I am very happy for my friends who are in the final stages of their working lives, with PSU banks. In the first round of VRS that came, many did not opt for the pension option. They preferred to take cash. Those days, the co FD rate was 12% plus and it was clear that taking the money out was the best option.
Alas. Interest rates fell and those who did not opt for pension, regret.
Now there is great news. The bank unions have managed to introduce 'pension' as a defined benefit to all employees, including those who left the banks in the first round of VRS! All they have to do is to surrender a small sum and then they will get pension for life. A handsome amount (50% of last drawn wages) with adjustment for inflation also!
So, if you are from a PSU bank, rejoice. If you are a tax payer, grin and bear it. After all, the largesse is going to friends and family.
If you are a shareholder in a PSU bank, get the hell out. It is a matter of time before the pension bill becomes larger than the wage bill.
And of course, who the hell cares about bank profitability? Not certainly the owner or the Chairman. The chairman gets appointed as a reward for politicking at the end of his career and he uses the time to collect his graft.
This of course is beyond the ken of the species called 'equity research' analysts.
Mera Bharat truly Mahaan!!
Wednesday, January 27, 2010
Saturday, January 23, 2010
Aamchi Mumbai- The decline of Mumbai
The Congress displayed its appeasement as well as divisive politics in Maharashtra. They want to give cab licenses to local lingo speaking and 15 yr domiciled persons only. No one fights. This is clearly un-constitutional, since it does restrict freedom of employment.
Not that this is going to make a difference. If you look at the local lingo domiciled populace, they are not the type who will work hard. Most of them will be content with government jobs, with pension and their daily stroll in the 'naana naani' park. If you really break down mumbai, it is the out of stater who slogs and makes the state and city a better place. This is because he faces hostile odds and has come with a mission. Obviously his hunger is more.
I have seen this happen in Malaysia, where the Bumiputra guy is tolerated since he 'facilitates' business. Mumbai is heading to that. Job reservations for locals will one day mean that a company will treat that as a cost of doing business in the State. So, it will tell the 'statutory' local to stay at home, pay him, and go on with life.
Imagine if the doctrine of the taxi license is applied to call centers in Mumbai. Or to the media in Mumbai. It will be great to see.
Not that this is going to make a difference. If you look at the local lingo domiciled populace, they are not the type who will work hard. Most of them will be content with government jobs, with pension and their daily stroll in the 'naana naani' park. If you really break down mumbai, it is the out of stater who slogs and makes the state and city a better place. This is because he faces hostile odds and has come with a mission. Obviously his hunger is more.
I have seen this happen in Malaysia, where the Bumiputra guy is tolerated since he 'facilitates' business. Mumbai is heading to that. Job reservations for locals will one day mean that a company will treat that as a cost of doing business in the State. So, it will tell the 'statutory' local to stay at home, pay him, and go on with life.
Imagine if the doctrine of the taxi license is applied to call centers in Mumbai. Or to the media in Mumbai. It will be great to see.
Friday, January 22, 2010
Life insurers are happy to see you skip premium payments
For an insurance company, it actually helps if clients default on policies that have not acquired any surrender value
A business paper recently carried a story about life insurance policies worth over a trillion rupees which have lapsed. Some of the interesting bits are:
i) A total of 9.1 million policies lapsed in 2009
ii) The lapse ratio for ICICI Prudential Life Insurance Co Ltd, the life insurance arm of India’s largest private sector lender ICICI Bank Ltd, stood at 53% in 2009, up from 40% in the previous year. About 777,000 conventional policies worth Rs25,269 crore lapsed, the highest among private insurers by value. (Obviously, ICICI does not want to miss market share any which way)
iii) In terms of lapse ratio, Aviva Life Insurance Co India Ltd, leads the list with 32,000 policies or 59% lapsed
iv) Reliance Life Insurance Co Ltd saw its lapse ratio almost double—40% in 2009 against 21% a year ago.
iv) Life Insurance Corp of India (LIC) declined to 4% for 2009 from 6% in the previous year. In absolute terms, nearly 7.3 million traditional policies worth Rs52,926 crore lapsed. Almost half the conventional policies that lapsed in the industry in 2009 were sold by LIC.
If this is not rampant mis-selling, I do not know what is. Most insurance companies do not repay or refund anything, if the policies are less than three years paid up. After three years, the agents’ commissions drop to ‘small’ levels of 2.5%-5%, so he cares two hoots. He would rather tell the fool (the client) to take a different policy after ditching the old, since it would give him a higher commission.
The great thing is that the paper quotes the Max New York honcho as saying that it is not mis-selling but “it indicates a lack of understanding on the part of policyholders”. Sir, who delivers the ‘understanding’?
Most insurance companies have a scheme or a process to ‘revive’ lapsed policies within around three years of the last premium paid. After that, they quietly pocket the money. So, for an insurance company, it actually helps if clients default on policies that have not acquired any surrender value. Probably, they must be hoping for this to happen every year and would be part of their business goals for each year. Probably, they reward agents who bring in such kind of clients into their web of deceit.
It is time people woke up. IRDA, being run by retired guys with either LIC or RBI backgrounds, will never help the insured. They are the owners’ representatives. The ideal rules would be:
i) When policies lapse, blacklist the agent/withdraw his IRDA code, so that he can get no more commissions and sell no more policies. This is the best way to ensure that the mis-selling stops.
ii) When there is a lapse, the insurance companies should refund the amounts collected less the charges they have actually incurred. For instance, if I have paid Rs2,000 per year for two years, I should get a refund of something like Rs2,000-Rs3,000. This should be made statutory and any violation should result in a heavy penalty on the insurance company.
iii) A list of lapsed policies should be put online compulsorily.
iv) Surrender values should be made compulsory even for a one premium old policy. Why should the insurance company rob the payer?
The other option is to explore if third-party buyers of lapsed policies can emerge legally. Maybe they can take a call on whether to revive the policy and take the assignment in their favour and continue it. All possibilities exist.
I am sure that the IRDA will do zilch to resolve this issue. It is high time that the finance ministry stepped in and passed the supervision to another body where the insured is also taken care of. If SEBI can handle mutual funds, I am sure it can handle insurance also. After all, every product they sell (except the pure term policy which they hide) is an investment product with some optional insurance.
A business paper recently carried a story about life insurance policies worth over a trillion rupees which have lapsed. Some of the interesting bits are:
i) A total of 9.1 million policies lapsed in 2009
ii) The lapse ratio for ICICI Prudential Life Insurance Co Ltd, the life insurance arm of India’s largest private sector lender ICICI Bank Ltd, stood at 53% in 2009, up from 40% in the previous year. About 777,000 conventional policies worth Rs25,269 crore lapsed, the highest among private insurers by value. (Obviously, ICICI does not want to miss market share any which way)
iii) In terms of lapse ratio, Aviva Life Insurance Co India Ltd, leads the list with 32,000 policies or 59% lapsed
iv) Reliance Life Insurance Co Ltd saw its lapse ratio almost double—40% in 2009 against 21% a year ago.
iv) Life Insurance Corp of India (LIC) declined to 4% for 2009 from 6% in the previous year. In absolute terms, nearly 7.3 million traditional policies worth Rs52,926 crore lapsed. Almost half the conventional policies that lapsed in the industry in 2009 were sold by LIC.
If this is not rampant mis-selling, I do not know what is. Most insurance companies do not repay or refund anything, if the policies are less than three years paid up. After three years, the agents’ commissions drop to ‘small’ levels of 2.5%-5%, so he cares two hoots. He would rather tell the fool (the client) to take a different policy after ditching the old, since it would give him a higher commission.
The great thing is that the paper quotes the Max New York honcho as saying that it is not mis-selling but “it indicates a lack of understanding on the part of policyholders”. Sir, who delivers the ‘understanding’?
Most insurance companies have a scheme or a process to ‘revive’ lapsed policies within around three years of the last premium paid. After that, they quietly pocket the money. So, for an insurance company, it actually helps if clients default on policies that have not acquired any surrender value. Probably, they must be hoping for this to happen every year and would be part of their business goals for each year. Probably, they reward agents who bring in such kind of clients into their web of deceit.
It is time people woke up. IRDA, being run by retired guys with either LIC or RBI backgrounds, will never help the insured. They are the owners’ representatives. The ideal rules would be:
i) When policies lapse, blacklist the agent/withdraw his IRDA code, so that he can get no more commissions and sell no more policies. This is the best way to ensure that the mis-selling stops.
ii) When there is a lapse, the insurance companies should refund the amounts collected less the charges they have actually incurred. For instance, if I have paid Rs2,000 per year for two years, I should get a refund of something like Rs2,000-Rs3,000. This should be made statutory and any violation should result in a heavy penalty on the insurance company.
iii) A list of lapsed policies should be put online compulsorily.
iv) Surrender values should be made compulsory even for a one premium old policy. Why should the insurance company rob the payer?
The other option is to explore if third-party buyers of lapsed policies can emerge legally. Maybe they can take a call on whether to revive the policy and take the assignment in their favour and continue it. All possibilities exist.
I am sure that the IRDA will do zilch to resolve this issue. It is high time that the finance ministry stepped in and passed the supervision to another body where the insured is also taken care of. If SEBI can handle mutual funds, I am sure it can handle insurance also. After all, every product they sell (except the pure term policy which they hide) is an investment product with some optional insurance.
Monday, January 18, 2010
Friday, January 15, 2010
The Midas Touch Investor-
http://www.vanityfair.com/business/features/2010/01/goldman-sachs-200101?printable=true
A compelling read on Goldman Sachs.The clout with the Feds (packed with ex Goldman guys) and the entry of Warren Buffett (who again ensured that the firm got the best of terms from the US govt) shows corporate governance at its abysmal worst. After this, if the world even expects corporate governance in any part of the world, it is only fooling itself.
It is money that counts. The more you can get, the more power you get. Does not matter how you get it. The key thing is not to get caught. If you involve the Fed, Warren Buffett etc, you are never going to get caught.
Jai Ho for Goldman and for Warren !
A compelling read on Goldman Sachs.The clout with the Feds (packed with ex Goldman guys) and the entry of Warren Buffett (who again ensured that the firm got the best of terms from the US govt) shows corporate governance at its abysmal worst. After this, if the world even expects corporate governance in any part of the world, it is only fooling itself.
It is money that counts. The more you can get, the more power you get. Does not matter how you get it. The key thing is not to get caught. If you involve the Fed, Warren Buffett etc, you are never going to get caught.
Jai Ho for Goldman and for Warren !
Saturday, January 9, 2010
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