LIC seeks hike in corporate investment limit to 20-25%

2:24 pm equity investments, equity portfolio and investments, equity stake buy limit, Insurance Regulatory and Development Authority, Life Insurance Corporation

Mumbai, Sept. 9: LIC would ideally like to have headroom of 20-25 per cent for investments in some of its investee companies. As of now, it can invest a maximum of 10 per cent in a company, and any exception to this is approved on a case-by-case basis by the Insurance Regulatory and Development Authority (IRDA).

“The matter has been in discussion with the regulator for some time. Let us see how much leeway the regulator wants to give us. My only concern is that this 10 per cent includes historic holdings which we have since 1956. So, for good scrips, I should have some headroom. Otherwise, what will happen is with the amount of equity we sit upon, we will not have good opportunities in the market,” D. K. Mehrotra, Chairman, LIC, told Business Line. Mehrotra also pointed out that he would not like to risk investment in stocks that do not add value for the insurer. This is why LIC has been asking the regulator to give it some headroom, especially where (in companies) LIC has reached the limit of 10 per cent or nearing it, he added.

Asked how much the life insurance behemoth would be comfortable with, he said: “I do not mind 25 per cent. And it is not that if they give 25 per cent I will reach 25. If they give 25 per cent, it will take care of our investment requirements for the next 10 to 15 years.

Lost opportunity

“It is not that any scrip is so attractive that we will jump on it and we also know that the market will be strongly disturbed if we do so. Anything between 20-25 per cent is good enough.”

When it was pointed out that LIC’s request for a stake of over 10 per cent in a company is already being considered on a case-to-case basis, he said by the time a decision was taken, it was an opportunity lost.

Read More

LIC's 11% SBI stake makes RBI see red

2:21 pm LIC, LIFE INSURANCE CORPORATION OF INDIA, RBI, SBI

The banking regulator is unhappy with the Life Insurance Corporation (LIC) of India holding more than 10 per cent stake in State Bank of India, the country’s largest lender. LIC stake in SBI was 11.05 per cent, as on June 30.

The Reserve Bank of India (RBI) has conveyed its discomfort to the bank’s management, according to a top SBI official. “These are two big institutions. RBI is not comfortable with two large institutions having a cosy relationship,” the official said.

A top RBI official also confirmed the development. “Any institution that wants to have more than five per cent stake in a bank needs to have our prior approval, even if the stake is acquired from the secondary market,” the RBI official said. “We don’t want the banking sector to have too much capital from volatile sources,” he added. 

The move comes at a time when LIC has increased stake in public sector banks by purchasing shares both from the secondary market and through direct equity infusion via preferential allotment. The cash-strapped government had asked LIC to infuse equity into public sector banks so that these lenders could have eight per cent tier-I capital. LIC had infused close to Rs 8,000 crore in several public sector banks such as Punjab National Bank, Bank of Baroda, Union Bank of India, Dena Bank, and Central Bank of India, among others, in the last financial year. LIC’s stake in SBI, however, has been acquired from the secondary market.

Interestingly, the insurance regulator is also unhappy with LIC for its more than 10 per cent stake in several public sector banks, as such a move breaches the single company cap norm. Concerned over the concentration risk, the Insurance Regulatory and Development Authority (Irda) has sought details of LIC’s investment in banks. Nearly 26 per cent of LIC’s equity investment is in banks, while nearly 39 per cent of its equity exposure is in stocks of public sector units.

According to the Insurance Act, equity exposure in a single entity is capped at 10 per cent. Thus, LIC can invest up to 10 per cent of the capital employed by the investee company, or 10 per cent of the fund size in a corporate entity, whichever is lower. The capital employed includes share capital, free reserves and debentures or bonds.

As on March 31, 2011, LIC’s investment corpus stood at nearly Rs 11 lakh crore, of which 20 per cent, or Rs 2.2 lakh crore, was equity. Of that, investments in state-run stocks stood at Rs 85,031 crore, while exposure in banks stood at nearly Rs 59,586 crore.

Read More

IRDA slaps Rs 22 lakh fine on Kotak Mahindra Life Insurance

2:17 pm IRDA, Kotak Mahindra Fined

Insurance regulator IRDA today slapped a fine of Rs 22 lakh on Kotak Mahindra Old Mutual Life Insurance for violation of various norms, including payment of death claims.

"I direct the insurer (Kotak Mahindra Life) to remit the penalty of Rs 22 lakh by debiting shareholder's account, within a period of 15 days," Insurance Regulatory and Development Authority (IRDA) Chairman J Hari Narayan said in an order.

Kotak Mahindra, the order said, violated the guidelines on group insurance policies by not paying the small value death claims directly to the beneficiary. The insurance company routed the claims through the NGO, instead of paying it directly to the beneficiaries as required under the law.

The insurance company, IRDA said, has violated the guidelines by not paying the death claims on grounds of non-submission of additional documents.

"... It is held that the claim repudiations on the basis of non-submission of requirements called for is violation (of regulation) ... and a penalty of Rs one lakh is imposed under the Insurance Act," IRDA said.

IRDA also advised Kotak Mahindra Life to revise its claim manual procedures in line with the regulations.

The insurance regulator has also hauled up Kotak Mahindra Life for inserting a clause to deny death claims within 3 months from the date of policy in its group insurance schemes.

"The insurer is directed to reopen all such claims which are repudiated because of inclusion of this lien clause and examine and decide on the same. The action taken be confirmed to the IRDA," the order said.

IRDA also found Kotak Mahindra violating the rules with regard to reimbursement of administrative expenses to master policyholders many of whom were acting as its corporate agents.

Read More

Jeevan Ankur a gift for you child in World Literacy Day

2:10 pm Jeevan Ankur, World Literacy Day

Read More

Insurance week celebrated in Madurai

9:37 pm Insurance week, LIC, LIFE INSURANCE CORPORATION OF INDIA

The Life Insurance Corporation of India (LIC), which turned 56 years on September 1, 2012, is celebrating the first week of September as ‘Insurance Week.’ Addressing a press conference here on Thursday, M. Govindaraju, Senior Divisional Manager, Madurai Division, said that the Insurance Week celebrations were being conducted in a grand manner.Various activities such as medical camps and competitions for school children have been conducted throughout the Division during the first week.The Madurai Division, which covers six southern districts, has generated new businesses to the tune of 1.04 lakh policies in the first five months of this fiscal.In last financial year, LIC Madurai Division settled 1.47 lakh policies maturity claims amounting to Rs. 429.15 crore and in Death Claim, it settled 8,563 polices to the tune of Rs. 57.67 crore. 

 As directed by the Central Government, he said that the Division was promoting the use NEFT mandate to all policy holders, which would enable LIC to expeditiously settle all policy-related payments through electronic transfer. Of the Madurai Division’s 30 lakh policy holders, so far 1 lakh NEFT mandates have been collected from our customers.“We request all the policyholders of LIC to provide their bank details for speeding up the payments to them whenever it falls due.”Giving a national picture of the LIC’s performance, he said that during 2011-12, 357 lakh policies were sold enabling it to command 80.9 per cent of the market share in new policies issued and its total first year premium income was pegged at more than Rs. 81,514.49 crore.Also as part of the celebrations, Mr. Govindaraju said that a new micro insurance product ‘Jeevan Deep’ was launched on 1st September. This is an endowment assurance with an added feature of guaranteed additions along with provision of loyalty addition. An immediate annuity product is available for ‘online buy.’

Read More