Insurance
SBI Life Flexi Smart: Why push a product with little value?

SBI Life is seeking media support to publicise the one year old SBI Life Flexi Smart variable insurance plan. It seems to be a desperate attempt to entice those who put money in traditional products

The PR agency of SBI Life has just sent us an email to help readers understand the one year old SBI Life Flexi Smart product. This has left us bemused. Is the company desperate to cash-in on the growing trend of traditional products and position variable insurance plans (VIP) as some better option? Is it a rude joke on customers who are already becoming worse off by shoving hard earned money on traditional products? The product is called "Flexi Smart", but it is targeted for the naive investor. It would have been understandable if SBI Life was trying to promote the SBI Life Annuity Plus product which was launched few months ago with competitive annuity rates.

Over a year ago SBI Life launched a variable non-participating insurance plan, "Flexi Smart Insurance". This variable insurance plan (VIP) was a new identity (after revamping) given to the banned toxic universal life policy. VIP combines the worst of both-ULIPs and traditional plans. The charges are transparent like those of ULIPs. It is 27.5% in the first year; 7.5% in the second and third years and 5% thereafter. There will also be a risk premium on mortality charges based on the policyholder's age, to cover the sum assured-which is 10 to 20 times of annualised premium. The heading of the product brochure is "No pain, only gain". You should read it as "No gain, only pain".

It was astounding to read an article one year ago in a leading business newspaper The Economic Times, which tried to project VIP as best of ULIP and traditional plan. It was deplorable that the article quoted SBI Life Actuary saying that the product interest rate works like a bank account. Which bank you walk in today will take your Rs100 and give you deposit receipt of Rs72.50?  It can only happen with a VIP product from an insurance company. Even LIC Bima Account I and II (also VIP) will not break-even in five years.

The investments are opaque like traditional plans and will be mostly in the debt market and hence, will fetch low returns. The SBI Life Flexi Smart plan provides a guaranteed annual interest rate of 2.5% which is absolutely pathetic. The carrot offered to lure the customers is 7.25% interim interest rate for 2012-13. The truth is that the interest rate is net of all the astronomical charges!

The product offers flexibility of a premium holiday option, facility of increasing or decreasing the sum assured as per the changing needs and an option to top up premium. The premium holiday option offers the flexibility of not paying the premium for one to three years after completion of five annualised premiums. Many ULIPs offer a limited premium payment term wherein the policy remains in force until the policy term, without the payment of premium. The flexibility of increasing the sum assured is not allowed after age 50; the cost of medical expenses is to be borne by the life assured and it will not be allowed if the policyholder has already exercised the option to decrease the sum assured.

Needless to say, the increase in sum assured will be accompanied by increase in risk premium (mortality charges). Neither the increase nor decrease in sum assured will reduce the premium amount. The death benefit will be the sum of the policy account balance and the sum assured. The maturity benefit will be the terminal interest rate along with the balance in the policy account.

You may also want to read:
http://www.moneylife.in/article/variable-insurance-plan-no-gainonly-pain/18821.html

http://www.moneylife.in/article/variable-insurance-plan-lic-bima-account-attacking-your-savings/14981.html
 

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COMMENTS

Veenaa Natchimuthu

4 months ago

Worst policy. i continue the policy for 5 years and total sum i paid was 245000 and the amount i got was 250000. stupid plan and all these agents are cheaters

KARISHMA SHAH

9 months ago

I had bought SBI flexi smart policy 1 year ago with 1 lac premium amount for 5 years. I have paid the first yearly installment and the 2nd installment is due in a few days. I do not see any growth in the amount invested. Should I discontinue or continue with the policy since discontinuing would lead to discontinuance charges ?

KARISHMA SHAH

9 months ago

I had bought the flexi smart policy 1 year ago with 1 lac premium for 5 years.I have paid the first installment and the 2nd installment is due in a few days time. I do not see any growth in 1 year. Would it be better to discontinue or should I continue with the policy ?

Saleem Ahamed

12 months ago

after 5 years if i will withdrawal my policy with 30000 yearly than how much will revived approx.

Saleem Ahamed

12 months ago

after 5 years if i will withdrawal my policy with 30000 yearly than how much will revived approx.

akashdeep sandhu

3 years ago



I am akashdeep sandhu. I have recently bought flexi smart insurance policy. My yearly premium is 99000 for 10 years. I hav paid only one premium. yesterday I received documents. I was assured by agent that interest will be calculated on sum assured. policy document have furnished details on assumed interest after various deductions. certainly it is not the plan I was looking for then. I visited the agent in person today. person is assuring again that interest will be calculated on sum assured compoundly. online customer service was also of no help. please help me out. I am thinking of returning the policy as thry have given me 15 days for free look.agent has estimated around 22 lacs on policy maturity while I doubt it according to document. Document assumes maximum surrender value of abt 14 lacs. Help. Any advice. reply. It's my hard earned money. Thanks

REPLY

Sucheta Dalal

In Reply to akashdeep sandhu 3 years ago

Request you to come through the helpline . i am sure raj will be happy to guide.
link here

http://moneylife.in/promotion/insuranceh...

Ronak Hindocha

4 years ago

Raj, You know what's even sadder? When the ULIPs will no longer be considered a tax saving product, traditional policies will be sold even more.(even now they account for 75% share).

ULIPs (although not a great product, per se) scores over a traditional policy over transparency of costs/ equity investment option. Selling a traditional plan to a young investor under the guise of tax planning is a terrible prospect.

Ronak Hindocha

4 years ago

Raj, you know what's even sadder? A gross way to look at it but makes sense: When the ULIPs will no longer continue to avail tax benefits, the traditional policies will be sold even more. We are already seeing that (about 75% policies sold are traditional). Between the two, ULIPs are definitely better on account of transparency and with an option to invest in equity oriented scheme.

Note: I personally do not recommend ULIP but between the two it is relatively better.

Madhusudan Thakkar

4 years ago

This plan is a joke.This is insult to Indian people.Raj you deserve our sincere thanks in exposing this plan.I fail to understand why such type of TOXIC plans are approved by IRDA?

REPLY

raj

In Reply to Madhusudan Thakkar 4 years ago

thanks. I agree

Poor Governance: Corporate India also to share the blame

India Inc should be firm in insisting on good governance in governmental administration with the least interference in business and industry instead of running to Delhi to get interest and tax cuts and subsidies

The ruling neta-babu nexus is not the only ones who are responsible for the present sorry state of economic affairs. Corporate India, going by the term India Inc, has a major role for its lack of valuable contribution leading to the Indian economy going awry.

 

Immediately, after Independence, essentially the Post-World War II era conditions necessitated rigid controls and regulations. In the absence of large capital formation there was an urgent need for massive investments in the core areas that saw the rise of the command public sector going into remote areas across the country.

 

The 1980s witnessed Indian entrepreneurial skills coming into its own with more and more entering the capital markets and the existing companies going for increased public holdings. The stock market boom was on. Little was said of the need for protection—the existing licensing laws pre-empted any worthwhile competition from within or abroad.  Industrialists were smug that they could merrily carry on unhampered.

 

The throwing open of the economy in 1991 under trying circumstances brought about a howl of protests calling for what they termed the need for level playing fields from the captains of industry—the Bombay Club. They were used to jealously to protect their private turfs by taking care of the netas-babus so as to ensure that no one dare enter their protected terrain or activity. Those once opposing licences and permits were now openly seeking it! The liberalisation process not only brought in competition from overseas MNCs but also from the lower-cost budding domestic small and medium entrepreneurs. This was not to the liking of the interests that were so far firmly entrenched and manipulating prices and controlling supplies of cars, scooters and consumer durables. Unfortunately they are still here to stay and they are all past masters at rule bending.

 

The 2G (second generation) spectrum scam brought out in the open the arrival of a new tribe of fixers called Corporate Lobbyists whose services were availed by some of the biggest and well known names in Indian industry. Their fabulous pay-off charges went to take care of biggest guns all the way right up to the top of the echelons of power at New Delhi. Their retainers made unsuccessful legal bids to stop further exposure by crying invasion of privacy. They didn’t hesitate to resort to backdoor corruption that is punishable under the Prevention of Corruption Act. Today they also oppose vehemently the application of the provisions of the Right to Information Act, even when the public equity holding in their entities and their borrowings from public sector institutions exceeds more than 50% of their own stakes. Their clout is such that they have succeeded so far. They need to be reined in, too. Sooner the better.

 

The insulated Indian economy has been able to withstand the vicissitudes of the South-East Asian and Latin American financial crisis and the 2008 Western Meltdown, thanks to one astute governor of the Reserve Bank of India (RBI)—Dr YV Reddy—who refused to succumb to political pressures to further open up the rupee.

 

The post-1990s Indian economy has witnessed a dramatic shift in the economic milieu. It has seen the rise of world conquering heroes who have won for India a place on the top of the world’s great economies; be it G20, BRICS or ASEAN. They have not only disproved the trickledown theory of getting rich themselves but also creating a vibrant, affluent consumption-oriented enlightened IT-savvy risk taking middle class by going on a massive world wide M&A spree hitherto not witnessed—acquiring major international automobile, steel, liquor, chocolate, foods, teas, drugs and pharmaceuticals, IT hardware and software, engineering goods and consumer durables companies. Their appetite for acquisitions remains insatiable. All this at a time when major Western economies were reeling under financial downturns and job losses. The vast Indian middle class with a bludgeoning domestic market has been eagerly lifting all that is produced from here but from abroad too, fascinated as they are by the foreign/imported stuff. It is no small wonder that every large international manufacturer— be it BMW, Mercedes or Volkswagen or white goods or food or retail giants— wants to set up shop here.

 

It is the same India Inc market heavyweights who are whining about policy paralysis and trust deficit and bleating for interest cuts preferably with some tax cuts thrown in.  All of them are sitting on mountains of cash without any worthwhile plans to put them to productive use.  They’ve chosen to flee to the safety of conservative risk avoidance—detesting risk taking decisions following the ostrich approach when they could have listened to what Intel co-founder Gordon Moore said “You can’t save your way out of recession”. Intel proved it in 2001 when the dotcom bubble burst. It ramped up R&D spend to levels where it made its bottomline barely profitable but stood to reap benefits in higher turnover numbers and profit growth in later years. Proving thereby a counter-cyclical approach to business and counter-institutive spending during rough times has paid off handsomely.

 

The best of companies have succeeded in using recessionary conditions as an opportunity to try out something new, by radically changing business model and strategy, explore newer opportunities, products and markets where there may be risks but ultimately reward with a potential towards higher returns in the long run.

 

The same companies, who cry hoarse of shortage of talents, do not hesitate to issue pink slips during downturns to trim excess forgetting that they often shave off the very home-grown talent that helped drive their business in boom times. They could possibly help develop newer products or improve the existing.

 

It is rather unfortunate that India Inc still has a mindset of complacency—coming as it did from highly protected conditions moving into a few short years of high growth trajectory and wanting to be hand held at every step.

 

Instead India Inc should be firm in insisting on good governance in governmental administration with the least interference in business and industry. Mind its own business of keeping  manufacture, marketing and services going instead of running to Delhi to get interest and tax cuts and subsidies. Make full use of free market competition and free enterprise. Goad the authorities in getting funds locked up in tax havens for productive use back home.

 

(Nagesh Kini is a Mumbai based chartered accountant turned activist.)

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COMMENTS

T D Sharma

4 years ago

Oh, what a wishful thinking! Who after all runs the bureaucracy? The India Inc., as it is fashionably called now. Corruption is a two-wat traffic--the giver always has the upper hand. And, then, which political party enjoying power depends on subscriptions from "supporters" without corporate alms? Even the Left parties threaten and collect, and now beg and get, "donations" from the real power in the driver's seat of governance. Every bureaucrat in the IAS, IPS, etc., is sold out to one or the other business house (or even a small-time trader who tips all those serving him!) right on the very first day in ervice. Most of these bureaucrats rise to the top!
It would be unfair to blame the giver as long as the eager "receivers" (beggars, actually) are too ready to serve the bread-givers taking care of all the prosperity for all their progeny, with children studying abroad and spouses becoming "painters of acclaim selling works of art" for lakhs, or starting dubious NGOs, etc.
It is safer to avoid these filthy issues.

Flat-buyers can insist that builder meet OC conditions

Thane District Consumer Forum ruled that builder has to fulfil conditions laid by the civic authority while granting OC, even if such conditions are not mentioned in the sale agreement

Thane: The Thane District Consumer Forum has ruled that builder must abide by the conditions laid down by civic authority while granting the occupation certificate (OC), even if such conditions are not a part of the sale agreement with flat buyers, reports PTI.

 

President of the Forum RB Somani and Member Jyoti Iyer passed the ruling last week on a complaint filed by Sarvottam Co-operative Housing Society against city-based Radhakrishna Developers.

 

Accordingly, the construction of the 7-story building was completed in mid-2005, but it developed leakages in the first monsoon itself.

 

The builder did not do anything to fix the problem, nor did he get the society registered, the complaint said. Also, no rainwater harvesting facility and solar water heater unit were installed, despite the conditions laid down by the civic corporation while giving occupation certificate.

 

The society also said that builder had not returned one of the flats, which he had been using for his office.

 

The builder argued, among other things, that rainwater harvesting system and solar system were not promised in the sale agreement.

 

However, the Forum said that the builder was supposed to meet the conditions laid down by the corporation in the OC.

 

The Forum ruled that the builder must pay damages of Rs9.4 lakh to the society on various counts.

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