INSUNEWS January 2021 - College of Insurance

QUOTE OF THE WEEK

“Success is to be measured not so much by the position that one has reached in life as by the obstacles

which he has overcome.“

Booker T. Washington

INSIDE THE ISSUE

Insurance Industry 2 Insurance Regulation 5 Life Insurance 8 General Insurance 9 Health Insurance 11 Motor Insurance 14 Crop Insurance 15 Survey 16 Pension 19 IRDAI Circular 22 Global News 23

INSUNEWS Weekly e-Newsletter

16th – 22nd January 2021

Issue No. 2021/03

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INSURANCE TERM FOR THE WEEK

Salvage value

The amount for which an asset can be sold at the end of its useful life. In insurance circles, this term commonly refers to the scrap value of damaged property. In property insurance, salvage value (e.g., scrap value) will be subtracted from any loss settlement if the insured retains the damaged property. In extra expense coverage, the salvage value of property purchased for temporary use while repairs are made will be deducted in determining the amount of loss recovery.

INSURANCE INDUSTRY

Insurers asked to adopt one aspirational district each, says IRDAI Chairman Khuntia - The Economic Times – 20th January 2021

Concerned over low level of insurance penetration in the country, IRDAI Chairman S C Khuntia on Wednesday said the regulator has asked insurance players to adopt one aspirational district each. The protection gap is 80-90 per cent in the country, so only 20 per cent people have any kind of insurance protection either in the form of life or general insurance, he said while addressing a virtual conference organised by economic think-tank NCAER.

Life insurance penetration in the country is 3.6 per cent of the GDP, way below the global average of 7.13 per cent, and in case of general insurance it is even

worse at 0.94 per cent of GDP, as against the world average of 2.88 per cent.

The regulator, Insurance Regulatory and Development Authority of India (IRDAI), is engaged with the insurance industry to improve awareness and push appropriate products which are need-based.

"We have asked every insurance company to adopt one aspiration district where awareness creation is done," he said. Citing the example of Tripura, he said, the state government wants 100 per cent insurance inclusion among all families.

The Aspirational Districts Programme (ADP), launched by Prime Minister Narendra Modi on January 5, 2018, aims at rapid transformation of 115 districts that have shown relatively lesser progress in key social areas and have emerged as pockets of under-development.

Speaking at the virtual conference, Additional Secretary (Insurance) in the Department of Financial Services Amit Agrawal said there is a need for simpler financial products where the possibility of mis-selling is less and is easier for consumers to understand.

Consumer protection is underpinned by higher levels of competition and greater consumer choice, Agrawal said, adding, the financial market has a role to play here. As greater FDI comes and more number of listings happen, he said, an entity widely held with greater investor participation will have better disclosures.

Agrawal also emphasised the need to look at the Investors beyond silos as investors are one but comes under different regulatory institutions because of the nature of investment.

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Here are key expectations from insurance sector – CNBC - 18th January 2021

Budget 2021-22 will be presented on February 1 by Finance Minister Nirmala Sitharaman, which will be the third budget of the Modi 2.0 government.

Ahead of it, here are key expectations from the key insurance players:

Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance “On the direct tax front for individuals, I feel the government should provide tax exemption to people opting for home insurance. Thus, providing them with much-needed motivation especially in the light of increasing natural calamities that leave people

stranded. This may be done by providing a separate limit over and above the already savings biased 80C limit. On the indirect tax piece, there is a direct need for government to reduce the GST rates on insurance premium given the low insurance penetration in India and the fact that insurance is intended to provide financial support against any sudden human or economic loss.”

Balachander Sekhar, CEO & Co-Founder, Renewbuy “We believe that the need for Insurance coverage is critical in these times and should be a very important consideration in Budget 2021. The government should definitely look at strengthening the sector by building insurance accessibility for consumers. Tax saving impetus towards insurance under section 80C and 80D would definitely help in increasing the insurance penetration in Tier 2 and 3 cities, where the insurance gap majorly lies and could give relief to consumers, especially in the wake of COVID-19.”

Parag Raja, MD and CEO, Bharti AXA Life Insurance ‘We expect this budget to spur penetration of insurance with a lower tax regime and higher tax-free slabs in a crammed 80C and 80D limit where life insurance comes across to be grappling for space.”

Kamesh Rao, MD & CEO, Aditya Birla Sun Life Insurance “While investment in NPS offers additional tax deductions of Rs 50,000 under section 80CCD, life insurer’s pension plans do not enjoy this benefit, making it unattractive for customers. The budget should announce measures to bring parity between pension products offered by life insurers and NPS. Additionally, life insurers offer annuities as retirement income, for which they generally invest the fund in government securities for a long-term guaranteed return, which also plays a significant role in nation-building. "

"The government should increase the supply of long-dated (40-50 years) bonds for increased liquidity in the market. It should further develop the corporate bond market, where insurance companies can source long-term, creditworthy, or enhanced corporate bonds, and generate better long-term yields for such annuity plans."

Vighnesh Shahane, MD & CEO, IDBI Federal Life Insurance “We propose an increase in FDI from 49 percent to 74 percent, in line with AMC's which are at 100 percent FDI and banking which is at 74 percent FDI. Secondly, Section 80C of the Income Tax Act provides for a tax deduction of up to Rs 1.5 lakh on various investments including insurance policies. Since this section is cluttered with many investment options, we would recommend either increasing the deduction limit or keeping a separate section for insurance policies."

"In addition, tax laws could be aligned to the regulatory minimum of 7 times the cover for individuals above the age of 45 years. Since insurance is a crucial part of an individual’s financial plan, we would also recommend a reduction in GST on life insurance from 18 percent to 12 percent which would help to increase insurance penetration in the country. We would also recommend raising the exemption limit for

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TDS on insurance commission from the current limit of Rs 15,000/- (under section 194 D of the Income Tax Act). Raising this exemption limit would prove beneficial to insurance agents in the country."

Sanjay Tiwari, Director, Strategy at Exide Life Insurance "Though the uncertainty spurred by the Covid-19 pandemic has improved insurance awareness, a lot will have to be done to increase insurance penetration which is still quite low in the country. Protection plans have finally gained traction but the Union Budget 2021 must look at enhancing this awareness further and positioning life insurance as an important aspect of one’s financial portfolio. We hope the Union Budget will create a separate category to avail tax benefits for premiums paid towards life insurance. We also hope the Budget will address the high GST rate on protection plans which is a deterrent for potential buyers at the moment."

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Is ‘sum assured’ the same as ‘sum insured’? – The Hindu – 17th January 2021

‘Sum insured’ and ‘sum assured’ are among the fundamental terms an individual essentially needs to understand before choosing a life insurance plan. The two terms are the basis on which a plan is evaluated. Though a novice may interpret the two to mean the same, the actual meanings are significantly different. While sum assured refers to the benefit, sum insured is the reimbursement of insured loss.

Non-life insurance policies, such as motor, home and health, which work on the principle of indemnity offer an amount called sum insured. Indemnity refers to the compensation that insurer pays for any loss, damage, or injury. These policies provide coverage

only for the losses due to any damage that happens to the insured asset. For instance, an individual buys a health insurance policy that offers a sum insured of ₹1 lakh. Now, in case of the insured person’s hospitalisation, any bill amounting to less than ₹ 1 lakh will be entirely paid by the insurance company. However, if the bill amount exceeds ₹1 lakh, then the insurer will be liable to pay only ₹1 lakh and the remainder will have to be borne by the policyholder.

The idea behind this concept is the compensation should not lead to a monetary benefit to the policyholder and only the amount that is equal to the actual loss suffered should be paid to him. This is why the cover in non-life insurance policies is known as the sum insured. Sum assured is a pre-decided amount that the insurance company pays to the policyholder when the insured event takes place. For example, when you buy a life insurance policy, the insurer guarantees to pay a sum assured to the nominee in case of the insured person’s demise. It is the sum assured that determines the amount of premium payable by the policyholder to the insurer. Typically, life insurance plans offer sum assured and non-life insurance policies sum insured.

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Decoding digital disruption in the modern insurance landscape – Outlook - 21st January 2021

Digital revolution has disrupted business practices across India and the insurance industry has been no exception. With internet penetration rising at the rate of 18 per cent annually, digital technology has improved several aspects of the insurance business such as customer touchpoints, transparency in product features, service availability and payments.

There has been a spike in digital adoption by insurers over the last few years. It has affected the overall approach and servicing of insurance products for end-users. Adoption of digital technologies has worked as a win-win situation for both insurers as well as the customers.

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For insurers, digitalization helped increase reach and in reducing operational cost. For customers, it facilitated transacting at their own convenience with security.

Changing preferences of modern customers Modern customers have evolved with e-commerce and various everyday utility apps. There is a clear expectation in terms of simple, customized and readily available products or services, using handheld devices 24 hours a day. Access to financial products cannot therefore be any different. Today's challenge is to provide enhanced customer value, ensuring high customer satisfaction through digital means. User-friendly digital means with faster processing will help retain customers in the long term.

Understanding customer better Modern customers in this digital age expect agility alongside ease of use. Digital technologies act as an enabler to make data-led analytics understand customers better. Customers today expect the ease of interaction with the brand. Empowering customers with easy and intuitive experience goes a long way in creating value.

In days to come, customized products that meet customers' needs and preferences, introduced at the right time, will enhance a company's credibility.

Redesigned customer journey Digitalization has completely revamped customer communication, and the insurance sector is no exception. Enhanced digitalization through various channels has led to improved access and user experience. Services are available round the clock just at the touch of a button. Success does not only depend on the digital tools provided to the customers, but the experience those tools enable. Smooth and transparent experience ensures and inspires customer loyalty. The journey ahead must continue to allow customers to carry out seamless conversations with financial advisors through their preferred channel and make an informed purchase decision offline or online.

The road ahead The insurance industry has grown substantially over the past decade. The current need is to build and sustain a systematic approach that chalks out the entire journey from data model designs to organizational changes required to maintain operational excellence.

Digital technologies have given access to ever-burgeoning data. This can lead to penetrating insights and help the insurance industry further evolve and make it an enabler for customer experience. The future will belong to insurers who can invest in owning and analyzing data. Those playing the role of "risk avoidance" rather than "risk mitigator" will be ahead of the rest. Insurance companies that move forward swiftly and decisively with innovation at the heart of their strategies will have a competitive advantage.

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INSURANCE REGULATION

Auto dealers can act as sub-brokers for motor insurance: Irdai panel – Live Mint - 20th January 2021

The committee to review the motor insurance service provider (MISP) guidelines on Wednesday suggested that automotive dealers can act as one of the distribution channels on a stand-alone basis, soliciting motor insurance business similar to insurance brokers. MISP is an automobile dealer appointed by the insurer or the insurance intermediary to distribute or service motor insurance policies of automotive vehicles sold through it. The MISP guidelines were first issued by IRDAI in August 2017 to bring orderly conduct in the matter of distribution of motor insurance business through motor dealers. The regulator in June 2020 had set up the panel to review the practices under the guidelines. The committee noted that the motor insurance business sourced by MISPs through brokers and insurers constitutes around 25 percent of the total motor insurance business or around 11.25 percent of the

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overall general insurance business in India. “In order to develop the MISP as another robust channel of distribution of motor insurance policies, the committee makes the following suggestions: automotive dealers as one of the distribution channel on stand-alone basis soliciting motor insurance business similar to insurance broker representing the customer with conditions such as i) mandatorily have agreements with all insurers; ii) prohibited from collecting premium; iii) provide access to customers to make a direct online payment to the insurer," the committee said in its report.

“Alternatively, the automotive dealer may become a sub-broker or a sub-agent and work for a broker or a corporate agent, respectively," it added. On sponsorship of MISPs, the panel suggested that they can be sponsored by either an insurance intermediary or any one or more of the insurance companies at the same time. “All insurance companies may be directed either to develop a portal or app or use the existing electronic or e-commerce platform through which insurance policies shall be issued. The electronic platform or portal shall have no functionality or mechanism built into it that can alter, modify or change the premium quoted by the insurance company," the committee said.

The panel has also suggested that the original equipment manufacturer (OEM) should be brought into the regulatory ambit by including OEM in the definition of MISP. “The OEMs shall be equal to MISP and will be subject to all the provisions of MISP Guidelines. They shall give the list of their authorized-dealers and authorized sub-dealers to IRDAI and that list can be uploaded at IIB (Insurance Information Bureau) for generating unique identification numbers of the MISP," the report said. On premium payment, the committee said the amount must be done through a single check and the customer should make payment to the insurance company directly, which is facilitated by the MISP.

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IRDAI panel not in favour of standardisation of cyber insurance - Financial Express - 20th January 2021

An IRDAI working group has opined against standardisation of cyber liability insurance as it might impede innovation and hinder adaptation to evolving industry needs.

In October last year, the Insurance Regulatory and Development Authority of India (IRDAI) had set up the working group to study cyber liability insurance and suggest among things, possibility of developing standard coverages, exclusions and optional extensions for various categories. Cyber insurance policy is a risk transfer mechanism for cyber risks.

The panel, as per its report published by the regulator, examined various aspects relating to cyber

insurance in India, including coverage issues, sector wise exposures, underwriting/ pricing methodology, and claims response and management to come to an informed conclusion on standardisation.

“The Working Group believes that early standardisation of cyber insurance in India, might impede innovation and hinder adaptation to evolving industry needs. It may lead to price-based competition instead of developing competencies for agility to design new products suitable to new environments,” the report said.

It further said that while standardisation of cyber insurance policy seems to be a very good approach, at present it faces many challenges. Cyber insurance is a response mechanism to cyber risks which are dynamic and evolving. Standardisation may not be able address all the emerging risks and is likely to limit innovation, said the report on which IRDAI has invited comments by February 9.

“Cyber insurance, at present, is much dependent upon support of reinsurers who instead of a standardised wording may prefer to use coverage and exclusions as per the latest developments in the

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market,” said the report, and added that cyber insurance, being a relatively new product, calls for flexibility for gaining traction.

The report also noted that cyber insurance policies, currently available, address the requirements of individuals reasonably well. But, there are some areas in the product features and processes which need improvement. It has recommended that there should be flexibility with regards to insistence of an FIR at the time of claims. It also suggested there should be clarity in exclusion language relating to compliance with reasonable practices.

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IRDAI panel suggests standard professional indemnity policy – Live Mint – 19th January 2021

An IRDAI panel has suggested standardisation of the professional indemnity policy under which insurance cover can be provided to brokers, corporate agents, web aggregators and insurance marketing firms.

A professional indemnity policy is a liability insurance product that protects individuals giving professional advice and professional entities against negligence claims by their clients for errors and omissions. It covers financial loss suffered by the clients resulting from breach of professional duty.

The committee for standardisation of professional indemnity insurance policy set up by IRDAI has

suggested standard proposal and policy form for brokers (direct, reinsurance and composite), corporate agents, web aggregators and insurance marketing firms.

As per the recommendation, policies issued under the new format will cover all damages resulting from any claim for breach of duty of the insured, fraud and dishonesty of any employee for which the insured becomes legally liable. Under the new dispensation, it would not be permissible to issue any public liability insurance policy with unlimited liability, as per the proposed standard policy. Stakeholders can send their comments on the standard policy to the Insurance Regulatory and Development Authority of India (IRDAI) by February 7, 2021. The rates of premium under the new agreement will be on an annual basis and full premium will have to be paid at the inception. It will not be permissible to accept premium in installments, the panel's report said.

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Cashless health insurance claim settlement for Covid-19 treatment: IRDAI issues new instructions - Financial Express – 16th January 2021

The Insurance Regulatory and Development Authority of India (IRDAI) has said that in case of cashless claims under a health insurance policy, the claims should be settled as per the tariff decided by the parties in compliance with provisions of Regulation 31 of IRDAI (Health Insurance) Regulations, 2016. The regulator, however, said that insurance companies should make efforts to have agreements with health providers on the rates for treatment of COVID-19 similar to other diseases.

The IRDAI has directed all insurers to ensure that reimbursement claims under a health insurance policy should be settled as per the terms and conditions of the respective policy contract. “In case of “Cashless Claims” under a health insurance policy, the claims shall be settled as per the tariff decided by the parties in compliance to provisions of Regulation 31 of IRDAI (Health Insurance) Regulations, 2016,” IRDAI said in a circular dated 13th January 2021.

“However, the insurers shall make efforts to have agreement with health providers on rates for treatment of Covid-19 similar to other diseases for which rate agreements are in place. Also, while entering into

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such agreements, the reference rate of GI council can be kept in view for guidance alongwith rates fixed by State Governments and Union Territory administration, if any and as relevant,” the circular added.

The insurance regulator further said, “All the insurers are directed to ensure that the “Reimbursement claims” under a health insurance policy shall be settled as per the terms and conditions of the respective policy contract. Hence, the insurers shall honor all the health insurance claims as per the terms and conditions of the policy contract.”

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LIFE INSURANCE

How NRIs can buy term insurance plans in India - Business Standard – 19th January 2021

The Coronavirus pandemic has made life uncertain throughout the world. With people losing their lives and livelihood, every precaution possible needs to be taken to ensure safety and security of our loved ones and ourselves. The deadly virus has already infected over 81 million people so far, with more than 1.77 million deaths[1]. Among the countries that have the highest number of infections include the US (more than 19 million cases), India (over to 10 million cases), Brazil (7 million), Russia (3 million), France (2.5 million), Spain (1.8 million) and UK (2.2 million).

Term Insurance for NRIs In such circumstances, having a term life insurance policy becomes crucial, especially if you have dependents. In addition, when it comes to Non Resident Indians, or NRIs, it becomes even more important because some of their dependents may be living in India while they themselves are living abroad -- maybe for work, for education or some other purposes. If something untoward were to happen, then their families in India may suffer. But if they have a term insurance plan with an Indian insurer, then it would not only protect the financial interests of their families, but would also ensure that the nominees under the policy are able to easily get the sum assured.

According to the data available with the Ministry of External Affairs, there are over 32 million such NRIs and PIOs[2]. And, the Foreign Exchange Management Act (FEMA) has made it possible for them to buy term insurance in India. Moreover, several Indian insurers offer term insurance plans to meet the specific needs of the NRIs.

How can NRIs buy term life insurance in India Being an NRI, one way you can buy a term insurance plan in India is when you make a visit to India. This is the most convenient option, but it may not be practical for many who are unable to make frequent visits to India. The good news for such NRIs is that they can also purchase a term plan from an Indian insurance company directly, on the organization’s website from their own country of residence.

However, if you buy the term insurance on your annual visit to India, the process is quite similar to what’s followed if an Indian resident makes a purchase. You just approach the insurance company directly or through an agent, and apply for investing in the term plan of your choice. The insurance company would evaluate your case and ask for your medical history. It would also consider the country you reside in and if everything is in order, the insurer will accept your proposal to invest in their term plan along with premium charges as per the terms of the policy that you may have chosen.

However, if you are planning to purchase the policy while staying abroad, you can do so from the life insurance company’s website directly. For example, Bajaj Allianz Life Insurance offers online purchase and renewal of their term insurance plans, depending on your country of residence.

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By choosing an insurer like Bajaj Allianz Life Insurance, you can make the whole process hassle-free, from filling in the application form to premium payments. Bajaj Allianz Life has a portfolio of innovative insurance products including Retirement plans, Savings Plans, Investment plans, and Child plans, to help you fulfil your life goals. Policyholder can also pay premiums through NRE or NRO account maintained with Indian bank

Documents required An NRI buying a term plan from an Indian insurer has to submit a set of essential documents that will help the insurance company evaluate the case and process the application. While the requirements may vary from insurer to insurer, here are some most common documents that you may be asked to submit.

A duly filled in application or proposal form An attested copy of your passport with exit & entry details Proof of address Proofs of your income and earnings PAN Card/Form 60 Recent Photograph FATCA questionnaire/declaration Medical examination and tests, NRI questionnaire, Travel questionnaire etc. if required

Things to keep in mind Significance of country of residence: Your country of residence determines your eligibility for a

term plan. It is advisable to check the list of countries that your chosen insurer serves Insurance policy term: This refers to the period from when the policy has been purchased until

its maturity or expiry. Extent of protective life cover: Since term plans are pure protective policies that offer a lump

sum payment if the policyholder dies, make sure the cover is adequate to get your family through financial troubles in the unfortunate event of your demise.

Premium amount: The premiums charged by the insurer depend on factors like health, occupation etc. While most of these factors are the same for a resident Indian and an NRI, some are specific to the latter like whether their country of residence is prone to an exceeding amount of political instability. In such cases, you would be required to pay a higher premium amount. If you live in a country known for lesser or no instability, your premium amount would generally be much lower. However, before opting for a plan, you could compare the premium terms offered by different insurers.

There is no doubt that term life cover is essential for every individual, but for NRIs, it is crucial to have an Indian life insurance policy even if they have one in their country of residence. By opting for this, your family back home in India will find that it’s easier to raise a claim to the insurance company in the event that something unfortunate happens to you. Moreover, it would also prove convenient if you decide to return to India later in life.

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GENERAL INSURANCE

Low-cost insurance products in era of Covid pandemic - Millennium Post - 17th January 2021

Low-cost Insurance products that are easily affordable are referred to as sachet insurance or bite-sized products. Think of small shampoo sachets costing Re1/-. You may prefer to purchase them rather than a big container of shampoo. This is a similar concept in insurance. There are a whole range of products costing less than 50 paise or just a Rupee and going upto Rs. 1000/- annually. If you are aware of them, then you can give yourself the benefit of insurance protection both economically and conveniently.

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We can make the best use of these policies in the present pandemic-ridden times. They are also tailored to cover your specific needs. Some examples are given below. Any reference or mention of third-party companies' products and/or services made in this article is for illustrative purposes only. Such reference or mention does not comprise an endorsement, or recommendation of the efficacy of any product or service. Please obtain advice from a suitably qualified professional consultant based on your personal requirements. The views, opinions or advice expressed in the article do not amount to professional, commercial or legal advice and the author accepts no liability arising directly or indirectly in connection with reliance on the use of the information provided.

Should one purchase these schemes? It would always be advisable to examine all the terms and conditions and particularly the exclusions carefully, before purchase, to avoid unpleasant surprises at the time of claims. The available toll-free numbers should also be utilised to clarify doubts, if any. The claim settlement ratio of the insurer should also be verified, before entering into the contract. Whilst this genre of low-cost schemes is affordable, well packaged and convenient to access, it would be prudent to remember that they are not comprehensive insurance covers. They may address specific needs conveniently and for a busy millennial or someone without any insurance cover, it is quite handy. They can also help to supplement existing insurance covers in specific areas. However, one should eventually move on to comprehensive insurance covers which provide more adequate insurance protection for your needs.

Some common attributes of Low-Cost Insurance products .

Can they be accessed online? Yes. All these products are marketed digitally and are dependent on a robust IT platform. You can even use your mobile phone for this purpose. Their claim procedures are also streamlined and supported by their digital platform. Some of the important players in this segment are insurance start-ups like Toffee Insurance, Digit Insurance, Acko Insurance and Mobikwik. Established insurers have partnered with them to sell their products. There are even some low cost government sponsored schemes. Some examples of existing low cost insurance products:

1. Train Travel Insurance: IRCTC (Indian Railway Catering & Tourism Corporation) provides travel insurance at an unbelievably low premium of 49 paise only, inclusive of all taxes, whilst booking tickets through the IRCTC site or through the mobile app. Coverage starts from the departure of train from the originating station and ends on arrival at destination station. The policy is for a Sum insured of Rs. 10 Lakhs for accidental death and permanent total disablement, Rs. 7.5 lakh for permanent partial disability, Rs. 2 lakh for hospitalization expenses in case of injury and transportation of mortal remains is covered upto Rs. 10,000.Only Indian citizens above 5 years of age can be covered. The insurers providing these covers are Bharti Axa General Insurance, Bajaj Allianz General Insurance and Shriram General Insurance.

2. In-trip insurance cover: Cab aggregator Ola, in conjunction with Acko General Insurance and ICICI Lombard General Insurance, has launched an in-trip insurance cover named 'Chalo Befikar' at a premium of Re1/-.The premium can go up to Rs 15/- and the cover can go upto Rs. 5 lakhs. It is available for use for its users at major cities across the country. The insurance purchase can be done while booking an Ola cab by the mobile application. It covers accidental death or disability, loss of baggage, backpack or laptops, missed flights, accidental medical expenses, daily allowance for hospitalization, ambulance transportation covers, emergency hotel requirement costs, fire and burglary at home etc. The claim process is also fairly simple with quick settlement and minimum documentation.

3. Back-pack insurance: Many cannot do without their trendy and faithful backpack, especially the modern millennial. Backpack Insurance is provided by HDFC Ergo through the insurance start-up Toffee Insurance, at a reasonable premium. The premium starts at Rs 25 and goes up, according to the value of the back-pack. Insurance is provided for duration of 6 months from the invoice date of purchase of the backpack/rucksack or laptop bag against theft. There is zero depreciation and a token deduction of Rs 250/- at the time of claim.

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4. Dengue Insurance: Vector borne diseases have taken a heavy toll in India, especially in the Metro cities. HDFC Ergo is offering Dengue Care Policy through insurance start-up, Toffee Insurance. It covers hospitalization expenses due to Dengue for a sum Insured of Rs 1 lakh for a year, for an annual premium of Rs. 682/-. Even if hospitalization is not required OPD expenses upto Rs. 10,000 are payable for Dengue treatment. There is a 15-day waiting period for claims, in the first year. It is available for persons in the 18 to 65 year age profile and is renewable lifelong.

5. Health Insurance: The Daily Cash Plan offered by HDFC Ergo through Toffee Insurance is a handy cover for taking care of only daily expenses during hospitalization. If you have a plain vanilla health insurance or a corporate cover, the odds are that this add-on will not be available for you, as part of your existing health plan. You can then buy this Plan to supplement your existing health insurance. The annual premium is just Rs 449/-. Hospitalization of more than 24 hours is required for a claim pay-out Rs. 1000/- per day, for a maximum of 30 days in a year. This is enhanced to Rs 2000/ per day, in case of admission to an ICU for a maximum period of 15 days. There is a waiting period of 30 days in the first year. Pre-existing diseases are covered after 48 months of continuous coverage.

6. Delayed flight insurance cover: Start-up Digit Insurance is providing a low cost domestic travel cover. It is a fixed-benefit cover for only domestic flight delays at a premium of Rs. 49/-, for a single flight. An amount of Rs.1000/- is payable for a delay of 90 minutes or more during the travel months of February to November. For delays of 120 minutes or more during the travel months of December and January, there is a benefit of Rs. 750/-. Sudden and uninformed delays are covered and not delays communicated in advance. The claim process is mobile phone oriented and simple and hassle free. The claim amount is credited to the account of the Insured and can be used for any purpose that he deems fit.

7. Personal Accident Insurance: Pradhan Mantri Suraksha Bima Yojana or (PMSBY) is a low cost personal accident insurance scheme. It covers accident insurance for Rs. 2 lakhs at just Rs. 12/- per annum, regardless of economic criteria. Death and Permanent Total Disablement (PTD) are covered for Rs. 2 lakhs. Permanent Partial Disablement (PPD) is covered for Rs. 1 lakh. PTD is total disability due to the total and irrecoverable loss of both eyes or loss of use of both hands or feet or loss of an eye and loss of use of a hand or a foot. PPD is partial disability due to the total and irrecoverable loss of an eye or loss of use of a hand or foot. This scheme is available to persons between 18 years to 70 years of age. This scheme is available online (on identical terms) in all public sector banks and most private banks who have tied up with various insurers for this purpose. The applicant requires an Adhaar card linked savings account and a mobile number. The claim procedure and documentary requirements are also streamlined for convenience. You could even avail of this scheme yourself or enable your domestic staff and others to cover themselves, as a social security measure.

8. Life Insurance: Pradhan Mantri Jeevan Jyoti Bima Yojana or (PMJJBY) is a low cost life insurance scheme. For an annual premium of Rs. 330/-, irrespective of any economic criteria, an applicant can cover themselves against the risk of either accidental or natural death (except suicide) for an amount of Rs. 2 lakhs. It is a plain term insurance cover and there is no provision of any survival benefit or money-back in case of survival. It is available to persons between the ages of 18 years to 50 years and can be renewed upto 55 years of age. This scheme is also available online (on identical terms) in all public sector banks and most private banks who have tied up with various insurers for this purpose. The applicant requires an Adhaar card linked savings account and a mobile number. The claim procedure and documentary requirements are also streamlined for convenience. You could even avail of this scheme yourself or pay the premium as a gift to enable your domestic staff and others to cover themselves, as a social security measure.

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HEALTH INSURANCE

Planning for the preventable – The Hindu – 17th January 2021

If immunisation is insurance against disease, what about insurance for immunisation? I just checked my policy and immunisation procedures such as vaccination and inoculation are expressly excluded. Some policies exclude them except after a bite, as in the case of rabies.

To be fair, it is a hospitalisation policy and does not cover out-patient procedures but listed day-care procedures. Even those have initial waiting periods before coverage kicks in. Many general insurance companies offer vaccination cover only as part of maternity benefits under the hospitalisation policy.

Vaccination expenses for the new-born, up to a limit, typically ₹10,000, is covered under the policy.

So, what does one do? If your company offers vaccinations as an add-on cover, it makes sense to opt for it. There could be a waiting time for you to become eligible. If you are buying health insurance anew, you can try to buy a policy that offers this as part of the basic cover and there are options available and here, you can claim immediately when the policy commences for some types of vaccines. When it is a part of the basic cover, the premium is built in and there is a separate limit for immunisation costs so it does not cut into your sum assured. Fortunately, claim for vaccination will also not affect your no-claim bonus. Insurance for immunisation is not so much a COVID-19 vaccination requirement, because clarity is yet to emerge on it being free or otherwise.

But the thing is, we have largely forgotten vaccinations after that dreaded painful shot in our school days that gave us fever and an ugly scar. Only a few of us have taken adult vaccinations for Hepatitis, typhoid or rabies and fewer still have had even annual flu shots. Exceptions may be when visa applications require it or we become concerned after a conversation with our doctor.

Jabs for children Vaccinations for children has become universal only recently in India and it’s been quite an achievement to get rid of small pox, whooping cough, polio and that ilk of heart-rending childhood afflictions.

In the same breath, let us see an often-forgotten perk in your hospitalisation policies. Once in block of a certain number of claim free years, your insurance company will pay for your preventive health check. There is an upper limit, usually pegged to your sum assured, and it will defray your expenses partially at least. Availing this too will not affect your no-claim bonus. Of course, a preventive health check benefits both you and your insurer as you can take corrective measures and save yourself major health problems in the future and save them a claim. They should start approaching vaccination also similarly as the benefits will only be larger!

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Here’s why you need to buy top-up health insurance plan - The Economic Times – 20th January 2021

Health insurance is your safety net when it comes to unforeseen illnesses and medical expenses. The importance of health insurance is usually not realized until the need arises but it is one of the most significant investments you can make for long-term peace of mind. While a regular policy reimburses bills up to sum assured, a top-up plan covers cost after a certain threshold is reached. For price-sensitive markets like India, this has tremendous application and translates to cost benefits for the end customers.

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These top-up plans are an extension to your existing health insurance policy and can be taken over by an existing health plan. They help you get coverage over and above your existing health insurance plan and at a much lower premium.

What Is Top-Up Health Insurance Plan? A top-up plan also called a “High Deductible” health insurance plan offers coverage for hospitalization claims over and above the deductible selected.

Top-up health plans are indemnity policies and they provide the same benefits as regular health insurance policies but the only difference is the high deductibles that make these plans cheaper.

Let’s understand deductibles: A deductible is a fixed amount paid out-of-pocket by an insured for the hospitalization expenses before an insurance company pays the balance cost. For e.g. a customer has a top-up plan of cover for Rs 500,000/- with a deductible of Rs 100,000/-, the insurance company will start paying after the claim amount has exceeded Rs. 100,000/-

There are two types of top-up plans-- top-up and super top-up. Let’s understand each of them:

Top-up plan The top-up plan works on a per claim deductible basis and the insured is eligible for claims only if the claim amount exceeds the selected deductible.

Super Top-Up Plan Super top-up plan works on an aggregate of claims basis and will trigger once the total claim amount including multiple claims in a year exceeds the selected deductible.

Top-Up health plans are meant to bridge the gap between existing policies and actual costs. The idea is to buy extra cover but at a reasonable cost. Hence, it is imperative to consider buying a top-up plan irrespective of the circumstances. The prospect of hospitalization due to COVID-19 and high medical costs in private hospitals was one of the major reasons for individuals to sign up for private health insurance.

However, one should not wait for any emergency to strike but always be prepared. Similarly, if one has a limited health insurance cover from the employer, it will exhaust quickly given the situation. In that context, the super top-up plan will aid individuals to have continued cover for health during the year. Planning and preparation are key.

Things to keep in mind while buying the top-up plan: Coverage similarity of the base plan and top-up plan- both the plans should be as similar as

possible to be able to get the optimum benefit of both the covers. One should try to buy both the covers at the same time, which enables an individual to have

similar benefits in both the covers on account of waiting periods. One should also try to take a reasonable large cover on the top-up front as the incremental cost is

relatively lower and taking a higher Sum Insured at the beginning does not put an individual on restrictions due to an increase in sum insured later.

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The benefit of top-up covers: The top-up cover is beneficial to the insured as an additional cover with a deductible available at a much cheaper price than the base cover for a higher sum insured.

Considering that the chances of exceeding the deductible threshold are low (in case of high deductibles), the premium for such covers are comparatively lower than the base health insurance plan for high sum insured.

These are also suitable for the self-employed/business class level where an individual can self-fund the hospitalization expenses up to a certain limit and utilize the super top-up plan for unfortunate events where the hospitalization expenses are high.

These covers are also suitable for service class people who are covered for a limited amount through employer-provided health insurance cover. The cover limit can be extended by suitably selecting the deductible.

With the help of top-up covers, one can get sufficiently large health insurance cover at a reasonable price and it covers any eventuality in case one has to undergo a serious illness treatment process.

Top-up and Super top-up plans are an excellent way to increase your health insurance coverage amount. Investing in such plans is a wise decision as it will help one in securing oneself in case of any emergency.

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MOTOR INSURANCE

How additional motor insurance premium may be calculated – Live Mint - 19th January 2021

You might have to pay more premium for a motor insurance policy if you violate any traffic rules henceforth. The draft proposal report submitted to Insurance Regulatory and Development Authority of India (Irdai) on 18 January by working group committee has recommended traffic violation premium.

This additional traffic violation premium section will float over both Own Damage (OD) and Third-Party (TP) sections of motor insurance policy.

As per the draft proposal, "IRDAI will need to mandate uniform Traffic Violation Premium across insurers that are impervious to competitive pressures and may review the adequacy and effectiveness of this premium every three years, or earlier as it so deems fit."

Sajja Praveen Chowdary, head, motor insurance, Policybazaar.com, said, "It is proposed to add a new section under motor premium for traffic violations. Every violation has points and the points you have got in the last 24 months will be taken into consideration. And on basis of the points, the premium can go up to an extra of ₹1,500 over and above what you are paying today."

As per the draft proposal, all traffic offences have been categorized into three main categories, namely: * Offences that cause traffic hazard * Offences that are compliance-related * Offences that are pollution-related Currently, traffic violations that cause traffic hazard have been identified for linkage with the motor insurance premium.

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Details of how your premium may be calculated: A point system has been designed and recommended for adoption by the IRDAI’s working group. This ystem takes into account both the relative severity of traffic offence as well as repetition. Therefore, a repeater of a less severe traffic offence can collect as many points as a one-time serious traffic offender.

For each traffic violation, a vehicle will accumulate violation points as described in the table "Traffic Violation Points" below.

Violation points have been assigned on the basis of perceived severity of the traffic offence. Repeat offences get normal points multiplied by the repeat frequency. For instance, if a violation of traffic signal attracts 50 violation points, second such offence, any time in the past, will attract 100 points; third such offence any time in the past will attract 150 points, and so on. Hence if a vehicle owner approaches an insurer for motor insurance and has violated traffic signal thrice in the last two years, his/her violation points for traffic violation premium shall be 300 (50 for a first offence, 100 for second offence and 150 for the third offence).

As per the draft proposal, a new vehicle (either brand new or under a new owner) will start its traffic violation points from a clean slate and accumulate points for the vehicle owner—combination for a rolling period of two years after which, with every passing day, the past violation history older than two rolling years will get wiped out.

The additional premium you may have to pay: It is recommended, as per the draft proposal, that traffic violation premium be fixed by IRDAI and reviewed every three years or earlier as deemed appropriate.

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CROP INSURANCE

Efforts on to get crop loss relief, insurance benefits – The Hindu - 21st January 2021

The Department of Agriculture has initiated steps to ensure early disbursal of crop loss compensation and get insurance benefits as farmers have suffered extensive loss of crops due to the recent rain, Director of Agriculture V. Dakshinamoorthy has said. Besides causing extensive damage to the district’s infrastructure, the recent rain, particularly, the unexpected and unseasonal showers that lashed the coastal district continuously for four days just before ‘Pongal’ dashed farmers’ hopes by destroying crops, mostly rain-fed crops including maize, corn, pearl millet, green gram, black gram and chilli, all cultivated on over 1.70 lakh acres in the northern part of the

district, particularly in Kayathar, Kovilpatti, Ettaiyapuram, Vilaathikulam and Pudhur taluks. Similarly, the Tamirabharani following heavy downpour in the catchment areas of Manimuthar and Papanasam Dams inundated the paddy cultivated on a few thousands of acres along the watercourse leaving the farmers in tears. When the affected farmers submitted petitions to Collector K. Senthil Raj on last Monday, he admitted that the aggrieved agriculturists would be bailed out once the ongoing crop damage survey by the Departments of Revenue and Agriculture was completed.

Against this backdrop, Dakshinamoorthy, who came to the district on Thursday to expedite this process, discussed the quantum of crop loss in the district with Additional Collector Vishnu Chandran and senior officials of Departments of Revenue and Agriculture. He said the district, in the wake of the downpour, had lost crops cultivated on 1,64,274.12 acre - minor millets on 69,426.23 acre, green gram and black gram on 76,448.16 acre, paddy on 3,079.94 acre. He also visited some of the affected fields where the

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crops had suffered extensive damage and said the survey on crop loss would be completed and forwarded to the government. “We are keen on distributing the compensation to every farmer who has lost his crop. No affected farmer should be left out in this exercise, the officials have been told. Farmers, in case of crop loss, should give relevant details including their names, area of cultivation, crop variety, Aadhaar number, bank account number to the officials for getting the compensation. Moreover, process on getting insurance benefits for the crop loss has been started simultaneously,” he said.

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SURVEY & REPORTS

Insurance industry to transition from ‘Adaptive to Resilient’: Synergy - The Economic Times - 21st January 2021

The Covid-19 pandemic has impacted the insurance industry and ushered a fast change on how the insurance sector evolves not only from a business standpoint but also on how insurers have adopted technology and digital. A report by Synergy reveals the top factors shaping up for 2021 are focus on Health & Life products, change in regulatory landscape and focused digital engagement. According to the report, while most of the insurers in Asian region faced operational challenges but were able to quickly adopt remote capabilities and stayed focused on settling claims on time.

The report said, “50% of the Insurers ranked process enhancements, digital enhancements and automation as high priority initiatives that will continue for the first 6 months of 2021. Initiatives geared towards ‘bottom line management’ is clearly coming out as a trend for 2021.”

Commenting on the impact of the pandemic on the Insurance industry, Pradeep Satya, Founder & CEO, Synergy said, “The Insurance industry has quickly moved to accept the reality that embracing digital is the way ahead, it cannot be done with the old playbook. Pandemic has helped in speeding this up and given the right direction across the region. Insurance companies are arguably in the midst of one of the most significant change in the industry’s history. The trend report clearly outlines the way forward for the industry and we are happy to present our views and findings for the region.”

Elaborating on the huge potential for the Insurance market in the Asia region, Sandeep Sathyanarayan, Director – India Operations, Synergy added, “Home to some of the fastest growing economies and a middle class that is rapidly expanding, India & rest of Asia region, hold the key to the global Insurance industry’s future. The millennial and post millennial population have come to expect omni-channel, tailored, real time services.”

Sandeep adds, “The pandemic has changed timelines and legacy insurance companies will have to be forward-looking in establishing tie-ups with technology specialists and solution providers. At Synergy, we recognise this as a huge opportunity and are geared to provide new and innovative solutions and take a differentiated, accelerated growth strategy.” The market survey for the 2021 trend report has been carried out across 23 different insurance companies mainly covering CXO level respondents covering Hong Kong, Japan, India, Singapore, Indonesia, Philippines and Thailand.

According to the report, the spotlight will be on health and life insurance and insurers are likely to see an increased appetite for pure term protection and health products. The report said, “77% respondents see an increase in awareness of health and well- being amongst customers. The resilient segments during the pandemic for 43% of the respondents were Group Health lines which suffered small impacts and Retail Health which increased by 20% for 36.3% of the respondents.”

The report adds, customer engagement will gain momentum and the shift will be towards personalisation of services and apt pricing for tailored and usage-based risk offerings. Sales & Distribution will go hybrid, the report adds, “48% of respondents feel that remote lead generation, lead nurturing and presenting quotations and illustrations to customers has been moderately challenging but not a significant challenge. 70% of the respondents confirmed no delays in policy issuance, delivery of

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welcome kits to customers or the underwriting process thanks to hybrid models already in place.” Further trends include, cost efficiency mandate becoming stronger in 2021, Insurers investing heavily in digital ecosystem, upskilling and training for the digital age, wellness programs will be back in action, increased focus on zero-touch operations and gig economy trendsetters will show the way the forward.

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Term plan ownership is rising, but savings rule amid Covid-19 pandemic - Business Standard – 21st January 2021

The pandemic has raised awareness about the need to have adequate life insurance. However, urban India has also grown more anxious about financial security and preparedness over the past year, owing to the Covid-19 pandemic. These are some of the key findings of the third edition of the Max Life India Protection Quotient (IPQ) 3.0 survey, conducted jointly by Max Life Insurance Company and Kantar, an insight and consulting company. Prashant Tripathy, managing director and chief executive officer (CEO), Max Life Insurance, says, “While the survey has observed a positive trend in urban India’s approach to financial protection over the past three editions, there’s still a long way to go.” A closer look at the findings reveals insights that buyers can use to make informed decisions. Term versus savings plan: The survey witnessed an increase in urban India’s level of awareness and ownership of term insurance, especially in tier 1 cities, in the wake of the pandemic.

Now, 28 percent of urban Indians own term products, compared to 24 percent in IPQ 2.0. However, savings plans still remain the most owned life insurance product. Deepali Sen, founder and partner, Srujan Financial Advisers LLP, says, “Term plan makes sense for nearly everyone. But some people have the mindset: ‘What if I don’t die? Shouldn’t I get some money back?’ Such people go for term plans with a return of premium option, or for savings plans.” Savings plans help an individual accumulate a fund for the future. They have only a thin sliver of life cover attached to them. Sen adds, “The returns on these plans is a pittance — 4-5 percent.”

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More Indians covered by health insurance but overall percentage still low: NHFS-5 – DownToEarth – 18th January 2021

Health insurance coverage increased in the past five years in a majority of the Indian states and union territories but still remained well below half the population in most of them, according to the latest National Family Health Survey (NFHS-5).

As many as 15 of the 22 states and UTs surveyed showed an increase in the health coverage. Other than Andhra Pradesh, Telangana, Assam and Kerala, all major states have less than 50 per cent households with one member covered by a health scheme.

Since the last survey done in 2015-16, there was a significant increase in Lakshadweep, Goa, Assam and

Meghalaya. Kerala and Bihar recorded a minor improvement.

In September 2018, the Narendra Modi government in the Centre launched Pradhan Mantri Jan Arogya Yojana to provide health benefits to over 10 crore poor families. The scheme and other health finance benefits extended by some states around the same time, were widely popularised in awareness campaigns.

Andhra Pradesh has the most households (70.2 per cent) where at least one member had a health scheme, although it has seen a decline in the last five years. This is followed by Goa (66 per cent) and Meghalaya (63.5 per cent).

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Majority of the surveyed states have shown an increase in the number of households with a member covered under a health insurance scheme.

Tripura recorded the biggest decline — 25 percentage points in the last five years. The figure in remained the same in Karnataka since the last survey.

Every second household in Mizoram, Kerala, Assam and Telangana and two out of every three households in Meghalaya, Goa and Andhra Pradesh were found covered under a health insurance scheme.

Andaman and Nicobar Islands, Jammu and Kashmir, Manipur, Bihar, Ladakh and Maharashtra reported less than 20 per cent households with at least one member covered under a health insurance scheme.

The ingrained regional inequality in health insurance coverage varies among the states and UTs. The difference between urban and rural regions of Assam, Telangana, Meghalaya, Mizoram, Tripura, Sikkim, Andhra Pradesh was found more than 10 per cent.

In majority of the surveyed states and union territories, coverage of health insurance is better in rural areas than in urban areas except in Himachal Pradesh, Sikkim and Jammu and Kashmir.

Bihar, Manipur and Jammu and Kashmir have a very low health insurance coverage both in rural and urban areas.

Of the overall 342 districts that were surveyed, insurance-covered households are lowest in the districts of Andaman and Nicobar Islands.

Most of the districts in Andhra Pradesh, Telangana, Assam and Meghalaya have 70 per cent or more families covered by health insurance. However, all other districts across the surveyed states and UTs show poor or low coverage.

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A total of 25 dristricts in Bihar, Jammu and Kashmir, Manipur and Maharashtra reported 10 per cent or less households with any usual member covered under a health insurance/financing scheme.

A non-uniform inter-district variation emphasises the importance of the state-level initiative in boosting universal health cover.

Several reasons can be cited for the low health insurance coverage in India. One of the fundamental reasons can be the lack of awareness of people about the necessity of health schemes.

Secondly, health insurances are optional and so, many citizens tend to delay or ignore

subscribing to one. To change this, the foremost task that needs to be carried out is sensitisation and awareness of the insurance schemes.

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PENSION

Why you shouldn’t rely just on EPF for your retirement needs – Live Mint - 19th January 2021

If you are a salaried person, you would be contributing a part of your salary mandatorily towards the Employees’ Provident Fund (EPF), which is considered a traditional tool for saving for retirement. However, if you are assuming that the EPF corpus you have been building would be enough to meet your retirement needs, you may be mistaken.

Given the tax-efficiency, EPF is certainly a good investment product. EPF enjoys the EEE (exempt-exempt-exempt) tax regime, which means it is tax free at the three stages of contribution, interest amount accrual and withdrawal. It’s a government-backed scheme, which makes it a safe instrument. However, EPF if primarily a debt product and the limited exposure to equity and caps on investment it has may not help you accumulate the required retirement corpus. Equities are said to be one of the few instruments that has the potential of generating inflation-beating returns in the long term.

Debt Product EPF is primarily a debt product as the majority of its corpus is invested in debt products such as government securities, and a very little amount in equities. In 2015, the Employees’ Provident Fund Organisation (EPFO) started investing in equities. Initially, it was given a go-ahead to invest 5% of the incremental corpus in equities; the limit was increased to 15% in 2017. EPFO invests in exchange-traded funds (ETFs), including Central Public Sector Enterprises (CPSE) ETF and Bharat 22 ETF.

However, experts believe that EPF’s equity exposure is very limited, due to which it may be difficult for the instrument to generate inflation-beating returns. Plus, in line with the declining interest rate in the country, EPFO has lowered the rate of interest for FY20 to 8.5% from 8.65% in the previous year. The last time, EPFO had paid a rate of 8.5% was in FY13.

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The interest rate on EPF is decided by EPFO’s apex decision-making body Central Board of Trustees (CBT), depending on the surplus they have from the previous year as well as the income generated during the financial year. The interest rate is then sent to the finance ministry for approval. CBT comprises representatives of employers, employees and the government.

Limited contribution Apart from the concern about lower equity exposure, limited contribution towards EPF is another cause for worry. Both employees and employers contribute 12% each to EPF on a monthly basis. However, in case the employee’s salary is above ₹15,000, it is not mandatory for the employer to contribute 12% of the actual salary (basic plus dearness allowance). They can limit the contribution to 12% of ₹15,000 that is ₹1,800. Therefore, irrespective of the employee’s salary level, the employer’s contribution may be limited to a lower level.

“EPF contribution is 12% of your actual salary or 12% of ₹15,000 (based on the employer’s preference). Hence, limited contribution may restrict you from achieving your retirement goal. Also, many employers may not offer you the VPF (Voluntary Provident Fund) option (which allows you to increase your EPF contribution). Keep in mind that 8.33% of the employer’s contribution will go towards EPS (Employees’ Pension Scheme), which will not earn a single penny of interest. One gets the pension at the time of retirement, which is not much. Hence, considering all these restrictions and the way inflation (the actual inflation experienced by an individual) is rising, I don’t think it is worth relying on EPF for retirement," said Basavaraj Tonagatti, certified financial planner (CFP) and a Bengaluru-based fee-only Sebi-registered financial adviser.

Mint Take EPF is certainly one of the best retirement savings products as despite the recent cut in interest rates, it is still giving higher rates than products in the small savings basket. Another popular long-term savings product, Public Provident Fund (PPF), is giving an interest of 7.1% for the quarter ending 31 March. However, to beat inflation and not outlive your retirement corpus, it is important to have substantial equity exposure at least in the initial working years of your life for long-term goals like retirement. As you move towards retirement you can bring down the equity exposure. Equity as an asset class has the potential to deliver inflation beating returns.

To get an idea of equity returns, consider how much the Nifty index has delivered, as tracked by an index fund. For instance, Franklin Index NSE Nifty fund has delivered a return of around 13% over the past 20 years, as on 18 January 2020, according to data from ValueResaerchonline.com. “Rising cost due to lifestyle changes, expected chronic diseases during retirement life and the way actual inflation of lifestyle or hospitalization costs are increasing rapidly, one must consider equity as the part of their retirement goal to beat inflation," said Tonagatti.

“In fact, my suggestion is that even during retirement, one must not stay away from equity completely. Instead by creating a bucket strategy, they can take calculated risk and can beat inflation by investing their retirement savings in equities as per their risk appetite," he added. When building a retirement kitty, include equity-oriented products such as mutual funds of the relevant category. However, how much equity exposure you should have will depend on your risk appetite. You can consult a financial planner or adviser in case you are unable to decide that on your own.

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National pension scheme: NPS as a tax-saving tool goes beyond Section 80C - Financial Express – 19th January 2021

While the objective of the government through the National Pension Scheme (NPS) is to promote financial savings for the twilight years, the way most people look at it is a little different. Most investors look at it as a method to enhance tax-saving—eligible investment of Rs 1.5 lakh under Section 80C, through Section 80CCD. Under this section, Tier I of NPS is eligible for another Rs 50,000, taking the total tax-saving-eligible investment to Rs 2 lakh. This is correct, but there is scope to broaden the perspective.

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Final withdrawal taxation In tax parlance, it is known as EEE, where the first ‘E’ stands for exempt at the stage of investments; e.g. ,Section 80C eligible investments, the second ‘E’ stands for exemption of interim flows; e.g., interest in EPF or PPF, and the last ‘E’ stands for tax exemption on final withdrawal; e.g., insurance maturities under Section 10(10D). In NPS, it is almost EEE; i.e., you get tax benefit up to the defined limit under Section 80CCD, interim flows if any are exempt, but the final withdrawal needs to be explained.

At age 60 or later, the subscriber can exit from NPS. At least 40% of the proceeds need to be invested in purchase of an annuity. In fact, 60% of the proceeds are exempt from tax, and the 40% invested in purchase of an annuity is apparently tax free at that point of time. However, when the annuity flows in later, the quantum received in that year is taxable. Hence, in a way, it is a deferment of tax. However, there is a nuance in this deferment. Let’s say a person is working till age 60 and is earning enough to be taxed at the 30% slab. At age 60, s/he retires and withdraws from NPS. Post retirement, earnings are lower, only from investments, and the tax slab shifts from 30% to say 20% (old and new tax rate options) or 10% (new tax rate option). That is, effectively, the tax rate is coming down after retirement.

Let’s take a ballpark on the effective final taxation. Let’s say a subscriber at age 60 has a kitty of Rs 100 in NPS. S/he withdraws Rs 60 free of tax and purchases an annuity worth Rs 40. The amount that flows in every year is taxable at the rate relevant in that assessment year. If the tax rate is 30%, then 30% of Rs 40, i.e., Rs 12 is the tax component, taking all the annuity flows together for simplicity. In other words, the tax rate on final withdrawal of NPS is about 12% on the entire Rs 100. This is a simplistic approach, because the total annuity inflow will be different from the purchase price of `40 and only the flow of that year is taxable in that year. However, this explains the concept. Now, as mentioned earlier, the tax rate is expected to come down after retirement. If the rate is 20%, effective tax would be 20% of Rs 40; i.e., 8% and at 10% tax rate, it would be 4%.

Liquidity While you can exit before 60 under certain conditions, the lock-in till age 60 means lack of liquidity in NPS if you are looking at it as an investment option.

NPS as investment option Besides tax benefit of Section 80 CCD, NPS offers the benefit of very low fund management expenses. If you are sure of your horizon (age 60), or if you are in your 50s, the taxation compares favourably with mutual funds or PMS. Hence you may look at more than `50,000 per year for long-term investments. This is more for debt investments as there are allocation caps for equity in NPS.

Beyond pension NPS offers tax exemption at the stage of investment up to `50,000 in Tier 1 via Section 80CCD

under Section 80C Interim inflows in NPS are also tax exempt On exiting NPS at 60, 60% of final withdrawal is tax exempt Annuity income from 40% of final withdrawal is taxed at a lower rate since earnings after

retirement is less NPS has very low fund management expenses. Taxation compares favourably with debt mutual

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Four types of annuity schemes available under NPS – Live Mint – 18th January 2021

When you exit or close your pension account under National Pension System (NPS), you can withdraw up to 60% of the corpus at retirement, but compulsorily need to buy an annuity plan with the remaining 40%.

In the context of NPS, annuity refers to the monthly sum received by the subscriber from the Annuity Service Provider (ASP). A percentage of the pension wealth, as decided by the subscribers (minimum

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40% and 80% in case of superannuation and pre-mature exit respectively), is utilized for the purchase of annuity from the empanelled Annuity Service Providers.

ASPs are responsible for providing a regular monthly pension to subscribers after they exit from NPS. These ASPs are Insurance Regulatory and Development Authority (IRDA) regulated insurance companies which are empanelled by PFRDA to provide annuity services to NPS subscribers.

When can you exit from NPS? - Upon superannuation When you reach the age of superannuation/attaining 60 years of age, you will have to use at least 40% of accumulated pension corpus to purchase an annuity that would provide a regular monthly pension. The remaining funds can be withdrawn as a lump sum.

- Pre-mature exit In case of a premature exit. This means exiting from NPS before attaining the age of 60 years. In such a case, at least 80% of your accumulated pension corpus has to be utilized for purchase of an annuity that would provide a regular monthly pension. However, the remaining 20% of the funds can be withdrawn as a lump sum. You can pre-exit from NPS only after completion of 10 years.

- Upon your death In the case of your demise, the entire accumulated pension corpus (100%) will be paid to the nominee or your appointed legal heir.

Here are the schemes that are available with ASPs under NPS 1. Annuity for life You get the annuity throughout your life after retirement. Basically, on the death of the annuitant, payment of annuity ceases. The annuitant is an individual who is entitled to collect the regular payments of a pension or the investment made in the annuity.

2. Annuity for life with return of purchase price on death On the death of the annuitant, payment of annuity ceases and the purchase price is returned to the nominee

3. Annuity payable for life with 100% annuity payable to spouse on the death of the annuitant On the death of the annuitant, an annuity is paid to the spouse during a lifetime. If the spouse predeceases the annuitant, payment of annuity will cease after the death of the annuitant.

4. Annuity payable for life with 100% Annuity payable to spouse on the death of annuitant with return on the purchase of Annuity

In such a case, on the death of the annuitant, an annuity is paid to the spouse during lifetime and purchase price is returned to the nominee after the death of the spouse.

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IRDAI CIRCULARS

IRDAI issued guidelines on cross border re-insurer. Source – https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4350&flag=1 ___________________________________________________________________________________________________________ IRDAI issued exposure draft on report of the working group (wg) to study cyber liability insurance. Source – https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4348&flag=1

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Gross premium underwritten by non-life insurers within India (segment wise) : For the month / upto the Month Of Dec, 2020 (Provisional & Unaudited) is available on IRDAI website. Source – https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4349&flag=1 ___________________________________________________________________________________________________________ IRDAI issued report of the Committee for standardization of professional indemnity insurance policy – insurance intermediaries. Source – https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4346&flag=1 ___________________________________________________________________________________________________________ IRDAI issued report of the Committee to review MISP Guidelines. Source – https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4347&flag=1 ___________________________________________________________________________________________________________ IRDAI issued exposure draft on report of the Working Group (WG) to examine and recommend linking of motor insurance premium with traffic violations Source – https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4344&flag=1 ___________________________________________________________________________________________________________ New business data as at 31.12.2020 (Line of Business wise) is available on IRDAI website. Source – https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4345&flag=1

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GLOBAL NEWS

Taiwan: Life insurance sector posts lower premium income in 2020 as new business suffers hit – Asia Insurance Review

The total premium income of the life insurance industry from January to December last year reached NT$3,025bn ($108bn), a decrease of 7.9% from the previous year, according to statistics from the Life Insurance Association (LIA-ROC).

First-year life premiums fell to NT$784bn last year, plunging by 28.7% compared to 2019. Renewal premium income reached NT$2,241bn last year, an increase of 2.5% from 2019.

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There are two main reasons for the performance of the life insurance industry in 2020:

Traditional insurance products: The interest rate on insurance policy liability reserves was lowered twice at the beginning of last year and the middle of the year. Consequently, the interest rate on variable-interest insurance policies was lower, and the buying momentum of traditional insurance policies was weaker.

Investment insurance products: In addition to the impact of the COVID-19 pandemic, the Insurance Bureau has issued new measures for investment-type insurance policies. Sales of investment-related insurance products declined as insurers offered lower investment returns after the regulator made it a requirement for target-maturity bond funds to be linked with policies that only invest in bonds with ratings of “BBB” or higher. In addition, such bonds must not exceed 40% of the fund’s net value at most, so that the income of the fund linked to the insurance policy decreases, which affects the performance of investment insurance policies.

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