نوشته‌شده در

IndiaFirst Life gross premium rises 28% to Rs 5,187 crore in FY22

IndiaFirst Life gross premium rises 28% to Rs 5,187 crore in FY22

IndiaFirst Life Insurance Company Ltd (IndiaFirst Life) on Friday said it registered a 28 per cent jump in its gross premium income to Rs 5,187 crore in the fiscal year ended in March 2022.

“Our gross premium has jumped 28 per cent from FY21 and crossed Rs 5,187 crore in FY22,” IndiaFirst Life said in a release.

The insurer said that it continued with its robust business expansion journey clocking a year-on-year growth rate of 50 per cent in terms of individual new business annual premium equivalent (NB-APE).

At Rs 1,345 crore of individual NB-APE, the company is the fastest-growing private life insurer in the country, IndiaFirst Life claimed.

The renewal premium income crossed Rs 2,400 crore for the first time ever since inception at Rs 2,420 crore, it said.

Among others, the life insurance company witnessed a 55 per cent jump in its individual new business premium at Rs 1,428.7 crore in 2021-22, from Rs 924 crore in 2020-21. The company’s 13th-month persistency ratio stood at 82 per cent at end of March 2022 as against 78.7 per cent by year ago same period.

The group credit life new business premium rose by 112 per cent to Rs 503.6 crore from Rs 238 crore.

The assets under management (AUM) rose by 11 per cent during the year to Rs 18,932 crore at end of March 2022 from Rs 17,109 crore, it added.

“Our robust business performance has ensured we continue to grow faster than the industry for the seventh consecutive year. In FY22, we registered a 50 per cent rise in individual NB-APE but what’s more heartening is the fact that we have a 7 years CAGR of 36 per cent,” Rushabh Gandhi, Deputy CEO, IndiaFirst Life Insurance Company said.

IndiaFirst Life’s current shareholders include Bank of Baroda, Union Bank of India, and Carmel Point Investments India Private Ltd (Warburg Pincus LLC group), holding 65 per cent, 9 per cent, and 26 per cent stakes respectively in the company.(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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نوشته‌شده در

Tax benefits matter, but watch out for tricky insurance policies

Tax benefits matter, but watch out for tricky insurance policies

Debroop Roy, 26, was approached by a family friend, doubling up as an insurance agent, with a lucrative investment plan. Roy will have to invest ₹1.2 lakh every year for 12 years and from the 13th year onwards, he will get ₹1.3 lakh annually for the next 34 years. That’s not all. The ₹14.40 lakh paid in premiums over the first 12 years will be returned fully in the final year of the investment term.

“The plan caught my attention as it promises guaranteed annual income well into retirement years and also returns the total investment amount. But, I approached a financial expert before committing as I’m aware how traditional insurance policies are pushed during the tax-saving season,” said Roy.

Roy was right in doing that. The internal rate of return (IRR) on this traditional insurance policy is 6%. In an insurance policy, IRR gives you the rate at which the invested money will grow to yield the guaranteed maturity amount in relation with inflation.

Mint calculated the IRR of three different traditional life insurance plans–one endowment plan and two money back plans with and without return of premium options–and found traditional insurance plans with policy terms of 20-35 years typically yield 6% (see graph). This is less than other comparable fixed-income investment options of the Public Provident Fund (PPF) and Sukanya Samriddhi scheme, which also enjoy triple taxation benefits like life insurance products, that are currently offering 8.1% and 7.6% annual interest rates, respectively.

 

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“Policies bought 20-25 years back are maturing to yield 6%-7%. It is worth noting that 20-22 years back, 10-year G-sec yield was 12%, 30-year G-sec yield was around 14% and AAA bond was 16-18%. During that time if somebody invested in AAA bonds and reinvested after 5-10 years in a 10-year G-sec bond, the return on investment would have compounded a minimum 9%. If you compare this, traditional insurance plans are a strict no,” said Vijai Mantri, co-founder and chief investment strategy, JRL Money.

The idea is not just to see what you earn on your investment but also to draw attention to the acute shortfall in insurance coverage that such plans offer. “The primary call of insurance is protection and endowment plans fail to achieve that,” said Mantri.

The shortfall

As a general rule, financial planners suggest buying a life insurance cover of 10-12 times one’s annual income. This is totally affordable if you buy a pure risk term plan. For example, a 30-year-old woman has to pay around ₹11,000 in premiums annually for a ₹1 crore life cover. In a traditional plan, on the other hand, affordable premiums offer an abysmally insufficient cover.

“In an endowment plan, you can either pay an affordable premium or get sufficient coverage. If you want to buy a life cover of ₹1 crore through an endowment plan, you’ll have to shell out ₹6 lakh – ₹7 lakh annually on the premium alone,” said Prableen Bajpai, founder, FinFix Research and Analytics.

The pull factor

It’s no secret that traditional insurance plans are aggressively sold in the last quarter of every financial year when taxpayers scramble to make last-minute tax-saving investments. The appeal is not just a tax break on the premium but also tax-free maturity proceeds.

“Maturity proceeds, including bonuses, received from life insurance policies are fully tax-exempt provided the ratio of premium paid to sum assured does not exceed 10% in any year. For policies issued before 1 April 2012 and after 1 April 2003, it is 20% of the sum assured,” said Sujit Bangar, founder, Taxbuddy.com.

Kartik Sankaran, founder, Fiscal Fitness, is of the opinion that tax breaks on life insurance policies prove to be more expensive than paying the tax. “Maturity proceeds are tax-free and you get a tax break today but you live with over 20 years of poor returns. One should rather allocate the premium in a mix of term plan and equity-linked savings scheme (ELSS) fund. Even after paying long-term capital gains (LTCG) on an ELSS fund 20 years later, you will have more net earning.”

Insurance policies lack liquidity and flexibility and, hence, are not the ideal tax-saving tool under section 80C. In comparison, ELSS, PPF, and National Savings Certificate score higher on flexibility as they have shorter lock-ins of 3 years, 15 years, and 5 years, respectively. Partial withdrawal on PPF is allowed after 5 years.

The idea of protection and saving in one plan along with guaranteed returns make traditional plans still very attractive to many investors. “As long as the customer knows what he’s buying, it’s alright but the problem is that selling practices are such that these plans are sold without properly explaining the commitments of long lock-in and that the premium has to be paid for a couple of years and not just the first year,” said an industry expert who did not wish to be named.

Policyholders, said experts, should ask questions on IRR, lock-in period and payment terms before buying a policy.

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نوشته‌شده در

The hidden advantages of humble insurance agents

The hidden advantages of humble insurance agents

Such incidents are not uncommon. Many people prefer buying insurance online if it is available at lower rates. Data from insurance regulator Insurance Regulatory and Development Authority of India (IRDAI) shows that the contribution of individual insurance agents to individual new business premium is decreasing. It fell to 58.14% in 2020- 21 compared to 60.09% in 2019-20 in the life insurance business. In the case of health insurance, it slipped to 73.90% in 2020-21 from 75.21% in 2019-20.

Instead, online direct selling and web aggregators saw an uptick in sales— from 1.72% in 2019-20 to 1.92% in 2020-21 in life insurance new business premium and from 4.56% in 2019-20 to 5.95% in 2020-21 in health insurance. Interestingly, the share of banks in new business premium in life insurance increased from 26.7% in 2019-20 to 29% in 2020-21. However, it decreased from 8.06% to 7.84% in case of health insurance. The data trend aside, what you must care about is the distribution channel through which you are buying the policy.

 

Mint View Full ImageMint 

Focus on source more than the premium: There is a casual approach to buying insurance. People lay emphasis on the premium amount or a specific insurance company. However, the first step should be to search for a favourable distribution channel, be it individual, corporate agents or web-aggregators. Take into account factors such as expertise in the industry, the agent’s commission structure, and the pre and post sales services.

Skin in the game: Not all distribution channels earn the same amount on selling a policy. You must understand to what extent you matter to a specific distribution channel. Ask the agent how much upfront or renewable commission they earn from the premium you pay.

“Agents’ remuneration includes first year as well as renewal commission whereas alternate channels get only first year commission which is higher than the commission given to agents. Hence an agent would be service-oriented because their future commissions are linked,” said Shailesh Kumar, co-founder and insurance head at Insurance Samadhan, a grievance redressal platform.

Mahavir Chopra, founder, Beshak.org agrees with this. “Customer executives on toll-free numbers have goals that may not be aligned to customer’s long-term interest. For instance, if a claim gets rejected due to something amiss in the proposal form or even information that is incorrectly understood, there is hardly any impact on the reputation or earnings of the advisor,” says Chopra.

So far as banks are concerned, they have the least skin in the game. The online web-aggregator platforms do have a separate team that looks into claims resolution, but banks do not have any such mechanism.

Advice jaroori hai: Insurance is not a one-size-fits-all product. Experts can guide you about the product that better suits your needs. The distributor involved should be incisive enough to ask the right questions. “Just as there are family doctors who stay involved with your family for generations, you need a similar connection when buying insurance,” said Kumar.

Most importantly, when the time comes to file a claim or make changes in the policy, dealing with customer care executives or bank officials is the last thing you want.

“In an imperfect world of insurance where post-sales services are still not seamless, you need a human by your side. Accept it or not, insurers have a certain conflict of interest in settling claims. We have seen cases where they would rather err on the side of not paying it over settling a claim. If you have a reputable agent by your side, they will fight for you to get your rightful claims settled,” said Chopra.

Choose the advisor wisely: It is not that all individual agents are equally good. “95% agents leave the business in two-three years. You should buy policies online than going to such agents. At least you will have some support in the former,” said Avdesh Mishra, founder and CEO of Caterpillar Insurance.

Do your research well. Some websites like Beshak.org are building an alternative business model. “We have curated a list of professional financial advisors on our platform. Customers can explore the list and get a video consultation with anyone whom they prefer, without paying any fees or charges,” said Chopra.

Price parity: Meanwhile, individual agents have started questioning the price disparity.

“The industry has been working aggressively over the last few years to minimize the difference between what an agent charges and direct sales. In our case, the difference has been coming down year-on-year and is now about 5-7%,” said Prashant Tripathy, MD & CEO, Max Life Insurance Co.

Mishra of Caterpillar Insurance confirms that he can now match the online prices against the physical services he offers for a couple of life insurance policies. A welcome trend, indeed.

Mint Take: Insurance misselling occurs across the board, whether the agent is a bank, aggregator, or individual. However, individual agents with whom you have a direct relationship may provide you with better after-sales service even if they quote a higher premium. Take this into account, while buying an insurance policy.

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