| 
Impact 
 (Source: CSO, PersonalFN Research)
The Index of Industrial Production (IIP) once again displayed signs of mellowing down as it registered a growth of meagre 1.6% in December 2010 as against 2.7% in the previous month. From 18.0% in December 2009 to just 1.6% in December 2010, the IIP has had a roller coaster ride in the past 12-months (as depicted by the above graph).
The lacklustre performance of the December 2010 IIP can be attributed to the following reasons:
- Decelerating manufacturing growth: The manufacturing index which is the principal component of the IIP (constitutes around 80% of the index) slipped further for December 2010 to 1.0% (from 3.2% registered) in November 2010. However, when assessed for the period ending April 2010 to December 2010, the manufacturing grew 9.1% as compared to 8.9% for the period ending April 2009 to December 2009.
- Mixed sectoral performance: The capital goods sector too took a beating and posted a negative growth of 13.7% as against +12.82% in the previous month. Also, the consumer non-durables registered a negative growth of 1.1% for December 2010. However, consumer durables reflected a strong growth of 18.5% in December 2010 from 4.4% in November 2010. Collectively this resulted in the consumer goods posting a growth of 3.9% in December 2010.
Reacting to IIP numbers, Planning Commission Deputy Chairman - Mr. Montek Singh Ahluwalia said, "Month-to-month variation in IIP should not occupy us too much. This high frequency IIP data is not necessarily an indication of an underlying trend. In the current year, the Planning Commission has said that GDP will grow at 8.5% or maybe a little higher. That prediction remains."
In our opinion though the month-on-month performance of the IIP appears bleak, if analysed from a consolidated period, the April - December 2010 registered a decent growth of 8.6%. Also, the core sector growth in December 2010 scored a decent 6.6% which again reveals growth momentum continuing in the economy. Moreover, this may lead to RBI increasing the policy rates in its fourth quarter mid-review of monetary policy 2010-11 (scheduled on March 17, 2011) as it faces the challenge of managing spiralling WPI inflation. (8.23% in January 2011)
| 
|
Impact
After the roll-out of the Mobile Number Portability (MNP), in the telecom industry, the Insurance Regulatory and Development Authority (IRDA) has now introduced portability in health insurance products. Thus now, with effect from July 2011, all existing and new policyholders can switch over to another health insurer and carry the benefits of the previous health insurance policy (provided by the erstwhile health insurer).
At present too, if a policyholder wishes to switch from one insurer to other, they can do so; but any benefit or credit for the period of cover with previous insurer, is not passed on. Hence now, by adopting the concept of "portability" health insurers will allow all policyholders to carry forward the credit gained for pre-existing conditions in terms of waiting period when he or she switches from one insurer to another or from one plan to another, provided the previous policy has been maintained without a lapse.
Moreover, if the policy results into discontinuance because of any delay by the insurer in accepting the proposal, IRDA said the insurer should not treat the policy as discontinuance and allow portability. The regulator has also asked all insurance companies to share the database, including the claim details of the policies, where the policyholders had opted for portability with their counterparts, if requested by the counterpart within seven working days of such request. The regulator asked insurers to acknowledge applications within three working days.
We believe that health insurance portability is a dream come true for the policyholders as they can now switch their insurers at their own will and retain the benefits of their pervious policy. This directive of the IRDA will also infuse competitiveness amongst the insurers and this in turn will result in better service for the policyholders.
|
Impact ![]()
The Insurance Regulatory and Development Authority (IRDA) has introduced a new regulatory norm for life insurance agents wherein they (agents) face the risk of losing their licenses if half their policies sold lapse within three years.
Life insurance agents will now have to ensure that 50% of the policies they sell till March 2014 do not lapse, beyond which they will have to maintain a persistency of 75% for the remaining policies, according to the new norm. From July 2011, all agents will have to adhere to the new persistency norm.
Moreover, in order to move one step forward and be vigilant, IRDA has also directed that employees of insurance companies cannot engage their relatives as agents in the same insurance company. However, as a relief agents would be eligible to take over orphan policies and be entitled to receive 50% of the deferred commission, which the original agent was eligible for. A policy becomes orphaned when its original agent quits the company and is not serviced by anyone.
Insurance agents, in order to earn high commissions sell various insurance policies to individuals dangling the carrot of tax benefit. But later policyholders struggle to meet their premium obligations for various reasons - one being mis-selling. This thus has led to an industry average lapse of around 30%, due to which customers lose and companies gain (as the policyholder is not refunded any premiums in most cases). In our opinion the initiative taken by IRDA is a disciplinary one, and it would instil insurance products being promoted in a wise manner to serious customers, and would ensure better service being provided by insurance agents.
| | | Weekly Facts |
| Close | Change | %Change | | BSE Sensex* | 18,211.52 | 482.9  | 2.72% | | Re/US$ | 45.35 | 0.4 | 0.83% | Gold /10g | 20,370.00 | 140.0 | 0.69% | | Crude ($/barrel) | 103.73 | 2.0 | 1.96% | | FD Rates (1-Yr) | 7.00% - 8.75% | Weekly change as on February 17, 2011
*BSE Sensex as on February 18, 2011 | | Have you reviewed your MF portfolio?
Dear reader,
Buying mutual funds is not like buying vegetables and groceries – a thorough assessment of your risk appetite and time horizon is vital to determine which mutual fund really fits in your portfolio. It’s the time to review your mutual fund portfolio.
Click here to know more | |
In this issue
|
In an interview with the Economic Times, Mr. James Gorman - President and Chief Executive Officer of Morgan Stanley shared his views on the global economy, jobless rate in U.S. and macroeconomic situation in China and India.
According to Mr. Gorman the world economy is a little better at present than a lot of people who thought otherwise. He said, "Of the three that could have been tipping points, all of them are likely to be better than most people thought. The three glaring issues in the middle of the past year were - whether China would have a hard landing or not; whether we would have sovereign debt crisis in Europe? The issue in the US was if we would have a double-dip recession with unemployment stubbornly high? But the corporates had very strong balance sheets, consumers repaid a lot of debt, there were net savings. So, I thought the administration was beginning to understand the importance of a more balanced relationship to business."
Mr. Gorman believes employment numbers in the U.S. are getting better. He is of the view that job recovery requires people to have a confident view of the future to make investments. He also brings out the fact that other parts of the world are going through their own contraction and as exports are bound to suffer which in turn will affect employment.
He asserts that consumer behaviour in the U.S. has been a major driver behind the success of the Chinese economy and is thus transitioning towards a demand-driven society. To him India and China are larger economies. He further adds by saying that, "You can have political shocks we can't anticipate. But I don't plan around political shocks. I look at the fundamentals. To my mind, industrialising populations in the developing markets, freer trade around the world, liquidity in financial markets, political stability around the globe, a financial system which is being cleansed after a serious shock after a more rigorous capital and liquidity standards provide banking the strength that they can start building their balance sheets and assets."
|
Persistency Ratio: A ratio which reveals the percentage of policies that continue paying premium over the premium paying term. The higher the ratio the better it is.
(Source: PersonalFN Research) | |
QUOTE OF THE WEEK
"Capital is that part of wealth which is devoted to obtaining further wealth."
- Alfred Marshall | |
This Week's Poll !!!
************
Will you change your health insurer, if unsatisfied?
To Vote Now! | |