Personal finance Thursday

Reliance Life Insurance launches new ULIP; Regional Rural Banks to open no-frills accounts for minority students: RBI; SEBI extends ASBA facility; Credit cards transaction up nearly 29% in August 2010

Reliance Life Insurance launches new ULIP

Reliance Life Insurance has introduced a new unit-linked insurance plan (ULIP) called Reliance Life Insurance Highest NAV Advantage Plan. The new ULIP offers guarantee on maturity with the highest net asset value (NAV) per unit achieved during the entire 15-year policy term. The Plan pays the beneficiary double the sum assured plus total fund value in the event of accidental death for the base cover portion. The unique Plan also offers the benefit of up to 100% equity exposure during the policy period. The plan, which is available for customers in the age group of 7-65 years, also provides liquidity through partial withdrawals after fifth policy anniversary and loan after the completion of second policy year and top-up option to the policyholder.

Regional Rural Banks to open no-frills accounts for minority students: RBI 

To check discrimination against students from minority communities, the Reserve Bank of India (RBI) on 13th October has asked the regional rural banks to facilitate opening of no-frills accounts, which could be opened with bare minimum or no deposit, for such students seeking scholarships.In a notification issued, RBI said the Ministry of Minority Affairs had brought the matter to its notice. The RBI said, "It has been brought to our notice by ... Ministry of Minority Affairs that banks are not opening 'no-frills' accounts in favour of students from minority communities who wish to avail of the scholarships ... This is causing hardship to the applicants for scholarship schemes of the government and is inviting criticism."It added: "You (Regional Rural Banks) are advised to ensure opening of no-frills accounts or other accounts for students from minority communities and other disadvantaged groups to enable them to avail of various scholarships or other benefits offered by the government."In its annual policy statement of 2005, RBI had asked all to make available a basic banking 'no-frills' account either with nil or very low minimum balances as part of its financial inclusion project. Minority students are one of the focus groups for the purpose.

SEBI extends ASBA facility

The Securities and Exchange Board of India (SEBI) has allowed syndicate/sub-syndicate members to collect Applications Supported by Blocked Amount (ASBA) forms from the investors and to submit it to Self Certified Syndicate Banks (SCSBs). Earlier only SCSBs were allowed to collect ASBA forms, while the syndicate/sub-syndicate members collected the non-ASBA forms. Under the new scheme syndicate/ sub-syndicate members would be required to upload the bid and other relevant details of such ASBA forms in the bidding platform provided by the stock exchanges and forward the same to the respective SCSBs. SCSBs should carry out further action for such ASBA forms such as signature verification, blocking of funds etc and forward these forms to the registrar to the issue.

Credit cards transaction up nearly 29% in August 2010

Transactions worth Rs6,259.4 crore were carried out in the country by credit cards during the August-month, a growth of 28.9% from the figure recorded in the same period last year.Credit card transactions during August 2009, were at Rs5,817.5 crore, according to the figures released by the Reserve Bank of India.
The number of credit cards in circulation have, however, declined by nearly 14% to 1.9 crore as on 31 August 2010, from 2.2 crore in the same period last fiscal.
During the first five-months of the fiscal, the total transactions carried out via credit cards increased 18.8% to Rs29,024.8 crore, as against Rs24,427.3 crore in the April-August period of 2009-10.Meanwhile, debit card transactions in August was up by 42.3% to Rs3,321.1 crore, as against Rs2,333.5 crore in the corresponding month last year. There were 20 crore debit cards in use in the country as on 31 August 2010, up over 29% over the figure of 15.5 crore in the year-ago period. In April-August period, the total transactions carried out by debit cards jumped by 44.2%, to Rs14,288.6 crore, from Rs9,911.9 crore in the first five-months of the last fiscal.
 

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“Cost of insurance should come down with PPN”

G Srinivasan, chairman and managing director of United India Insurance, spoke to Moneylife’s Raj Pradhan on the various issues facing the insurance industry and his company’s growth plans

Raj Pradhan (ML): Please tell us the current situation in the cashless imbroglio between PSU insurers and hospitals.

G Srinivasan (GS): We had started with 250 hospitals on the Preferred Provider Network (PPN) and now it is over 500 hospitals in four cities. We aim to add many more hospitals. There was initial resistance, but we have made good progress for even corporate hospitals in cities other than Mumbai. The cost of insurance should come down over a long period of time with PPN.

ML: Why do group insurance policyholders still enjoy cashless facility at corporate hospitals which is denied to individual policyholders? The CAG audit report shows PSU insurers suffering huge losses in group insurance during 2006 to 2009.

GS: We have a lot of pricing flexibility with group insurance. If our experience is bad, we can increase premiums or curtail benefits. If group insurance policyholders want cashless (facilities) at all hospitals, we charge more premium on renewal. If they accept our PPN, we give premium discount. The CAG audit finding was always known to us, but not to (the) market. During the tariff era we used to get high premiums for fire, engineering, marine (insurance), etc. We would cross-subsidise health insurance. With de-tariffication, the rates for lucrative segments came down, but health insurance cross-subsidy remained for some more time. We are now in a tight market and group health insurance premiums have increased.

ML: Have commissions come down for group and individual mediclaim policies?

GS: The commission rates are same for individual mediclaim policies, but have been reduced for group mediclaim policies due to losses.

ML: Do you offer lifelong renewals for mediclaim? Many private insurers do not offer lifelong renewals.

GS: We cannot deny renewal if the policyholder has decided to continue. The regulator is clear that the insurance company is not supposed to say ‘no’. Moreover, premium increases have to be in-line with IRDA (Insurance Regulatory and Development Authority) product filing.

ML: There have been recent changes for claims-filing period reduction from 30 to 7 days. Will it cause inconvenience to policyholders?

GS: It was already implemented by a few companies in the market. We are starting to enforce the same to have control over claims. When the policyholder is admitted to a hospital, we need to know so that we can talk with doctors, do our investigation. The time limit for submission of claims should not be too long. If there are genuine reasons for delay the policy conditions can be waived at various levels. It will help in fraud control. If there are post-hospitalisation bills, they can be submitted as separate claims later.

ML: There are reports of PSU insurers coming up with a new policy for cashless facility at corporate hospitals. Are you planning any other new product?

GS: We will file for a ‘premium’ product for cashless (facility) at corporate hospitals in a month. We have filed for two new products — each for health and motor. The health products are totally new for different segments, while motor products are variation of existing products. We want to bring innovative products like ‘top-up’ policies which are doing very well. We currently have about 150 products that include 10 health products.

ML: How strong is the TPA case against four PSU insurers that is pending with the Competition Commission of India (CCI)?

GS: It is not a serious issue. We are talking about back-office work; not products or the pricing competitive spirit. The reason to go for one TPA is for more efficiency of claims processing. It is not an area where CCI would like to step in. Moreover, we are not moving all businesses to common TPAs immediately. It will take a number of years for it to evolve. The existing TPAs will continue to get partial business.

ML: Are the plans of LICHFL Financial Services to collect Rs1,000 crore of United India Insurance premiums in one year too ambitious?

GS: LICHFL Financial Services carries a strong brand name and has the potential to scale up fast. We have a vibrant economy with huge potential. Even though they are starting at the retail level for different general insurance sector businesses, they will move to the corporate level soon and will be able to sell group insurance policies. United India Insurance will provide the training, capacity-building and technical expertise.

ML: What are your views on IPOs from PSU insurers?

GS: PSU insurers’ IPOs need legislative amendment. The Insurance Act amendment in Parliament needs to be passed to give government leverage to go for IPOs. The other step is IRDA regulations that may come by the next financial year. The decision for IPOs can be taken only after these prerequisites.

ML: What is United India’s current financial situation?

GS: We are targeting a premium income of Rs6,000 crore in 2010-11, as against Rs5,000 crore achieved in 2009-10. In the first six months of this year, we have already crossed Rs3,000 crore. The company’s underwriting losses are likely to come down to Rs800 crore by the fiscal-end, as against Rs880 crore incurred in the last fiscal. The underwriting losses were pared by the increase in the fixed investment to Rs800 crore during last year. This year, we are looking at achieving fixed income of Rs850 crore. We made profit of Rs900 crore on equities trading.

The company is projecting to bring down its combined ratio to 118% as against the current 122% by the fiscal-end. We want to bring our combined ratio down at 110% within three years from now. We had the highest profit among PSU insurers in the last two years along with minimum underwriting losses.

ML: What are your growth plans?

GS: We have 100 corporate agents as of now, responsible for getting 10%-12% of the company’s entire business. We have 30,000 active agents across the country. Every office will have unit managers responsible for recruiting, training, and motivating agents. We target to have one lakh agents by 31 March 2012. The product knowledge training will be imparted to avoid any mis-selling. We also have a strong grievance redressal system in place. Anyone is welcome to personally write to me.

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Great expectations from Infosys this quarter

After a poor showing against TCS in Q1, most analysts on the Street expect Infosys (results on 15th October) to be a top performer among Tier-1 IT stocks this quarter

INFOSYS Q2

Net sales (INR): Rs66.1 billion-Rs68.4 billion
Net sales ($): $1.44 billion-$1.48 billion
Net profit: Rs16.8 billion-Rs17.6 billion

Rs bn                Jun-10  Sep-09
Net sales           61.98    55.85
Net sales ($bn)  1.36     1.15
Net profit          14.88    15.40

Ready Reckoner for guidance:

Q2 sales: Rs65.63 billion-Rs66.26 billion or $1.41 billion-$1.43 billion
FY11 sales: Rs264.4 billion-Rs268.8 billion or $5.72 billion-$5.81 billion
FY11 EPS: Rs112.2-Rs116.7 or $2.42-$2.52

  • Sequential growth expectations are almost all upwards of 6% up to 10% against the guided growth of 4%-5%
  •  Most expect Infosys to outperform peers this time since promotions at TCS and Wipro and wage hikes at HCL Tech are expected to hit those companies. Also, its Q1 growth was lower than expected so there is some amount of low base effect
  • Margins are expected to bounce back (after declining in Q1) on revenue growth and favourable currency (euro and pound up against the dollar and the rupee has depreciated against the dollar) and better utilisations
  • Most expect at least a marginal hike in the dollar guidance for the year. However, some believe that strong appreciation towards the end of the quarter may prevent this from happening. Also, because of this, comments about the rising rupee and its effect on profits in the second half will be keenly watched
  •  Expected to leverage the most on a pick-up in discretionary spend.

Infosys has not yet disclosed its September shareholding pattern - surprisingly tardy for the high corporate governance oriented company.

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife).

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