No more short term and cheap ULIPs

IRDA's decision to cap the ULIP charges to 3% from 2010 has already showing impact.SBI Life has increased the minimum policy premium from Rs 6,000 to Rs 12,000, Star Union Daiichi Life Insurance has increased it from Rs 12,000 to Rs 18,000 and also the minimum tenure has gone up to 10 years. Another company Aegon Religare has increased the minimum premium from Rs 12,000 to Rs 15,000, and has increased the term to 10 years from five years.Other private companies are likely to follow.

The move to lower charges was definitely to effect the term of the policy as IRDA has regulated charges in terms of YIELD (Gross return- net return at 10% should not be more than 3% for policies less than 10 years and 2.25% for more than 10 years). So the charges will remain more or less the same as commission needs to be payed from that and instead the term will be long term and bonuses will be more at the end of the term, and it will increase proportionately with the term of the policy; so that the yield cap is maintained.

Also the fund management charge(FMC) is capped at 1.35 per cent for products below 10 years and at 1.25 per cent for more than 10 years. So longer term means more FMC in terms of money payed. So more or less there is not going to make any major difference and instead the customer ends up locking his investment, which in turn is good for the customer himself, economy and the company. Some of the losses the company will make will be recovered by lending the money of the customer to long term projects of the economy.

The overall effect- More long term policies, less commission for short term policies, less small ticket policies, more money for the economy, but the effect in new policies sold needs to be seen. It may be less as customers always prefer short term unless the agent miss-sells long term policies as short term.

Shoud India be divided into smaller states?

The recent Telangana issue that it should be divided from Andhra Pradesh because of backwardness is no reason. Earlier India was divided into states based on language. Now the context is development. But my question is those politician who ask for a separate state has not done anything for their respective constituencies and as such there is no development. And now they are asking for separate state on developmental issues!!

This division will only lead more such movements as in AP itself( rayalseema), UP, West Bengal(Darjeeling),Maharastra (Vidarba), Gujarat, Rajasthan, MP and so on. But does it really help the poor.Haryana and Himachal has taken nearly four decades to be successful. The rampant corruption and Maoist issues in Jarkhand and chhattisgarg tell a different story.There are smaller states in North East but where is the development?

And it is only the richer will get richer. There will be new CM, and ministers, new head of police, judicial, etc (leading to more corruption on account of newer projects)and only the higher class will be benefited. But the farmers will be farmers. The poorer will be poorer.

Instead of a separate state, they should be given autonomy. Except for legislative and military powers all other powers can be given. Let them have a new High Court, new University etc.But then the politician will not get involved as there are no New Ministerial berths created.

Why employees leave company?

This idea came after a heated argument with one of my friend about why employees leave a company. This I am writing from my own experience and observation.

What I feel is that employees leave an organisation due to various reasons but can be broadly classified into these four....

1) Money: It may be salary or incentives. If an employee feels that he is not getting what he is supposed to get( comparable from market and competitors) and he feels that he is exploited. He may be paid 10k or 100k per month but he must feel that he is paid the best according to his abilities otherwise it will not work out.

2) Growth: Career growth is what all employees look. If one's career prospects is not fulfilled in a particular company then he will look out.

3) Mental balance: In this I mean to say whether he is able to handle the pressure, time spent with his near and dear ones, time to do other activities that he likes to do apart from his normal office duties. One can call it as work-family imbalance and it has huge repercussions.

4) Environment: If the above factors are not there but his working environment is good, he will surely wait for some more time before leaving. By environment I mean his immediate boss, his colleagues, and distance to and from his office. If his working environment is not good and any one of the above is also not fulfilled then he is sure to leave. I have included the distance mainly due to the shifting of companies outside the city area as well as people residing outside city limits due to costs. It consumes a lot of time and makes you tired.

Now apart from these also some will not leave, and the reason is that he does not want to take risk by moving out into another company or that he is unable to get a new job.

These factors will also make a company good or bad in terms of working conditions.