Aviva launches i-Life, the cheapest Online Term Insurance in India

Life insurance premiums of Term Plans (Pure Life Insurance) have progressively come down in the past two years with the launch of online term plans.

The latest offering, the i-Life plan from Aviva Life Insurance, is priced 16-20% lower than the cheapest online term plan in the market. For instance, a 25-year-old male needs to pay Rs 4,051 a year for a cover of Rs 50 lakh for 35 years (see table). This is almost 20% cheaper than the iProtect Plan from ICICI Prudential Life Insurance.

Online term plans have become quite popular with buyers, ever since Aegon Religare Life Insurance launched its iTerm plan in November 2009. In the first year itself, the company sold close to 11,000 policies online with an average cover of Rs 65 lakh.

Its runaway success prompted other insurance companies to join the bandwagon. Kotak Life Insurance, which launched its eTerm plan in November 2010, has already sold 1,800 policies online with a combined cover of more than Rs 1,000 crore. Aviva’s i-Life is the sixth online term plan in the market.

With each new launch, the deal has become more tempting for the consumer. Whether it is in the form of longer terms (policies of up to 35 years term) or as insurance cover extending to beyond retirement (up to 70 years), customers have benefited from the increased competition in the online term insurance segment.

The major difference between the online term plan and conventional term plan is that the latter is sold through intermediaries (agents / brokers / channel partners) whereas the former is purchased directly by the customer through the company’s website, thereby saving substantially on the distribution costs.
Some customers, however, are worried that the terms and conditions of online term plans might have loopholes that will allow companies to reject their claims. They point to the high claim rejection ratio of some private insurers, who have started to offer the online term plans in the last couple of years.
However, Gaurav Rajput, Associate Director, Marketing, Aviva Life Insurance, in an interview to Economic Times said that there is no difference in the terms and conditions of the company’s online and regular term plans (Aviva Life Shield Plus). “As far as products and terms are concerned, they are similar except that one is sold online and the other through regular channels,” he said.

If you are planning to buy an online term plan, keep in mind that the risk cover offered by the company and claim settlement primarily depend on the authenticity and accuracy of the information you provide. You therefore need to be more careful in filling the application – more so as there will be no agent to guide you on filling the application form and take utmost care that no vital information is ignored or under stated especially in relation to health, life style and previous cover.

Warm Regards,

Prashant.

 

The ‘Warren Buffet’ Way of Investing

How Warren Buffett decides which Stocks or Companies to Buy? The Decision is based on the Answer to the following 11 Important Questions:

1. Is the business simple and understandable?

Warren Buffett will invest only in a business he can understand, this is one of the reasons why he avoided technology stocks even during the boom of the late 1990s. If you understand a business, you have a better insight of spotting opportunities and threats before they arise.

2. Does the company have a consistent operational history?

Buffet will invest in Businesses which are proven over the years. Although past performance is not a guarantee of future results, it does show whether a business can operate in a variety of business conditions and cycles.

3. Does the business have a favorable long-term prospects?

Warren Buffett believes in holding good companies for the long term and that means seeing a clear future and growth prospects. Companies that operate on trends, fashion and technology that will be out of date tomorrow don’t fit his model regardless of how profitable they were in the short run.

4. Is the management rational?

Buffett places a great deal of importance on management pedigree and one of the areas he focuses on is how excess cash is utilized. If the company can generate above average returns by reinvesting the cash in the business it should do so because this builds shareholder value. However, if not the management should return the cash to shareholders in the form of dividends. In other words, the decisions should be rational.

5. Is the management candid with shareholders?

Warren Buffet favours companies which are transparent and properly disclose the finance and accounts of the company, Buffett believes that many companies hide their numbers behind accounting conventions and don’t fully report to shareholders. He admires managers who admit their mistakes and take responsibility for the company.

6. What is return on equity?

Buffett focuses on return on equity rather than the more popular earnings metric in evaluating companies. His rationale is that earnings are fleeting and can be manipulated. Long term, return on equity will have a more profound effect on the company’s fortune than earnings.

7. What are the company’s “owner earnings?”

Buffett uses a rough calculation that replaces the traditional cash flow calculation to give him a clearer picture of company value. His calculation includes estimates of future capital expenditures, something missing in cash flow calculations.

8. What are the profit margins?

If a company can’t convert sales into profits, it has obviously failed. One of the ways this happens is to keep expenses to a minimum. Buffett avoids companies with bloated expenses because it reflects a lack of discipline even if the company is profitable – it would be more profitable if expenses were always controlled.

9. Has the company created at least one dollar of market value for every dollar retained?

Buffett notes that this is the test of correct capital allocation. Has the company correctly used capital to create market value (shareholder value) with cash it retained? If the company is holding on to cash, but not creating value for shareholders, what’s the point?

10. What is the value of the company?

Buffett says the value of a company is simply the total of the net cash flows (owner earnings) expected to occur over the life of the business, discounted by an appropriate interest rate. This model differs from most you’ll find because it depends on being able to predict earnings for the life of a company. Buffett says if you pick company that has the attributes mentioned above, you can do this.

11. Can it be purchased at a significant discount to its value?

This is pure Buffett and where he gains his margin of safety. By buying at a discount, he knows that even if he is off somewhat of his evaluations, the discounted price will cover the difference. However, my guess is he doesn’t need that margin very often.

Source: “The Warren Buffett Way” by Robert Hagstrom. Published by Wiley Books.

 

Investing in Silver through E-Silver by National Spot Exchange Ltd

Silver has corrected approximately 30% since my last post (Gold Vs Silver Vs Sensex), and now probably is the time to start investing in Silver in a systematic manner. Where a lot of avenues are available for investing in Gold such as Gold ETFs, Gold MFs, Gold Companies Funds, E- Gold, there is hardly any awareness to the common investor about investing in Silver, apart from investing in it physically, which could be quite a cumbersome exercise.

This post of personal planners aims at providing the requisite information about how a common investor can invest in Silver and hold it in their demat account through a relatively new avenue called E-Silver.

E-Silver is a new ‘Avatar’ of silver, innovated by the National Spot Exchange (NSEL), which enables investors to invest their funds into silver in small denominations and hold it in the demat form. It is available on the pan India Electronic Trading platform set-up by National Spot Exchange, which can be accessed through members of NSEL or their franchises. It provides a unique opportunity to buy, accumulate, hold and liquidate “Electronic Silver (E-Silver)” as well as to convert the same into physical silver coin/ bar in a hassle free manner.

NSEL has come up with this brilliant idea for millions of investors willing to invest their small savings into silver, by making silver available in smaller denomination of 100 grams and its multiples.

Following the successful launch of E-GOLD, National Spot Exchange launched E-SILVER, the second in the E–Series products designed to promote savings and investment by the masses. E Silver has been operational since April 21, 2010.

This is a praise worthy initiative of NSEL towards financial inclusion, as silver is made available at the same price in the entire country for all segments of the society. A small investor, based in any part of the country can buy Silver at the same price. A small investor willing to invest Rs. 5000 or an HNI, willing to invest Rs. 5 crores, can buy silver at the same price, with this facility.

Thus, E-silver is a very good option for investors looking to invest in silver, and also it is backed by physical delivery. Silver is stored in Exchange designated vaults and will be tradable on the NSEL platform. The product  ensures seamless entry and exit as well as transparent pricing to all investors. Since it can be traded in denominations as low as 100 grams (the present value is around Rs 5200), it has opened up investment option even for lower income group.

The timing for E-SILVER trading is from 10:00 am to 11:30 pm from Mondays to Fridays, the contracts being sized at 100 gram and multiples thereof. The clearing and settlement pay-in and pay-out are based on T+2 cycles, and will be settled in the demat form only. Investors will be required to open demat account with any DP empanelled with Spot Exchange to participate in this contract.

This has also opened up a huge business opportunity for members of National Spot Exchange in terms of brokerage activity by getting huge number of clients over a period of time and  also opens up huge business opportunity for DPs empanelled with NSEL by opening millions of clients beneficiary accounts.

Thus E-Silver gives a mutually beneficial opportunity to the Investor, Broker and the Exchange.

Awaiting your ratings and feedback.

Prashant.