The investment methodology is debatable; returns will be average due to shift from equity to debt
SBI Life has introduced 'Smart Horizon' ULIP with stated objective of providing long-term capital appreciation. "The unique automatic asset allocation (AAA) feature makes Smart Horizon ideal for many evolving Indian investors who do not have the time to make fund allocation decisions on an on-going basis," said MN Rao, managing director, SBI Life.
AAA is an algorithm-based active investment allocation mechanism. This IT-based system, developed through testing over 5,000 potential scenarios in the Indian equity and bond markets, determines the optimal risk-return combination, the company explained in a statement.
The investment will be done in such a manner that initially there will be higher exposure to equities, followed by increasing exposure to debt and money markets as the plan nears maturity. AAA mechanism ensures better returns for investors, while protecting capital, the company said.
We have our reservations about the working of this methodology. The returns, too, will be average due to the shift from equity to debt.
The product also provides the customer flexibility to actively manage his investment. We found the premium allocation charge and policy administration charge to be the lowest among new ULIPs for the first five years and on the lower side for 10 years. The charges beyond 10 years are not on the lower side. The mortality charges for the product are much lesser than other ULIPs we came across. We hope that other insurers will take note.
Premium allocation charge: 2% of annualised premium in the first policy year only.
Policy administration charge: An initial policy administration charge equal to 0.70% of the annualised premium will be deducted at the inception of the policy. A monthly policy administration charge equal to 0.45% of the annualised premium will be deducted throughout the term of the policy.
Age at entry: Seven years to 60 years.
Age at maturity: (Maximum) 70 years.
Plan type: Regular premium.
Policy term: 10 years and any term between 15 years and 30 years, both inclusive.
Premium frequency: Yearly/half-yearly/quarterly/monthly.
Monthly frequency is available only through the electronic clearing system (ECS) or standing instructions (where payment is made either by direct debit of bank account or credit card).
Premium paying term: Same as policy term.
Premium range: Minimum - yearly Rs24,000, half-yearly Rs15,000, quarterly Rs8,000, monthly Rs3,000.
Maximum - yearly Rs74,000, half-yearly Rs37,000, quarterly Rs18,500, monthly Rs6,200.
Minimum sum assured: For age below 45 years - higher of [(10×AP) or (0.50×term×AP)]* and for age 45 and above - higher of [(7×AP) or (0.25×term×AP)]
Maximum sum assured : 20 × AP
(*AP stands for annualised premium)
This new policy is not quite different from the old schemes we saw before 1st September
ULIPs for children have long played on the anxiety of parents to ensure financial security for their kids in their absence. Now, Aegon Religare Life Insurance has launched 'Rising Star Plan'.
Like most other child plans, it offers typical features including premium waiver and income benefit. In the premium-waiver rider, the company continues to pay the premium in the event of the parent's demise. Income benefit pays an amount equal to the annualised premium to the beneficiary, at the start of every policy year following the date of death, till the end of the policy term.
But this comes at a cost and increases the mortality charges in the plan which is ultimately paid by the policyholder. The brochure does not specify the mortality charges for different ages, though it is a very important aspect especially for child ULIPs. Be sure to understand its impact, as the higher mortality charges will reduce the funds that get into investments.
Child ULIPs are not necessarily the best way to secure your child's future. The charges in the plan are in line with other new ULIPs. The new ULIP charges are equal or more than that of the old ULIPs over a period and hence there is no real reduction of charges. Which is why a term insurance cover coupled with SIPs in a diversified equity mutual fund is likely to do the job better.
One of the investment options is called 'Invest Protect', in which premiums are invested heavily in equities in the initial years of the policy and partially switched to debt funds systematically in the last three years of the policy. There is no true 'investment protection' possible with this strategy.
Premium allocation charge: This is a percentage of the premium appropriated towards charges from the premium received. Year 1: 4.40%, Year 2-5: 3%, Year 6-10: 2% Year 11 onwards: 1%. The top-up premium allocation charge is 3%.
Policy administration charge: At the start of every policy month, from the first policy year, Rs60 will be deducted monthly through cancellation of units. This charge escalates at 3% per annum at the start of every policy year, from the second policy year. This formula remains fixed throughout the policy term.
Minimum annual premium: Rs20,000 per annum in annual mode, Rs30,000 per annum for other modes.
Policy term: 25 years minus the age of the child at entry.
Premium pay term: Equal to the policy term.
Minimum sum assured: (for age less than 45 years) is higher of 10 times of regular annualised premium or (0.5 x policy term x annualised premium); (for age greater than or equal to 45 years) higher of seven times of regular annualised premium or (0.25 x policy term x annualised premium).
Maximum sum assured: 30 times regular annualised premium.
Entry Age: Parent (life assured), minimum - 18 years, maximum - 60 years.
Child (nominee), minimum one day, maximum - 15 years.
Maturity age: (maximum) 75 years.
Premium payment frequency: Yearly, half-yearly, monthly.
A hefty increase of 500% in mediclaim premium led to a low renewal ratio for Reliance General. It is believed that the company approached IRDA for reducing the premium
Reliance HealthWise policyholders don't seem to be in a mood to pay a hefty 500% premium increase even if it means losing a four-year waiting period on pre-existing conditions. Following the sharp hike in the premium last year, Reliance is losing customers rapidly. It may even have approached the regulator to rollback its premiums, though the company denies it.
According to sources in the insurance industry, "Reliance General's renewal ratio for health insurance has been at 10% after the almost 500% increase in premiums last year. In recent months, after Vijay Pawar (CEO and ED) took over the charge, the renewal ratio has increased to 25%, but it is still way below the industry average of the 90% renewal ratio."
However, according to Sharad Goel, Reliance Capital Corporate Communications, "These numbers are incorrect and much below the actual figures." A source in the insurance industry said, "Reliance General approached the Insurance Regulatory and Development Authority (IRDA) recently to reduce the premiums because of its impact on business. IRDA refused to do so, saying that once the premium is hiked due to the adverse claims ratio, it cannot be reduced." Reliance, however, has denied approaching IRDA to reduce premiums.
An increase in the premium by almost 500% in Reliance HealthWise has put off customers. (Read, 'Unhealthy rise in Reliance HealthWise premiums') The full impact of the unhealthy increase in premium by almost 500% will be seen over a period. Reliance General's market share has been reducing in almost all segments. (Read, 'Reliance General market share plunges by 40%')
According to a broking house, more than 70% of Reliance customers have switched to another insurer due to Reliance's premium hike. "Due to the losses made in the past three years, Reliance had to cover up the same and revise the premium that resulted in the hike. The market reaction to the hike has led Reliance to revamp its portfolio of health policies. As a result, Reliance health insurance is not perceived as competitive in the market," said an official at another broking house.