Tag Archives: Mutual Funds Distributor

Business Ethics of Insurers

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Hello Friends,

           Last weekend (Feb 25/26) I watched a movie called “Rainmaker” directed by Francis Ford Coppola, rated as one of the best directors and has movies like Godfather to his credit. The movie is based on a book written by John Grisham, Lawyer and acclaimed writer of legal thrillers.

Matt Damon, plays the role of an Attorney, very enthusiastic and fresh out of college. He signs up the case of a poor family with their son, about 20 years old, suffering from Leukemia, which can be treated through bone marrow transplant. But their Insurance Company rejects the claim multiple times (saying treatment is very high and chances of survival is low) and Matt files a lawsuit against the Insurance Company. The insurance company is ruthless and as a protocol rejects every claim, atleast the first time, without going into merits of the case (their operational manual say “reject” the claim). The diseased victim dies during the trial, as the time frame to start the surgery got delayed. The parents of the victim pledge the entire money to social cause, if they get the verdict in their favour, as their son is dead and don’t intend to use that money for themselves.

Finally, the Jury gives the verdict in favour of the victim and his poor family and asks the Insurance Company to pay a huge amount as punitive damages, resulting in the Insurance Company going bankrupt. 

Before you start thinking that why PenguWIN has shifted lanes from writing about “Financial Topics” to “Movie Reviews”, let me assure that this is a personal finance blog and I am not a movie buff to demonstrate my competency in Reviewing Movies!

On the 2nd March (Last Thursday), I read an article on consumer protection by Jehangir in Business Standard. When I read the article, I was really shocked. It relates to a life insurance claim of a person for a Sum Assured of 2 Lakhs, who was hospitalised in Amritsar and died. The Insurance Company repudiated the claim made by the victim’s wife on grounds that the victim was suffering from chronic liver disease for 18 months and the same was not revealed when the insurance policy was taken. I don’t want to name the Insurer, which is what is frightening more so for the claim amount (I have attached the paper cutting in the link). 


The Insurance Company lost the case in Gurdaspur district forum but went ahead to appeal in Punjab State Commission. The Insurer relied on Medical Certificates obtained from 3 doctors that claimed the victim was an alcoholic and had suffered cirrhosis of the liver (an abnormal liver condition in which there is irreversible scarring of the liver, resulting in failure).

The state commission upheld the Insurer’s stand and set aside the district forums award. The victim’s wife approached the National Commission and contended that her husband was a school teacher, used to go for regular health check-ups and the reason for death was an accident which had nothing to do with alcoholic Cirrhosis of Liver and produced the relevant records. This is where you will see another twist..

The national commission, on reviewing the medical certificates that the insurer produced from 3 doctors, found several loopholes – 1 is not even a allopathic doctor and the handwritten certificate did not have the date and reference. Similar observations were made on the other 2 certificates and the medical record of the hospital showed that it was uncertain whether the liver problem was associated with alcoholism. The National Commission indicted the insurer for their fraudulent practices and decided the verdict in favour of the victim.

Apparently, a claim cannot be declined on assumptions or on basis of medical certificates which are vague. The name of the Insurer and the way they had conducted themselves to decline a small sum of 2 Lakhs is definitely worrisome.  

Does the lawsuit ring a bell with a similar one which caught the attention of the entire the country?


<Blog # PenguWIN 1050 – Business Ethics of Insurers>

Finally, some good news to cheer

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Hello Friends,

           I started writing this blog early last week but had to delay it for more than a week. The reason is not the availability of time but wanted to ensure that the blog title should not be construed as an innuendo to the 2 weeks drama in Tamilnadu Politics.  Also, the kind of interest that people had in following this drama outside Tamilnadu and even in other countries would make anything else insipid.

I had mentioned in one of the earlier blogs that the outflow of money through Foreign Institutional Investors (FII) is countered by the inflow of Domestic Institutional Investors (DII), mainly retail investors. The flows from Retail investors has been increasing month on month as witnessed by the data provided by CAMS (Back office operating unit for major MFs) in the picture.


This can be interpreted in 2 ways:

  • Retail investors have started accepting the fact the equity investments are the best for long term wealth creation.
  • The returns from Physical assets like real estate, gold and financial assets like Bank FD have been dwindling and even providing negative results.


Whatever be the interpretation, Indian Investors have realized the importance of Equity investing. The proportion of investments or the Asset allocation is something that would vary based on age, risk appetite, risk capacity and so on. In the past, any pull-out by FIIs would result in a blood bath in Sensex and Nifty, even if it has nothing to do with our fundamentals. Now, the DIIs are able to counter the FII pull-out to a great extent as shown in the graph, which is one of the key reasons why our Indices were not majorly affected by Brexit or US Fed Rate Hike or Demonetization drive. All losses were recovered in a short period of time

The other concern that was prevalent was the run-up of Index values, not justified by the earnings of the companies, which was poor. Demonetization, resulted in reduction of consumer spending for certain sectors like FMCG, 2 wheelers, Consumer Durables and Telecom (more due to the Reliance Jio entry). After several quarters of mediocre earnings, the growth was expected to pick up in the Dec 2016 quarter. Unfortunately the demonetization drive overlapped with the earnings recovery season and the results were expected to be tepid.

However, if you go by the Q3 earnings released till date, the margins of companies have been expanding which is evident in the picture that shows the Q3 2015 performance Vs Q3 2016 performance. The recovery of commodities, energy sector and treasury gains helped to a large extent.                   



<Blog # PenguWIN 1049 – Finally, some good news to cheer>

Tax Savings under Sec 80C – Deduction of 1.5 Lakhs under ELSS

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I had already written a detailed article on tax saving schemes during the last Financial Year and thought of reminding you as the Finance/Payroll folks starts to chase us.  Most of the content is valid today also and I have added the content in specific areas to reflect the changes for the current scenario.
  • After retaining the popular Public Provident Fund  (PPF) Interest rate at 8.7% for quite some years, Government in Feb 2016 decided to Peg the interest rates of all small saving schemes including PPF, SCSS, KVP, Post Office Time deposits , MIS, Suganya Samrithi to the Government Securities or G Sec. yields for the previous 3 months. This rate will be reset every quarter going forward. This has resulted in PPF rates going down to 8.1% in April – June Quarter and Jul-Sep Quarter, FY 2016-17. Subsequently, starting 1st Oct 2016 the rate has been further lowered to 8% and remain the same till Financial Year Closure, i.e. 31 Mar 2017. I have taken PPF as an example since it a popular tax saving option among small savings. The reduction is applicable to the other products too with variations in Interest Rates (SCSS, Suganya Samrithi enjoyed higher rates than PPF earlier and the difference continues)

  • Bank Fixed deposit rates has been coming down sharply due to RBI Repo rate cuts and limited credit off-take. This has resulted in the popularity of Tax saving Bank Fixed Deposits going down. 
  • Since 2014, retail investor participation (via Mutual Funds) has been increasing with the Inflows touching all time highs month on month in CY 2016. The participation of Provident Funds and increasing NPS (National Pension Scheme) flows has resulted in the Domestic Institutional Investors (DIIs), investing huge money to counter the Foreign Institutional and Portfolio Investors. The markets react negatively whenever the FIIs and FPIs pull out, going down, which was a cause of concern. With the flows from DIIs increasing, the stability of the market has been improving 
Equity Linked Savings Schemes investing in Equity Markets has the minimum lock in period among all other options in 80C. Typically systematic investments is recommended for Equity but many of us think about submitting the proof of investments only when the company starts chasing us. So, you could still invest on a weekly basis for this financial year and plan to do more systematically from next financial year. Investors who are averse to Equity shoud use this opportunity to take small exposure that you are comfortable with.
India is moving towards an Economy where investments in Real Estate and Gold are not attractive options anymore (like most developed countries). This makes Equity Investment almost a mandatory option unless your wealth is significantly huge that even if it lies in Savings A/c, it will last for 2 generations!!! 
$$ Axis Long Term Equity, Birla SL Tax Relief 96, DSP Black Rock Tax Saver, Franklin India Tax Shield, Invesco  India Tax Plan and Reliance Tax Saver are some of the funds with a good track record


<Blog # PenguWIN 1048 – Tax Savings under Sec 80C – Ded. of 1.5 Lks under ELSS>