SEBI to align corporate governance norms with OECD principles

The six principles involve ensuring the basis for an effective corporate governance framework, the rights of shareholders, equitable treatment of shareholders, role of stakeholders in corporate governance, disclosure and transparency, and the responsibility of the boards

Mumbai, May 25 (PTI) Market regulator Securities and Exchange Board of India (SEBI) on Friday said it is in talks to keep the domestic corporate governance norms aligned with the global standards ratified by Organisation for Economic Co-operation and Development (OECD), reports PTI.

Paris-based OECD, an international grouping of top economic powers, has ratified six 'Principles of Corporate Governance', which have become a benchmark for policymakers, investors, corporations and other stakeholders worldwide.

"SEBI is having bilateral talks with OECD for keeping the corporate governance aligned with six fundamental principles ratified by OECD," SEBI Whole-Time Member Rajeev Kumar Agarwal said.

These six principles involve ensuring the basis for an effective corporate governance framework, the rights of shareholders, equitable treatment of shareholders, role of stakeholders in corporate governance, disclosure and transparency, and the responsibility of the boards, he said.

Speaking at a seminar organised by NSE in association with the National Institute of Securities Market (NISM) and BSE on corporate governance, Agarwal also called upon all the stakeholders to generate trust by displaying robust corporate governance practices.

He further said SEBI had last year held policy dialogue with OECD on 'Minority Shareholders Protection: Related Party Transactions' and it was attended by all stakeholders.

"We expect to have many such initiatives for the development of corporate governance standards in India," he added.

OECD was originally set up as a block of the American and European economic powers in 1960, but has started working with emerging giants like India, China and Brazil over the years.

Stating that the investors interest are being protected, Agarwal said trust is the most important element.

"We have to generate trust by displaying the corporate governance," he said.

Agarwal also expressed hope that the once the proposed Company Bill is passed by the Parliament, it would further strengthen the legal framework for corporate governance.

"The proposed new Company Bill also contains certain provisions pertaining to corporate governance," he said.


Personal Finance Exclusive
AEGON Religare, Aviva, Bharti AXA, HDFC Life Term Insurance: Why is premium for Rs40 lakh higher than Rs50 lakh?

The concept may sound contradictory, but four insurers charge a higher premium of anywhere between 10% to 32% for a cover of Rs40 lakh sum assured than they would on a cover of Rs50 lakh SA. Insurers claim that mandatory medical check up for a higher sum assured reduces their risk and allows a lower premium. They also offer a discount for higher SA.  Are there other reasons for the discount?

Pradip Kumar Paul, 43, with an annual income of Rs5 lakh purchased a Rs50 lakh cover from AEGON Religare Life Insurance (ARLI) online. The 25-year iTerm policy carried a premium of Rs10,449. After the medical test, ARLI told him the premium would Rs12,494 for a sum assured (SA) of Rs 40 lakh. This turns out to be 20% higher than premium for Rs50 lakh SA. Mr Paul was also offered the option of a Rs50 lakh SA at the same premium of Rs10,449, if he gave up his existing ICICI Pru Life policy of Rs10 lakh SA. This was communicated to him offline. It was clear that there was no loading based on medical tests, but a clear predicament for the customer. If he accepts Rs40 lakh SA, he pays Rs12,494 (20% additional premium); if he wants Rs50 lakh SA at Rs10,449, he has to give up ICICI Pru Rs10 lakh SA cover.

Please Read - AEGON Religare: Kum Insurance Dene Ki Bimari?

Moneylife decided to investigate this paradoxical situation. We found that ARLI was not alone in offering a lower premium on a higher sum assured of Rs 50 lakh as compared to what they would pay on a cover of Rs40 lakh.  We learnt that Aviva i-Life, Bharti AXA eProtect and HDFC Life Click2Protect all charge anywhere between 10% to 32% higher premium on Rs40 lakh policy that they would on a cover of Rs50 lakh. Strangely, the premium for Rs30 lakh cover is close to that of Rs50 lakh SA in most of the cases. In effect, a customer who wants a cover for Rs30 lakh may as well get himself/herself a cover of Rs 50 lakh at almost the same price. And, if you want a cover of Rs50 lakh, readers must ensure that they are not persuaded to opt for a lower SA, because you would end up paying a higher premium and only the insurer will benefit.


Insurers tell us that this discrepancy in premiums is because they offer discounts on higher sum assured and that medical examinations are mandatory for a Rs50 lakh cover. According to Aviva Life, “Most insurance companies offer discounts on higher SA. There are two types of costs involved when pricing a policy – Fixed Cost and Variable Cost. Even if the SA increases, the fixed cost remains the same and as a percentage to the overall cost, it keeps reducing. Typically, insurance companies pass on this benefit to the customer as a rebate for high sum assured. For i-Life, we offer such a rebate for Rs50 lakh, Rs1 crore and Rs5 crore slabs”.

Regarding the impact of medical test, Aviva added, “Customers going for Rs40 lakh SA do not need medical test for many age groups. But at Rs50 lakh SA, a medical test is mandatory. Due to this, the mortality experience of those going for Rs50 lakh SA is lower than Rs40 lakh SA. Insurance is a need based product. It is difficult to identify the target segment for Rs40 lakh SA as the amount of life cover one may opt for would entirely depend on his needs and liabilities”.

Medical test and high SA discount may not be the only reason for 10%-32% higher premium for Rs40 lakh SA compared to Rs50 lakh SA. After all, some online term plans require a medical even for a cover of Rs15 lakh. Are there other reasons for the difference? Yes, insurance companies cap the level of insurance that you can buy depending on your annual income. That is why, Mr Paul, in our example above was asked to get rid of his existing cover, if he wanted a higher SA from AEGON Religare.
According to an insurance industry expert, this is due to the perception that a person earning more, has a higher standard of living and has access to better medical facilities and hence, likely to have lower mortality rates.
Another insurance industry expert attributes the premium paradox to reinsurance. He says, when the SA is lower, the insurance company bears the risk and would charge a higher premium. While a higher SA may be reinsured, but no insurance company would reveal details of their reinsurance arrangement.
 In a response to our query, HDFC Life told us, “We offer a high sum assured discount, which is applicable from Rs50 lakh SA. The objective of these discounts to the premium rates is to ensure that a customer can go for higher life cover”.

AEGON Religare Life Insurance and Bharti AXA Life did not respond to our question on why the premium was higher on Rs40 lakh SA as compared to that on a cover of Rs50 lakh.

Based on your age, annual income, existing insurance policies, lifestyle habits, requested insurance cover and so on, the insurance company should be able to tell how much cover they can offer. The medical test should only reveal if there is any loading based on medical results. Unfortunately, some insurers may start negotiating the insurance cover only after the medical tests at which point the customer is already trapped. Either the customer has to accept what the insurance company dictates or cancel the policy within free-look period which means refund is after deduction of medical test and other charges.





4 years ago

This particular case is an eye-opener of whimsical decisions of Insurance Industry. Why customers are compelled to purchase less insurance paid by more premium. Why Mr. Paul was offered 40 lakh SA (with 20% higher premium in respect to 50 Lakh SA) when he was interested to get 50 lakh SA and he has enough ability to pay the premium. Moreover, how is it fair to impose the condition to cancel another company’s policy to get 50 lakh SA.I am eagerly waiting to see the outcome of Moneylife investigation and the stand of IRDA.

Ratanlal Purohit

4 years ago

To get insured or not insured, is a To be or not to be. A battle of wits. Stastically based. Actual events have no relation. In my humble opinion Insurance companies always play their Card of Pre Existing Diseases to deny benefit in No Test. Dono hath me laddoo. HIG dont require cover any way. Chhota mota ailment are not claimed and keep their health checked. Insurer has to lure them. But where is IRDA in all this? Taking a nap or partying with Medico Legal Consumer Consultants to Insurance Companies denying Claims On Pre Existing Diseases.
The World of Apparent Paradox is all about Cover like Apparels. RICH NEED LESS AND LESS. Poor any way cant afford.

Madhusudan Thakkar

4 years ago

The rejection of claims[percentage wise] in low sum assured policies is higher than large sum assured policies.In large sum assured policies medicals are compulsory and are conducted by panel of Cardiologists,Pathologists,Radiologists and so on.....Furthermore Financial proof is also mandatory.Thus Life Insurance companies offers risk in large sum assured policies after taking into consideration above aspects...So the premium is lower ....Whereas in low sum assured policies the risk on Life Insurance companies is comparatively high in the absence of above ....So no wonder the premium is also high.....



In Reply to Madhusudan Thakkar 4 years ago

A couple of points:
1. Is the risk in high sum assurred policies so low that premium for 50 lakhs is lesser than permium for 40 lakhs or equal to premium for 30 lakhs? In that case why don't all customers opt for 50 lakhs?
2. Why is this rule not for LIC? See
Why only discount for single premium policy only above 1crore? And that discout is already specified.
3. Why is that only online policies are having this rule? Doesn't this look like price was as we have in telecom? One reduces/increases the price others follow?
4. In the above mentioned example instead of medical health, income has been cited as the reason. Is 10* the golden rule for insurace? LIC allows upto 22*.

Ratanlal Purohit

In Reply to pravsemilo 4 years ago


Deepak R Khemani

4 years ago

What Aviva says is logical up to a point, there are rebates for high Sum Assured and logically when the company is not insisting for medicals in the lower slab they are taking a higher risk so the premium is higher, although why not make medicals mandatory and have a uniform pricing as per the company's mortality table and not price the policy depending on whether the client has undergone medical tests or not.
My advice to anyone going in for term insurance is that PLEASE insist that medicals are done so that there is no problem in claim settlement later on because that can be the ONLY factor which will decide whether your nominee will be paid the claim or not!



In Reply to Deepak R Khemani 4 years ago

fully support this theory. in fact, irda should have a pre-defined panel of hospitals & tests that user can pay for out of pocket & use those results to apply for insurance in any firm. this would be fair to all parties concerned.

ITC Q4 net profit up 26% to Rs1,614.36 crore

ITC said it mitigated the cost pressures through a combination of improvements in product and process efficiencies, smart sourcing and supply chain initiatives

New Delhi: Diversified conglomerate ITC on Friday reported 25.98% increase in its standalone net profit for the quarter ended March 2012 at Rs1,614.36 crore on the back of good performances by all segments, reports PTI.

The company had posted a net profit of Rs1,281.48 crore in the same period last year, ITC said in a statement.

ITC's total income during the fourth quarter also went up by 18.1% to Rs7,162.51 crore from Rs6,063.38 crore in the year-ago period, it added.

For the entire 2011-12 financial year, the consolidated net profit rose by 24.7% to Rs6,258.14 crore from Rs5,017.93 crore in the previous fiscal, the company said. ITC'ss total income in FY12 stood at Rs27,336.14 crore compared to Rs23,110.80 crore in FY11, up 18.3%, it added.

The Board of Directors has recommended a full year dividend of Rs4.50 per share.

"Total cash outflow in this regard will be Rs4,089.04 crores, including dividend distribution tax of Rs570.75 crores," ITC said.

"During the year, the business witnessed sustained inflationary pressure on input costs. Supply side driven constraints coupled with growing demand caused prices of packaging materials, edible oil and industrial fuels to remain at inflated levels," ITC said.

The cost pressures were mitigated through a combination of improvements in product and process efficiencies, smart sourcing and supply chain initiatives, it added.

During the January-March quarter, the company generated a net revenue of Rs3,249.88 crore from its cigarettes business as against Rs2,767.34 crore in the year-ago period.

"The cigarettes industry in India continues to be impacted by an environment of rapidly escalating challenges and discriminatory taxation. The steep increase in the tax rates on cigarettes, both at the central and at the state levels, has led to the undesirable consequence of shifting consumption patterns to lightly taxed or tax evaded tobacco products besides fuelling the rampant growth of illegal cigarettes," ITC said.

The net revenue from non-cigarettes FMCG segment in the fourth quarter went up to Rs1,616.50 crore from Rs1,312.51 crore in the corresponding period last year.

"The branded packaged foods business grew significantly during the year, recording robust growth in revenues and enhanced market standing across segments," the company said.

ITC, however, said its hotel business witnessed a fall in net revenue in the fourth quarter of last fiscal to Rs285.84 crore from Rs300.33 crore in the same quarter previous fiscal.

"The hospitality industry in India continued to be impacted by the slowdown of the domestic economy and adverse economic environment of the international feeder markets of the US and Europe...Both international and domestic business segments for the luxury hotels business remained muted," the company said.

The agri business division had a net revenue of Rs1,414.22 crore in last quarter as against Rs1,081.83 crore in the year-ago period.

The net revenue from paperboards, paper and packaging segment also grew to Rs979.94 crore from Rs916.96 crore in Q4 of FY11.

Shares of ITC closed Friday 0.75% down at Rs231.75 on the BSE.


We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)