For policyholders, this means they will not have to pay for bundled products that they don’t want. The biggest change will be in the way that car, health, house insurance, etc, are priced. New insurance products, which are simpler yet more effective in countering risks, should hit the market next year. The long-term effect for policyholders is also positive. They will have more choices and better say in deciding the policy premiums, customer service and handling claims.
This is the last stage of deregulating the insurance industry. The process started in January 2006 when Irda allowed the insurers to charge their own premiums for non-life policies. Now, the companies can create customised policies. For instance, the insurers will decide your car insurance premium based on factors like the driver’s age and the driving record, the kind of vehicle that is being insured, the period for which it has been used, and so on.
The freedom to word a policy will also make the business brokerdriven. Brokers will play an important role in product development and design. So if research indicates that a certain model in red is usually bought by youngsters who drive fast, the premium on such cars may be higher than for the same car in a different colour.
Product differentiation will also offer considerable scope for insurers to introduce innovative products and value-added features. As each company pursues a different business philosophy, the premiums they offer will also differ, depending on the stage of the insurer’s business, their product mix and reinsurance arrangements.
But do not assume that detariffing automatically means discounts on the existing premium rates. The amount you will have to pay for the customised covers will only be known once the products come out in the market. What you can be sure of is that your specific needs will be met. So, if you are a software professional who spends many hours hunched in front of a computer, you should be able to find a policy that covers the health risks you face: carpal tunnel syndrome, vision impairment and spinal disorders. As you can see, the possibilities of such customisation are limitless.
— Narayan Krishnamurthy
“MINDSET MUST ALTER”  Dr. Tobias Farny In the first impact of freedom in wording of insurance policies. On the kinds of unique products that should hit the market. On the factors to consider before buying a policy. |
Profit in mismatch
| Peak interest rates for existing borrowers | |
| ABN Amro | 13% |
| ICICI Bank | 13.5% |
| HDFC | 12.75% |
| * Tenure: 15-20 years | |
| Lowest interest rates for new customers | |
| Central Bank of India | 9% |
| Indian Bank | 9.5% |
| Punjab National Bank | 9.5% |
| Union Bank of India | 9.75% |
| * Tenure: 5 years for loans below Rs 20 lakh | |
Are high home loan EMIs stretching your budget? Chances are that you have taken a loan from a private bank and not from the PSU ones which have already reduced the interest rates. This is a oneof-its-kind mis-step among banks who are known to cut/raise interest rates in tandem. But don’t fret if your bank has a high loan rate. Switch to another bank even if it means paying a pre-payment penalty. This is because the interest rate difference between banks is as high as 4% in some cases.
For example, ICICI Bank charges 13.5% from its existing customers who have taken a loan on a floating rate. On the other hand, Indian Bank is offering a minimum interest of 9.5% to its new customers. “If the difference between old and new rates is more than 2.5%, the borrowers can shift banks,” says Harsh Roongta of Apnaloan. PSU banks are giving both the options to customers—to reduce the EMI or the tenure at the same EMI.
“Most new customers are opting for a reduced tenure with some even settling for a higher EMI,” says the managing director of a PSU bank. Experts advise the borrowers with an outstanding loan of Rs 20 lakh to prepay some amount to the bank before transferring their loan account. This is because the loans below Rs 20 lakh get an additional benefit of 0.55% on interest rates.
Selling in pieces
The company is offering a rental return of 12% a month and an ‘assured’ buyback at a 30% premium after three years. At the end of this period, you can also sell your part of the property to anyone other than the developer. Is this just a strange concept or will it translate into good returns for the investors? “It may be difficult to get out of such investments as apart from the developer, there will be very few buyers in the open market,” says Anuj Puri, chairman, JLL Meghraj. If nothing else, this scheme has let the cat out of the bag—the developers are desperate for customers.
WORD’S WORTH  — P. Chidambaram, Finance Minister “I don't believe that the total number of jobs will go down even if the GDP growth is at 7% or less than 7%.” — Montek S. Ahluwalia, Deputy Chairman, Planning Commission “The industry does not have a magic wand to cut prices; what needs to be done is to make lending rates by banks cheaper. Banks are not lending to customers.” — Rahul Bajaj, Chairman, Bajaj Auto “There is no direction at the moment. The market is driven by global factors rather than fundamental and technical factors.” — Vijay Kanchan, V-P, Derivatives, Dolat Broking Source: The Economic Times, Business Standard & Business Line |
Card controls
In the offing may be scrutiny of the issuance of such cards based on guidelines such as Know Your Customer (KYC), Anti-Money Laundering (AML) and even the Combating of Financing of Terrorism guideline. All non-bank entities issuing pre-paid instruments will have to approach RBI for authorisation.They will have to maintain an escrow account with their banks to the extent of outstanding balances in the cards issued by them.
This means that the companies giving their employees pre-paid food coupons, (which can also be used for buying provisions), may have to maintain the details of the people who use them. According to the deputy governor of the RBI, V. Leeladhar, “A number of innovative payment instruments/systems have been introduced by unregulated entities. While large unregulated payment instruments present risks to the stability of the financial system, unauthorised retail payment systems, without proper management and operational structures, can undermine public confidence in the efficacy of the payment systems as a whole.”
E-retail therapy
| Average online spending in the past 12 months | |
| Australia | US $4,160 |
| Singapore | US $3,480 |
| Japan | US $3,175 |
| South Korea | US $3,027 |
| India | US $2,147 |
| Hong Kong | US $1,698 |
| Source: Visa e-Commerce Tracking survey | |
The chief attraction for online shopping seems to be convenience and value as nearly 90% respondents said that they preferred the Net because it helped them find the best prices and allowed them to shop any time. About 76% of the Indian respondents, the highest in any country, bought digital entertainment online. Music downloads (63%) were the biggest hit. “With almost four out of five Net users buying online, people in the Asia Pacific region are taking full advantage of the global shopping experience,” says Mohamad Hafidz, Visa’s regional head for e-Commerce in Asia Pacific.
TELLING FIGURES  Rs 398 crore 50% 88% Rs 30,600 cr |
Evolving with time
| How the term plan works | |
| Annualised premium | Minimum: Rs 2,000 p.a. for regular premium Rs 10,000 for a single premium |
| Sum assured | Minimum: Rs 5,00,000 |
| Entry age | Minimum: 18 years Maximum: 55 years |
| Maturity age | Maximum: 75 years |
| Premium pay term | Increasing: Single / Equal to policy term Decreasing: Single / 11 years (except 10-year plan) |
| Policy term | Minimum: 10 years Maximum: 30 years (increasing); 20 years (for decreasing) |
| Premium payment frequency | Single, yearly, half-yearly, quarterly, monthly |
The life insurance needs tend to vary with time as the number of financial dependants may change or your contribution to their wellbeing. But your term plan always remains the same—a fixed life cover for a fixed price. Now you can change the status quo. Aegon Religare has launched two new term plans— Increasing Term Plan and Decreasing Term Plan—that allow you to opt for a fixed, increasing or decreasing cover.
Take the increasing-cover plan. At 5% additional cover every year, a Rs 10 lakh cover will be worth Rs 15 lakh in 10 years and you don’t have to pay any extra amount. This is a good concept as it attempts to index your life cover with inflation. The policies have been structured on the lines of ‘cost of living adjustments’ (Cola). Some other insurers also offer products that follow this principle, but as these two plans bundle it with a pure risk term plan, it is a low-cost, high-value proposition. Similarly, instead of a mortgage protection cover, you can opt for the decreasing cover that closely matches your home loan outstanding and covers the outstanding loan accordingly.
— Rakesh Rai
Early loss
First came the hefty price. Then the record discount. Now they are talking of compensation. The Honda Civic Hybrid, the country’s first hybrid car (running on both petrol and electricity) is now available at 60% of its launch price—a fall from Rs 21.5 lakh to Rs 13.6 lakh. But is it unfair to those who bought the car at the original price? The company spokesperson says that they are yet to take a call on it. Unfortunately, early-bird buyers have no option when such drastic cuts happen. “There is nothing legally wrong with a huge discount as it is the manufacturer’s decision. But the brand loyalty suffers,” says Virendra Jain of Investor Helpline. But if the existing customers raise their voices, companies may be forced to take notice. This is what happened with Apple when it slashed the price of the iPhone. It was forced to offer a rebate of $100 to the customers who had paid the original price of $399.
YOUR VERDICT We bring you the results of Money Today online poll on select and current investing issues.Our question Do you think Barack Obama will impose curbs on outsourcing? Your answer 67% Yes, sooner or later 30% No, he won’t offend India 3% I don’t know Despite obvious concerns, experts feel that the current recession will prevent Obama from taking drastic steps. Conducted between Nov 14 and Nov 21. Total responses: 165 |
