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LIC launches "Jeevan Nischay"- Will it be a success ?

Created by : Ekta Dutta, Hedge Fund Analyst/Trader, ING Vysya Bank  | 10 30 2009 08:06:47 +0000
Industry : InsuranceFunctional Area : Growth(Strategy & Execution)
Keywords : insurance lic jeevan nishchay jeevan aastha
Activity:  595 views;  last activity : 07 06 2010 20:18:09 +0000

Dear friends, Life Insurance Corporation (LIC) of India is set to launch a new guaranteed single premium plan – Jeevan Nischay similar to last year’s Jeevan Aastha which rejuvenated the life insurance market when confidence on financial services was shaken following the global financial crisis.

There are several unique features in the plan, which differentiate Jeevan Nischay from last year’s close-ended single premium plan. For starters, the policy will be available only to existing policyholders of LIC. The amount a person can invest will be linked to the extent of protection the individual already has purchased.

Officials said the minimum cover requirement is not really an exclusion. An individual can always buy term insurance to the extent of investment that he wished to make.

Will this be successful ? What is your take on this ?

  
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It seems, the policy is trying to tap the maturity benefits offered under an older plan – Bima Gold, which sold more than 1 crore policies when it was launched. Jeevan Aashta had mobilised close to Rs 10,000 crore, as it offered a safe haven of guaranteed returns amidst the turmoil in the market. So I think it will become a success in the market.
By Ekta Dutta, Hedge Fund Analyst/Trader, ING Vysya Bank  10 30 2009 08:06:47 +0000
 
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The policy covers only the mandatory five times of the premium amount for the first year of insurance. For subsequent years, the sum insured will be equivalent to the premium paid. So, I don't think it will be as successful as it is expected.
By Rashmi Chawla, Cust. Service Manager, Leading Bank  10 30 2009 08:15:17 +0000
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The concept of "LOYALTY ADDITION" is a stroke of genius.

The "LOYALTY ADDITION" is never taxable, even after the NEW TAX CODE as it comes from Provision.

It can work out from between 8 - 12% per annum and possibly more because of cost reduction at LIC OF INDIA and improved efficiencies in Managing Money and Information flows for strategic action.

The Surrender Value in Jeevan Saral (regular non-single premium) is currently 7.75%; on 3 years.

Jeevan Saral also has "LOYALTY ADDITION"

LET ICICI GET THE TRUST  OF INDIANS THROUGH ACTION AND NOT ADVERTISEMENT - "PATHETIC"!!!!!!!!!!!!!!
By Jairam Gopalan Aiyer, CEO/MD/Director Writer www.insuranceworld.co.in, Ajvmm Creative Solutions  | 11 05 2009 18:43:06 +0000
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The same was the case with Jeevan Aastha, it also gave a reduced coverage from the 2nd Year Onwards.

So I dont think that is an issue.It will garner HUGE FUNDS.TIME TO GAIN EXTRA MARKET SHARE OF THE ORDER OF 12% By MARCH 2010 END and this is only new business.
By Jairam Gopalan Aiyer, CEO/MD/Director Writer www.insuranceworld.co.in, Ajvmm Creative Solutions  | 10 31 2009 15:40:24 +0000
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For life cover you have other options with lic also. But this policy has made an edge over other debt intruments.
By Bhupendra Shah, Consulting Financial Planner  | 10 31 2009 03:58:18 +0000
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Definitely it will be successfull plan as it provides edge over other debt investments, a tax free guranteed maturity for 10 yrs arround 6.43% annualized. again it has gurantee from Govt of India as per Section 37(i) LIC act 1956.

If you consider other debt investments, there is post tax returns hardly reaches up to 5.60% for higher tax bracket.

 
By Bhupendra Shah, Consulting Financial Planner  | 10 31 2009 03:55:58 +0000
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Both the policies are similar except the Jeevan Aastha launching at the time of crashing of interest rates and Nischay launched at the time of RBI’s exit from the accommodative policy.Jeevan Nischay only a single premium bond mobilising Rs 10,000 crore which shows it has a very good future in Indian markets...
By Niranjan Meena, Actuary Manager, LIC  | 10 30 2009 14:41:20 +0000
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I also think it will succeed. Both the policies have almost everything in common. The only difference is while Jeevan Aastha was launched when interest rates were crashing, Nischay’s launch coincides with RBI’s exit from the accommodative policy. Just as in the case of Jeevan Aashta, Jeevan Nischay is more like a single premium bond, as the protection it offers is only rudimentary.
By Jithesh Ramesh, Actuary Manager, Tata Aig Insurance Solutions  | 10 30 2009 08:12:36 +0000
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Firstly Policy is only for the existing policy holder of LIC of India and not for all. This is a Single premium product with minimum premium at Rs. 10,000.

For a single premium of Rs. 1000 following is the MSA for age of 30 year.

5 year

7 year

10 year

1256

1409

1715

25.6%

40.9%

71.5%

 If we consider a rate of even 7% to 8% in FD it would at least fetch you 100% of your single premium (that is Rs. 2000).Loyalty addition is not guaranteed and hence not calculatied it for the purpose of return.Death benefit is high only in the first year and hence from risk point of view this policy doesn’t look promising. 
By Paresh Dhembare, Area Sales Manager, ICICI Bank Ltd  | 11 05 2009 17:48:06 +0000
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As Rashmi said, not all the things are covered by the policy in the very first year. Other times, sum insured will be equivalent to the premium paid. So, I don't think this will become successful in the market...
By Esha Johar, Risk Analyst, Irevna  | 10 30 2009 14:43:12 +0000
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