Moneylife Foundation held an exclusive, in-depth session on insurance needs at 50 years of age. Personal accident, life, health, car, travel and home insurance needs were discussed in detail. Insurance cannot cover everything and hence there is need to be financially prepared
Moneylife Foundation hosted its 166th seminar titled “Insurance at 50+” conducted by Raj Pradhan, who has written several cover stories for Moneylife magazine. He gave insights to an eager audience on insurance options for life and health insurance, which gets difficult and expensive with an increase in age. He spoke about Personal accident (PA) and added that PA cover premium remains unchanged, even though most products are offered only till 70 years. Apart from this some car insurance products offer premium discounts for customers in the age group of 35 to 60 years. Also overseas travellers should consider buying health insurance as medical treatment can be unaffordable abroad.
There are few mediclaim products in the market which do not have any entry age limit, but insurance companies reserve the right to underwrite. It means that if you are a senior citizen and not in best of health, you will have a difficulty in buying health insurance. If it is made available, then it will be a high premium loading. Life insurance can also be offered at a higher age, but at a price. The premiums you see for online term plans may not be the premium you pay after your medical tests.
Accrording to Mr Pradhan, PA policy is inexpensive and a must-have. Critical illness can be thought as an add-on to your mediclaim. It will pay lump-sum irrespective of your expenses on medical condition. It is useful as many times after hospitalisation you may not be able to work for an extended period and mediclaim will not cover beyond hospitalisation expenses and few months of pre and post hospitalisation expenses.
A major part of the audience was interested in the concept of super top-up. Mr Pradhan pointed out that it is a good product for those who are already covered by a corporate or retail health insurance policy and wish to go for a higher coverage. This product is also useful for someone without mediclaim but is willing to pay for medical expenses up to the high deductible barrier (Rs2 lakh or Rs3 lakh) before the super top-up policy kicks in to pay for additional medical expenses.
Mr Pradhan gave the audience a checklist for understanding what a mediclaim policy offers which should be used before you buy the product. Understanding of room rent limit, co-pay, sub-limits, permanent exclusions, pre-existing diseases, claims loading, no-claims-bonus and day care procedures can help to narrow down your search. A cheapest mediclaim may not be the one with the least features and the most expensive mediclaim may necessarily not have great features. There is a need to study the policy for making an informed decision.
He explained that a senior citizen mediclaim is an option for those who missed the boat of buying health insurance at a younger age. It obviously comes with lot of restrictions and you may end up paying a higher premium. Portability of your regular mediclaim policy can be difficult at older age even if you don’t have any medical ailment.
Mr Pradhan even said that life insurance needs at 50 are also high due to dependent children and spouse, too, as the children may not be self dependent and may be still studying. There are several parameters to consider for finalising on the right term life insurance product. Your life insurance needs will go down as you get near retirement. Annuity is another product from life insurers that gives a fixed stream of income throughout the life of the policyholder. Your nominee will get back the purchase amount, but you will not be able to get it back during your lifetime.
Corporate credit stress is reflected by the Indian banking system’s gross non-performing assets (NPA) and restructured loans, according to India Ratings & Research
India Ratings & Research (Ind-Ra) expects corporate credit stress for FY14 to be at levels comparable to FY13, under its base-case. However, in a stress case scenario, the levels could be significantly higher and are likely to be driven by 22 corporates (in BSE 500), with outstanding adjusted debt (including guarantees) of around Rs1,267 billion. The levels could be even higher if the currency depreciates further. Corporate credit stress is reflected by the Indian banking system’s gross non-performing assets (NPA) and restructured loans.
As in the past, Ind-Ra’s sector-specific outlook has provided substantial early warnings with respect to corporate stress levels. The agency’s corporate sector ‘credit outlook for 2013’ covers 22 sectors, including infrastructure. For the purpose of this analysis, the sector-specific outlook is mapped to the outstanding industrial loans of the Indian banking system.
Around 30% of the industrial loans in Indian banking belong to the sectors which are on a negative or stable-to-negative outlook. The proportion of industrial loans in sectors with a negative outlook shot up in 2012 to 28% of outstanding credit (2011: 6%). Gross NPA rate increased to 2.8% in FY12 (FY11: 2.3%), subsequently rising to 3.7% in Q3FY13.
Apart from these 22 large corporates, the overall quality of industrial loan assets in FY14 will be driven by the current status of the industry and impact of the six ‘Risk Radar’ factors identified by Ind-Ra. The factors are: a) foreign exchange, b) investment in pre-election year, c) possible benefits of commodity price correction, d) domestic private consumption, e) interest rate transmission and f) export levels. The single most important factor limiting corporate stress level at the FY13 levels is the assumption that the rupee-dollar exchange rate will remain between Rs53 per dollar to Rs56 per dollar. If the rupee depreciates (for a sustained period) significantly above the Rs56 per dollar level, gross NPA levels may shoot increase significantly above the FY13 levels.
Global risk aversion may be creeping up, as signalled by a rise in sovereign credit default swaps spreads. A further rise in global risk aversion, driven by a possible curtailment of quantitative easing, may severely impact the rupee-dollar exchange rate. Enhanced risk aversion in the past has often resulted in a reduction of exposure to emerging market assets by global investors. Given the sovereign’s higher dependence on forex inflows to fund the current account deficit, any such scenario may potentially depreciate the rupee to unseen levels. In such a scenario and given the impending volatility which comes with it, corporate stress level may be significantly higher than the FY13 levels.
Mid-cap indices and funds have shown lower volatility and higher returns compared with large cap indices and funds says a study conducted by the ratings agency
Ratings agency CRISIL has said mid-cap equities not only provided higher returns compared with large-cap stocks over longer period, but shares in mid-caps were also less volatile.
The CNX Midcap Index returned 23% annualised returns over the 10-year period ending March 2013, while the CNX Nifty Index returned 19%. Volatility (risk) measured by standard deviation for the CNX Midcap Index was also lower at 25% compared to over 26% for the CNX Nifty Index. Even over other periods of analysis, viz., three, five and seven years, the mid-cap index was less volatile while it outperformed the CNX Nifty Index over a five year time-frame, CRISIL said.
CRISIL Research also looked at the past 10 calendar years to test the consistency of this hypothesis. Over this period, the CNX Midcap Index has outperformed the CNX Nifty Index in six out of 10 years. On the volatility front, the mid-cap index has been less volatile in 50% of the observed instances, especially from 2007 onwards. In other periods too, the difference in volatility between the two indices was marginal.
According to a study conducted by the ratings agency, mutual funds too displayed similar traits. Small and mid-cap equity funds were less volatile than large-cap funds across three, five and seven-year timeframes. The former also generated higher returns over multiple periods, the study said.
Another observation from the CRISIL study was that while the small and mid-cap category outperformed, not all individual funds gave higher returns. The difference in returns between the best and worst performing fund varied from 7% in the 10-year period to 19% in the three-year period, thus reiterating the need for investors to make well-researched investment decisions.
Mukesh Agarwal, president, CRISIL Research, said, “The study also evaluated the reasons behind this trend. Firstly, the CNX Midcap Index is more diversified vis-à-vis the CNX Nifty Index at both sector and stock levels. While the CNX Midcap Index has exposure to 29 industries, the CNX Nifty Index constitutes 17 industries. In terms of concentration, there are only four industries with more than 5% exposure in the mid-cap index compared to nine for the CNX Nifty Index. Greater diversification and lower concentration help lower the risk for the CNX Midcap Index. Secondly, the CNX Midcap Index has a 23% allocation to defensive sectors (which are less volatile) such as consumer staples and pharmaceuticals, while the CNX Nifty Index has 10% allocation to these sectors.”