I-T) department has finalised its tax liability claim against Vodafone at around Rs12,000 crore, he said.

"It (the tax liabilities) is around Rs12,000 crore," the CBDT chairman said in response to a query.

The IT department is likely to issue a fresh tax demand notice to Vodafone amounting to around Rs12,000 crore today.

The Supreme Court had on 27th September issued notices to the tax authorities directing them to decide within four weeks the liabilities of Vodafone.

It had refused to offer any immediate relief to the company, which has challenged the Bombay High Court order allowing the government to tax the company's $11 billion deal with Hutch.

The Vodafone case will come up in the Supreme Court on 25th October.
 

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Personal finance Friday

Tata Mutual Fund floats Tata Fixed Maturity Fund Series 29 Scheme A; Kotak Mahindra MF launches Kotak FMP 370 Days Series 10; HDFC Mutual Fund unveils HDFC FMP 100D October 2010 (3); Sharekhan ties up with US-based academy to offer stock market courses

Tata Mutual Fund floats Tata Fixed Maturity Fund Series 29 Scheme A

Tata Mutual Fund has launched Tata Fixed Maturity Fund Series 29 Scheme A, a close-ended income scheme. The investment objective of the Scheme is to generate income and/or capital appreciation by investing in debt and money-market instruments having maturity in line with the maturity of the Scheme.
The Scheme offers growth and dividend (payout). During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The exit load for the Scheme is nil. The Scheme opens on 22nd October and closes on 27th October. The minimum investment amount is Rs10,000.
The benchmark index for the Scheme A (371 days maturity) is CRISIL Short Term Bond Fund Index.

Kotak Mahindra MF launches Kotak FMP 370 Days Series 10

Kotak Mahindra Mutual Fund has launched Kotak FMP 370 Days Series 10, a close-ended income scheme.
The investment objective of the Scheme is to generate returns through investments in debt and money-market instruments with a view to significantly reduce the interest rate risk.
The Scheme offers growth and dividend (payout). During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The Scheme closes on 26th October. The exit load for the Scheme is nil.
The minimum investment amount is Rs5,000. The Fund seeks to collect a minimum subscription amount of Rs1 crore.
CRISIL Short Term Bond Index is the benchmark index. Deepak Agrawal and Abhishek Bisen are the fund managers.

HDFC Mutual Fund unveils HDFC FMP 100D October 2010 (3)

HDFC Mutual Fund has launched HDFC FMP 100D October 2010 (3), a close-ended income scheme. The investment objective of the Plan under the Scheme is to generate income through investments in debt/money-market instruments and government securities maturing on or before the maturity date of the Plan. The Plan will invest 60%-100% in debt and money-market instruments having low to medium risk. The Plan will invest 40% in government securities having low risk.
The Plan offers growth and dividend (payout). During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The exit load for the Plan is nil. The Plan closes on 1st November. The minimum investment amount is Rs5,000.
CRISIL Liquid Fund Index is the benchmark index. Bharat Pareek and Anand Laddha are the fund managers.

Sharekhan ties up with US-based academy to offer stock market courses

Mumbai-based retail broking house Sharekhan Ltd has tied up with California-based financial education provider Online Trading Academy (OTA), to offer courses in stock market education in India. The curriculum will be based on OTA's hands-on coaching style to provide live trading experience to students.
All trading costs and losses, if any, incurred by the students, will be borne by OTA. The seven-day introductory course called Professional Trader India Course has been specifically designed to suit Indian trading conditions.
Sharekhan will offer brokerage discounts to students till their entire tuition fee is virtually reimbursed. It will also offer access to its recently launched Trade Tiger platform - a single online platform for multiple exchanges as well as mutual funds and initial public offerings.
 

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COMMENTS

j

7 years ago

ALL AMCs SEND HORDES OF INFO ON FMPs, BUT NEVER SEND AN INKLING OF WHAT THE RETURNS ARE / WOULD BE LIKE! WHETHER IT COULD BE -VE OR 500%?!?!?

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