Insurance regulator IRDA, which has won its turf war with market watchdog SEBI over regulation of ULIPs, is expected to tighten norms for these schemes, including commission charges, to make them attractive for investors.
There would be stricter and stringent distribution norms, leading to lowering of commissions on the sale of such products, sources said.
Currently, commission charges are as high as 50 per cent of the first-year premium.
According to IRDA Chairman J Hari Narayan, it will frame new guidelines for these products to make them more attractive for policy holders.
At the same time, the regulator plans to come out with directives to improve the transparency element of such hybrid products, which involve both investment and insurance.
The regulator will also try and address the issue of increasing the lock-in-period and raising life cover.
More Details :- IRDA to make ULIPs investor-friendly
MY All Agents
Showing posts with label india. Show all posts
Showing posts with label india. Show all posts
Wednesday, June 23, 2010
Sunday, June 20, 2010
Insurers may unveil new unit-linked offerings
With the regulatory dispute over unit-linked insurance plans (ULIPs) behind them, insurance companies are gearing up to launch new ULIPs.
Most insurers had put on hold new launches after the Securities and Exchange Board of India, asked them to take its permission before launching such products.
“Many investors will now go ahead and invest in ULIPs. Insurance companies that had put on hold new products will now bring them out,” said Mr Nageswara Rao, Managing Director and Chief Executive Officer, IDBI Fortis Life Insurance. “We are also working on some new products”.
More Details :- Myallagents.com
Most insurers had put on hold new launches after the Securities and Exchange Board of India, asked them to take its permission before launching such products.
“Many investors will now go ahead and invest in ULIPs. Insurance companies that had put on hold new products will now bring them out,” said Mr Nageswara Rao, Managing Director and Chief Executive Officer, IDBI Fortis Life Insurance. “We are also working on some new products”.
More Details :- Myallagents.com
Lakshmi Vilas signs MoU with LIC
To achieve its ambitious growth plan, Lakshmi Vilas Bank (LVB) plans to take both the organic and inorganic route to grow, its Managing Director and CEO, Mr K.S.R Anjaneyulu, said. Speaking to the media after signing a Memorandum of Understanding (MoU) with the Life Insurance Corporation of India for marketing the latter's product offerings through LVB's branch network, Mr Anjaneyulu said: “we will require capital to keep pace with our growth plans. We plan to enhance equity for the bank and its subsidiary.” He said he would be unable to divulge more details at this point as such issues would have to be cleared by the Board
More Details :-Myallagents.com
More Details :-Myallagents.com
Tuesday, June 15, 2010
LIC NEWS
Monday, June 14, 2010
Life insurers want tax relief for maturity proceeds to continue
Life insurers want tax relief for maturity proceeds to continue
The insurers have made a representation to the Government that the Exempt Exempt Exempt (EEE) method of computation should continue as against the Exempt Exempt tax (EET) method proposed in the Direct Taxes Code.
Insurance products are driven by tax benefits. The January-March quarter, which is the tax planning season, contributed 45-50 per cent of the total sales of the industry, said Mr Nageswara Rao, Chief Executive Officer, IDBI Fortis Life Insurance.
The domestic insurance industry is at a nascent stage and taxing the maturity proceeds as proposed by the Direct Taxes Code will adversely impact the life insurance business and the industry. It will discourage investors to invest in long-term savings as it may result in unjustified tax burden especially on those customers who do not avail themselves of the benefit under Section 80C, said Mr T.R. Ramachandran, Chief Executive Officer and Managing Director, Aviva Life Insurance.
More details :-
| Life insurers want tax relief for maturity proceeds to continue |
Saturday, May 8, 2010
Winning With Mutual Funds
Winning With Mutual Funds
A mutual fund (called 'unit trust' in Asia) is an investment vehicle that pools money from many individual investors. A professional fund manager invests and manages these funds into stocks, bonds and other securities.
People usually invest in mutual funds because it is offers the advantage of broad diversification (it spreads your money over tens or hundreds of stocks to reduce risk) and professional management. However, do remember that as broad diversification reduces risks, it also reduces return.
First, here is the bad news. If you speak to most people who have invested in unit trusts in Asia (especially Singapore) or in mutual funds, most would report losing money or just earning measly returns of 2%-4%. In fact, in the year 2004, it was reported in the Straits Times that 559,000 Singaporeans lost $680 million by investing their CPF in these funds. By going to the largest unit trust distributor Asia, you can easily calculate that only 6% of unit trusts beat the S&P 500 over a ten-year period. What are the chances of you placing your bet on this 6%? Chances are you would have had lower returns that the index, while still having to pay those hefty sales charges and annual management fees.
How about the US mutual fund market? On average, less than 10% of mutual funds beat the S&P 500 index each year! What's worse is that it is a different 10% each year. Less than 3% of mutual funds are able to beat the S&P 500 Index over a five to ten year period. So again, what are the chances of you beating the market through betting on the right fund? Only 3%! You have better odds at the Black Jack table. The worse thing is that the fund manager gets paid an annual management fee whether or not the fund makes money.
Why is it so difficult for most people to make money in mutual funds? There are four main reasons.
1) High Sales Charges & Management Fees
Most people buy mutual funds through banks and financial institutions at retail prices where there is a sales charge (front load) and high annual management fees (expense ratios).
In Asia, most banks & financial institutions sell unit trusts with a sales charge of 5%-6% and with annual fees of 1.5%-2%. It means that before you even begin, you are down 6.5%-8% on your investment and will be down another 1.5% every year. Your fund must outperform the S&P 500 by 6.5%-8% just to make it worth your while! Again, less than 10% of funds worldwide can achieve this every year and less than 3% can achieve this over five years.
2) Buying the Hottest Performing Funds
Most people choose funds based on high short-term returns. These are the funds that are normally pushed and advertised by financial retailers. They feature impressive and enticing returns like 'This fund was up +65% in the last six months'.
The fact is that the best short-term performing funds tend to also be big losers in the subsequent years and long term. Why? Because these funds tend to be invested in hot stocks or hot sectors where the stocks have been rising rapidly and fund managers buy, riding on the momentum. That is why they post very spectacular returns. However, strong buying activity tend to push these stocks to be overvalued and sure enough, the stocks will come crashing down in the next few years. Mutual funds that consistently beat the S&P 500 tend to be invested in non-hot sectors and do not post spectacular short-term returns.
3) Limited Selection of Unit Trusts Locally
If you are in Asia, then you are normally exposed to only a limited number of unit trusts. A check with fundsupermart.com (the largest Asian unit trust distributor) shows that there are just about 300 funds available here compared to over 8,000 funds in the US market.
When I made a search on the Top Performing Fund sold locally (year 2005), I was presented with 'Fidelity America USD' with a 10-year annualized return of 11.27%. (Recall that the S&P 500 returned 12.08% a year). So, even the top-performing fund couldn't beat the S&P 500 after deducting expenses & fees!!
4) Lack of Research Knowledge, Data & Tools
The single most important reason why investors lose money in mutual funds
is because they don't have the knowledge or necessary information to search for the top 3% of consistent performing funds at the lowest costs. Investors tend to buy on the advice of their bank managers, facts from the fund fact sheet or prospectus which does not provide enough information to select the right fund.
A mutual fund (called 'unit trust' in Asia) is an investment vehicle that pools money from many individual investors. A professional fund manager invests and manages these funds into stocks, bonds and other securities.
People usually invest in mutual funds because it is offers the advantage of broad diversification (it spreads your money over tens or hundreds of stocks to reduce risk) and professional management. However, do remember that as broad diversification reduces risks, it also reduces return.
First, here is the bad news. If you speak to most people who have invested in unit trusts in Asia (especially Singapore) or in mutual funds, most would report losing money or just earning measly returns of 2%-4%. In fact, in the year 2004, it was reported in the Straits Times that 559,000 Singaporeans lost $680 million by investing their CPF in these funds. By going to the largest unit trust distributor Asia, you can easily calculate that only 6% of unit trusts beat the S&P 500 over a ten-year period. What are the chances of you placing your bet on this 6%? Chances are you would have had lower returns that the index, while still having to pay those hefty sales charges and annual management fees.
How about the US mutual fund market? On average, less than 10% of mutual funds beat the S&P 500 index each year! What's worse is that it is a different 10% each year. Less than 3% of mutual funds are able to beat the S&P 500 Index over a five to ten year period. So again, what are the chances of you beating the market through betting on the right fund? Only 3%! You have better odds at the Black Jack table. The worse thing is that the fund manager gets paid an annual management fee whether or not the fund makes money.
Why is it so difficult for most people to make money in mutual funds? There are four main reasons.
1) High Sales Charges & Management Fees
Most people buy mutual funds through banks and financial institutions at retail prices where there is a sales charge (front load) and high annual management fees (expense ratios).
In Asia, most banks & financial institutions sell unit trusts with a sales charge of 5%-6% and with annual fees of 1.5%-2%. It means that before you even begin, you are down 6.5%-8% on your investment and will be down another 1.5% every year. Your fund must outperform the S&P 500 by 6.5%-8% just to make it worth your while! Again, less than 10% of funds worldwide can achieve this every year and less than 3% can achieve this over five years.
2) Buying the Hottest Performing Funds
Most people choose funds based on high short-term returns. These are the funds that are normally pushed and advertised by financial retailers. They feature impressive and enticing returns like 'This fund was up +65% in the last six months'.
The fact is that the best short-term performing funds tend to also be big losers in the subsequent years and long term. Why? Because these funds tend to be invested in hot stocks or hot sectors where the stocks have been rising rapidly and fund managers buy, riding on the momentum. That is why they post very spectacular returns. However, strong buying activity tend to push these stocks to be overvalued and sure enough, the stocks will come crashing down in the next few years. Mutual funds that consistently beat the S&P 500 tend to be invested in non-hot sectors and do not post spectacular short-term returns.
3) Limited Selection of Unit Trusts Locally
If you are in Asia, then you are normally exposed to only a limited number of unit trusts. A check with fundsupermart.com (the largest Asian unit trust distributor) shows that there are just about 300 funds available here compared to over 8,000 funds in the US market.
When I made a search on the Top Performing Fund sold locally (year 2005), I was presented with 'Fidelity America USD' with a 10-year annualized return of 11.27%. (Recall that the S&P 500 returned 12.08% a year). So, even the top-performing fund couldn't beat the S&P 500 after deducting expenses & fees!!
4) Lack of Research Knowledge, Data & Tools
The single most important reason why investors lose money in mutual funds
is because they don't have the knowledge or necessary information to search for the top 3% of consistent performing funds at the lowest costs. Investors tend to buy on the advice of their bank managers, facts from the fund fact sheet or prospectus which does not provide enough information to select the right fund.
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