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Information provided on this newsletter has been independently obtained from sources believed to be reliable. However, such information may include inaccuracies, errors or omissions. Its affiliates, information providers or content providers, shall have no liability to you or third parties for the accuracy, completeness, timeliness or correct sequencing of information available on this newsletter, or for any decision made or action taken by you in reliance upon such information, or for the delay or interruption of such information. Its affiliates, information providers and content providers shall have no liability for investment decisions or other actions taken or made by you based on the information provided on this newsletter.
The year 2018 saw a change of guard at the Insurance Regulatory and Development Authority of India (Irdai). After industry insider T.S. Vijayan’s five-year term came to an end, former bureaucrat Subhash C. Khuntia took office in May. Under Khuntia, Irdai’s most prominent task has been to relook at insurance products—life, health, and motor. In that sense, this year can be seen as the founding year of important reforms the industry is likely to witness.

Life Insurance

From a regulatory standpoint, the work on reviewing insurance products moved ahead a few inches. In 2017, Irdai set up a product committee to review product regulation and one of the main concerns of the committee was high surrender costs in traditional plans that also bundle up as investment products.

Taking the work forward, Irdai set up a working group in July this year and in October came out with draft guidelines that eased surrender penalties but only slightly. While this would be seen as a missed opportunity to tackle the problem of high surrender costs in traditional plans that dominate the market currently, the draft gave a new lease of life to unit-linked pension plans by making them more flexible in offering partial withdrawals and a higher take-home on maturity. It also increased the revival period of a lapsed traditional policy from two to five years.

“This is a positive step and if implemented it will proactively encourage the industry to curb lapsation by convincing the policyholders to revive their policies. For an industry where lapsation is a real threat, this is a welcome move,” said Pankaj Razdan, managing director and chief executive officer, Aditya Birla Sun Life Insurance Co. Ltd and deputy CEO at Aditya Birla Capital.



From an industry standpoint, two events that were prominent in 2018 were an increasing focus on protection plans and the use of technology to smoothen sales and customer service. “The average sum assured in the industry increased by 25% and this is a huge plus given the lack of social security and the huge insurance gap India has. There is now a prominent mindset shift and protection solution has become dominant,” said Razdan. “Every single insurer is focussing on it whether it’s life insurance by customizing and innovating term plans or health insurance by offering disease-specific insurance plans,” he added. Of course, the advent of technology has a role to play as well. According to Vineet Arora, managing director, and chief executive officer, Aegon Life Insurance Co. Ltd, the advent of technology gave term insurance policies a huge push as a result of which now there is awareness and people have started appreciating the need. “Gradually we will see other types of life insurance policies available for sale online. However, this year the industry integrated technology in a big way to make the sale process smooth whether it’s agent assisted sale or direct to the customer. This trend is here to stay and will only become more prominent in the future,” he said. In fact, even the regulator is closely watching how technology can help insurers—for instance, the role of telematics in profiling and rewarding customers. Action in this space is only going to get better next year.

Source:Live Mint

Two very important events marked 2018 for health insurance. One was the launch of Pradhan Mantri Jan Arogya Yojana (PMJAY) that offers health insurance to the underprivileged and the constitution of a committee on health insurance that looks at standardizing and rationalizing clauses in a health insurance policy. “PMJAY comes with no exclusions and therefore is a policy that springs no surprise to the insured. This is not the case with retail health insurance. However, the launch of PMJAY, court orders in certain cases and a report of the Irdai working group on health insurance exclusions have initiated a healthy debate,” said Kapil Mehta, co-founder, SecureNow.in.

In July this year, Irdai set up a committee to look at standardizing exclusions in health insurance. The committee submitted its report which not only proposed a much sharper and unambiguous definition of pre-existing ailments, one of the main clauses that lead to claims rejection but also recommended that insurers can’t deny a claim on the ground of non-disclosure after an eight-year window.

Also, acting on the Mental Healthcare Act, 2017 that prohibits any discrimination between mental illness and physical illness, Irdai directed insurers to make provisions for medical insurance for treatment of mental illness on the same basis as is available for treatment of physical illness. This simply means that health insurance can’t discriminate or exclude mental illness and will have to cover any related hospitalization. This doesn’t mean that insurers are mandated to insure people who are diagnosed with mental illness as that would depend on their underwriting criteria, but if an insured person is diagnosed with mental illness and is hospitalized, the insurers can’t deny cover.

“I would call the year 2018 as the year of consolidation as the focus was on tying up the loose ends. For instance, this year in the health insurance space the focus has been to simplify and standardize exclusions which will go a long way in customer understanding and will aid customer protection. This year also saw new insurers focused only on digital and has given a push to e-commerce. The regulator also took steps to create a conducive environment for technology,” said Tapan Singhel, managing director and chief executive officer, Bajaj Allianz General Insurance Co.Ltd.

Source:Live Mint

It’s the year-end and it is also the tax-planning season. My sessions obviously have a lot of queries relating to Section 80C for tax saving. And despite all the noise about the adoption of mutual funds, I find that 60-70% of the participants still prefer investing in investment-linked insurance over equity-linked savings schemes (ELSS) or even Public Provident Fund (PPF) simply because they believe that these policies give the highest returns with little or no risk. Moreover, they are willing to lock in money in an endowment or unit-linked insurance plan (Ulip) but not in PPF. This is because of investment biases people have. In the above case, investors continue to invest in investment-linked policies simply because they are familiar with these investments and fear losing money in other investments. Decisions about money are mostly not taken rationally and there is a tendency to let our emotions overrule logic. In most cases, despite knowing why one should be choosing another investment, one ends up investing in tried and tested products due to investment biases.

For example, real estate is still the most preferred investment for most investors simply because of their false sense that nothing is likely to go wrong with real estate. This is because they are biased by an existing conclusion that with real estate, one cannot go wrong. The same bias also applies to those buying traditional insurance. Unfortunately, these biases are hard-wired and overcoming them is a big challenge. Further, with the overload of information available, investors find it difficult to focus on the relevant information. With market-linked investments, individuals feel they are not competent to understand how these investments work and hence stay away. The anchoring bias or relying just on some specific information is another issue. For example, with mutual funds, investors base their decisions on the current net asset value (NAV) rather than whether the fund ties in with their risk profile or is suitable for their investment horizon.

People are also influenced by where others in their circle are investing. Every individual at some point is influenced by family members or colleagues or friends, on their financial choices. To the extent that even if an individual has made the right decision, an influencer may put him down. I have come across so many cases, where women are questioned about their financial decisions by those who may not have knowledge themselves.

Investors always blame market volatility for their losses, but in most cases, it is an error of judgment while choosing investments or wrong decisions during the investment period that actually lead to losses. So how can you overcome your investment biases and prevent yourself from being your own enemy?

Educate yourself: Educate yourself on the various investment products and how they work. Most people who buy investment-linked insurance do not realize that the sum assured is just not enough to take care of the family needs in case of an eventuality. Self-awareness is important to bust myths like all mutual funds do not invest only in stocks. There are funds which are less volatile and can be invested into for various goals.
Take out time to make financial decisions: View money management as something that allows you to live your life the way you want instead of looking upon it as a chore.
Create a financial plan: To actually be able to be financially secure, it is important to keep out the noise from the markets, influencers and create a financial plan. Unless you have a financial plan in place, you wouldn’t know the right financial choices for your goals. I had a client who wanted to invest into a second property without realizing that he would have very little left to be saved post-EMI, for children’s education or retirement. A financial plan is your money map and will guide you towards choosing which investments you need to make versus those you want to make.
Learn from your mistakes: Mostly one loses money not due to bad luck or market volatility but because of not choosing the right instrument for the investment period. Analyze why you lost out. Is it because you panicked on a market correction or invested into something without understanding the working of the product?
Build in accountability: Unless you are accountable to someone, you will keep following the same investment biases. Normally, one decides where to invest and convinces oneself about it. Have someone play the devil’s advocate who can challenge your decisions.
How about the above for a new year resolution?

Source: Live Mint
Are you in the highest tax bracket? Well, 2018 wasn’t that good a year for you. “How taxes have fared for citizens this year depends a lot on their income bracket,” said Vishal Dhawan, founder of Mumbai-based Plan Ahead Wealth Advisors. It has not been a good year for the higher income brackets on the back of long-term capital gains tax although, with standard deduction rule, it may have become easier for lower tax bracket, he added. Here’s a look at how 2018 was for your taxes:

Tax on equity

On the direct tax front, this year’s budget brought in a lot of changes. One change which did not go well as the introduction of long-term capital gains tax (LTCG) arising from the transfer of listed equity shares or units of equity-oriented fund or units of business trusts. An LTCG at the rate of 10% will be applied on gains exceeding ₹1 lakh, said Rahul Singh, a chartered accountant with Taxmann. Although gains made up to January 31, 2018, will be grandfathered or exempt.

Introduction of the standard deduction

For the salaried individuals, this year a standard deduction of up to ₹40,000 was introduced in lieu of transport allowance and reimbursement of medical expenses. Earlier a deduction of ₹19,200 was allowed as transport allowance and ₹15,000 for medical reimbursement, according to Rahul Singh, chartered accountant with Taxmann. “Here the net benefit to the customer is hardly ₹1,000-2,000 which is minor in amount. The government has basically combined two categories,” said Singh.

Rise in penalty amount on late ITR filing

To make tax payment more stringent, you have to pay a penalty of ₹1,000 to ₹10,000 if returns are filed after due date whereas earlier an interest rate of 1% of the tax amount was applied for every month after the due date till the returns were filed, said Singh. “The late payment fee is essentially an additional burden to the taxpayer as earlier they could pay taxes till March of the next financial year at ease although it is a benefit for the government,” said Singh.

Deduction limit up for senior citizens

Senior citizens saw some good news in 2018. The deduction limit under section 80DDB was enhanced; this deduction is allowed when an individual or Hindu undivided family (HUF) taxpayer pays for the medical treatment of critical illness for himself or family members. The deduction limit has been increased to ₹1 lakh for senior and very senior citizens compared with ₹60,000-₹80,000. The limit for Section 80D was also increased to ₹50,000 from ₹30,000, which qualifies for deduction for premium paid towards health insurance policies for senior citizens. A new section 80TTB is inserted to the Income-tax Act, 1961 to allow deduction of up to ₹50,000 to the senior citizen who has earned interest income from deposits with banks or post office or co-operative banks, said Singh. After introducing this new deduction, the existing deduction of up to ₹10,000 under Section 80TTA shall not be allowed to the senior citizens, he added. Another incentive introduced for senior citizens is that the threshold limit to deduct TDS on interest income (from the bank, or post office deposits) has been increased to ₹50,000 from ₹10,000. “Senior citizens are in their retirement phase and do not have a regular source of income. These exemptions are a major relief for them,” said Singh.

Source: Live Mint
Please do not reply back to this mail. This is sent from an unattended mail box.
Information provided on this newsletter has been independently obtained from sources believed to be reliable. However, such information may include inaccuracies, errors or omissions. Its affiliates, information providers or content providers, shall have no liability to you or third parties for the accuracy, completeness, timeliness or correct sequencing of information available on this newsletter, or for any decision made or action taken by you in reliance upon such information, or for the delay or interruption of such information. Its affiliates, information providers and content providers shall have no liability for investment decisions or other actions taken or made by you based on the information provided on this newsletter.