Moneylife Events
Securing our Elders

A recently-held special seminar for senior citizens at the Moneylife Foundation discussed the various problems faced by the elderly in matters relating to finance, healthcare and insurance, and the solutions for the same

Senior citizens slowly find themselves left in the wilderness with regard to various matters, and especially those relating to finance, health and insurance. The bad news is that there are no easy solutions and the scenario isn't encouraging. Take the case of insurance. According to statistics available, insurance companies have made lower payouts on claims by senior citizens than they have towards group policies of large corporate.

This was discussed at a special seminar on healthcare insurance for senior citizens at the Moneylife Foundation on 25 September 2010. Rohan Dukle, director, Magus Corporate Advisors Pvt Ltd, an insurance claims consultancy firm, said during his presentation on the subject that there were no great options for senior citizens, but there could be some solutions through aggregation. He suggested that a holistic solution could help improve the situation for seniors who have almost no cover at all.

The programme was attended by senior citizens, some knowledgeable persons representing senior citizen groups, insurance and hospital professionals and members of the Moneylife Foundation.

Mr Dukle explained that in working towards an aggregated solution, it was necessary to focus on ways to enhance protection for each person as individuals have different needs, levels of protection and finance. "There can never be a single solution that fits everybody who has crossed 60," Mr Dukle said. The Magus director proposed the constitution of an 'aggregated' group, and offered the services of his team to analyse individual needs and structure a solution.

The argument for setting up an aggregated group is that it would have increased negotiation power with insurance companies. The services offered did not imply dealing with a particular insurance company or loading a premium for senior citizens based on the claims ratio of the group. The 'aggregation' would consider each policyholder independently, while using the power of the group to negotiate with multiple insurance companies. Mr Dukle's team that would provide services to the aggregated group includes insurance professionals, chartered accountants, doctors, lawyers and claims experts.

Sanjay Datta, head of customer services for health and motor insurance at ICICI Lombard, echoed the remarks by Mr Dukle on the limited mediclaim options for senior citizens. He also said that the healthcare industry was going through a lot of changes. "The escalating costs of medical costs, coupled with de-tariffing and new competition, has put pressure on the industry. The cashless spat between PSU insurers and hospitals reflected the high claims ratio," he said. "ICICI Lombard has been able to continue the cashless facility across 4000-plus quality hospitals to date, but we do have the concept of Preferred Provider Network (PPN) where we drive the business on properly negotiated rates. We have moved to in-house claims processing that is working out well. We have had no increase in premium, except due to change in service tax and cess."
One of the problems senior citizens face is the difficulty in increasing the sum assured. For example, if one were to increase the sum assured from Rs1 lakh to Rs3 lakh, the pre-existing conditions would not apply on the increased amount of Rs2 lakh for the rest of the stipulated period. More importantly, after a certain age limit (like in the case of senior citizens) insurance companies could refuse to increase the sum assured, Mr Dukle pointed out. Therefore, he underlined the need to plan insurance coverage-especially for the silver years-in the 30s, or at least in the 40s. (The American Association of Retired Persons begins enrolment of members from the age of 50. The association provides a slew of services and educates its members on various matters of interest.)

Another aspect that was discussed was on how insurers linked pre-existing ailments and current illnesses to reject claims. Also, unlike vehicle and property insurance, healthcare insurance payments/ denials are hotly contested by both sides. Therefore, it is necessary to ensure that the documents submitted to the insurer have no errors on the doctor's certification for the date when the ailment was diagnosed. It has huge ramifications on the benefit payment.

Legal redressal for the policyholder is another important area. Mr Dukle explained that in the insurance sector recourse was slow and justice often delayed or denied. Among the options available to the policyholder if claims are denied or slashed is approaching the grievance cell of the insurance company, or the grievance cell of the Insurance Regulatory Development Authority (IRDA), the Insurance Ombudsman, or consumer court and finally the civil court. All are expensive and time-consuming, with no certainty of a positive result.
Mr Dukle said customer ignorance was also a big problem as there is very low awareness about the basic issues that are key to picking proper insurance cover.

"With total de-tariffing of the non-life industry post-2006, resulting in major price wars in hitherto profitable segments such as fire, engineering and so on, there is increased pressure on the bottom lines of insurers," Mr Dukle said. "This coupled with lower ceding commissions has resulted in tremendous pressure on the insurers, forcing them to reconsider pricing." With the constant entry of new players in the non-life segment, this pressure is not expected to reduce immediately. As such, therefore, insurers are becoming more stringent in passing of claims. This is even more evident in the case of Mediclaim which is repeatedly seeing high incurred claim ratios.

The Margus director said, traditionally, in a tariffed regime, insurers followed the policy of "pay if you can, reject if you must". In the current scenario insurers are rejecting claims at the slightest opportunity, taking advantage of weak redressal mechanisms. This is why he often recommended insurers who charge a higher premium with an assurance of hassle-free claim settlement, for clients who are not price sensitive and want quick settlement for genuine claims.

Medical care is one of the three main causes of impoverishment in the country. Treatment costs of major ailments like cancer, heart attack, stroke, renal failure are galloping. It is estimated that senior citizens will make up 10% of the population by 2015, with old age dependency increasing from 8.1 in 2000 to 22.6 in 2050.

In this scenario, Moneylife Foundation intends to work with service providers such as Mr Dukle to find ways to obtain holistic solutions for senior citizens through the power of aggregation. Those interested to know about our initiatives can write to [email protected] and we will be in touch with you when a product or service is worked out. We also welcome ideas and suggestions to take this initiative forward.

Pictures of the event




7 years ago

The real problem is the very limited capacity of SrCns particularly the 70+ to pay premium. Aggregating SrCns will not solve the problem. Premium will still be high resulting poor penetration of HI resulting into higher premium.
The answer is aggregating them with their family and aggregating the families among themselves.This has been achieved in Arigyasri of AP. For the last four years the expenditure per year per family has been within Rs 400
to 500 for a cover of 1.5 lakhs on floater basis.
It is within the reach of every one.
We should look at this possibility.
Invite comments from experts in the field.

Do Indian regulators need a hearing aid?-II

Even as the Sensex scales a 32-month high, thousands of crores are flowing out of equity funds while data from the NSE proves that the Indian equity market is extremely hollow. But regulators are in an ivory tower. In this second part of a three-part series, we look at what investors have to say on a wide range of issues that affect them directly

A Moneylife Foundation survey reveals that mindless measures by financial regulators are perhaps scaring away investors from the capital market.

The survey, conducted in August 2010, covered more than 3,000 Foundation members countrywide, on issues and policies that affected investors. The responses offer new evidence on how far-removed our regulations are today from investors' needs. Here are the highlights from the responses of 471 investors.

Sharing financial information with brokers

In August, a SEBI diktat asked brokers to collect income details of investors, ostensibly to check black money in market transactions. Brokers will be required to collect 

documents such as income-tax returns for three years, salary slips and bank statements for six months. The objective of collecting this information may have been rationalised by SEBI, but has it factored in the crucial aspect of lack of trust? Or concern about the information being misused? In any case, why should a person be forced to provide information on his/her financial status to anyone but a statutory body? It is no surprise that a massive 70% of respondents said they were uncomfortable with providing their personal financial information to brokers. 

Fear of misuse of information

Many asked how providing tax statements to brokers would help to check black money when all trading transactions are through PAN-registered bank accounts and depository accounts, and know-your-customer (KYC) checks are conducted before opening these accounts. "What is the need for a broker to record such financial data when a risk management system is already in place?" asks one respondent. Another respondent argues: "I am not borrowing from a stockbroker. The broker does not give me any credit, but is in fact collecting margins. Why then should I provide all my financial details to him?"

Many investors are concerned about the possible misuse of such information provided to brokers. "What about the security of information provided to the broker? Who will guarantee that it is not misused?" asks one respondent. Another points to the nuisance of telemarketing calls: "I receive several marketing calls everyday from broking houses seeking to sell their services. Is my personal information being sold to outsiders? Can the regulator guarantee that this will not happen?"

One investor says his broker sold a database of his clients' mobile phone and email details to credit card companies and marketing agencies. Another respondent focused on the privacy issue. "Why should I risk my financial position being exposed to other people? Risk assessment should be done through a margining system and not by authorising brokers to demand my income details." This is just a sample of the concerns expressed on the controversial matter of divulging financial details.

Will I-T returns track black money?

The ostensible aim of collecting financial details from investors is to check black money. Most investors find it ridiculous. If KYC, PAN (Permanent Account Number) and such other systems have not been successful in tracking black money, they wonder how providing income details to brokers would help.

"Policies of the government and statutory bodies are always half-baked, confusing, repetitive and inefficient. It is an unnecessary burden on brokers as well as customers," writes one respondent in the survey. "Black money is not generated in the capital market; rather it's the outcome of real-estate dealings. The government should tighten requirements (like asking for the income-tax returns for the last three years) for registration of real-estate sale deeds for both buyers and sellers." Another investor was critical of the stock market regulator. "SEBI has never cared for the retail investor - if it has done something, it has been a secondary outcome. They have absolutely no clue about what is happening in the market. It is time we got some professionals there."

Real source of black money in the market

Well over half of the respondents (59%) believe that maximum black money is routed through FIIs. "A large part of the funds in the parallel economy is stashed abroad, and this has regularly found its way back into India through FII investments. Many (FIIs) structure products specifically for such money," says a respondent. Another explains: "Black money can be routed through dummy companies registered in tax havens such as Monaco, St Kitts, Mauritius, and, of course, unaccounted Swiss accounts." One respondent writes, "There is no tracking of domestic black money, but it may be negligible compared to (that in) FII flows." There were more critical responses too. "If it (generation of black money) is happening here, then are our banks, the Reserve Bank of India (RBI) and the income-tax department sleeping?" Clearly, the recent SEBI directive requiring brokers to collect more personal financial details from investors is hardly going to flush out black money, but it has become a serious irritant for investors.

Lack of awareness

The survey also revealed a lack of awareness among investors about dispute resolution and arbitration cases. Only a third of the respondents were aware that as many as 84% of the arbitrations conducted by stock exchanges had gone in favour of stockbrokers. Comments by several investors indicated that they have not used the arbitration mechanism and they are clueless about how the process is loaded against them. "No, I did not know this... But I am hardly surprised. Money and power talk," says one respondent. But there were some who had used the system. "As a victim, I should know better. My impression is that it is not 80%, but over 90% of arbitration cases that go against investors. SEBI is hand in glove with the stock exchanges and brokers and it is making things worse for investors with new rules that are anti-investor." This may be an expression of anger, rather than a serious allegation, but it expresses investor sentiment about regulation.

Mutual funds, the favourite option but…

As many as 94% of the respondents said they have invested in mutual funds at one time or the other; a large section (72%) believed that this was the best option for retail investors to participate in the capital market. However, a significant number (64%) of the respondents said that they had also withdrawn some of their investments after SEBI banned entry-loads in August 2009, virtually killing the business of many independent financial advisors (IFAs). In the year since then, over Rs14,000 crore has been withdrawn from mutual funds. It's proof of how poor policy directly hurts investors.

"Mutual funds seem to be the best route for retail investors, but recent regulations have puzzled investors, even frustrated them," one respondent says. Another investor had a contrary view. "No. Mutual funds are not the best route. I am a victim. I lost much of my money that I had invested in mutual funds in 2006-07, based on bullish statements made by the (then) Union finance minister P Chidambaram." A respondent also advised investors to be cautious. "Investors must take pains to monitor and analyse mutual funds' performance on a regular basis, instead of just looking at the net asset value (NAV) alone." Some others expressed worries over 'mis-selling' and 'churning'; some others advised avoiding sector funds.

Other issues with brokers

There have been at least a couple of other investor issues on dealing with brokers that have been festering for a long time. Under pressure from a four-year campaign by investor protection groups, SEBI agreed recently that the power of attorney (PoA) that investors sign with brokers is one-sided and is often misused. Now, the regulator has also consented to prepare a new standard PoA.

In December last year, SEBI had issued new guidelines to tighten clauses in the client-broker agreement in an attempt to curb the misuse of clients' money by brokers. But it has not been able to ensure the implementation of these rules, as brokers have pleaded difficulties particularly with the clause that requires them to settle the funds and securities at the end of the calendar quarter/month. The survey found that investors continue to be worried about these and related issues. The question is: Is the regulator open to hearing what investors have to say? And how?

(In the next and concluding part of this series, we examine the track record of various portfolio management schemes)




7 years ago

Will writing the article and comment solve problem of BLACK MONEY, govt wants black money in real estate as they have huge investment.. How can we stop this? writing article and comment is not the option.. Common man crying and crying.. 40% population is bpl...


7 years ago

Hearing aid is required for whom are actuall dumb but not for them who don't want to hear.


7 years ago

Well Mr BHAVE has an opportunity to redeem himself ,atleast for a one major mess that is going to really hurt the existing business (minuscule retail).It might actually be nice of Mr Bhave if he could while leaving (abdicating )the High Chair undo a wrong before it creates a mess for the stk market with a reluctant retail participant.This would be one less thorn in the memory of the retail investor whose interest has been long buried in the sands of Mauritius

Personal finance Tuesday

IDBI Bank ties up with World Resources Institute; ICICI Home Search and Ekta Group tie up for Ekta Parksville; HDFC Mutual Fund floats HDFC FMP 35D September 2010 (3); M&M signs MoU with Allahabad Bank for car loans and commercial vehicle finance; Bank of Baroda, Development Credit Bank increase base rates

IDBI Bank ties up with World Resources Institute

IDBI Bank has signed a memorandum of understanding (MoU) with US-headquartered World Resources Institute (WRI), an environmental research institute. WRI has a global reach, working with more than 400 partners in 50 countries. IDBI Bank has entered an MoU with WRI for financing micro, small & medium enterprises (MSMEs) in India for implementing ESCO (Energy Saving Company) projects. Broadly, the issues focused by WRI include climate change, ecosystem protection, environmental governance, green markets, sustainable transportation, etc.

The MoU with WRI envisages IDBI Bank as the official partner/financier which would enable the Bank to develop financial products to meet the needs of ESCO projects, besides implementing the ESCO projects in select MSMEs who have potential for energy savings in their units.

IDBI Bank has also introduced a 'SME Smart Line of Credit' which offers a pre-approved line of credit that would be available to both new and existing MSME customers in the form of term loan/working capital or both (fund-based/non-fund based limit) to meet their unexpected or sudden business needs.

With a view to provide door step banking services to MSME borrowers, the Bank has introduced the facility of online application form on its website. Under this, the prospective customer can apply for various credit facilities from anywhere in the country. The Bank has also put in place a web-based application for the MSME borrowers to enable them to track the status of their applications submitted to the Bank online. The system, among the first of its kind in the banking industry, would usher in transparency in the processing of loan applications, enabling the borrower to know the stage of processing of the loan application.
On 1st October, IDBI Bank had entered a special partnership with the Small Industries Development Bank of India (SIDBI) for joint financing of MSME clients across the country.  Initially, the co-financing facility would be rolled out in 10 centres viz., Ahmedabad, Bangalore, Chennai, Coimbatore, Delhi, Indore, Jaipur, Lucknow, Ludhiana and Rajkot and subsequently, would be extended across the country. Common documentation would be done under pari passu basis, which would facilitate MSME clients to get funds smoothly. IDBI Bank would provide the working capital and SIDBI would provide the term loan.

ICICI Home Search and Ekta Group tie up for Ekta Parksville

ICICI Home Search in association with Ekta Group provides an opportunity to buy apartments in Mumbai. ICICI Home Search is a division of ICICI Finance Company Ltd. Located in Virar, the project - Ekta Parksville will be completed in approximately three years. The booking is open up to seventh floor. There would be four to seven apartments on each floor in different towers. The cost of 1BHK is Rs13.9 lakh onwards. Minimum investment on booking is Rs6.95 lakh. The cost of 2 BHK is Rs19.84 lakh onwards and minimum investment on booking is Rs9.92 lakh. The cost for 3BHK is Rs29.02 lakh onwards and minimum investment on booking is Rs14.51 lakh. The lock in period for investors is 12 months.

This is a pre-launch property hence not yet approved by ICICI Bank Home Loans for funding. Ekta Parksville will include amenities like club house, children's play area, community party lawn, library, jogging track, health club etc.

HDFC Mutual Fund floats HDFC FMP 35D September 2010 (3)

HDFC Mutual Fund has launched HDFC FMP 35D September 2010 (3), under HDFC Fixed Maturity Plans-Series XIV. The Scheme is a close-ended income scheme. The investment objective of the Plan is to generate income through investments in debt/money-market instruments and government securities maturing on or before the maturity date of the Plan. The Plan will invest 60%-100% of assets in debt and money-market instruments and the remaining in government securities.

The Scheme offer growth and dividend (payout) option. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The exit load is nil. The NFO closes on 11th October. The minimum investment amount is Rs5,000. The minimum target amount is Rs1 crore. CRISIL Liquid Fund Index is the benchmark index. Bharat Pareek and Anand Laddha are fund managers.

M&M signs MoU with Allahabad Bank for car loans and commercial vehicle finance

Mahindra & Mahindra Ltd (M&M) has signed a memorandum of understanding (MoU) with Allahabad Bank. The agreement will enable M&M customers to avail of vehicle finance services from any branch of Allahabad Bank, in addition to over 100 delivery channels for retail lending through 27 centralised retail banking boutiques and 75 retail banking boutiques across the country.

For car loans, loan amount of up to 85% will be granted of the cost of vehicle on the road. This includes one time registration along with first time road tax & insurance charges etc. The interest rates for car loans start from 10% to 10.5%.

For commercial vehicle loans, which are lesser than Rs5 lakh up to 80% on road cost will be granted and for loans greater than Rs5 lakh up to 90% on road cost will be granted. The interest rates for commercial vehicle start from 8.75% to 10.5%.

Bank of Baroda, Development Credit Bank increase base rates

Bank of Baroda and Development Credit Bank have increased their base rates by 50 basis points. Bank of Baroda has increased its base rate to 8.5% from 8% with immediate effect, which will make loans from the bank costlier. Development Credit Bank has also raised its benchmark lending rate to 8.25% from 7.75% with effect from today. The base rate is the benchmark rate below which banks are not allowed to fix their lending rates.


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