  | | February 15, 2013 | | | | | | | Weekly Facts | | | Close | Change | %Change | | BSE Sensex* | 19,468.15 | (16.6) | -0.09% | | Re/US$ | 53.93 | (0.7) | -1.33% | | Gold Rs/10g | 30,280.00 | (130.0) | -0.43% | | Crude ($/barrel) | 119.32 | 2.6 | 2.25% | | FD Rates (1-Yr) | 7.25% - 9.00% | Weekly change as on February 14, 2013
*BSE Sensex as on February 15, 2013 | |
Impact 
In today's times, with mounting healthcare cost many of you would agree that having a health insurance policy is imperative. Recognising the solemnity of this, we are quite sure that many of you would be covered for mediclaim. And now with the Insurance Regulatory and Development Authority of India (IRDA) approving the health insurance regulations, you can expect transparency and fairness. Even those who aren’t having a health insurance policy, but intending to take one have a reason to cheer with the new guidelines being approved by the insurance regulator.
So, what has been enunciated in the new health insurance guidelines?
Well, there’s plenty in the interest of policyholders, such as:
- All health insurance policies will now provide for entry age upto 65 years and will not have any exit age for renewal, provided the policy is continuously renewed without a break.
- Life insurers selling health insurance policies will offer products with a policy term of at least four years and non-life insurers will offer products for not more than three years.
- In case of group insurance policies (either by life insurers or a non-life insurers), the term shall be of only one year.
- No loads would be allowed to charge on health insurance policies which have been renewed, even if the policyholder has a claim.
- For pre-health insurance check-up, insurer will have to reimburse 50% the cost incurred by the insured (i.e. policyholder) provided the proposal is accepted and results in buying the policy. Insurers will have to empanel Government medical institutions from which pre-insurance medical examination is to be done.
- To address to growing need of non-allopathic treatments, insurers will also have to provide coverage for this kind of treatment, provided the treatment has been undergone in a Government hospital or in any institute recognised by Government and/or accredited by Quality Council of India/National Accreditation Board on Health or any other suitable institutions.
- All health insurance policies will allow access for treatment in the network provider or in any hospital which is not part of the network provider, across the country, except that unauthorised hospitals are excluded from providing healthcare services for health insurance policies.
- Insurance companies will have to settle claims within a period of 30 days from the date of receiving complete documents from insured. But as an insured person (i.e. policyholder), one would have to furnish documents within a stipulated time period.
- Insurers shall not deny claims on the grounds of delay, unless the delay was deliberate.
- Insurer will also offer cumulative bonus, which shall be stated explicitly in the prospectus and even in the policy document.
- The insurers will have to devise mechanisms to reward policyholders for early entry and continued renewals and disclose the same upfront in prospectus and policy document.
- All life, non-life and standalone health insurance companies will have to ensure exhaustive dissemination of product information on their website, which will include include description of the product, policy clauses and premium rates inclusive and exclusive of service tax.
- For senior citizens, the premium charged for health insurance products will have to be fair, justified, transparent and disclosed upfront and any loading charged on the premium will have to be intimated.
- Health insurers and Third-Party Administrators (TPAs) will have to pursue a separate channel to address health insurance-related claims and grievances of senior citizens.
- If the insurers want to withdraw a particular product from the market, IRDA approval will be required to be obtained by giving reasons and complete details of the treatment to the existing policyholders. Existing customers will have to be given an option to switch to a similar product.
- An insured (i.e. policyholder), who wants to port his policy to another health insurer, will have to apply to the health insurer at least 45 days from the premium renewal date of his existing policy.
We are of the view that, the aforesaid new guidelines for health insurers are policyholder friendly and would build a reliable and transparent system. Once they come in force (i.e. with effect from the date of notification in the official gazette) one may find products brochure following the aforementioned guideline for disclosures, which will enable fairer treatment from insurers.
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Impact
Yesterday, the WPI inflation data for January 2013 was released and it brought in some respite as the inflation bug mellowed down to 6.62% from 7.18% in the month of December 2012. Hence as depicted in the chart below, after plateauing above the 7.0% plus mark for 14 months, the headline inflation has finally dipped, making a four-year low.
WPI Inflation eases further
(Source: Office of the Economic Advisor, PersonalFN Research)
So, will this WPI inflation number induce reduction home loan rates further?
Well we are of the view that, if we assess the WPI inflation data, although there’s some moderation evident in inflation caused mainly by non-food manufactured products, the risk persists from food articles. Also now Brent crude oil prices after undergoing a corrective are once again depicting an ascending trend, plus the pass-through of diesel price adjustments over the next several months and the possibility of adjustment in other administered prices could keep the movement of WPI inflation range bound. Also if the Indian rupee shows signs of weakness, that could result in imported inflation. Thus taking these facets into account, the Reserve Bank of India (RBI) would be watchful and it may not reduce policy rates in the next mid-quarter review of monetary policy 2012-13 (scheduled on March 19, 2013). The central bank too would prefer to assess the impact of Union Budget 2013, and thereafter decide its stance on policy rates and liquidity measures. If RBI’s projection of inflation at 6.80% for March 2013 is met, then policy rates may be cut in the monetary policy 2013-14 (scheduled on May 3, 2013-14), depending upon growth-inflation dynamic and twin deficit situation.
As many of you may be aware, the central bank in its 3rd quarter review of monetary policy 2012-13 has reduced policy rates and CRR – both by 25 basis points (bps) each, and some banks passed this on to customers in the form of reduced lending rates. But now in the backdrop of the aforementioned inflationary risk, further reduction in home loan rates appears dim, and much would also depend upon cost of funds to the bank to prompt further rate cuts for banks and housing finance companies. At present, some banks seem to be desisting to cut rates citing high cost of funds (which has attributed to slower deposit growth).
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Impact
Quite a few citizens, in their endeavour to earn high disposable income evade tax direct taxes. But let us apprise you that in the game of 'hide and seek' with the tax authorities, there are likely chances that one getting caught and facing prosecution. Likewise not filing a return, despite one holding a Permanent Account Number (PAN) could land one in trouble. Moreover, now that the Government of India is determined to achieve the fiscal deficit target of 5.3% for the present fiscal year, and the target for next year too fixed at 4.8%, the tax authorities could eye on those not paying their due taxes.
In fact the Finance Minister (FM) recently issued stern warnings to taxpayers to disclose their to disclose their true income and pay taxes or be ready to face action, warning that it has information on over 12 lakh non-filers.
According to the ministry, letters have been sent to 35,170 PAN holders by the directorate of intelligence and criminal investigation, seeking to know why they have not filed tax returns. To read more about this news and to know our view over it, please click here.
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Impact
Many of you may agree that as Indians, most of us have an insatiable appetite and flair to own the precious yellow metal. We buy for both emotional and financial reasons. While some take refuge under the precious yellow during uncertain times or to hedge against rising cost of living; others buy with an emotional reason in mind – say, accumulating it for child’s marriage. This thus makes India the world’s largest importer and consumer of gold.
Rough estimates suggest that Indian households possess about 18,000 tons of gold. According to the World Gold Council data, about 23% of all imported gold by India was treated as investments, but 75% of jewellery was held with an investment perspective.
But now to moderate gold import demand, thereby attempting to put a leash on the widening current account deficit (which risks the country to a Balance of Payment (BOP) problem), the Reserve Bank of India's (RBI) working group has recommended setting up of gold banks and introduction of gold-backed financial products. To what this means, and to read our view over it, please click here.
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- On subject of issuing new banking licenses, the Chairman of Insurance Regulatory and Development Authority (IRDA), Mr J. Hari Narayan expressed his view in the Economic Times, saying that financial services companies, including insurance companies should be kept out of banking when new licenses are given.
He believes that while financial services may appear to have similar goals, they are driven by different values, therefore making the idea of financial conglomerates flawed.
We are of the view that, this is not the first such view against issue of new banking licenses and seemingly due to which there’s been a delay in issuing new banking licenses. There seems to be a fear that if financial conglomerates are issued banking licenses, manipulations could occur and interest of deposit holders may be compromised. In fact earlier, Nobel laureate Joseph Stiglitz had also advised against giving licences to industrial houses for setting up new banks. Also the International Monetary Fund (IMF) has suggested disallowing industrial houses from promoting and owning banks. So, now while the RBI has been empowered to issue new banking licenses, it will have to reinforce its whole logic of granting banking license to industrial houses and even financial services companies.
- In a move to keep a check on credit card frauds, the National Payments Corporation (NPC), backed by the RBI is prodding banks to sign up for a software which will enable them track their customer’s historical spending, the amount defrayed, the outlet at which it was spent and frequency of transactions amongst host of other features. The software would also throw-up alerts for easing tracking.
The NPC proposes to generate scores ranging from 0-100, whereby a lower credit score below 30 would denote chances of less risk of default from the respective client, while closer to 100 would denote high default risk. For transactions with score in the range of 30-70, the settlement body will send intimation to the issuing bank, about a possible case of fraudulent transaction. It is noteworthy that a high score will be generated for transaction which is far beyond means, and farther away from the normal transactions that have happened on the card in its history.
We are of the view that, such software would help banks having a credit card portfolio in effective tracking from a risk management perspective.
We also that while credit cards offer you enough credit limit at 0% interest for period of usually 45 days, it is imperative to use your credit card wisely and pay your dues on time with the total amount due. Else paying only a part of your credit card dues or merely paying only the minimum amount due could get you in a “debt-trap”. To know the 3 tops tips which will keep you out of debt trouble and keep your credit score healthy, click here.
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Credit Scoring: A statistical analysis performed by lenders and financial institutions to access a person's credit worthiness. Lenders use credit scoring, among other things, to arrive at a decision on whether to extend credit. A person's credit score is a number between 300 and 850, 850 being the highest credit rating possible.
Source: Investopedia
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Quote : "You must learn to save first and spend afterwards." – John Poole
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