Single premium, guaranteed 'double' return with insurance will entice customers says Kamalji Sahay

Star Union Dai-ichi (SUD) Life has just launched Dhan Suraksha Platinum. Depending on your age, it can almost double your investment after 10 years. The product also offers five times the premium as insurance component. This is a typical J-F-M (Jan-Feb-Mar) product to attract customers for tax-savings. The insurance component may be low, but customers looking for tax-savings are keen on getting good returns on investments. Excerpts from the interview with Kamalji Sahay, managing director and chief executive officer, SUD Life:

Moneylife (ML): The insurance component of Dhan Suraksha Platinum is only five times the premium. Don’t you think it is low considering that insurance products should have decent sum assured?

Kamalji Sahay (KS): This product is a single premium, guaranteed return product. Depending on the age, we are offering to almost double your investment in 10 years. Getting an insurance cover of five times the premium throughout the policy is an icing on the cake. No other product in the market offers it.

ML: There is already a product (Bajaj Allianz Guaranteed Maturity Insurance) in market which offers to double your investment in 10 years for any age. Your product offers 1.36 to 1.97 times your investment after 10 years. How is it competitive?

KS: The product you are referring to has decreasing sum assured. It offers five times the premium only in the first year. In the remaining nine years, the insurance is only 1.25 times the single premium. Our product (Dhan Suraksha Platinum) offers insurance of five times premium, which will remain through the policy. Due to this, our product will offer tax benefits of 80C at the time of entry and also 10(10) D at the time of exit.

The minimum ticket size is Rs1 lakh; which will offer insurance of Rs5 lakh. In case of premium of Rs5 lakh to Rs49.9 lakhs, there will be additional benefit of 2% of the premium payable on maturity. In case of premium of Rs50 lakh and above, 3% of the single premium is payable on maturity. 

We did want to structure our product to offer double the investment. There were some queries from Insurance Regulatory and Development Authority (IRDA) and hence we settled for 1.97 times the investment.

ML: Was there any delay in getting product approval from IRDA?

KS: No. Unlike the perception about regulatory delay in product approvals, we did not find any delay in our product approval.  

ML: The rate of return for Dhan Suraksha Platinum will be 7%, while a bank FD can offer almost 10% for 10-year FD. How will your product compete with bank FD?

KS: Our product does not compete with a bank FD. We are offering an insurance product. It will offer tax benefits at entry and exit. A bank FD may be taxable depending on the income. Banks are offering high rates for lower fixed deposit term and may not give a high rate for 10-year FD.

ML: Why is the product available for only three months? Is it because bank deposit rates may fall next year?

KS: True. We need to have proper debt instruments to lock in to be able to guarantee any returns.

ML: What is your target business for Dhan Suraksha Platinum?

KS: We plan to sell 10,000 policies in each of the three months of this quarter (Jan-Feb-Mar). With our strong bancassurance channel we should be able to achieve our target.

ML: What will be the agent commission for this product?

KS:  This is single premium product. We will offer 2% as commission.


ONGC to invest Rs15,000 crore in KG gas find

ONGC believes that UD-1 gas discovery in the southern part of its Block KG-DWN-98/2 can produce for 14-15 years with peak of about 20 mmcmd

State-owned Oil and Natural Gas Corp (ONGC) plans to invest Rs15,340 crore (about $2.894 billion) in developing its ultra-deepsea UD-1 gas discovery in the Krishna Godavari basin by FY17.

ONGC believes that UD-1 gas discovery in the southern part of its Block KG-DWN-98/2 can produce for 14-15 years with peak of about 20 million cubic meters per day (mmcmd) lasting for five years, official sources said.

The company detailed the production profile and the likely investment in the revised proposal for declaring the UD-1 find as commercial (called Declaration of Commerciality). Block KG-DWN-98/2 sits next to Reliance Industries' KG-D6 block where drop in reservoir pressure and water/sand ingress has seen output dip by over 35% to just over 39 mmcmd.

UD-1 is the deepest gas discovery ever made in the country and ONGC estimates it may hold 4.257 Trillion cubic feet of inplace gas reserves, source said adding the upstream regulator, the Directorate General of Hydrocarbons (DGH) has accepted the DOC but with lower inplace volumes of 3.938 Tcf.
Of the inplace reserves, ONGC estimates 2.55 Tcf can be recovered while DGH puts the figure at 2.315 Tcf.

Sources said ONGC plans to drill 11 wells to bring the field to production by FY17 with an output of 585 million cubic feet per day (16.5 mmcmd).

The production would rise to 715 mmcfd (20.24 mmcmd) in the second year and stay there for five years. Output from the seventh year would start dipping and it would be 86 mmcfd (2.4 mmcmd) in year 15.

DGH, they said, found the discovery commercial after considering cumulative production of 2.315 Tcf with recovery of 58.5% for 15 years.

It estimated a net present value (NPV) yield for ONGC at about Rs1,066 crore ($200 million) after considering Rs15,985 crore (almost $2.984 billion) of capital investment and another Rs9,430 crore ($1.77 billion) in operating expenses.

ONGC has said Development Plan at this stage of the project remains conceptual and may change based on new data. Further as on date, there is no off-the shelf commercial production technology available with any company in the world to produce gas in such deep waters (2,841 meters), sources said adding ONGC believes that technological solutions would be available in next three years.

The block KG-DWN-98/2 is divided into two - Northern Discovery Area and the Southern Discovery Area. The northern part has nine discoveries - Padmavati, Kanakdurga, N-1, R-1 (Annapurna), E-1, A1, U1, W1 and D-1/KT-1. The southern part holds the UD-1 discovery at a record depth of 2,841 metres.

In the late afternoon, ONGC was trading at around Rs258.55 per share on the Bombay Stock Exchange, 0.62% up from the previous close.


Honda 2-wheeler Dec sales up 36%

Motorcycle sales jumped 24.97% to 78,721 units in December, last year, against 62,991 units in December 2010

Two-wheeler manufacturer Honda Motorcycle & Scooter India (HMSI) reported a 36.15% growth in sales in December 2011 at 1,91,584 units over the year-ago period.

The company had sold 1,40,719 units in the corresponding month in the previous year, HMSI said in a statement.

Motorcycle sales jumped 24.97% to 78,721 units in December, last year, against 62,991 units in December 2010, it added.

The company reported an increase of 45.20% in scooter sales to 1,12,863 units compared to 77,728 units in December 2010.


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