| Insurance Contract Tenor |
Fund Management Charges |
| <= 10 Years |
The difference between gross yield and net yield shall not exceed 300 bps, of which, fund management charges shall not exceed 150 bps |
| > 10 Years |
The difference between gross yield and net yield shall not exceed 225 bps, of which, fund management shall not exceed 125 bps |
(Source: IRDA Circular No: 20/IRDA/Actl/ULIP/09-10)
This will thus make ULIPs more remunerative for investors. This is because the reduction in fund management charges will result in an increase in yields, all else being equal. Insurance companies will therefore have to live with thinner margins and will pay lower commissions to their agents.
Existing policyholders will also be able to switch to a new fund which has lower charges. IRDA has specified that no charges should be levied for such a switch. However, this option will not be available if the insurance provider has chosen to stop selling the old compliant policy.
The measure taken by IRDA, is definitely in the interest of the investors’, but we opine investors’ should look at their indemnity needs only and therefore invest only in pure term insurance plans and avoid ULIPs.
INTERVIEW
In an interview with the Mint, Chairman of HDFC Ltd, Mr Deepak Parekh, expressed his views on the India’s real estate sector.
Mr. Parekh believes that the demand for commercial real estate will not pick up in the near future. He also said that “HDFC will not fund any developer in the commercial real estate segment because there is huge amount of surplus space”.
On residential real estate, he is of the view that, there is huge shortage and every family in India wants to own a house and also wants to upgrade over a period of time. There is therefore a huge demand in this segment, which he believes will continue for the next 10 years.
The prices in the real estate market will continue to increase, depending on demand and supply. “If more land is given in the city and more developers start constructing then prices won’t go up”, he said. On the price rise he said, “there will be resistance; the builders will try, but if they want to sell their stock, they (builders) should not go for a hike as they won’t get the buyers”.
Mr. Parekh also said that “I have been always advocating that we need to have a regulator in real estate. It’s the largest purchase any family makes”. He is of the view that the regulator should classify developers, evaluate them, grade them and bring in some code of ethics.
He believes that teaser rates (which are 8.00 - 8.25% for the first two years and thereafter floating rate) currently prevailing in the markets, are not a very healthy way of lending and is a marketing gimmick. It can create problems since many borrowers may not have the capacity to service loans later at higher rates.
And Other News...
- Domestic Stock Exchanges have announced that they will open 55 minutes earlier i.e. at 9 am from Monday onwards,despite the agitation from the Association of National Exchange Members of India (ANMI) members.
- After the private nuclear plants became a possibility in India, following the Indo-US nuclear deal, the Insurance Regulatory & Development Authority (IRDA) is deliberating on insurance companies to cover liabilities arising out of nuclear accidents.
- The Registrar and Transfer Agents (RTAs), Karvy and Computer Age Management Services (CAMS) launched their web-based platform ‘Finnet’ to help mutual fund distributors to provide services in a cost-effective manner by transacting on an integrated system. Finnet will facilitate order placement, execution and customer services on an integrated system.
- Vodafone, the cellular service provider launched an unlimited SMS offer for its prepaid and post paid customers in Mumbai. Prepaid investors can avail of the offer by buying a bonus card of Rs 89, which will have a validity of 30 days. The post paid customers can enjoy 15,000 SMS anywhere in India per billing cycle, for Rs 149.
- The mobile tariff war intensified further after MTS (brand of Sistema Shyam Teleservices Ltd.), the new mobile telephony service provider launched its half a paisa per second per call offer.
- Mr. R. Ravimohan, the man credited with building India’s largest credit rating agency Crisil, passed away on Monday following a massive heart attack. He was recently inducted onto the board of Reliance Industries Ltd.
- Concerned with the food inflation, spreading to the other sectors, Deputy Governor of Reserve Bank of India (RBI), Shyamala Gopinath said that the near term policy challenges will depend on the evolving growth –inflation conditions.
Financial Terms. Simplified.
Health Insurance:A type of insurance coverage that pays for medical and surgical expenses that are incurred by the insured. Health insurance can either reimburse the insured for expenses incurred from illness or injury or pay the care provider directly. Health insurance is often included in employer’s benefit packages as a means of enticing quality employees.
(Source: Investopedia)
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