Tata Mutual Fund unveils 366 days fixed maturity plan

Tata Mutual Fund new issue closes on 9th May

Tata Mutual Fund has launched Tata Fixed Maturity Plan Series 34 Scheme A (366 days maturity), a close-ended income scheme.

The investment objective of the schemes is to generate income and/or capital appreciation by investing in wide range of debt and money market instruments having maturity in line with the maturity of the respective schemes. The maturity of all investments shall be equal to or less than the maturity of respective schemes. The tenor of the scheme is 366 days.

The new issue closes on 9th May. The minimum investment amount is Rs10,000.

Crisil Short Term Bond Index is the benchmark index. Murthy Nagarajan is the fund manager.


SME businessmen increasingly air-bound

According to the ‘British Airways Business Traveller Report’ involving 107 businesses, “68% have reported increased business-related travel since the depths of the financial downturn of around 18 months ago.”

The number of business travellers from India, especially those representing small and medium enterprises, travelling abroad is rising significantly, says a British Airways’ survey.

This is a signal that the country would soon emerge as “one of the greatest business travel markets” in the world, it said.

According to the ‘British Airways Business Traveller Report’ involving 107 businesses, “68% have reported increased business-related travel since the depths of the financial downturn of around 18 months ago.”

Of this, over 20% of Indian business travellers claimed to have doubled their travel, while nearly half have increased their travel by 25% to 40%.

“Travel for business from India is on the rise across all sectors and all classes.

While the larger companies are increasing travel in business classes, the rise in economy, premium economy and business class travel from the SME sector seems to be equally strong,” said Judy Jarvis, British Airways regional commercial manager (South Asia).

“The report reinforces our view that India is already taking its place as one of the greatest business travel markets in the world,” she said.

The report said one of the reasons for the rise in business travel was that Indian businessmen see it as an investment in client relationships (67%) or necessary for securing new clients (59%).

The report also found that business travel in India was much more optimistic than in other markets. 82% of respondents believe that their business-related travel will increase in the next 12 months and only 3% expect to fly less next year.

“A quarter of the businesses surveyed said that they undertake more than 25 domestic trips in a year; and 34% undertook between 5 and 10 international business trips in 2010. A small minority consistently flies first class both domestically and internationally,” it said.

The report also highlighted the precarious nature of travel during a financial slowdown.

It said that 67% of respondents agreed with the notion that, when times are hard, travel is one of the first and easiest cuts to make.

Indian SMEs, in particular, hit the brakes when faced with financial difficulties and the majority (85%) stopped most international and some domestic travel to reduce costs during the financial crisis, it added.



Will insurance agents vanish in the face of competition from banks?

Insurance in India has predominantly been sold through agents. And insurers have big plans to enlarge their agent network. However, IRDA believes that banks are the distribution channel of tomorrow

Insurance in India is mainly sold through individual agents. Today, over 90% of business is done through such agents, including corporate agents, although banks are slowly getting into the business. A fortnight ago, the insurance regulator popped a surprise, saying that the dominant agency model of selling insurance has serious shortcomings and that he does not see it surviving in India for long.

"Agency, in the traditional form, has vanished in many markets in the world and I don't see why India will be an exception to this," J Hari Narayan, chairman, Insurance Regulatory and Development Authority (IRDA), said at an insurance seminar, organised by the Federation of Indian Chambers of Commerce & Industry, recently. And he disclosed that "IRDA has set up a group to look into how the bancassurance channel can be more efficiently utilised and re-engineered to meet the needs of tomorrow."

The statement may come as a punch for the 30-lakh odd insurance agents in India, serving every nook and corner of the country. The withering away of the agency channel will affect the livelihood of agents, as opposed to the bancassurance channel whose main source of income is not insurance. Does the industry concur with IRDA and what are the ground realities?

The fact is that insurers with a dominant bank backing have slowly increased their agency force substantially. More than half of ICICI Prudential Life's new business comes through the agency channel, while HDFC Life gets up to a third of its new business through agencies. Even new entrants having bancassurance support are planning to double the number of agents in a year. Among these are Star Union Dai-ichi, IDBI Federal and IndiaFirst Life Insurance. IDBI Federal currently has 9,000 agents and it plans to increase this to 18,000 agents by March 2012. IndiaFirst Life has an even bigger plan, aiming to increase the number of its agents from 1,000 to a minimum of 5,000 by March 2012.

Kamalji Sahay, managing director and chief executive officer, Star Union Dai-ichi, says, "Since we have just launched the agency channel, doubling the number of agents during the next 12 months is not a big deal; but our strategy definitely indicates our conviction in the agency channel as a huge potential medium of distribution of insurance products."

India is not evolved market for a 'push' product like insurance and hence the dependence on the agency model will continue for years to come. Insurance products are complex and well-trained agents will be needed to explain the products to potential customers. Agents will have to grow from their current selling role to be a true insurance advisor independent of the commissions. The 'trust' factor is lacking in many agents today.

According to Kshitij Jain, managing director and chief executive officer, ING Vysya Life, "ING Life strongly believes that there is a bright future for the agency channel in India. Life insurance remains an advice-based product which requires well-trained and professional people servicing customers."

Amitabh Chaudhry, managing director and chief executive officer, HDFC Life, says, "Historically, the agency model has played a dominant role in the distribution of life insurance products in the country. India is an under-insured country and it would be premature to write off any channel at this early stage. We think what the regulator meant was the agency model as is prevalent in the industry isn't sustainable. Keeping in mind the financial literacy scenario and the complexity of a life insurance product, it is important for a customer to sit with an agent to understand the product. A proper need-based analysis is very critical for selecting a life insurance product. Agents would need to play a more evolved role - as a financial advisor - and would need to play a pivotal role in the entire financial planning exercise of an individual."

The Life Insurance Corporation of India (LIC), the country's biggest life insurer with a 70% market share, has a huge network of 15 lakh agents who push its insurance products across India and a meagre 3% of its business is from banks. So, it's difficult to imagine this changing in the near future.

Another factor that is not openly discussed is the kickback from a part of the commission that agents give back to policyholders that is also keeping the agency route alive. But will bancassurance be far behind in sweetening the deal for customers? For example, a traditional insurance product of Rs10,000 premium per year can fetch the seller up to Rs4,000 (40%) commission in the first year. In many cases the customer could get Rs2,000 from this, or even more.

Neighbourhood bank managers inherently command the trust of a customer and could well indulge in crossing the fine line of mis-selling. "I do not agree that banks should be entering the insurance space at all. With the increasing pressure on bottom lines, insurers are resorting to various means including obtuse interpretation of policy conditions," says Rohan Dukle, director, Magus Corporate Advisors. "It is not expected that agents will be able to cope up with the increasingly demanding insurance space. Banks, whose core competence does not lie in this sector, are in effect worse than such agents since the employees providing the last-mile service are not only not qualified adequately for providing insurance services,  but are riding two horses at the same time, the banking as well as the insurance horse. In fact, it is quite often seen that banks arm-twist their borrowers to buy insurance policies from them, very often resulting in very adverse claim settlements since policies are underwritten very badly."

However, with distribution channels using mobile telephony, Internet, distance-marketing, broking services and such other innovative techniques changing the face of the insurance business, agency channels are bound to face stiff competition going ahead.

Girish Malik, vice-president (life), Nandi Insurance Broking, says, "The distribution channel is the lifeblood of all insurance business. The traditional agency distribution channel still rules the roost in life insurance in India. However, it is losing its sheen today for obvious reasons like higher cost for both insurer and consumer, because of higher commission rates, an old-fashioned approach not fully updated with technological advancements, and it is not as convenient as other distribution channels that offer more solutions as per individual needs and requirements.  Also, consumer awareness of insurance has increased due to the collective effort of regulators, government, media and insurance companies. The consumer is aware of other distribution channels and is ready to experiment and adopt these rather than bank on the traditional agency channel."

Evidence of this change is seen in some south Asian countries, where bancassurance has seen tremendous growth over the past decade. Atrey Bhardwaj, head of general insurance, Bonanza Portfolio, says that while the agency has been the backbone of insurance distribution in India, bancassurance has grown in other south Asian countries from 5% of the total business in 2001 to 25%-30% today.

"Bancassurance has been a highly evolving channel since it was introduced in the Indian market and companies who identified and did liaison with premier banks at the start, share a pioneer advantage. The agency channel, as portrayed by the IRDA chairman, is losing its share of the pie to other distribution channels," Mr Bhardwaj says. "India also needs dramatic regulatory changes to bring about all the positive factors to provide the necessary impetus for such channels to grow and bancassurance is one of them."



Keshav B Bhat

5 years ago

It is really serprising to see a coment by Mr Girish naik that insurance awareness has increased by the efforts of the regulators.
in reality what ever insurance awareness the ordinary people are getting is through good agents but all so called experts blame all individual agents of misselling because of few agents do this. Eventhough every one talks about misselling but nobody comes forward to regester the complaints against the people who are indulged in misselling and punishing for their crimes, it is the tragedy in india.
Keshav B Bhat


5 years ago

First MF agents, Next Insurance Agents , Last ?


5 years ago

Before giving the free hand and monopoly to Bankers to sell all financial products MFs, Insurance, derivatives etc, regulators should keep in mind the role played by Universal Bankers in USA (Sub-Prime Crisis and others). Also keep in mind the decision of RBI imposing penalties on some Banks for selling currency derivatives to companies having highly "qualified" CFOs, CEOs and team of MBAs. Imagine the fate of poor investors at the hands of these universal Bankers.

Krishna Gopal Gupta

5 years ago

Why the commission to corporate agents and banks is higher than IFAs? Why the exclusive plans by some insurers are created for banks only? Why those plans are not offered to be sold through IFAs if they are really meant beneficial to common investors? I must tell you so that there is no comparison between IFAs and bank's working and bank people can tell their customers that they have the monopoly to sell these plans. Why this monopoly is being delivered to them by insurers through the recommendation of IRDA. Why a preferred treatment to bank? IRDA Chairman is sleeping and wish to promote banks. Must have got huge hefty sums from these banks for his retirement and family members. Needs to be investigated by media on PRIORITY.

Krishna Gopal Gupta

5 years ago

It is sad & painful that the head of a regulator is biased and partial towards IFAs and promoting banks to sell insurance and MFs. It is well known and has been established repeatedly that the most of the mis-selling happens at banks only (that is why you had stated in one of your issues banker as bhayanker). These regulators are promoting banks, corporate agents, posts etc who do not have required IRDA certified IFAs at all present in their locations and most of the selling is being done by other staff. Instead of making arrangements to check this flaw, regulators are busy in supporting them, obviously must be having their personal vested interest. That is to be again investigated. These bureaucrats are looting the country in the name of common investors by their biased decisions and non-actions into the desired directions. These regulators had not created till now any feedback system from IFAs nor the Insurers and AMCs, AMFI etc. They do not reply to their mails at any time. They do not look into the grievances of IFAs with their Insurers and AMCs. Where they should go is not clarified in last decade. The regulator has not made mandatory to create and follow the Code of Ethics by Insurers and AMCs, why? Whereas at every possible point, IFAs are being threatened with rules & regulations to follow the code of ethics created by these regulators and Insureres, AMcs as well. They are simply harping upon KAMJOR KADI and showing their strength on these.

Keshav B Bhat

5 years ago

if everybody wants to kill the insurance industry, what anybody can do?
wre have seen Mr Bhave and co murdering MF industry. Today you can see the inflow to the Eqity based funds dasticlly redused and slowly it will be difficult to run the fund schemes and there wont be any fund to invest so the Bhave and copany's dream of saving costomer cost is achived since there are no funds available and no body will invest so people are saving their expances.
great Mr Bhave and his chamcha's

Alok Ranjan

5 years ago

Phasing out agent commission is matter of time. Arguments against this is not tenable. People (rural / urban) know how to manage their requirements and they invest in Bank FD, Post Office schemes, MF etc without the same being pushed or forced sold to them, then why should insurance be force sold and often mis-sold.

Furhter it has to be agreed that the best in class agents will continue to survive and they will adopt to the way of being financial consultants and charge fees for services they render.


5 years ago

MF agents are partly vanished .birla amc now asking to work free o charge for current NFO with your own zerox petrol and all KYC expence to beared by agent .
same thing may happened to insurence.
be prepared.
big fish eating to small in fased manner


5 years ago

Agents will not vanish. The tough one will survive. The business of all Insurance companies are dependent on agents to a large extent.

dillip swain

5 years ago

There is a gap between advisor and investor, which is not with A banker and customer. To close that gap it needs investor awareness.As a result irda thought will not work. INVESTOR BECOME DABANG TO PUT HIS DANDA ON IRDA'S HEAD.


5 years ago

What is IRDA taking ? Getting rid of Insurance Agents !!! This is the era of compitition and IRDA CHairman is talking of elimination of a vertical. Let there be compition between tha Bank Assurance Vs Agency. Best will survive. Why should anyone make a move to eliminate ?

Point 2 : Let bank concentrare on Banking activity for which they are ment for, SEBI should seroiusly think of Banning Sale of Third Party Products through the Banks. Now we have certifications in place for various products to be sold, good product knowledge is being imparted to the Intermediaries....Let us all be practical in doing good the Investor and Socity.

Let these top position holders of SRO not complicate the matter and make it worst !!!!

Let us not foget we all have greater responsibility of JOB CREATION , so let us work toeards that.....

More Jobs are created, good for our country , is what i belive............

Let the people sitting at the Ivory towers don't try to control Inflation by taking away the jobs and earnings of the Citizens................

sarvesh dixit

5 years ago

Bank are mis seller for financial product they misguide to his investor for financial product basically they don't have any individual responsibilty for this customer they want fulfill his target they don't bathered for his customer need they think only for him self.

sunil jog

5 years ago

I think Mr Hari Narayan is speaking fm the Ivory Tower.If takes trouble to look into rural area of India, he would well understand agents have pivotal role in selling ins and how banks fail to renew,revive,resale the old policies without proper knowledge of products. Pl dont mistake me of advocating agency model,it is my exp,research and database which says so.



In Reply to sunil jog 5 years ago

yes, it is true that much of life insurance business comes from banks or known as alternative channel.
but imagine the fate of policyholders whoose bank shifted their loyalty to other co.
ex andhra bank from lic to own company
axis bank from metlife to maxnewyork
no service from bank as the person who sold the policy by OBLIGATION may not be there.
so the existing bank person will simply guide to lapse/paid up the present policy and take a new one which has LOWER or better SOLUTION for his/her financial goals !!!!!
But agents know how to survive by recomending a 40 % comission policy and returning 30 % to clients.

sanjay doshi

In Reply to sunil jog 5 years ago

Well siad, Sunil. The regulators in general think that selling to rural India is a piece of cake. They would know what it takes only if they have sold something in their lifetimes. Dealing with an uneducated and suspicious populace is so very hard

Nagaraja K

5 years ago

Very appropriate. Banassurance is the best channel available at present.
As it is, agents have been made the main "accused" in the distribution channel. Instead of making the agency channel strong by asking the agents to educate themselves and giving some recognition to qualified agents, people at the helm want to get rid of them. So be it. Let the whole clan of agents be destroyed at one shot as everything is in the hands of the regulator, who can do anything. As an agent myself, I would like to see the change as early as possible, instead of waiting like a sheep to be butchered. Mera desh Mahan.

Sanjay Doshi

5 years ago

The Big chief of IRDA, like all regulatory bodies worldwide, must create a level playing field, which he has not done.

a. He must remove the surrogate guarantee that LIC enjoys from GOI

b. He must make commissions payable comparable to ULIP's sold by individuals in the following :

i. banking and other alternate channels

ii. all those who sell traditional policies

c. All benefits of such reduction should be passed onto the consumer

For 63 years after independence the individual has given yeoman service to the industry and now his role is not only being reduced but he is being pushed to extinction. This is the reward for his untiring efforts. This reminds me of the Maharajas , who ruled India for over 7000 years, brought it all its splendour and glory, and in 1947 after agreeing to all elements of change , were pushed into oblivion.

One way to reach any conclusion is to compare the ratios of each channel of distribution and compare it with international benchmarks e.g. claims, repudiation, cost efficiency ratios etc . We compare such ratios, all the time, in the stock market, so why not here ? Besides this process and findings should be public and debatable. None of this appears to be done and it seems that the banking channel is being promoted at the cost of the individual. Might is Right .
Sanjay Doshi

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