LIC joins online play with pure term policy

 Life Insurance Corporation will sell its policy through the internet for the first time soon with the launch of a pure term plan.

"We are in the process of designing a pure term product which would be sold through both online and through agents," LIC's ED- marketing S Roy Chowdhury. "The rates will be lower than what is charged at the moment," he added.

LIC currently charges higher premium for its term plans than private competitors. For example, a 30-year-old non-smoker has to pay an annual premium of 7,300 for a 25-lakh policy under LIC's term plan Amulya Jeevan, while she can buy online policies such as ICICI Prudential's iProtect for 3,350 and Kotak Life's e-term plan for 2,750.

LIC plans to reduce this gap with the launch of its online term policy, where it can save on agent commission. Its move is expected to make private insurers reduce their rates further. The state-owned insurer is also betting big on Bancassurance, or selling policies through bank branches.

LIC's ED Vipin Anand said the insurer has set a target to double its income from Bancassurance this financial year to 5% of its total new business income. The insurer is targeting new business income of 54,000 crore this year. At present, 20 banks, including United Bank, UCO Bank, Central Bank, Corporation Bank, BoM and PNB, sell LIC policies.

LIC has announced a bonus of 21,580 crore for its policyholders for 2010-11, which is 95% of its net surplus of 22,716 crore. The rest 5% has gone to the government.

It has announced a higher bonus rate under seven with-profit plans, namely Jeevan Anand, Jeevan Tarang, Jeevan Madhur, Child Future Plan, Jeevan Shree I, Jeevan Bharti I and Jeevan Pramukh. It also announced loyalty additions for the first time in other seven plans.

Life insurers can invest in VC funds

The insurance regulator has opened the doors for life companies to invest in venture capital funds - a move that is likely to result in VC funds making a beeline for the Life Insurance Corporation of India which will have a headroom of close to Rs 30,000 crore to invest in such funds.

Until now life insurers were allowed to invest in VC funds but it was subject to the condition that the investment would be predominantly in infrastructure . Insurers say that this will create new investment opportunities for them. "This is a positive move as it opens up new avenues for investments.

Although for most private companies the size of the traditional portfolio is relatively small, it is growing steadily and should be sizeable going ahead" said Puneet Nanda, ED, ICICI Prudential Life Insurance. In a circular , IRDA said it had received a lot of queries from insurers on whether their investment were restricted only to infrastructure .

"The IRDA after inviting coments and concerns of insures clarifies that ...insurers may invest in any venture fund registered under Sebi Regulaion, which includes VC funds investing in small and medium enterprises," the circular said. IRDA has however barred insurers from investing in funds promoted within the group or by an investment manager, who is indirectly controlled or managed by the insurer or promoters. Insurers also say that this will give companies to participate in promising business at an early stage.

"Today most private companies go for a round of private equity or venture capital funding before they get listed. By the time they go for a listing, it is at a significant premium," said the investment head of a private life company. Incidentally , all Sebi regulated private equity funds are registered as venture capital funds. While IRDA has widened the scope of venture funds, it has retained the investment limits. Overall investment in VC funds will continue to be a part of the 'other investments' of a life company, which stands capped at 15% of the life fund. The maximum that a life company can invest in a venture fund would be 3% of the life fund size.

http://timesofindia.indiatimes.com/business/india-business/Life-insurers-can-invest-in-VC-funds/articleshow/9843549.cms

Reliance Capital, Nippon Life to explore broader tie-up

 Reliance Capital and its Japanese partner in life insurance, Nippon Life Insurance, will explore strategic tie-ups in finance, initially in the asset management and private equity businesses of the Indian group.

Any strategic collaboration would boost Nippon Life's presence in India, while giving Reliance Capital better access to capital and expertise, analysts said.

Reliance Capital, controlled by billionaire Anil Ambani, manages assets of over $23 billion across mutual funds, pension funds, managed accounts and hedge funds. Its other businesses include insurance, broking, consumer and commercial finance.

The two firms will also explore possibilities for a distribution tie-up in India for Nippon Life's funds. Japanese companies are stepping up the pace of their overseas expansion after the devastating March 11 earthquake provided another spur to escape a moribund domestic economy.

Reliance Capital's net profit in the June quarter more than halved with income across its core businesses dropping.

Last month, brokerage ICICI Direct said it expected the firm's asset management business to improve due to a greater focus on the retail segment while Citigroup said stiff competition, sluggish inflows, and weak recovery prospects would hurt in the near-term.

In March, Nippon, the world's No.7 life insurer, agreed to pay $680 million to buy a 26 percent stake in Reliance Life Insurance, valuing the business at $2.6 billion.

Indian rules bar foreign firms from owning more than 26 percent in insurance joint ventures with local firms.

Reliance Capital saw a 59-percent fall in its annual premium equivalent in its insurance business for the quarter to end-June, but analysts expect the fund infusion by Nippon to boost its valuation.

Shares of Reliance Capital have fallen about 43 percent in 2011 so far, but analysts see this as a good opportunity to buy.

Shares in Reliance Capital closed up 1.8 percent at 384.2 rupees in a firm Mumbai market on Tuesday. Indian markets remained closed on Wednesday and Thursday for religious holidays.

http://economictimes.indiatimes.com/personal-finance/insurance/insurancenews/reliance-capital-nippon-life-to-explore-broader-tieup/articleshow/9825186.cms 

IRDA scraps profit rule for life insurance IPOs

The insurance regulator has scrapped the minimum three year profitability clause for life insurers to float initial public offerings, throwing a lifeline for many companies that would have struggled for capital. The Insurance Regulatory and Development Authority , or Irda, took the decision in a recent board meeting, two people familiar with the matter said. 

The decision to do away with the requirement, which was part of the draft guidelines for IPOs, follows lobbying by insurance firms that the absence of higher foreign investment and access to public funds could cripple their businesses. Valuing insurance companies in India may become tricky with some arguing they are at a growth stage and the market has huge potential. While insurers may look for high valuations due to market potential, their losses could be talked down as it happened in the case of dotcom companies. The insurance regulator had prescribed a minimum embedded value for which the insurers objected to and sought flexibility. 


SOURCE-http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/irda-scraps-profit-rule-for-life-insurance-ipos/articleshow/9131020.cms

Life insurance business nose-dives in crucial month of January

January, February and March are crucial months for the life insurance industry. The new business premium collection for January was 20% lower than December 2010 for individual single premium policies, while it was 10% lower for individual non-single premium policies. It is surprising to note that new business premium (NBP) for January was 20% lower than the NBP of December 2010 for individual single premium policies. NBP for January was 10% lower than the NBP of December last year for individual non-single premium policies.

Insurance companies are coming out with new traditional plans due to business shifting away from ULIPs (Unit-linked Insurance Plans). However, this does not explain why NBP has dropped substantially. Even the behemoth Life Insurance Corporation (LIC) of India was not spared.

Insurers want separate tax deduction limit

With the Budget just round the corner, insurance companies have suggested a separate limit for deductions under Section 80C of the Income Tax Act, for long-term saving instruments like life insurance and exempt exempt exempt (EEE) treatment on the maturity proceeds of products. While insurers feel the direct tax code is going to change the way individuals invest, they want a separate limit for life insurance. Currently, the limit stands at Rs 50,000, including tuition fee and health insurance.

Experts feel it is the tenure of investments that should be incentivised and not the instrument. “It may be long-term insurance products, mutual funds or provident funds. The core competency of India is the saving habits of individuals and the government should incentivise the same in the long-term,” said P Nandagopal, managing director and CEO, IndiaFirst Life Insurance.

Last year, the government had absolved all charges, except the fund management charges, under the unit-linked insurance products from service tax.

“Life insurance and pension are the only segments of financial services that address the needs of individuals in the long-term. The government should encourage people to save for the long-term by providing a separate limit for long-term savings,” said T R Ramachandran, managing director and chief executive officer, Aviva Life Insurance. Currently, the deduction under Section 80C also includes short-term saving instruments like some mutual funds and fixed deposits.

Taxing the maturity proceeds would impact the life insurance business and the industry adversely, executives say.

The industry is also demanding a carry-forward of losses. For the last few years, industry players have been asking the government for permission to carry forward the losses to 12 years, as against 8 years at present. They say most insurers do not make profit even in the 10 year.

http://www.business-standard.com/india/news/insurers-want-separate-tax-deduction-limit/424466/

Irda scans pension liabilities of life insurance companies

After a notional loss of Rs 1,400 crore was reported in three pension schemes of the country’s largest insurance company, Life Insurance Corporation of India (LIC), the Insurance Regulatory and Development Authority (Irda) has examined the pension liabilities of all life insurance companies. “We want to ensure that life insurance companies have provided enough resources to take care of their long-term liabilities. So, we investigated pension liabilities of all insurance companies,” said a senior Irda official. However, the regulator found that all insurers had provided enough resources for their pension products.

P Nandagopal, CEO, Reliance Life, said it was a usual inspection, as India First Life Insurance had been in the business for one year and did not have long-term liabilities.

Generally, Irda examines investments of insurance companies every year. It is a week-long procedure. A five-six member team from Irda visits companies and carries out the inspection. LIC had formed a sub-committee after the deficit was reported. The three-member panel has finalised the report and may submit it any time.

“The sub-committee will submit the report to the chairman. It will also be made available to various departments such as audit, investment, etc,” said a senior LIC executive. The losses had occurred in three guaranteed-return annuity policies — Jeevan Dhara, Jeevan Suraksha and Jeevan Akshay — launched in 1980 and 1990 with an assured return of 11-12 per cent. Irda had clarified that it was a notional loss.