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| October 01, 2015 |
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| Weekly Facts | | | Close | Change | %Change | | S&P BSE Sensex* | 26,220.95 | 357.45 | 1.38% | | Re/US $ | 65.59 | 0.57 | 0.86% | | Gold Rs/10g | 26,000.00 | -415.00 | -1.57% | | Crude ($/barrel) | 46.46 | 0.54 | 1.18% | | F.D. Rates (1-Yr) | 6.25% - 8.00% | Weekly changes as on September 30, 2015
S&P BSE Sensex* as on October 01, 2015 |
Impact 
While cost of everything else around you is rising, that of your health insurance is set to fall. The Insurance and Regulatory Development Authority of India (IRDA) is all set to take an important decision that may help you save a good deal of amount on your non-life insurance policies.
Why premiums may fall?
Non-life insurance companies that overstated their expected incurred claim ratio at the time of filing for the insurance product will now have to lower premiums. All those insurers whose actual claim is lower by 10% over 3 years than the expected incurred claim ratio they estimated at the time of seeking regulator's approval for the product. Let's see what it means ...
As given by the IRDA, Net Incurred claim Ratio = Claim amount paid (net) + Claims outstanding (Inclusive of IBNR*) amount at the end of the Financial Year (net) - Claims outstanding (Inclusive of IBNR) amount at the beginning of the Financial Year (net)
*IBNR: Incurred But Not Reported
Naturally, if insurance companies paid far lower towards claims in proportion to what they collected as premiums, benefits should be passed on to the policyholders.
PersonalFN is of the view that move of the regulator should be welcomed. Having said this, PersonalFN suggests that you shouldn't just go with policies that charge you the lowest premium. Do consider the history of the insurer offering it along with the claim settlement history of the insurer; because everything that's cheap may not necessarily be the best.
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Impact
Has any virus ever attacked your computer? It is quite possible that you faced several such attacks in the past. Sometimes, you might have been responsible for them and possibly sometimes you were not.
An antivirus package installed in your system, will warn you when you try to open websites or webpages that are likely to send viruses. In such a case if you overlook or deliberately ignore the warnings and go ahead with your browsing, virus may damage your system. The other possibility is, you failed to run the update for the software and the newly spread virus attacked your system.
Something similar happened to JPMorgan recently. Not that, it didn't know Amtek Auto Ltd. wasn't the best company to bet on. Yet the fund house invested in debt instruments of the company for it two funds - JPMorgan India Treasury Fund and JPMorgan India Short Term Income Fund. JPMorgan Mutual Fund perhaps kept watching as rating agencies put a downgraded on Amtek Auto and hoped for the best. But eventually the writing was on the wall. Last week, the company defaulted on the payment to NCD holders, including JPMorgan Mutual Fund. Stressed investors rushed to exit but JPMorgan Mutual Fund denied them a way out by capping the redemption in two of its troubled schemes to 1% of units outstanding.
Disallowing redemptions was never a solution; it could have just been a temporary arrangement. A latest development is JPMorgan has managed to win much needed approval of majority of unit holders to hive-off investments in Amtek Auto Ltd. Hence, the virus has been quarantined finally.
What would be the impact of this?
JPMorgan India Treasury Fund and JPMorgan India Short Term Income Fund together have exposure worth Rs 150 crore to Amtek Auto. The impact of this segregation of investment would be...
- There will be two Net Asset Values (NAVs) available for each scheme; one for the assets that can be liquidated and converted into cash and the other for illiquid Amtek Auto Assets.
- There could be a potential loss for you as an investor
So here are the learning's from the episode?
- If you were to invest in a debt fund, invest in one that holds high quality assets and performs consistently across timeframes
- Don't go by just brand names, they don't guarantee you anything
- Closely track your investments and check portfolios regularly to see where the fund manager is investing your money
In case you don't have time and expertise to do all this on your own, PersonalFN's DebtSelect unbiased research offering can be of help. DebtSelect aims to guide investors take the right investment decision while investing in debt mutual funds.
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Impact
When you watch an exciting sport on television and you know the team you are backing is likely to lose the game, you don’t stop cheering for them do you? You always expect some magic to happen and the team to win in the end.
The world of Finance too is getting exciting these days, amid clamour for rate cuts, and the Reserve Bank of India (RBI) has surprised everyone this time.
In its fourth bi-monthly monetary policy statement for 2015-16, the RBI has cut policy rates by 50 basis points (bps) ahead of festivities of Dussehra and Diwali. Here are the highlights:
- The repo rate under the liquidity adjustment facility (LAF) has been reduced from 7.25% to 6.75% with immediate effect;
- The reverse repo rate has been reduced from 6.25% to 5.75%
- The cash reserve ratio (CRR) of scheduled banks however is left unchanged at 4.0% of net demand and time liability (NDTL);
- Moreover, the RBI has decided to continue to provide liquidity under overnight repos at 0.25% of the bank-wise NDTL at the LAF repo rate and liquidity under a 14-day term repos, as well as longer term repos of upto 0.75% of the NDTL of the banking system through auctions; and
- Decided to continue with daily variable rate repos and reverse repos to smoothen liquidity.
To read more about this news and our views, please click here
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Impact
Unhappy with the Bose Committee recommendations, are Distributors and Mutual Funds companies crying wolf?
When you need certain products like groceries, fruits, and vegetables, do you need any persuasion to purchase them? But when you go out shopping for clothes, your choices are influenced by the suggestions of the salesperson, the current trends, the price versus value, etc. Going one step ahead, when deciding to buy a car, we seek some serious, expert advice to ensure we're investing in the most suitable vehicle.
Expectedly, the one who recommends a product to you, keeps in mind your expectations and understanding of it as well as its suitability in your life. Imagine a salesman suggesting that a corporate-yuppie buy a pair of semi-casual trousers instead of the classic formal one with the "it's a new style/trend" pitch. A gullible buyer may fall for it without realizing how inappropriately dressed he will look on Monday morning. You may wonder why a salesperson would do this in the first place. It is simple: the salesperson earned a higher commission from selling the "new style" and clearly didn't understand or meet the buyer's need.
To know more about this and PersonalFN’s views over it, please click here.
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Incurred But Not Reported: A type of account frequently used in the insurance industry to refer to reserves that are established for claims and/or events that have transpired, but have not yet been reported to an insurance company. In these instances, an actuary will estimate the potential damages to a region; the insurance company may decide to set up reserves to allocate funds to those expected losses. To an actuary, these types of events and losses are said to have been incurred, but not reported.
(Source: Investopedia)
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Quote : "It's good to have a special price to pay for the future and it will pay you in return, in the exact way you would wish to be paid." - Auliq Ice
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