No claim can be repudiated by insurers after three years-its impact (New Insurance Bill-2015)

Insurance Companies issue the policies primarily to cover the risk and provide financial freedom to the policyholders. Insurers are settling the claims even if the life insured died on the next day of taking life insurance policy, but subject to verification of the declaration and other reports if any, given by life insured in the proposal form in the areas of health history, family history and insurance history etc.

Why do insurers verify the declaration and do investigation at the time of death claim, especially with early claims? It is because they want to rule out any suspicious claims and to protect the policy holders from such suspicious claims.

Sec 45 of insurance act (before enactment of new insurance bill 2015) says thatNo policy of life insurance after the expiry of two years from the date on which it was effected be called in question by an insurer on the ground that statement made in the proposal or in any report of a medical officer, or referee, or friend of the insured, or in any other document leading to the issue of the policy, was inaccurate or false, unless the insurer shows that such statement was on a material matter or suppressed facts which it was material to disclose and that it was fraudulently made by the policy-holder and that the policy-holder knew at the time of making it that the statement was false or that it suppressed facts which it was material to disclose”.

The above statement says that insurer has to prove that the claim is fraudulent if it is rejecting after 2 years from the date of issuance of the policy, but there is no need of proving it if the claim happens before 2 years of issuance of the policy. This shows that insurers have a way to protect the policyholders’ money from fraudulent claims at any point of time (by proving).

Now, the current insurance bill 2015 says that “no claim can be repudiated/rejected by insurer under any circumstances if the death happen after 3 years of issuance of policy”.

This will have a great impact on insurers. What are these impacts and its mitigations on them. The impacts are:

  1. No. of claims may increase 3 years from now since there might be high probability of not disclosing the existing diseases in the proposal form by life insured
  2. Insurers may have to spend more money towards claims which leads to high claim ratio, thereby leading to increase in premiums.

We hear about many frauds happening in life, health and general insurance industries. This new provision may lead to a greater extent, an increase in hiding the truth in the application form to escape from rejection of the proposal or to avoid extra premium for the extra risk or to go for fraud claim mitigation.

What is the way out for insurers?  1. Strengthen the underwriting process 2. Agents confidential reports should show the real picture of the life to be insured in the areas of health, financial status etc since agent is the person who meets customer many times for issuance of the policy and it is his/her responsibility to provide correct report. Agent is considered to be primary underwriter.

But one thing insurers need to look into is to issue the policy and complete the investigation to rule out any fraudulent intent, within 3 years from the date of issuance of policy for high sum at risk policies to start with. There might be thousands of such policies for which investigation to be completed before 3 years.If in the course of investigation, it is found that some facts are not mentioned by the life to be proposed, the insurer can  reject the policy upfront and may return the premiums paid already after deducting expenses including risk charges till that point of time. The investigation requires visiting various hospitals, employers and other agencies to get the documentation to prove that the life to be assured misled the insurer by not mentioning the health, financial and other related facts that impacts the decision of the insurance company while issuing the policy. This leads to huge expenses to be incurred by the insurer in doing huge number of investigations to weed out fraud cases and reject them. This cost ultimately may be passed on to policyholders in the form of higher premiums or reduced bonuses etc.

Written by P Vasudevudu Compliance Officer – CAMS Insurance Repository Services Ltd.

About CAMS:

Computer Age Management Services (CAMS) is India’s premier Mutual Fund Transfer Agency serving over 60% of assets of the industry across 15 Mutual Funds. Leveraging superior technology, CAMS brings several innovative services to Mutual Fund investors and distributors. CAMS is also is a service partner to leading insurance companies, banks, NBFC’s and private equity funds. To know more visit www.camsonline.com .

Technology in the hands of businessmen

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The benefits of eIA with CAMSRep

An e-IA account is like a Demat account which holds your Insurance Policies instead of Shares. You can hold all your Insurance Policies whether it’s Life, Motor or Health in this account.

You can view policy Status

You Can print the copy of the policy including proposal form, terms & conditions and benefit illustration

You Can get the annual statements in electronic form

You Can get the renewal premium due alerts by SMS and e Mails

You Can avail policy services from any of CAMS, CAMSRep Approved Person branches

No need of submission of KYC documents on purchase of further new policies.

CAMSRep4

CAMS has a variety of information available in its website and also share excellent inputs on Investments and Savings in our Facebook Page. Like us on https://www.facebook.com/CAMSRTA . To watch informative videos visit https://www.facebook.com/CAMSRTA/videos .

Are my mutual fund investment details safe on CAMS?

CAMS is a Sebi registered RTA specializing in servicing of Mutual fund investors.

CAMS functions as the custodian of investor data, apart from providing transaction processing and customer care services.

CAMS has an evolved technology platform, enterprise applications and delivers best in class investor services. CAMS is an ISO 27001 certified company assuring information security and data confidentiality. The systems and processes are subject to periodical audits by Sebi, trustee boards and CAMS.

As mutual fund investments are long term in nature, technology platforms, system, business processes and controls are designed to project the interest of investors including special processes for managing dormant investor accounts, minor accounts and transmission of investments.

CAMS also offers assurance services to investors whereby an investor, upon authentication, can seek his statement t of account from any of its branches.

An investor can also seek statements of account via registered email anytime, Transaction alerts, services request alerts and confirmation of fulfillment are sent via SMS and emails to investors wo have registered their email IDs and mobile phone numbers with CAMS.

NK Prasad – President and CEO of CAMS – Answering a question in Outlook Money (August 2015 edition) – 100 Answers that will change your financial life

Outlook Money_Aug _2015_Pg 82_(Cc 50)_WHY WHAT HOWOutlook Money_Aug _2015_Pg Cover Page_(Cc 100)_100 Anwers That Will Change Your Financial Life

Plan for your Future

The secret of multiplying your investment in geometric progression lies in planning early by setting realistic targets and goals. Once they are envisioned, we should aspire and perspire to attain our objective of exceeding those financial targets and goals. There will be a number of stages of challenge that we would encounter till the goal is reached. Every one of those challenges are important and we should not rest till our objectives are realized.

There are many who get confused between dreams and goals. The secret of becoming a successful investor lies in distinguishing between dreams and goals. Dreams are imaginary while goals are dreams that encapsulate objectives which are realistic and time bound. Goals are mostly measurable as well.

It is only when we set goals coupled with objectives it will motivate you towards attainment of the same. Goals can be classified as short, medium and long term.

As suggested earlier, planning early is the key to building a reasonable corpus.

If you are a young Investor, you can opt for systematic investment plan (SIP) via Mutual Funds. SIPs give tremendous flexibility for the Investor in terms of duration as well size of the investment. You can approach any of your Registrar and Transfer Agent (RTA), like CAMS for registration of your SIPs.

However, SIP in an equity fund should never become an option for pursuing short term financial goals. For meeting your long term goals like child’s education, marriage, retirement etc., investors can consider investing in SIPs of equity funds.

Now onto the most important financial goal that is neglected by the Investor is the creation of an emergency fund. The prerequisite for this fund is it should be liquid or easily en-casheable. While investing in short term Fixed deposit is a good option, investors can also explore the possibility of investing in liquid fund which will serve the same purpose but with comparatively higher returns if we take into account the post tax returns. CAMS as RTA serves many Mutual Funds which have Liquid / Cash funds that offer better returns than your Savings Bank.

We find most Investors often grapple with the problem of the size of the corpus to be accumulated. But this would be entirely need based. For example, planning to save for your child’s education, you have to take into account the course of stream your child want to pursue at what age and the current cost of it.

Now to extrapolate it to the kind of corpus you should accumulate, you have to take into account the inflation factor. Financial advisers estimate that the education cost is often 3-5 percentage points above the retail inflation rate and so if the current inflation rate is 6%, you can safely estimate the education cost at 10% p.a.

Now with this rate, you have to calculate approximately the total corpus that you would be requiring for your child’s education in a particular stream of interest with two or three options. A good equity MF scheme can fetch you fantastic returns beating the monster of inflation. So, what you are waiting for ? Just calculate how much money you need to invest in a monthly SIP to achieve your target corpus.

CAMS has a variety of information available in its website and also share excellent inputs on Investments and Savings in our Facebook Page. Like us on https://www.facebook.com/CAMSRTA . To watch informative videos visit https://www.facebook.com/CAMSRTA/videos .

Happy investing….

Path towards your financial goals!!

There are three variables that impact the total return investors receive from an investment: the amount saved, the return rate, and the amount of time invested.

Most investors spend a good amount of time and effort trying to increase all three. But what if we can’t do all three, if we’re inhibited by time, skill, knowledge, or ability (after all, many fund managers spend a lifetime trying to milk out an additional 1% return with limited success.)

If we could only focus on one of the factors to impact, which is the best option? What is the best way to achieve better returns?

The secret of building a huge investment corpus lies in investing early to maximize returns from compounding.

If you do not like Risks, then opt for traditional investment instruments like PPF, NPS, KVP, NSC etc., to build up a secure corpus.

Recurring deposit are also an ideal investment option for small saving Investors as they can get started their investment right away with a minimum contribution of Rs. 100/- per month.

The interest rate will however depend upon the monetary cycle. The tenure of investment is from a minimum of six months to a maximum of 120 months.

If an investor need to inculcate a regular savings habit, then Systematic Investment Plans (SIPs) are the best option. SIPs are suitable for investors who are risk averse and also looking for decent returns. CAMS as RTA handles a whole lot of Mutual Funds which offer wonderful very decent returns and CAMS takes pride in servicing such Asset Management Companies. To Know the list of AMCs serviced by CAMS, please visit www.camsonline.com
Once the basic investment targets are met, then an investor can look out for bolder avenues like investing in equities, commodity market, Gold ETFs, Mutual Funds with aggressive Equity profiles and and Real Estate.

But the returns on these investments can vary depending upon the performance of the market and therefore can be deemed as speculative. As always, please read the terms of offer carefully before investing in any instrument of your choice.

It is also desirable to maintain a contingency fund sufficient to meet one’s expenses for at least six months. Such contingency funds should be invested in a mode of investment instrument which is liquid as well as provide higher returns. Liquid funds seem to be the right option for such class of investments.

CAMS has a variety of information available in its website and also share excellent inputs on Investments and Savings in our Facebook Page. Like us on https://www.facebook.com/CAMSRTA . To watch informative videos visit https://www.facebook.com/CAMSRTA/videos .

Happy investing….

Everybody have this desire to get rich rather quickly. But that needs a miracle and strikingly enough; it is possible through proper wealth creation efforts.

If you stick to your investment targets ingenuously, skillfully and discreetly, then you are at the door steps of success to realize what you plan and propose to achieve. Let us analyze and some basics:

Inculcate the spirit of saving right from when you are young

How many of us remember Sanchaika.. the good old savings schemes when we were children in our schools? Where is the habit gone now? The success of wealth creation hinges on investing from young. So, what are you waiting for?  Start applying right away to start SIP in Mutual Fund. Please bear in mind that the power of compounding fetches you miraculous RoI over long term. Therefore, postponing one’s investments/savings is not a wise thing to do and such     procrastination can only jeopardize your financial security.

Demonstrate Love – Insure your family

The best kind of health insurance is investing in a comprehensive policy which includes your near and dear ones, so that they can get the benefit of life / medical cover during times of crisis.

You are unique in your own way – Why should you impress others?

It is commonly seen that people in the 22-28 category have bloated egos which implore them to impress their colleagues / friends with their over spending. This might prove detrimental to ensuring their financial security. It’s your life “After All”. Let your friends flash with new gadgets and pay for the price of not starting to invest later, when they will be old…

Constant improvement should be your Mantra

Strive always to become the best in everything; be it is on saving, health or investments. The process of achieving your target by itself is a goal which ignites our expectations, motivation, and curiosity and stimulates one’s interest.

Be superbly focused

Always be focused on what you wish to achieve and have the necessary will to augment your expectations. In the same vein, you should also be alert to negative churnings too. So, the thumb rule is “you always tread with caution”.

To be continued in our next few blogs.

CAMS Pvt Ltd is the leading RTA in India and serves millions of Mutual Fund Investors by serving them in a dedicated manner. CAMS has presence across nation and reaching out to CAMS is very simple. Like us on our Facebook page and watch educating videos in https://www.facebook.com/CAMSRTA/videos.

Not all eggs in One Basket!!

Whether you are working or retired, your portfolio can maximum have 4 asset types – Equity, Bonds &  Savings instruments which give interest on them, Real Estate assets that you can own and Commodities. The need to have several asset classes is predicated on the simple principle of diversification. Let us look at these in detail…

Assuming you plan to accumulate a corpus of Rs. 3 Crores over a period of time. The first thing that you have to decide is the amount to be saved for every month and then the compounded annual return that investment has to earn. e.g if you just decide that the return on investment for one full year is to be in the region of just 5%, even RD in a bank would suffice.

But if you want a higher rate of return, then investing in Equity is the only viable option. Of course, there are risks associated with it, but in life, you need to take risks to achieve your ambitions and goals. The need for equity is the same whether you are a working individual or a retiree. If you are a working individual, you need higher return to save less and spend more. As a retiree, the higher return will help you meet your ever increasing cost of living haunted by the spectrum of inflation. We would recommend an investment into Equity through structured savings in SIPs of such Equity oriented Mutual Funds.

On the other hand investment in real estate is met with many imponderables. The problem of associating your investment in real estate is being purely speculation driven, lumpy and illiquid. Moreover, real estate market crashes are also an important factor to contend with especially considering the fluid global economic scenario. It will also be hard to ensure that your property is well maintained if you move to another City or Country.

Your portfolio of investment should be based on the employment portability. If you are vulnerable to transfers frequently, then it will be in the fitness of things if your portfolio is in financial assets. But,the scenario changes if you are a retiree or approaching retirement.

There are several ways to earn return on your investment. You can even generate monthly income from bank deposits and life time annuities. Similarly, renting or leasing out your land and building will also yield you higher returns in the form of rent and security deposit keeping pace with inflation. Also, investment in commodities will also yield high returns. But the traditional norm and practice is to invest only in Gold and not on other commodities such as copper, zinc or crude oil.

Most of the Indians are literally obsessed with Gold and accumulate it mostly in the form of ornaments. But the point here is that these ornaments neither have a higher resale value nor do they generate income and are just kept as idle asset in your house safe lockers. Investing in financial gold (ETFs or gold funds) is also an excellent option. This too could be part of your portfolio.

But, during a financial crisis or unexpected extreme events and acts of god like situations of famine, drought, collapse of economy, any amount of our best investment plans can fail and mostly all asset classes typically crash. So, it is better for us to be aware of the need of diversification which will provide higher returns and various degrees of safely. Do not put all your eggs in one basket is what we would love to tell you…

We have a wealth of information in our CAMSONLINE portal and you could also view our enlightening videos in our FaceBook page. Cheers!!