Unit-Linked Insurance Plans (Ulips) are long-term saving instruments. How much accumulation happens over a period is a direct function of costs and the performance of the fund. Costs are largely known and are almost the same over a period for all Ulips. What changes is the performance.
The influx: In the last few years, insurance companies, through Ulips, have become one of the largest players in the Indian stock market. More than 60% of the life insurance products sold are in the nature of Ulips. With a total investment estimated at Rs1.5-2 trillion, they are almost close to the investment made by equity mutual funds.
Says K.C. Mishra, director, Pune-based National Insurance Academy, “The life insurance industry has about Rs8 trillion of assets, of which Rs2 trillion is in equities.”
The step forward: With long-term funds moving into the insurance sector, insurers are looking forward to certain regulatory changes. C.S. Rao, chairman, Insurance Regulatory and Development Authority says, life insurers have been making a representation and, therefore, the investment exposure norms in single group companies and a particular sector of 20% is under consideration.
At present, there are no prudential investment norms of single or group companies for Ulips, unlike for other traditional policies such as endowment and money-back policies. Exposure to a single company or fund is expected to be limited at 10% of the policy holder’s fund or the total investment in a particular fund, whichever is less.
LIC (Life Insurance Corp. of India), however, will have special investment exemptions as it is governed by the LIC Act.
What it means to you: As a Ulip-holder, you should be concerned about two things—continued insurance cover and good fund performance. The regulator needs to put in place prudential norms to avoid concentration of risk in one single company or sector. At the same time, as Ulips are long-term products, the insurers need to be given leeway to invest funds so that investments do better over a longer horizon. (Bridget S. Leena/Outlook Money)
Credit card heartburn
The latest annual report released by the Reserve Bank of India on the Banking Ombudsman Scheme notes that there has been a substantial increase in the number of complaints received by various omdudsmen offices.
In the last five years, the maximum number of complaints have been about deposit accounts, deficiencies in servicing loans, and delays in collection of cheques. In 2006-07, however, the maximum number of complaints received were about credit cards.
The Banking Ombudsman Scheme, 1995, notified by the RBI on 14 June 1995, provides for a system of redressal of consumer grievances against banks. The report on ombudsmen working shows that the total number of complaints went up by 200% in 2005-06, and another 22% in 2006-07, taking the total number of complaints in that year to 38,638. This increase is a result of inclusion of credit card complaints and facilitation of online complaint submission under the Banking Ombudsman Scheme, 2006. The city-wise data shows that the maximum complaints came from Mumbai, New Delhi and Kanpur.
In terms of disposal of complaints in 2006-07, the ombudsmen offices issued orders on 37,661 complaints, of which 21,747 were satisfactorily settled while 15,914 could not be considered owing to reasons such as their being outside the purview of the scheme, time-barred, insufficient cause, and others. At the end of the year, 16% complaints were being processed, the report says. (Rajesh Kumar/ Outlook Money)