Insurance
'State-run insurers' new scheme lacks focus on profitability'
In an attempt mainly to protect its topline regardless of profitability, the four public sector general insurance companies are considering re-appointing retiring development officers and marketing executives on contractual basis, said officials. But the move has evoked a mixed response, including heart burns.
 
The proposed scheme would allow development officers retiring on or after March 31, 2016, to be re-appointed as business associates provided they procured a premium ranging between Rs 1 crore and Rs 2 crore based on their place of posting.
 
The business associates will be paid a remuneration of their last drawn basic pay, subject to achieving the business target.
 
If the targets are not achieved, the remuneration will be reduced accordingly. However, a minimum remuneration of 40 per cent of their last drawn basic pay will be paid.
 
They will also be paid volume allowance, conveyance allowance and profit incentive.
 
The scheme, however, does not talk about the profitability of the existing business and whether it is prudent to retain them at all.
 
Currently the business channels for the National Insurance Company, New India Assurance, Oriental Insurance and United India Insurance are development officers, agents, brokers, micro-offices and direct sales people.
 
"It is a welcome move by the companies. At an average each development officer will do a business of Rs 2 crore per annum. Each company may have a minimum of around 1,000 such officers. So the potential business to be retained within the fold is around Rs 2,000 crore per company," S. Vasudevan, Secretary General, All India General Insurance Field Workers' Association (AIGIFWA), told IANS.
 
On the other hand, some of the officials manning the micro-offices/one man offices are upset at the development. The micro-offices are manned by administrative staff-clerical/officers having an aptitude for marketing and also by development officers and those promoted from the development officer cadre.
 
"A development officer is serviced by a full-fledged branch. On the other hand we have to procure business and complete the documentation. Our remuneration is only our salary. Many of us do business equivalent or better than a serving marketing executive," a clerk at a micro-office of a government insurer told IANS, preferring anonymity.
 
"The companies should also shift us to the Development Officer's cadre. We are willing to abide by the terms and conditions governing that cadre," he added.
 
"When the insurance brokers were allowed it was expected they would add value to the policy-holders and for the industry. However, a majority of them were like a glorified agent focusing on cutting the premium down by pitting one company against another," a senior official of a government-owned non-life insurer, not wanting to be named, told IANS.
 
"The data provided by some of the brokers about a risk to be underwritten were at variance with the actual," he said.
 
The economics of the business associates scheme has to be worked out in detail with the focus on profitability of the business sought to be retained, he said.
 
"There is a need for another round of VRS (voluntary retirement scheme) in the four companies to bring down employee cost. New recruitment across the cadres can be made to bring down the management expense ratio," he added.
 
Industry officials pointed out the need to do the profitability analysis of each distribution channel and to wind up unviable ones.
 
"More marketing feet on the road are needed. The business associates scheme should be made open to all the retiring employees. There are many administrative staff who are now doing handsome business and have good contacts," a long time employee of a government insurer told IANS.
 
"The scheme in the current format is like giving a chicken to a tiger that is already devouring a goat. Now the retired development officers are placing profitable business with private insurers and earn handsome commission while giving loss making business with the government insurers," he added.
 
"The reported scheme seems to be basically for protecting the volume of business. Though there is an additional 'profit incentive' in the reported scheme, there seems to be no built-in control for rejecting bad business," K.K. Srinivasan, former Member of the Insurance Regulatory and Development Authority of India (IRDAI), told IANS.
 
The scheme clearly shows that the branch/divisional/regional managers have failed to develop the necessary rapport with their corporate clients so that they are serviced directly even after the retirement of the development officers.
 
"So what happens to the business when the business associates attain the age of 65 when his/her appointment will be terminated," Srinivasan wondered.
 
"That is for the then chairman-cum-managing director to manage. Perhaps there will be a business surrogate scheme. By that time those who are responsible now would have retired," an official quipped.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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Seoul bans sale of 80 Volkswagen models
The South Korean government on Tuesday revoked the certification and banned the sale of 80 Volkswagen models in the country over the false emission scandal implicating the German car manufacturer.
 
The ban affects 32 different (18 diesel and 14 petrol) vehicles of Volkswagen and Audi, which make up most of the supply of the two brands in South Korea, said Seoul's Ministry of Environment in a statement.
 
The Ministry also fined Volkswagen $16 million as punishment for 47 models that cheated in the environmental tests in South Korea, EFE news reported.
 
Volkswagen, which already anticipated this decision, stopped selling vehicles affected by the scandal last week, including the Volkswagen Golf, Jetta and Tiguan models along with the Audi A3 and A6, in South Korea.
 
Seoul ordered the recall of some 5,800 Audi A4 and A5 vehicles, in some of its TDI versions, marketed in the country since 2014.
 
The certification cancellation affects some 209,000 vehicles, 68 percent of them marketed by Volkswagen since 2007, although this will not affect owners who can continue driving them and even sell them off eventually.
 
The ban comes after an investigation into Volkswagen over allegations that the company obtained vehicle approval of South Korean authorities by reporting false results on the noise level, fuel efficiency and vehicle emissions.
 
Prosecution in February had already raided Volkswagen offices over insufficient data submissions on the recall ordered, after the discovery of manipulation and in mid-July accused an executive of the brand's subsidiary in Seoul for allegedly tampering with data and violating the air quality law.
 
The origin of the case dates back to 2015, when it was discovered that Volkswagen had used fraudulent software to distort vehicle emissions in several countries, including South Korea.
 
The South Korean government fined the German manufacturer $13 million in November 2015 and ordered a recall of 125,000 vehicles in the country.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Power without Accountability: Repeated Raps from Higher Judiciary are Dangerous Portents for SEBI
It is good that the capital market watchdog had the sagacity to defuse, with an unconditional apology, an ugly situation with dangerous portends. It was also mature of the Securities Appellate Tribunal (SAT) to accept the apology and close the matter in order to protect the regulator’s standing with market participants (on 26th July). But is it okay for the Securities & Exchange Board of India (SEBI) to be repeatedly caught making irresponsible use of its regulatory powers, only to backtrack when it is rapped hard by a high court or an appellate tribunal? Here is what happened this time. 
 
In May 2016, SAT had asked SEBI to give a hearing to Adventz Finance and dispose of the matter within seven weeks or by 24 June 2016. Since then, SAT granted SEBI at least three opportunities to produce the order passed by its whole-time member (WTM). After much subterfuge and trying to pass off a letter by a chief general manager as an order, SEBI finally admitted that no formal order had been passed. Even then, SAT first asked the member to pass an order immediately, only to be informed that he was travelling. A livid SAT ordered SEBI to pay a fine of Rs1 lakh to the appellant for giving him the ‘run around’ and ordered a different WTM to hear and decide the Adventz Finance matter. It also expressed distress at the manner in which SEBI’s WTM had ‘discharged his quasi-judicial’ duties and asked that its ruling be forwarded to the finance minister and the SEBI chairman. After SEBI tendered an unconditional apology, SAT has relented and withdrawn the fine and permitted the WTM, Rajeev Kumar Agarwal (not named in the order), to pass a proper order within a week. This is not the first time that SEBI’s conduct as a quasi-judicial body has been questioned. Consider two examples.
 
1. In March 2015, the Bombay High Court set aside SEBI’s first ever exercise of its newly acquired power of arrest in the case of Vinod Hingorani. The Court said that it had exercised “the power of arrest in total contravention of the provisions” and its order was “arbitrary, illegal and void.” In fact, the Court had called it an ‘abuse of power’. 
 
2. In April this year, SAT had rapped SEBI for passing contradictory and inconsistent orders and penalties for similar offences. It was especially disturbed by a SEBI lawyer’s stand that the regulator stood by ‘both orders’. While SAT castigated SEBI’s conduct as ‘disgraceful’, the problem lies at a level much higher than that of the lawyer who was probably following instructions from the top. 
 
Significantly, it is SAT rather than the regulator, who seems concerned that SEBI’s contradictory orders are “detrimental to the interests of the securities market.” The need for confidence in the market and its regulation ought to be a national concern. There should be consequences for those who fail to understand the responsibility and gravity of their role as regulatory body and as a quasi-judicial authority. SEBI is now armed with enormous powers of search, seizure, arrest, freezing of bank accounts, barring entities from the market and stoppage of operations that can damage businesses and irreparably destroy reputations. Only the very brave or well-funded intermediaries have the courage to challenge the regulator legally and risk vengeful action in the form of interim orders that can shut down a business, with no obligation on SEBI to provide a hearing or issue a time-bound order. 
 
Indeed, many are silently crushed due to their reluctance to challenge the regulator. SEBI’s misguided policies, cumbersome procedures and constant tinkering with the rules is only making people fearful, confused and frustrated. The capital market thrives on information and savvy investors slowly learn to separate the grain from the chaff of insiders and speculators. But SEBI’s rules often end up gagging open discussion in public forums even while it is unable to monitor or check shady tipsters who use social media and SMS with impunity to entrap gullible and ignorant investors.

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COMMENTS

DR MUKESH

10 months ago

SEBI ,members should be made to pay for their inaction , lethargy and arrogance !. They think they are above the law , which will soon catch up with them . The judiciary is watching ! Beware guys !

Vaibhav Dhoka

10 months ago

The leniency is shown repeatedly to officials who gain arrogance at public cost.I would like to mention my correspondence with Mr Habibbullah then CIC,it was second appeal against RTI from SEBI the case was posted at New Delhi and a day before SEBI asked for adjournment,I wrote to CIC that officials attend at state cost and do not mind for eleventh hour adjournment as a common man one cannot go to New Delhi due to cost.He totally agreed with facts but said his inability to help as procedures.As procedures are prepared by babus they take undue advantage and judiciary or other authorities show leniency as they are also from same breed.

siva sankaran

10 months ago

Make the members of the SEBI pay for their actions/inactions.then only they learn in hard way

siva sankaran

10 months ago

Make the members of the SEBI pay for their actions/inactions.then only they learn in hard way

REPLY

DR MUKESH

In Reply to siva sankaran 10 months ago

Hon'ble PM , pl clean up SEBI now. They need to be shaken up !

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