Insurance
Twisted logic of MetLife’s Wealth Plus

The deluge of schemes offered by mutual fund houses, insurance companies and other financial services providers have only served to confuse investors rather than easing their troubled minds. Various schemes with colourful names have been vying for investors’ attention, without actually offering a glimpse of respectable returns on investment. While returns have been scant at best, product offerings have adopted fancier propositions, with service providers desperate to sell at all costs. What is compromised is the investors’ real need. 

The latest example is a brand new offering from MetLife India. Its product, MetLife Wealth Plus, is another unit-linked offering that claims to provide a cost-effective wealth-creation solution for customers. But MetLife, which positions itself as a one-stop-shop for all customer needs, has trouble distinguishing which products serve what particular needs of the customer and how its offering meets those needs. MetLife’s sales strategy is a testimony to this.
 
Moneylife Digital has seen an internal presentation that shows how agents and sales teams are indoctrinated in selling unit-linked insurance plans (ULIPs) by highlighting the positive aspects, running down a competing product and presenting some half-truths. The presentation is in the form of check boxes under which mutual funds are shown as products designed to meet the short-term savings needs of the customer. Even lay investors would be aware that mutual funds are meant to provide capital appreciation over the medium- to long-term. Also, while MetLife considers ULIPs not to be cost-effective, as per its internal presentation, it still argues that MetLife Wealth Plus is cost-effective, while the product is just another ULIP. The presentation does not explain how this is so.
 
The Met Wealth Plus plan claims to be cost-effective while providing good returns, liquidity and tax benefits to the customer. Add to this, it offers a guaranteed minimum return of 5%, five years from the end of the subscription period. This is only designed to meet the widespread customer worry about the safety of the principal amount. Of course, even when the product claims to provide a liquid and cost-effective avenue of investment, the costs associated with surrendering the policy are quite high, if one has not paid the requisite annualised premiums. This is not highlighted in the presentation, but the guarantee is.
 
The guaranteed return also tilts the field against a better investment product, mutual funds. The current perverse regulations allow insurance companies to provide a guarantee on ULIP products but mutual fund schemes have not yet been given such leeway. Customers easily fall for this ploy, without realising that this really means little to two products both of which would have the same stock market exposure. Despite repeated efforts, we could not get MetLife to respond to this story.

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COMMENTS

G Vijaya Kumar

5 years ago

I had some bitter experience with Metlife, that initially I preferred for a single term policy but issued with a term policy. Further on querying about the mismatch of my needs they simply evaded my question with a standard answer that the free-look periode over even they had committed several mistakes in the processing of related documents. On being asked for surrender benefit as per the policy terms and conditions, in which some literary mistake/omission committed by the company, they cleverly said that it will be read as conversely though the policy terms and conditions is an indemnified one. The IRDA also becomes a mere spectator as well as the insurance ombudsman who rejected my complaint merely stating that it is not coming in to his purview. The ombudsman till date not replied my mail for the exact reason to reject my complaint. If this the situation where will be end answer for such fraudulent business practices. For the past two years I am fighting with the company for surrender benefit as p[er the terms and conditions.

Param

5 years ago

Use the "free-look" period to your utmost advantage - that is the only arrow in the quiver of an ordinary customer...

In my case, I was thankful to insurance company for pathetic customer service (not even sending the policy document on time), which led me to cancel the policy as soon as I received it. Cheers!

Arhant Jain

7 years ago

What a scam and what a shame. Each instance of Mis-selling found should lead to compounded penalties levied to these firms

dhrubogupta

7 years ago

I have been thru this farce. In my case it was Tata-AIG that I got wacked by and the benificiary was my Banker, HSBC, who had hawked the ULIP. It seems the the scam was imported by the US counterparts whose names appear to give a sense of honest dealings - and we fall for the farang names and never read the very fine print. Is it a wonder that they think India is "untapped" .

Legislative ambiguities hinder formation of LLPs

Individuals who wish to get Limited Liability Partnership (LLP) status are having a tough time dealing with compliance issues. The LLP Act, passed in 2008, has only seen 426 registrations so far. 

Although applicants can register and download their forms from the LLP portal, the required Designated Partner Identification Number (DPIN) can only be received from the Central government in New Delhi.
 
An individual has to make an application electronically via Form 7 (available on the LLP website) to the Central government for obtaining a DPIN upon which a provisional DPIN is issued. After receiving this provisional DPIN, an application to the Central government has to be made within 60 days along with the requisite fees to obtain a regular DPIN.
 
“There are certain compliance norms which can only be completed in New Delhi. If the process is decentralised, then it would be much easier and faster (to register an LLP). Moreover, people are not aware of the newly-amended law and its implications,” said Siddhartha Shah, of Siddhartha Shah & Associates.                                                                         
 
“A chartered accountant’s firm cannot convert into an LLP unless the Institute of Chartered Accountants of India (ICAI) gives its permission. When the Chartered Accountancy Act was enacted in 1949, there was no concept of an LLP. There is no provision in that law for CAs to be a part of an LLP,” said Ameet Patel, partner, Sudit Parekh & Company.  
 
“Tax clarifications have only come recently. There are still lurking doubts about the law. There is negligible demand from individuals opting for an LLP,” adds Mr Patel.
 
“Approval of a name for an LLP is proving to be a tough task, given that the concerned registrar conducts a search of the Trademark Registry’s database in India (for allotting a name). So, if the proposed name is in existence, say, in the UK, the registrar may not allow the proposed name,” said Sharada Balaji, founder of NovoJuris Services.
 
An LLP is taxed like a general partnership firm under the Indian Partnership Act, 1932. The entity is taxed, and the income in the hands of the partners is exempt from tax. However, in a company, the income is taxed at the entity level and tax is again paid on the dividend given to shareholders.
 
“The industry was hoping that the LLP would be a pass-through entity for taxation, like many other countries. Venture capital and private equity firms would have been a happier lot had the LLP been allowed as a pass-through to taxation at the entity level,” added Ms Balaji.
 
Currently, minimum alternate tax (MAT) is not applicable to LLPs.
 
The advantage of forming an LLP is that an individual’s liability is limited to the extent of the capital contribution. Only two members are required for forming an LLP and there is no upper limit on the number of members.
 
LLP can be useful for small and medium enterprises because the cost of forming an LLP is lower, and there is no requirement for minimum capital contributions. Partners are not liable for the acts of other partners in the LLP and the entity can be easily dissolved. The maximum cost of registering an LLP is only Rs7,000.
 
Moreover, books of accounts of an LLP have to be audited only if the contribution is above Rs25 lakh or if annual turnover exceeds Rs40 lakh. However, an LLP cannot raise money from the public.

 

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ICICI Venture Fund to invest $250 million-$300 million in realty

ICICI Venture Fund Management Co Ltd (IVFMC), the investment unit of ICICI Bank Ltd, is planning to invest $250 million-$300 million over the next three years in realty, especially in the residential segment in India. At present, the company does not plan to invest in the commercial segment.

“We will be investing about $250-$300 million over the next three years, mainly in residential properties. I expect, by that time, the general market will also show signs of recovery. We will be soon raising fresh capital,” said Sanjeev Dasgupta, president for real estate, IVFMC.
 
He said, “The company plans to invest in new residential projects, even in projects which are (only) 30% complete. Developers do not have capacity to raise capital. Those projects are available today at attractive valuations.”
 
The fall in home loan rates is also a factor which is attracting investors. The venture fund is evaluating the market; it is not in a hurry to invest. “Investors are doing greater degree of diligence because a lot of things have gone wrong. They took a view on investment which involved a lot of risk and they thought they would manage it but they could not,” said Mr Dasgupta.
 
The company feels that the residential segment will see another round of small correction over the next six months as developers have increased prices at a rapid rate. “After the increase in prices, volume sales have dropped by 15%. Sales being currently witnessed are being driven by end-users and not speculative investors, contrary to what was witnessed during the boom,” said Mr Dasgupta.
“Till the first half of 2010, we are going to see few volume deals happening. We will see some degree of improvement from Q3 FY10 which again depends on many factors. As we are hearing some positive news on the economic front, we will see good growth in the real-estate segment,” he added.
 
The company is not thinking of investing in the commercial segment as most of the investors find that exiting from the asset is complicated and driven by many factors beyond their control. However, the residential segment has self-liquidating assets, so it is easier to exit and also get good returns.

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COMMENTS

Indrajeet roy

7 years ago

I need to speak or write to Mr. Sanjeev Dasgupta. Please share his mail and other contact details

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