Tata AIA, Reliance Life witness sharp fall in premium collection

Premium collected by private sector life insurance companies during the first half of current fiscal declined to Rs32,423 crore from Rs35,059 crore in same period last year

New Delhi: Tata AIA and Reliance Life witnessed steepest decline in the collection of life insurance premium during the six-month period ending September 2012, reports PTI.
The total premium collected by Tata AIA Life Insurance during April-September 2012 declined by 29.55% followed by Reliance Life Insurance at 28.62%, Minister of State for Finance Namo Narain Meena said in written reply.
"The reasons for a negative growth in the premium collections are various factors that are influencing the financial sector as a whole", the Minister said, adding the 23 private sector life insurance companies collectively witnessed 8.13% decline in premium collection.
The lone public sector player Life Insurance Cor of India (LIC) fared much better than its private sector peers, by recording only a marginal decline of 0.18% in premium collection during the six-month period.
The other private sector insurance companies which have witnessed significant fall in premium collection were SBI Life (23.97%), Birla Sun Life (15.56%), Shriram Life (14.6%), Sahara Life (12.94%) and Future Generali Life Insurance (12.60%).
The figures provided by the Minister revealed that premium collected by the private sector life insurance companies during the first half of the current fiscal declined to Rs32,423 crore from Rs35,059 crore in the corresponding period a year ago.
LIC collected a premium of Rs87,780 crore, down marginally from Rs87,937 crore in the six-month period of the previous fiscal, the minister said quoting figures.


Regulations and corruption

When the regulations make doing business impossible, the only shortcut is to bribe the officials enforcing the law and since most of the bureaucrats have an economic interest in an inefficient law, it remains in place

Law is simple: A series of yeses and nos; permits and prohibitions; injunctions and authorizations. The justification for most of these rules and regulations is the health, safety, and welfare of the public. Through the rules, the state can create faster, easier, and more efficient ways to settle disputes, protect property and pay taxes. Without the transparency of the law investors and businesses lack an important tool to gauge risk. In failed states absence of law leads to chaos. But what happens when law itself is the problem? The answer to this question is vital in determining the potential for long-term economic growth of any country and any industry.
One of the best metrics for determining the efficiency of the law is the World Bank’s International Finance Corporation’s report “Doing Business 2013” which was published at the end of October. Although it is easy to question some of the methodologies of this report, comparing laws of one jurisdiction to another may be apples to oranges, it is still an extraordinary report that should be required reading for international investors. 
To start there are the BRIC countries. These countries have experienced exceptional growth for most of the past decade. Many markets assume that the combinations of resources and demographics will continue to propel this growth for years to come. But there is one thing that is sure to stop this growth in its tracks—the law. The regulatory environment for all BRICs is so bad that only China makes it into the top half by one position, and that assumes that the Chinese actually enforce their own laws, which they don’t.  Only India gets near the top quarter in investor protection. This regulatory drag is beginning to have an effect as each country’s growth meets regulatory bottlenecks and distortions.
It is less surprising that some of the poorest countries in the world had the worst rankings. Enforcing a contract in oil-rich Angola takes 2.7 years and costs 44% of the claim. In Korea it takes less than eight months and costs 10% of the claim. Of course the Angolan court system looks swift compared to India where a contract action takes almost 4 years and costs 39% of the claim.
The only exceptions in Africa are Ghana and Namibia. They both score in the top half with scores of 64 and 87 respectively. They are also two of the only six countries in sub-Saharan Africa where civil rights are protected. 
Also on the bottom of the list are Afghanistan, Iraq, Iran, Syria and Venezuela. The problem of doing business in these countries is correlated with the level of corruption. Afghanistan and Iraq are the most corrupt countries in the world followed closely by Venezuela with Iran and Syria not far behind. The connection is not hard to fathom. When the regulations make doing business impossible, the only shortcut is to bribe the officials enforcing the law. Since these bureaucrats now have an economic interest in an inefficient law, it remains in place.
Changing these systems is exceptionally difficult. Greece is a democracy, but it has institutionalized a corrupt patronage system dominated by two parties that have been virtual family fiefs. To keep the system going required a bloated civil service and plenty of red tape, and the lowest ranking of the OECD countries. But with the demands of austerity came change. With reforms Greece jumped 11 places.
The odd thing about institutional reform is that it can be so easy. Laws and regulations are not made of steel and cement, just pieces of paper. Transportation infrastructure and electrical grids can take years of planning and billions of dollars. Regulatory reform can occur with the stroke of a pen. Poland was able to jump 19 places from 74 to 55 by improving its contract enforcement and insolvency procedures. Tiny Georgia with a population of only four and half million has made a concerted effort to become an investment destination. It streamlined its laws and now ranks at number 9 with a growth rate above 7%.
Still the process is fraught with difficulty. The United States is usually considered the bastion of the free market. In the past election the Republicans bitterly attacked the Obama administration for needless regulation. But in Texas and Florida, the two Republican strongholds, the list of licensing regulation is absurd. In Florida licenses are required for 20 occupations, including hair-braiding, interior design and teaching ballroom dancing. An interior design license requires a university degree, two-year apprenticeship and a two-day examination. When the conservative Florida legislature tried to pass a bill to remove these restrictions they were met with howls from the incumbent license holders. Why? Licensed professions receive 15% higher income, but unregulated trades had 20% higher growth. With money on the line, the bill failed.
To read more articles by the same writer, click here.
(William Gamble is president of Emerging Market Strategies. An international lawyer and economist, he developed his theories beginning with his first hand experience and business dealings in the Russia starting in 1993. Mr Gamble holds two graduate law degrees. He was educated at Institute D'Etudes Politique, Trinity College, University of Miami School of Law, and University of Virginia Darden Graduate School of Business Administration. He was a member of the bar in three states, over four different federal courts and has spoken four languages.)




4 years ago

This adumbrates the fundamental reason behind all legislation in "Animal Farm" Republics like India: EXTORTION.

SEBI to define 'front-running' soon: Sinha

Front-runners use confidential information for buying or selling securities ahead of a large order with the objective of benefiting from the subsequent price movement

Mumbai: Market watchdog Securities and Exchange Board of India (SEBI) has said it will review the regulations regarding fraudulent and unfair trade practices as the present rules need to clearly define 'front-running', reports PTI.
The comment follows a recent case on the issue where the Securities Appellate Tribunal (SAT), set aside a SEBI order.
"Front-running is an offence and we need to make a lot of improvement... Regulations on insider-trading are different, and we have to have a serious re-look at regulations," Upendra Kumar Sinha, chairman of SEBI told reporters at a media workshop organised by the regulator on securities market here Saturday.
Front-running is an illegal practise where a stockbroker executes orders on a security for his/her own account, taking advantage of advance knowledge of pending orders.
Front-runners use confidential information for buying or selling securities ahead of a large order with the objective of benefiting from the subsequent price movement.
Earlier this month, the SAT set aside a SEBI order penalising three persons for front-running -- it was the first case involving individuals -- which raised questions about the efficacy of the law.
The SEBI had barred the trio from the market, and imposed a fine of Rs1.13 crore on two of them. They had allegedly made a profit of Rs1.56 crore from 557 synchronised trades on the NSE and 50 on the BSE between January 2007 and March 2009.
But setting aside the SEBI order, SAT said the existing prohibition of fraudulent and unfair trade practises (FUTP) regulations of 2003 do not clearly define "front-running", and even if a particular fraudulent transaction could be construed as front running, the regulations applied only to market intermediaries and not individuals.
Traders Kanaiyalal Baldevbhai Patel and Anandkumar Baldevbhai Patel were in the dock for executing orders on the information received from cousin Dipak Patel, who was a portfolio manager at Passport India Investment Mauritius.
SEBI alleged that Dipak Patel tipped them off about forthcoming trading activity of Passport India, and Kanaiyalal Patel traded ahead of Passport's orders, making a huge profit.
Trades were executed using a phone number registered in Anandkumar Patel's name.
One of the handicaps suffered by SEBI while regulating front-running is it is not empowered to tap phones. It had sought a notification to get this power under the Telegraph Act.
The government did not accede to SEBI's request, but last week Finance Minister P Chidambaram had told PTI that government could provide SEBI with call records data on case to case basis.


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