Buying health insurance is still a little understood area for most people. But it is important that they try to learn how the mediclaim system operates and make the best use of it, according to speakers at a Moneylife Foundation seminar
The cost of healthcare is galloping and with insurance firms lobbying to increase their premiums, it is becoming more essential for those seeking to buy insurance to have a better understanding of how to go about it. This was the simple consensus at a well-attended seminar on "How to get the right health insurance cover at the right price", hosted by Moneylife Foundation today.
"Buying health insurance is like getting into a marriage," said Mahavir Chopra, head-eBusiness and Personal Lines at Medimanage. "Because, it's usually difficult to find the perfect product for all your requirements just like it is impossible to find a perfect match in marriage." Medimanage is a dedicated health insurance broking firm.
Mr Chopra explained that if insurance companies were to provide everything that a customer requires, the cost of such a product would be way higher and unaffordable. Hence, he emphasised it is essential to focus on getting the major burden covered instead of trying to get many more items included.
In this respect, he listed the following issues to be kept in mind: The younger you are you have more choices; it is desirable to look for the basics and cut out the frills; clearly understand the inclusions and exclusions as described in the policy; it is necessary to go long term and keep the maximum renewal age in mind; knowing the company from which you are buying the insurance.
Mr Chopra also cautioned against making comparisons of any sort, whether it is between public and private companies, or between policies and premiums.
Sudhir Sarnobat, co-founder and CEO of Medimanage, pointed out that medical insurance in India is restricted to hospitalisation coverage and needs to evolve to preventive healthcare. For instance, no insurance covers routine health checkups, whether it be eye, dental, or any periodical tests.
"You must be hospitalised for a minimum 24 hours; you should have taken active treatment; and there should be major diagnosis, to substantiate any insurance claim today," Mr Sarnobat explained. "The company will verify family history, symptoms, investigations before making the payment of the claim."
He also referred to the careless attitude towards medical insurance wherein people wait to fall ill before actually bothering about getting insurance. "They think 'I am healthy, I will buy when I need it'." Like in life insurance, there are those who also expect payment even in claim-free years, he pointed out.
Mr Sarnobat explained that with the breakup of the joint family system, an increase in lifestyle diseases, the increase in individual income levels and the choice in health insurance products, individuals should not hesitate to spend on the cost of mediclaim. Or, better still focus on preventive care by improving one's lifestyle.
Introducing the subject at the opening of the seminar, Debashis Basu, trustee, Moneylife Foundation, said healthcare costs are galloping at 20% per annum, which is twice the rate of inflation. Insurance companies, unable to cover costs, were lobbying for an increase in premiums. In this harsh demand-supply health insurance environment, the biggest victims were senior citizens, individuals, employees of small and medium enterprises, consultants, who could not benefit from group health insurance schemes.
In fact, less than 15% of the population have some form of healthcare. He stressed that while insurance is for unforeseen contingencies and not an investment for returns, more and more people should get themselves insured.
It would have been a useful part of the portfolio if the NSE small-cap index was constructed properly. But is it? Besides, the combined illiquidity of small-caps and the ETF itself would be a double whammy for investors. Stay away from the ETF; try DSP BlackRock’s Micro Cap fund
Benchmark Asset Management Company has filed an offer document with the Securities and Exchange Board of India (SEBI) to launch the Smallcap Benchmark Exchange Traded Scheme (Smallcap BeES), an open-ended listed index plan.
The investment objective is to provide returns that, before expenses, closely correspond to the total returns on securities represented by the CNX Smallcap Index, by investing in these securities in the proportion to the weightage they have in the index.
The scheme proposes to allocate 95%-100% of assets in stocks in the CNX Smallcap Index, with a medium- to high-risk profile, and invest up to 5% of assets in money market instruments, G-Secs, bonds, debentures and cash-at-call with low risk profile.
The launch of a small-cap ETF is a big step in expanding the range of products that can help you in proper allocation of assets. According to research, there are usually price anomalies in the small-cap segment from which big gains are possible. Even die-hard advocates of efficient market theory, Eugene Fama and Kenneth French, who believed that one cannot beat the market, later discovered that one could hold an edge in picking small-cap stocks. But it one wants an exposure to small-caps, it is not possible so easily. DSP BlackRock's Micro Cap fund (it is smaller than 300 companies by market cap) has done very well since its inception in May 2007, recording a 10.78% gain compared to the 2.95% on the benchmark index.
To take advantage of the higher risk-reward equation that small-caps offer, buying an index ETF would be a good option. But is the CNX small-cap Index the right option? The index has stocks like 3i Infotech, Adhunik Metaliks, Allied Digital Services, Alok Industries, Arvind and BF Utilities, all of which suffer issues related to corporate governance, erratic growth or business model.
If the stock index is not worked out properly, the performance of the fund would be affected as the benchmark fund proposes to invest exactly according to the weightage of stocks in the index. Moreover, CNX Smallcap Index has only just been launched, so we won't have any past performance to compare with or to analyse the index.
While investing in small-cap stocks, investors must keep in mind another aspect, that of liquidity. Despite their best efforts, fund companies often find themselves saddled with small stocks that have low liquidity. In a bull market, many small stocks appear to be good bets. They come with a promise of powerful earnings momentum. Their small size ceases to be a concern amid all the hyperbole. But liquidity in a small-cap stock disappears in a jiffy.
When the market is down, it does not take much for investors to flee from such stocks and for liquidity to dry up. When that happens, there may be redemption pressures too on the ETF. The ETF selling to raise cash, to meet redemption, will depress prices further. So, if at that stage you want to sell your ETFs, you will have to sell it at far below the NAV, because the buyers for the small-cap ETF-like in the case of small-cap stocks-will disappear overnight.
We believe that the best option is to take an exposure to DSP BlackRock Micro Cap fund. It's not exactly micro-cap, not even small-cap, but that's among the few good options available. And of course, hold it for the really long term. Small-cap ETF is too new and unproven to risk your money.
The Bombay High Court, earlier this month, ordered the resumption of proceedings against Helios and Matheson in a case relating to the fraudulent acquisition of vMoksha
Helios and Matheson (H&M), the Chennai-based company that is involved in a battle with vMoksha Technologies over the fraudulent acquisition of its subsidiaries, appears to have failed to inform the stock exchanges of a recent Bombay High Court order restarting proceedings against H&M and its chairman.
Moneylife has learned that till date H&M has not informed either the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE), about the High Court order on 6 May 2011, setting aside the Sessions Court order and allowing a revision application by vMoksha's founder Rajiv Sawhney against H&M.
High Court judge JH Bhatia also ordered all the involved parties to appear before the Additional Chief Metropolitan Magistrate on 4 July 2011. (Read, 'Bombay HC allows proceedings against Helios & Matheson')
Mr Sawhney has written a letter to the NSE alleging H&M's involvement in conspiracy, cheating, fraud and forgery against vMoksha. He has also mentioned that H&M has not updated the stock exchanges about the court order against the company and he has appealed to the exchange to de-list the company and bar its directors from raising funds.
The case dates back to 2005, when shareholders of vMoksha, an IT company, decided to sell its three units. The company appointed PriceWaterhouseCooper, who found out H&M as potential buyer for vMoksha's three units. On 11 May 2005, both the companies signed a share purchase agreement under which V Ramachandran, chairman of H&M, was to pay $19 million for the three units. Of this, $4 million was to be paid as the earn-out to Pawan Kumar, the then chief executive of vMoksha and former CEO of the controversial DSQ Software. Although, Pawan Kumar and his family members were also stakeholders in vMoksha, Mr Sawhney later bought out their stake as well.
Mr Kumar was allegedly hand in glove with H&M. Mr Sawhney soon realised that he had been kept in the dark about many aspects of the deal.
For instance, he found that instead of receiving $19 million, a bank account had been 'fraudulently' opened in the State Bank of Mauritius in vMoksha's name and used to borrow $13.5 million, using a fake board sanction and false entries. That money was remitted to H&M ostensibly for subscription of redeemable preference shares on 28 June 2005.
Moneylife has previously reported about the bruising battle between H&M and Rajeev Sawhney. (Read, 'Helios & Matheson Under The Scanner') Moneylife has also reported on how the market regulator, the Securities and Exchange Board of India (SEBI), had fined H&M Rs50 lakh for making false announcements to influence the stock price and hiding information about acquisition of vMoksha. (Read, 'Helios & Matheson fined Rs50 lakh by SEBI for financial irregularities; vMoksha co-founder also penalised')
A detailed e-mail query was sent to H&M, the NSE as well to the BSE for their comments. The message was not answered till the time of publishing the story.