Page 126 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 8: Insurance Sector

Religare Enterprises Limited (REL) is one of the leading integrated financial services groups of Notes
India. REL's businesses are broadly clubbed across three key verticals - the Retail, Institutional
and Wealth spectrums, catering to a diverse and wide base of clients. REL offers a multitude of
investment options and a diverse bouquet of financial services with its pan India reach.
Bennett, Coleman & Co. Ltd. (BCCL), part of the Times Group, is India's largest media house. It
reaches out to 2468 cities and towns all over India. The group owns and manages powerful
media brands like The Times of India, The Economic Times, Maharashtra Times, Navbharat
Times, Femina, Filmfare, Grazia, Top Gear, Radio Mirchi, Zoom, Times Now, Times Music,
Times OOH, Private Treaties and indiatimes.com.

Task Compare the performances of various life insurance companies in India
and make an analysis of the same.

Case Study IRDA's New Guidelines are a Step in the
Right Direction

With the latest guidelines, new products may appear more attractive than older ones. But investors
may stand to lose if they change policies.

The Insurance Regulatory and Development Authority (IRDA) has continued its drive
towards reforming the most criticised insurance product. In comparison to its earlier
guidelines, the latest circular is likely to have far-reaching impact on the way ULIPs are
sold in the market.
The most notable change in the recent guidelines pertain to surrender charges, five-year
lock-in period, a cap on difference between gross yield to net yield for investment periods
less than 10 years and a minimum guaranteed return on pension products. First, the
details on the changes:
Surrender charges that punished policyholders for early discontinuance have undergone
substantial changes. IRDA has recommended two slabs, one for an annual premium up to
25,000 and other for investment above this threshold. For an annualised premium of up
to 25,000, the first year surrender charges are capped at 20 per cent of the premium or
fund value subject to a maximum of 3,000, while this goes down to as low as 5 per cent or
1000 for surrendering in the fourth year. From the fifth year, ULIPs will not suffer any
surrender charges.
Surrender Charges

Policies with annual premium of above 25,000 will suffer lower charges but the maximum
charges are almost twice that in the other case. The new rule is far superior to the practice
of deducting 30-40 per cent of the first year's premium when the policy holder discontinues
the premium within the first three years.
The minimum three-year lock-in period in ULIP, which actually triggered this episode,
would henceforth be extended to five years. The biggest advantage of the change is that
policyholders, instead of suffering higher upfront charge, would henceforth pay the
distribution charges evenly till the lock-in period, thereby a higher amount of the premium
will go towards investment.
Contd...

LOVELY PROFESSIONAL UNIVERSITY 121