Shriram Life Insurance FY21 net profit at ₹106 crore

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Private insurer Shriram Life Insurance reported a three fold increase in its net profit to ₹106 crore in 2020-21.

Gross premium increased by 23 per cent to ₹2,019 crore last fiscal while the number of policies increased by eight per cent to 2,95,838.

“This growth was supported by a 25 per cent growth on total new business premium and 24 per cent growth on retail renewals,” it said in a statement on Friday, adding that approximately 47 per cent of its new business came from the rural segment.

As much as 54 per cent of the insurer’s claims came in from the rural segment. Income from investments more than doubled to ₹541 crore in 2020-21.

Casparus Kromhout, MD and CEO, Shriram Life Insurance said, “Shriram Life has been focused on serving the protection needs of the rural segment and lower income segments. These segments are most affected by the crisis due to the dual impact of the health emergency and loss of income. We remain committed in reaching our customer segment during this difficult time to ensure that financial protection is extended to more customers and that life cover continues for existing customers.”

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Term insurance premium may see a fresh round of re-pricing

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Term insurance premium could see a further increase this year with many re-insurers understood to be reviewing rates again.

“The second wave of Covid-19 has impacted mortality and there has been a spike in death claims, which is expected to continue for some time. Also online term insurance rates are still very low in India,” noted an executive with a life insurance company.

“There has been some talks of a fresh review in reinsurance rates this fiscal. It could possibly be in the range of 15 per cent to 20 per cent. Most insurers would have to reprice the premium for term insurance products again but having said that, term insurance premiums in India continue to remain amongst the lowest in the world,” said another executive with a life insurer.

If the move goes through, this would be the second round of increase in premium for term life products in recent years.

Many life insurance companies have since late last year revised term insurance rates after re-insurers hiked underwriting rates for such policies. Most of this hike was passed on to customers, who had to pay about 10 per cent to 15 per cent higher to buy term insurance policies.

However, notwithstanding the possibility of another price hike, most insurers expect term and protection products to continue to see demand from customers given the Covid-19 led uncertainty.

“The pandemic has created a rise in the demand for protection plans, even as the market volatility continued to affect the demand for linked plans. In 2021-22, along with the increased awareness of insurance, a digital push for insurance and any increase in term plan premiums are expected to drive the life premiums,” Care Ratings said in a recent note on first year life insurance premium growth for April 2021.

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Finmin pitches PM Jeevan Jyoti Bima Yojana again

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The Finance Ministry has re-energised its effort to get more people, especially from lower-income group and vulnerable sections, to enrol under the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), a low-cost life insurance scheme. But bankers are not very enthused about this effort.

“In these testing times, let’s take a step towards security. Subscribe to PMJJBY and secure the safety of your loved ones. Available to people in the age group 18 to 50 years with a bank account who give their consent to join/enable auto-debit of premium,” the Financial Services Department (DFS) said in a tweet.

Meanwhile, bankers are not very excited with the renewed thrust on the scheme as they feel this will put additional pressure on already overworked staff. Also, this could lead to crowding in bank branches.

“The government issues advisory, but it soon becomes a kind of important task for bank management. Who will have to work extra now? Besides, the staff available is in limited number as positive cases are here too,” a senior public sector bank official said on condition of anonymity. Another bank official was equally critical, saying how can one expect any additional work by bank staff at this moment.

Launched on May 9, 2015, the scheme offers a renewable one-year term life cover of ₹2 lakh to all subscribing bank account holders in the age group of 18 to 50 years. It covers death due to any reason, including suicide and murder. The rate of annual premium is ₹330 per subscriber. Life Insurance Corporation (LIC) administers the scheme. Anyone with a bank account in a Scheduled Commercial Bank can enrol for the scheme. She/he needs to give instructions regarding auto debit before May 31 every year. Cover is available for the period starting June 1 and ending on May 31.

 

Fear target pressure

Another bank official expressed fears that soon some target might be out and the need to achieve it in a given period of time.

“Our worst fear is crowding in any branch. Given security concerns, many people are still not very comfortable with using online banking and they prefer to visit the branch for any banking requirement. This could be so in the case of people willing to subscribe to a new insurance scheme,” he said.

As on April 28, the total number of subscribers under the scheme was 10.32 crore. The Finance Ministry also claimed that over 2.39 lakh claims have been settled since the inception of the scheme.

However, data as on March 31 shows that weekly enrolment has come down. For example, during the week starting March 17 and ending March 24, total enrolment was 4.91 lakh, which dropped to 3.60 lakh during the March 24-31 week.

However, Finance Ministry officials believe it that it is a temporary phase and things will improve.

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How to retire early without spoiling family’s dreams

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Raghavan, aged 49, and Saraswathi, aged 42, wanted to draft their retirement readiness plan. Raghavan, after a busy corporate life, felt it was time to quit and spend time with family. His daughter Anu (18) had just joined college and son Venkat (16) was in ninth standard.

The accompanying table (Assets) shows his net worth.

His investment assets are ₹5.53 crore. Also, he holds 75 sovereigns of physical gold. Raghavan has been a balanced risk taker over the years. He understands the volatility of equity investments and stayed put over the years to generate reasonable returns from his investment portfolio. He has now exited all his direct equity investments and stuck to mutual funds over the years. He has a sound investment portfolio built over the years, with regular investing.

Family history suggested that the life expectancy number for him and his wife would be 100 years. His family has maintained a modest lifestyle with monthly expense of ₹45,000 per month excluding children’s education expenses.

Goals

Firstly, he needs to maintain one-year expenses as emergency fund in fixed deposits.

Secondly, Anu needs ₹6 lakh towards her college education for the next two years, which is to be maintained as fixed deposits/liquid funds. Also, Anu’s PG needs funding.

Anu’s marriage expenses are estimated to be ₹35 lakh. Anu’s gold gift needs will be met from Raghvan’s current holding of physical gold.

Similar planning for Venkat is also required.

The family needs ₹2.7 crore to manage expenses of ₹50,000 per month for a period of 58 years, till Saraswathi attains 100 years of age.Expected return assumed to be at 8 per cent CAGR.

We suggested they add ₹5,000 per month towards any medical need as additional retirement fund. This may be needed to support any prescription costs, medical helper costs over the years.

It was also suggested that Raghavan keep some corpus towards his property maintenance. His independent house may need reconstruction/renovation as the years pass by.

All his goals are seen in the accompanying table.

Final thoughts

Raghavan is very well positioned to opt for immediate retirement with his modest lifestyle. With the current allocation of 49:51 in equity:debt, he can fund most of his goals without any compromise.

We arrived at a total cost of all his goals to be Rs 6.52 crore. His financial assets are worth Rs 5.53 crore. With long-term equity exposure to goals such as retirement health fund, post retirement vacation fund and property maintenance fund, this corpus is sufficient for him to retire immediately.

Mathematically, for a financial planner, saying ‘yes’ to retirement-ready status to a client is easier.

But there are other behavioural aspects to a peaceful and comfortable retirement. Having worked for more than 25 years with dedication, he was prudent and disciplined while saving for retirement. But he never really bothered to spend time with family or enjoy vacations which have become more important for him now.

This is likely to increase spending in the initial years of his retired life. So, it was advised to look out for regular earning opportunity.

This is basically to protect oneself against unexpected change in financial assumptions such as interest rate, inflation and other surprises such as health needs and lifestyle expenses.

When it comes to retirement readiness, it is always better to exceed the planned corpus by substituting with regular income or allocating additional corpus called ‘retirement fall back fund’.

Hence it was advised that Raghvan take logically sound decisions on spending in the first five years post retirement.

The writer, Co-founder of Chamomile Investment Consultants in Chennai, is an investment advisor registered with SEBI

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Ageas Federal Life Insurance net profit down 20%

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Ageas Federal Life Insurance reported a 20 per cent drop in its net profit to ₹119 crore in 2020-21 from ₹148 crore 2019-20. Total premium grew by 6 per cent on a year on year basis to ₹1,959 crore in 2020-21 while renewal premium increased by 4 per cent to ₹1,327 crore last fiscal.

“This is the ninth consecutive year of profit for the life insurer since it first declared profit in 2012-13. The growth in total premium was driven by a 24 per cent rise in individual new business premium to ₹504 crore,” it said in a statement.

New business premium

The company also benefited from a 40 per cent growth in individual new business premium from Federal Bank, it said. The private sector insurer’s 13th month persistency was at 86 per cent as of March 31, 2021 as against 83 per cent, a year ago.

“We will continue to ramp up our proprietary distribution channels, while looking to further leverage the relationship with our bancassurance partners,” said Vighnesh Shahane, MD and CEO, Ageas Federal Life Insurance. The board has recommended a final dividend of ₹104 crore, at a rate of dividend of 13 per cent, subject to approval at the Annual General Meeting.

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Know the two circumstances under which insurers waive premium

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Two neighbours’ daily routine of watering plants leads to an interesting conversation.

Sindu: The hydroponic farm is open for everyone and they have waived the entry fee too. We should go visit the farm.

Bindu: I am not sure. I think the farm will not charge an entry fee provided we make a purchase for at least ₹3,000.

Sindu: So what? We get nice plants. It is always about cost versus benefits. Just like in life insurance.

Bindu: I get your point. That is for plants but how so for a life policy?

Sindu: Life insurers offer ‘waiver of premium’ clause where they waive the premium if the person insured meets with an accident resulting in disability or if he/she falls critically ill.

Bindu: Interesting. Can we waive the premium? I mean can we choose not to pay the premium?

Sindu: No. Waiver is something that is offered by a life insurance company. If you stop paying the premium, that will lead to termination of your policy and you will not be given any life cover. Premium is waived only under two circumstances as I just mentioned. A few insurers do waive the premium if you report any terminal illnesses as well. The list of illnesses (both critical and terminal) will be available with the insurer. So, be sure to check it.

Bindu: For how long do I get the waiver?

Sindu: Your outstanding premium gets waived for the entire policy period. As a policyholder you continue to enjoy the life cover until the policy term.

Bindu: I am assuming this is available only with term policies?

Sindu: Mostly yes. But since it is a rider, life insurers may provide it with other life policies as well. This will be mentioned in the policy document. This rider may be available with a few child insurance policies as well. The ‘waiver of premium’ rider gets activated when the parent passes away. It ensures that the policy continues to be in force and insurers invest the premium regularly, and the maturity amount is given to the child after the promised number of years.

Bindu: Is this an in-built clause in life policies?

Sindu: No. Mostly, insurers offer this as a rider, which means, you will have to cough up additional premium for it.

Bindu: Of course I should pay extra. So, how do I decide if I should go for this rider?

Sindu: It depends on how much premium you can pay comfortably. This rider will cost you extra. There are products in the market that come with built-in riders. You can consider such policies as well, if you want to opt for this rider. But here too, the policy will cost you extra when compared to a plain-vanilla term cover.

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IRDAI issues clarification on cashless claims in Covid-19 cases

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Insurance Regulatory and Development Authority of India (IRDAI) has clarified that wherever insurers have an arrangement with the hospitals for providing cashless facility, such network hospitals are obligated to provide cashless service for all treatments including treatment for Covid-19.

This clarification comes in the backdrop of some reports that some hospitals are not granting cashless facility for treatment of Covid-19 despite policyholders being entitled for the cashless treatment under their policy.

Finance Minister Nirmala Sitharaman had earlier held talks with the IRDAI Chairman SC Kunthia on the problems some have faced and the need to address it.

The FM had earlier tweeted, “Reports are being received of some hospitals denying cashless insurance. Spoken to Chairman, IRDAI Shri SC Khuntia to act immediately. In March’20 #Covid included as a part of comprehensive health insurance. Cashless available at networked or even temporary hospitals.”

All the Network Providers (hospitals) who have signed Service Level Agreements (SLA) with general and health insurers have to mandatorily provide cashless facility for any treatment to the policyholders including Covid-19 treatment in accordance with agreed provisions of SLA and terms and conditions of policy contract.

Therefore, all policyholders that are entitled to cashless facility at all such network providers (hospital) with whom the insurance company/TPA has entered into an agreement shall avail the benefit of cashless treatment.

In the event of denial of cashless facility at any such hospitals the aggrieved policyholders may send a complaint to the concerned insurance company. The details and email ids of grievance redressal officers of insurance companies can be accessed from the website of the insurers.

Insurance companies have also been directed to ensure smooth availability of cashless facility with all the network providers (hospitals) empaneled with them by actively interacting with the hospitals.

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The outlook is optimistic and we look forward to grow: Kotak Life MD and CEO

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Optimistic about the prospects of the life insurance industry, G Murlidhar, Managing Director and CEO, Kotak Mahindra Life Insurance says expectations of improved economic growth, more awareness about insurance and digitisation will give a boost to demand.

In an interview with BusinessLine, he also expressed hope that the impact of the second wave of the Covid-19 will be limited as insurers have learnt to work through the pandemic. Edited Excerpts:

How do you expect the company to do this year?

How the company will do depends on the economy and the industry. My view is that India still remains largely under insured and under penetrated market. A lot of opportunity exists.

I think we’ll bounce back and we will have 10 per cent to 12 per cent growth this fiscal. GDP will grow so we expect domestic savings will grow. Also with increasing customer awareness, people are willing to buy insurance products, and I think the digital inclusive technology is really helping. I don’t see any problem for the industry. The outlook is is optimistic and we look forward to grow.

Are you worried about the second wave of Covid?

As an insurer, no, not really. Yes, this second wave of Covid is a problem and there will be some impact on business and mortality. But I think it will be limited for some time, and it will be overcome. The way we do business has also changed quite a bit. Even during the first wave, business went on, we were still continuing to sell and we still continue to so we did even today. The insurance industry on the whole hasn’t fallen behind substantially. We have learnt to work through this.

What is the strategy of the company going ahead?

We are a very balanced company– we have equal sale of group and equal sale of individual products. And on the individual side, we have agencies selling 50 per cent and the rest 50 per cent by non agency that is banca and others. So we are pretty balanced in what we sell and that will continue. There’s a huge thrust towards digitisation, which will continue not only in fulfilment but also in selling. In the last one year we have put together huge number of tools for digitisation. We will also work on direct B2C.

Is persistency still an issue for the industry?

There was a temporary blip in the month in the initial part after the pandemic because there was also extension of the deadlines. But otherwise the industry has slowly caught up. It was bound to happen. We as a company really focus on persistency.

Do you expect the demand for protection products to continue?

Protection saw a big spurt immediately after the pandemic broke out. I think it is now settling but it is still higher. Our protection business too has grown substantially and we want to see protection as a big share and we will like to grow it.

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IRDAI allows insurers to invest in Fund-of-Funds

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In a major boost to private equity industry, the Insurance Regulatory and Development Authority of India (IRDAI) has now allowed insurance companies to invest in Fund-of-Funds (FoF) that invest within the country. This move is expected to open more capital raising options for the startup ecosystem in India, fulfilling a longstanding industry demand.

The latest move by the IRDAI comes on the heels of the recent decision of the government to allow domestic private retirement funds to invest upto 5 per cent of their surplus in AIFs.

While insurers can now directly invest in FoF on the lines of their making direct investments in Alternate Investment Funds (AIFs), they are barred from investing in FoFs that invest in overseas companies or funds with overseas exposure, according to a IRDAI circular modifying the guidelines for investment in AIFs. The insurance regulator has also barred insurers from investing in AIFs in which insurer has taken an exposure.

IRDAI has also mandated insurers to obtain a quarterly certificate from a concurrent auditor about their compliance with these conditions and file it along with their quarterly periodical returns.

FoF is an AIF that invests in another AIF. An AIF is basically a vehicle established for the purpose of raising capital from a number of investors with an aim to invest these funds into assets to generate favourable returns.

In its 2017 Master circular, IRDAI had stipulated that no investment will be permitted in AIFs, which are FoFs and leverage funds.

However, now the IRDAI has said that the insurer shall invest only into FoFs which comply with the requirement of Section 27E of the Insurance Act 1938. Section 27E stipulates that no insurer can directly or indirectly invest outside India the funds of the policyholder.

Siddharth Pai, Founding Partner and CFO at 3one4 Capital, Co-Chair at Regulatory Affairs Committee, IVCA said, “IRDAI has fully embraced the Atmanirbhar movement through this new move that allows Insurance Companies to invest into FoFs. This move by the IRDAI and the move by PFRDA last month shows the government’s intent to accelerate institutional rupee funding to startups, which will help in economic growth and job creation.”

The inflection point for any startup ecosystem is when domestic institutional capital is allowed to start investing into the local ecosystem.”

Ashley Menezes, Partner and COO, ChrysCapital Advisors, LLP & Chair, Regulatory Affairs Committee, IVCA said, “It is a huge win for the private equity industry that insurance companies are now permitted to make investments into funds of funds as well, similar to them making a direct investment in an AIF. This allows insurance companies to derisk their exposure. However, such capital from insurance companies cannot be utilized by an AIF to make investments outside India and this is a matter that still needs discussion.”

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IndiaFirst Life Insurance registers 5% growth in individual new business

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IndiaFirst Life Insurance recorded a growth of five per cent or ₹894 crore in individual new business annual premium equivalent in 2020-21.

“This was the highest ever since its inception. This translates to a year on year growth of five per cent which, on the back of an industry leading 25 per cent year on year growth in 2019-20, is satisfying,” said Rushabh Gandhi, Deputy CEO, IndiaFirst Life Insurance.

Also read: How to save for children’s studies without sacrificing on retirement plans

The private sector life insurer also crossed ₹4,000 crore of gross premium in 2020-21 and registered a growth of six per cent in total new business APE of ₹995 crore last fiscal, it said in a statement on Thursday.

Renewal premium income crossed ₹2,000 crore in 2020-21. Individual 13th month persistency also improved to 78.7 per cent last fiscal from 75.8 per cent in 2019-20.

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