Monday, 30 December 2013
life insurers line up 500 schemes for launch in jan2014
As many as 500 new insurance schemes are all set to hit the market in the next couple of months, following the approval of the Insurance Regulatory and Development Authority (IRDA) as part of its new guidelines applicable from first January 2014.
The IRDA has cleared over 500 products in line with the new design norms which are being introduced by the domestic life insurers. Most insurers have already redesigned their products and also obtained approvals.
The IRDA has issued new guidelines to make policies more customer-friendly. The new guidelines have introduced three broad categories of products –traditional insurance plans, variable insurance plans (VIPs) and Unit-linked insurance plans (ULIPs).
Insurance behemoth, Life Insurance Corporation of India (LIC) has already decided to stop selling as many as 48 insurance plans, including Jeevan Anand, Jeevan Madhur and Jeevan Saral, to comply with new regulatory guidelines, and planned to unveil a slew of new insurance schemes.
Private sector insurer Reliance Life Insurance has lined up over two dozen new insurance schemes, which include protection and retirement, for their launch, in the next three months. Reliance Life said that traditional plans will contribute 80% while the ULIPs will contribute around 20% to the top-line in the new product environment.
Aviva Life Insurance has already launched 13 products that are compliant with the new traditional product guidelines.
Another player, Max Life Insurance has plans to launch four new products by the first week of January in line with the revised IRDA guidelines. The company has already launched 13 products.
Bajaj Allianz Life Insurance has received approvals for its individual and group insurance plans under the new product guidelines and planned to launch three new insurance schemes. These plans will cover the needs of individuals at their different life stages. The company will also be launching a suite of online and channel specific insurance plans by next month.
HDFC Life will make available 21 products to consumers from first January 2014 which will be compliant with new regulations issued by IRDA.
Others life insurers including ICICI Prudential, Birla Sun Life, TATA AIA and SBI Life are also planning to launch their product suit next month.
5 major changes in life insurance policies from Jan 1, 2014 – How it affects you ?
Some major changes are going to happen in life insurance industry from Jan 1, 2014, especially in traditional policies like Endowment Plans, money-back plans and even ULIP’s. You will surely have a LIC policy or any other private sector traditional plans or might buy them in coming times. Here are 5 major changes which you should be aware about and they will come into effect from Jan 1, 2014.
1. Service Tax introduced in LIC Policy Premium
Till now LIC was not charging the service tax of 3% from the customers and paying it to govt from the pool of money collected itself, but now the service tax will have to be charged separately from policy holders. Which means that if your LIC premium was Rs 50,000 per annum, now it will be 3.09% higher in first year, which is Rs 51,500 and after 1st year, it will be 1.545% as permoneylife article.
While customers see it as additional burden, note that its not the case exactly, Earlier – LIC was paying the service tax from the pool of money collected from investors only, which reduced the bonus amount given back to them. But now because it will not be taken out from the funds, that means the bonus declared each year will go up by that much margin and will come back to investors only. Note that Pvt companies were charging the service tax already, so nothing changes on their side. Only LIC was not charging it separately, which they will have to do from Jan 1, 2014 deadline.
2. Increase in Surrender Value
One of the major changes which has happened, is the change in surrender value for policy holders. The rules of surrender value depends on the premium paying term of the policy. If the premium paying term for policy is less than 10 yrs. Then the policy will acquire the surrender value after paying premium for 2 yrs (earliar it was 3 yrs), however if the premium paying tenure is more than 10 yrs , then the surrender value will be acquired only after paying 3 yrs premium.
In both the cases, the minimum surrender value would be 30% of the premiums paid without excluding the first year premium. Note that earlier, if you used to surrender after paying 3 premiums, you got 30% of premiums paid MINUS first year premium, but now as per new rules, the first year premium will not be deducted. Learn everything about LIC policies working before Oct 1
Another good change is that, from 4th-7th year, the minimum surrender value would be 50% of the premiums paid, and has to reach 90% of premiums paid in last 2 yrs of policy paying tenure.
3. Possible Decrease in Premium on LIC Policies
There is a great possibility that the premiums on LIC policies will come down by some margin, because the mortality rates will now be revised by LIC in calculating the premiums.
Mortality rates are the rates at which the insurance company deducts the fees for insuring you based on your age. LIC had been using old mortality rates till now, but now they will have to use new mortality rates . Just to give you an idea on reduction of premium, when I check the mortality rate for a 40 yrs old person in old table, its 0.001803 . But in new rates its 0.002053 . Which is approx 10% better. Lets not go into detailed calculation at the moment, but your risk premium part should go down by 10% (not the full premium, because only some part of whole premium in traditional policies are risk premium and rest is investment part) .
4. Higher Death Benefit
If the policy holder is above 45 yrs of age, then the Sum Assured has to be more than 10 times the annual premium, and for those who are less than 45 yrs old, it can be minimum 7 times the premiums. Note that for claiming the tax exemptions, your sum assured has to be 10 times the base yearly premium. So when you buy the policy in-case, you need to keep it in mind. BasuNivesh has done a great point by point notes on each aspect of regulation, in-case you want to go into details.
5. Agents’ incentives have now been linked to the premium paying term
Now agents commissions is linked to the premium paying tenure. Earlier a lot of agents used to sell the policies which had higher maturity tenure, but limited premium paying tenure (like 30 yrs policy with 10 yrs premium payment) . Here is the new commission structure taken from Moneylife article
In case of regular premium insurance policies, a policy with a premium paying term (PPT) of five years will not pay more than 15% in the first year. Products with PPT of 12 years or more will have first year commissions up to 35% in case the company has completed 10 years of existence and 40% for the company in business for less than 10 years.
LIC NEW PLANS LANCHING ON 1 1 2014
LIC’s Money Back Plan -20 years
LIC’s Money Back Plan -25 years,
LIC’s New Endowment Plan,
LIC’s New Jeevan Anand Plan,
LIC’s New Bima Bachat Plan,
LIC’s Single Premium Endowment plan,
all these plans have service tax 3.09 on first year
and 1.545 for renewals apply
waiting for premium charts
LIC’s Money Back Plan -25 years,
LIC’s New Endowment Plan,
LIC’s New Jeevan Anand Plan,
LIC’s New Bima Bachat Plan,
LIC’s Single Premium Endowment plan,
LIC’s New Jeevan Nidhi Plan
are launching on 01/01/2014all these plans have service tax 3.09 on first year
and 1.545 for renewals apply
waiting for premium charts
Sunday, 29 December 2013
Service tax in respect of Modified Jeevan Aarogya plan.and other plans
Finance& Accounts Department – Central Office, ‘Yogakshema’, Jeevan Bima Marg, P.B.No.19953, Mumbai
CO/F&A/Service tax/102 11.12.2013
Circular No.EDA/ZDB/965
TO ALL THE OFFICES OF THE CORPORATION
RE: Service tax in respect of Modified Jeevan Aarogya plan.
Under Modified Jeevan Aarogya plan, following points in respect of service tax may be noted:
- The service tax shall be payable by the policyholder on the premium including extra premium, if any, as per the prevailing service tax rates. The prevailing service tax rate for the F.Y. 2013-14 applicable to Modified Jeevan Aarogya plan is 12.36% (including Education Cess @2% and Higher Secondary Education Cess @1%).
- Service tax and the rate of service tax is applicable as per the amendments in Service tax laws from time to time.
- Service tax @12.36% shall also be collected on the cooling off charges recovered, if any.
- Service tax collected on premium @12.36% shall be refunded to the policyholder on cancellation during the cooling off period.
- The above service tax provisions are applicable to the whole of
Yours faithfully,
Executive Director (F&A)
000000000000000000000000000000000000000000000000000000000000000000000000000
Finance& Accounts Department – Central Office, ‘Yogakshema’, Jeevan Bima Marg, P.B.No.19953, Mumbai
CO/F&A/Service tax/102 20.12.2013
Circular No.EDA/ZDB/966
TO ALL THE OFFICES OF THE CORPORATION
RE: Service tax rates for the F.Y. 2013-2014
As per Rule 6(7A) of Service tax Rules, the Insurer has the option to pay service tax on life insurance business on the following basis w.e.f 1.4.2012 which is also applicable for the F.Y. 2013-2014:
(i) @12.36% on the gross premium charges from a policyholder reduced by the amount for investment or savings on behalf of the policyholder, if such amount is intimated to the policyholder at the time of providing service
(ii) @12.36% on the premium where the entire premium paid by the policyholder is only towards risk cover in life insurance
(iii) 3.09% of the premium charged from the policyholder in the first year and 1.545% of the premium charged from the policyholder in the subsequent year (for all the remaining policies which are not covered under (i) and (ii) mentioned above)
Kindly note that the above mentioned service tax rates includes Education Cess and Higher Secondary Education Cess (HSEC)
Type of plans for Service tax rates:
1.ULIP plans and ULIP type plans
For all the ULIP plans, service tax (including Education cess and HSEC) shall be charged @12.36% on the charges. For Non Linked plans (which are ULIP type) service tax (including education cess and HSEC) shall be charged @ 12.36% on the charges.
2.Terms Plans and Health Plans
For Term Assurance plans and Health plans where the entire premium is towards rsik premium, service tax (including Education cess and HSEC)shall be charged @12.36% on the premium (i.e. first year premium, renewal premium and single premium)
3.Other Plans
For Conventional plans, Endowment plans, Annuity and Pension plans service tax (including Education Cess and HSEC) shall be charged @3.09% on new business premium (i.e. first year and single) and 1.545% on the renewal premium.
Kindly note the below mentioned points:
- Service tax shall be payable by the policyholder on the additional /top up/extra premium as per the rates defined for type of plans mentioned above.
- Service tax collected on premium shall be refunded to the policyholder on cancellation during the cooling off period.
- Service tax calculated @12.36% on mortality charges, proportionate risk premium, accident disability rider, cooling off charges, if any shall be recovered from the policyholder on cancellation of the policy during the cooling off period.
- Service tax and the rate of service tax is applicable as per the amendments in Service tax laws from time to time.
The above mentioned service tax provisions are applicable whole of India except Jammu and Kashmir
Yours faithfully,
Executive Director (F&A)
Finance& Accounts Department – Central Office, ‘Yogakshema’, Jeevan Bima Marg, P.B.No.19953, Mumbai
CO/F&A/Service tax/102 20.12.2013
Circular No.EDA/ZDB/967
TO ALL THE OFFICES OF THE CORPORATION
RE: Service tax rates for New Plans
We herewith state below the service tax rates for the below mentioned plans.
LIC’s Money Back Plan -20 years, LIC’s Money Back Plan -25 years, LIC’s New Endowment Plan, LIC’s New Jeevan Anand Plan:
Since these are Endowment plans, the service tax (including Education cess and HSEC) shall be charged @3.09% on the first premium and other first year premium and 1.545% on the renewal premium
LIC’s New Bima Bachat Plan, LIC’s Single Premium Endowment plan:
Since these are Endowment plans, the service tax (including Education cess and HSEC) shall be charged @3.09% on single premium.
LIC’s New Jeevan Nidhi Plan
Since this is a Pension plan, service tax shall be charged @3.09% on the first premium, other first year premium and single premium and 1.545% on the renewal premium.
Kindly note that the provision of Service tax mentioned in our circular ref: ZDB/EDA/966 dated 20.12.2013 shall continue to apply.
Executive Director(F&A)
Saturday, 28 December 2013
IRDA to bring Common Service Centres for selling simple policies in rural areas
IRDA to bring Common Service Centres for selling simple policies in rural areas
HYDERABAD: The Insurance Regulatory and Development Authority (IRDA) is roping in Common Service Centres as a platform for insurers to sell simple policies in rural areas.
"We are bringing CSCs as insurance brokers to sell policies. In six months time it may come in full-fledged manner. We are going to make test market it in two to three months time," IRDA Chairman T S Vijayan said.
Common Service Centres, a cornerstone of the National e-Governance Plan, offers web-enabled .. e-governance services in rural areas.
In his speech, Vijayan said the aim of the project is to ensure that insurance penetration goes up in rural areas.
"We are bringing CSCs as insurance brokers to sell policies. In six months time it may come in full-fledged manner. We are going to make test market it in two to three months time," IRDA Chairman T S Vijayan said.
Common Service Centres, a cornerstone of the National e-Governance Plan, offers web-enabled .. e-governance services in rural areas.
"For the test market, we are in discussions with some companies. We select some districts where this e-seva has taken up really well and companies should also be comfortable in selling in those areas," he told reporters on the sidelines of a programme organised by the Federation of Andhra Pradesh Chambers of Commerce and Industry.
In his speech, Vijayan said the aim of the project is to ensure that insurance penetration goes up in rural areas.
"They (CSC) will be selling simple insurance products such as tractor insurance, vehicle insurance," he said.
The insurance penetration in India is pegged at 3.84 per cent and has the potential to go up to 6 per cent in coming years, he noted.
According to him, assets managed by all the insurance companies are worth Rs 20 lakh crore.
Replying to a query on Bancassurance, he said discussions are going on to make banks as brokers rather than agents.
Vijayan said ..
The insurance penetration in India is pegged at 3.84 per cent and has the potential to go up to 6 per cent in coming years, he noted.
According to him, assets managed by all the insurance companies are worth Rs 20 lakh crore.
Replying to a query on Bancassurance, he said discussions are going on to make banks as brokers rather than agents.
Vijayan said ..
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