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.

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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.’

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LIC embarks on ambitious plan to cover all Indians

9:32 pm LIC for all, LIFE INSURANCE CORPORATION OF INDIA

State-owned Life Insurance Corporation of India (LIC) wants every Indian to have life cover by 2020. The country’s largest insurer has formed a team that’s working on the ambitious expansion strategy, which could cost as much as Rs.2 trillion to execute, two top LIC officials said.

“We will stretch ourselves to any extent to meet the target,” said one of the two officials. “There will be new recruitments, the sales force will be expanded, and more branches and satellite offices will be added. There will also be new tie-ups with banks, post offices and others.”

The group working on the plan is expected to finalize the blueprint in the next two months for submission to the LIC board. “Fifty members of the strategy implementation group are working on it with seven sub-groups. Many executive directors are part of the group,” the second person said.Both officials did not want to be named because the plan is yet to be formally announced.India has 24 life insurers with combined assets of at least Rs.16.18 trillion. LIC is the largest, with at least Rs.13 trillion in assets.With at least 300 million policies in force, about 250 million people are covered by LIC in a nation of some 1.2 billion people.
According to a report by global consulting firm McKinsey and Co., life insurance premiums as a percentage of gross domestic product in India is about 4%, much lower than developed market levels of 6-9%. “In several segments of the population, penetration is lower than potential.

For example, in urban areas, penetration of life insurance in the mass market is about 65%, and it is considerably less in the low-income unbanked segment. In rural areas, life insurance penetration in the banked segment is estimated to be about 40%, while it is marginal at best in the unbanked segment,” said the report titled India Life Insurance 2012 by McKinsey.

In the June quarter, LIC collected Rs.14,451 crore in new business premiums. The industry’s new business premium income has been declining over the past three years in the backdrop of stricter regulations and weak market sentiment. In fiscal 2012, LIC’s first-year premium collection fell to Rs.81,514.49 crore from about Rs.86,444.72 crore in fiscal 2011.LIC is targeting a total new business premium collection of around Rs.1 trillion in the current fiscal, said the first person cited above.“Keeping all other parameters constant and excluding capital infusion, it may take at least Rs.2 trillion to grow LIC’s business in line with its target,” said the second official.Ashvin Parekh, a partner and national leader (financial services) at audit and consulting firm Ernst and Young India (E&Y), said LIC can achieve the target, but it has to work on product design.“LIC has to spend time on products. Merely launching one product after another may not help. There has to be a larger underlining concept behind every product,” Parekh said.The insurance regulator is working on new guidelines for insurance products, which are likely to be announced in the next few weeks. According to Parekh, the new norms may facilitate greater insurance penetration and help LIC, too.“LIC will also have to stop its overdependence on agency channel and work on multi-channel plans. A complete overhauling is required. LIC must come out of its comfort zone and work on segment-wise products and services,” said Parekh.

The state-run insurance company has been on overdrive over the past three years. In 2010, it appointed consulting firm Accenture Plc to suggest ways for speeding up growth. Accenture’s recommendations—on distribution and branding—are being implemented in a phased manner.The plan to ensure all Indians have insurance coverage is not part of Accenture’s recommendations.Currently, LIC has around 3,200 branches, including satellite offices. It has 1.28 million agents, and distribution tie-ups with at least six banks.Between December 2011 and June 2012, the insurer raised its equity stake in 11 state-owned banks, at the behest of the government, to reinforce their capital base.


The branch networks of these banks will come in handy in selling insurance. LIC bought a large equity stake in Corporation Bank in 2002. At that time, the objective was to use the bank’s branch network to distribute its policies. It holds a 25.49% stake in the bank.One of the LIC officials cited above said it may use the branch network of cooperative banks as well for the distribution of policies.Indian banks have at least 93,000 branches and 101,000 ATMs.“We sold at least 32 million policies last year. We should now be able to sell 80-100 million policies a year,” said the first person.With 300 million policies, LIC has what’s possibly the largest customer base for an insurer in the world, said a top official at ICICI Prudential Life Insurance Co. Ltd.“The unique identification number and the permanent account number are changing the ecosystem, and this will enable LIC to reach its target,” said the official on condition of anonymity. “It will have to expand its distribution network and that will benefit the private sector as well.”


Over the past few years, regulatory changes have slowed the growth of the life insurance industry. The industry’s new business premium income declined to Rs.1.14 trillion in 2012 from Rs.1.25 trillion in 2011. Experts say the industry is poised for consolidation.If LIC succeeds in achieving even close to what it is targeting, the private sector will react by consolidating businesses to compete, said Parekh of E&Y.In line with its plan, on 1 September, LIC announced the launch of a micro-insurance policy meant for the financially weaker sections. It plans to sell insurance cover to people below the poverty line under social security group schemes such as JanaShree Bima Yojana and Aam Admi Bima Yojana. It will offer free add-on scholarship benefit plans for the children of those covered under such schemes.

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LIC launches "Jeevan Deep" T810

2:38 pm 56 years, jeevan deep, LIC, LIFE INSURANCE CORPORATION OF INDIA

JEEVAN DEEP (UIN : 512N270V01)

The Life Insurance Corporation (LIC) of India local division launched a micro insurance policy called ‘Jeevan Deep T-810’ for the benefit of the common man on the occasion of its 56 anniversary on Saturday. The idea is to reach out to the economically weaker sections through the micro-policy. Addressing a press conference on the occasion on the office premises here on Saturday, LIC Senior Divisional Manager D. Tandi said that the insurance product was launched nationwide.

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’. Policyholders in the age group of 18 to 60 are eligible for insurance coverage. The policy term is 5 to 15 years. The minimum insurance coverage is Rs.5,000 and the maximum is Rs.30,000. Those who pay the premium amount without fail for two years will have complete insurance cover for the next two years. 

Product Summary:

It is a simple savings related life insurance plan with Guaranteed Additions where you may pay premiums either in lumpsum or regularly at monthly, quarterly, half-yearly or yearly intervals over the term of the policy.

1.      Sample Premium Rates:

Following are some of the sample premium rates per Rs 1000/- Basic Sum Assured:

            Annual Premium ( in Rs.) for Rs 1000/- Basic Sum Assured:

Age (yrs.)	Term of the Policy (years)
	5	10	15
20	210.60	107.30	70.25
30	210.70	107.45	70.55
40	211.3	108.45	71.95
50	213.45	111.75	76.30

Single Premium ( in Rs.)  for Rs 1000/- Sum Assured

Age (yrs.)	Term of the Policy (years)
	5	10	15
20	923.65	789.45	679.85
30	923.70	789.75	680.85
40	924.10	791.80	686.15
50	925.50	798.35	701.50

 2.      Eligibility Conditions and Other Restrictions:

Minimum age at entry                         :  18 years (completed)

Maximum age at entry                        :  60 years (nearest birthday)                             

Maximum Maturity Age                       :  65 years (nearest birthday)

Policy Term                                      :  5 to 15 years

Minimum Sum Assured                        :  Rs. 5000/-

Maximum Sum Assured                       :  Rs. 30000/-

Sum Assured shall be in multiples of Rs. 1,000/-

 3.      Grace Period:  A grace period of two calendar month but not less than 60 days will be allowed for all modes of payments.

4.      Revival:     Under regular premium policies, if premiums are not paid within the grace period the policy will lapse. Subject to production of satisfactory evidence of continued insurability, a lapsed policy can be revived by paying arrears of premium together with interest within a period of five years but before maturity from the due date of first unpaid premium. The rate of interest applicable will be as fixed by the Corporation from time to time.

5.      Nomination: As per Section 39 of Insurance Act, 1938.

6.      Cooling-off period: If you are not satisfied with the Terms and Conditions of the policy you may return the policy to the Corporation within 15 days from the date of receipt of the policy bond stating the reason of objections. On receipt of the same the Corporation shall cancel the policy and return the amount of premium paid after deducting the proportionate risk premium and stamp duty.

7.      Exclusions: This policy shall be void if the Life assured (whether sane or insane at the time) commits suicide at any time within one year from the date of commencement of risk and the Corporation will not entertain any claim under this policy except to the extent of a maximum of (i) 90% of the single premium paid excluding any extra premium paid or (ii) third partys bonafide beneficial interest acquired in the policy for valuable consideration (but limited to the basic sum assured of this policy) of which notice has been given in writing to the branch where the Policy is being presently serviced (where the policy records are kept) at least one calendar month prior to death.

Illustration:

Notes :i)   This illustration is applicable to a non-smoker male/female standard (from medical, life style and occupation point of view) life.ii) The non-guaranteed benefits (1) and (2) in above illustration are calculated so that they are consistent with the Projected Investment Rate of Return assumption of 6% p.a.(Scenario 1) and 10% p.a. (Scenario 2) respectively.  In other words, in preparing this benefit illustration, it is assumed that the Projected Investment Rate of Return that LICI will be able to earn throughout the term of the policy will be 6% p.a. or 10% p.a., as the case may be.  The Projected Investment Rate of Return isnot guaranteed.iii) The main objective of the illustration is that the client is able to appreciate the features of the product and the flow of benefits in different circumstances with some level of quantification. iv) The Maturity Benefit is the amount shown at the end of the policy term

Benefits

1.      Death Benefit:

On death during the policy term excluding last policy year: Basic Sum Assured along with accrued Guaranteed Additions.

On death during last policy year : Basic Sum Assured with accrued Guaranteed Additions along with Loyalty Addition, if any.

Maturity Benefit:

On surviving to the date of maturity, payment of the Basic Sum Assured along with accrued Guaranteed Additions and Loyalty Additions, if any, shall be payable

Guaranteed Addition:

The policy provides for Guaranteed Addition of Rs 20/- per Rs.1000/- Basic Sum Assured per year during the term of the policy.

Loyalty Addition:

Depending upon the Corporations experience,the policy shall be eligible for Loyalty Addition during the last year of the policy at such rate and on such terms as may be declared by the Corporation.

2.            Optional Rider:

  

Accident Benefit Rider : Accident Benefit Rider Option will be available under the plan by the payment of additional premium. This option is available under Regular Premium policies only.

In case of accidental death, the Accident Benefit Sum Assured will be payable as lump sum along with the death benefit under the Basic plan. In case of accidental disability, an amount equal to the Accident Benefit Sum Assured will be paid in monthly instalments spread over 10 years or up to death or maturity, if earlier, and all future premiums under the policy will be waived.

If the policy becomes a claim either by way of death or maturity before the expiry    of the said period of 10 years, the disability benefit instalments which have not fallen due will be paid along with the claim.

3.      Auto-Cover Facility:

If at least two full years premiums have been paid in respect of this policy, any  subsequent premium be not duly paid, full death cover shall continue from the due date of First Unpaid Premium (FUP) for a period of two years or till the end of policy term, whichever is earlier.

During the Auto Cover Period, the Accident Benefits shall not be available.

4.      Paid-up Value:

Under regular premium policies, if after at least two full years premiums have been paid in respect of this policy, any subsequent premium be not duly paid, this policy shall not be wholly void, but shall subsist as a paid up policy. The Basic Sum Assured under the policy shall be reduced to such a sum, called Paid-up Sum Assured, as shall bear the same ratio to the Basic Sum Assured as the number of premiums actually paid bears to the total number of premiums originally stipulated for in the policy.

This paid up sum assured along with accrued Guaranteed Additions shall be payable on the date of maturity or on Life Assureds prior death after the expiry of Auto Cover period.

Accident Benefit Rider will cease to apply if the policy is in lapsed condition.

5.      Surrender Value:

The Guaranteed Surrender Value is as under:

For Regular Premium policies - The Guaranteed surrender value will be available after completion of two policy years and at least two years premiums have been paid and is  equal to 30 % of the premiums paid excluding the premium paid for the first year and all premiums in respect of Accident Benefit rider and extras, if any.

For Single Premium policies- The Guaranteed Surrender Value will be available after completion of at least one policy year and is equal to 90 % of the premium paid excluding extra premium, if any.

The cash value of accrued Guaranteed Additions will also be payable.

Corporation may, however, pay special surrender value as the discounted value of Paid up Sum Assured and accrued Guaranteed Additions provided the same is higher than Guaranteed Surrender Value.

6.      Loan:  No loan facility is available under this plan.

7.      Cooling-off period: If you are not satisfied with the Terms and Conditions of the policy you may return the policy to the Corporation within 15 days from the date of receipt of the policy bond stating the reason of objections. On receipt of the same the Corporation shall cancel the policy and return the amount of premium paid after deducting the proportionate risk premium and stamp duty.

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