Doctor, banker, trader, broker

Expense account, Mint

Though I’ve noticed the similarities between healthcare and retail finance, the inherent conflicts of interest in the business models of the two snapped into focus as I watched the latest episode of Satyamev Jayate. For those who did not tune in, the show focused on the conflict of interest in healthcare where doctors cut open healthy people to make money (prescribing a liver transplant where none was required and killing the patient was just one case), where commissions on laboratory testing drive private practice and kickbacks and gifts nudge the use of branded medicines on prescriptions instead of the generics that cost a fraction. While the manufacturer and the service provider collude, the patient suffers—both in terms of adverse health results (loss of life and body parts) and in terms of money.

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Traditional plan clean-up begins

Expense Account, Mint

A committee set up by the insurance regulator earlier this month is all set to look into a host of issues, the chief being product structures in traditional life insurance products. There is arbitrage in the market as the unit-linked insurance plan (Ulip) got a cleaner structure in 2010, but the traditional plans (whole life, money back, endowment) continue to be opaque products. The Committee on Design of Life Insurance Products will look into some 17-18 areas including pension products and the highest net asset value (NAV) Ulip plans. On the committee are the chief executive officers of Birla Sun Life, HDFC Standard Life and SBI Life, actuaries of Aegon Religare and Life Insurance Corp. of India and representatives of the Life Insurance Council and Insurance Regulatory and Development Authority (Irda). The first meeting is on 22 May and the report is due in 15 days.

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Is RGESS the next Ulip in making?

Expense Account, Mint

Take a 1970s French scheme that “worked” in what are now seen as medieval times in finance. Add a government department desperate for a new idea, having botched up the retail part of the financial market by creating situations where regulators fight and investors get swindled. And you get the proposed Rajiv Gandhi Equity Savings Scheme (RGESS) that gives a tax break to small investors who invest directly in equity. The scheme will give first time equity investors who earn upto Rs10 lakh a year, that is Rs83,333 a month, or a post-PF and tax amount of about Rs50,000 a month, a 50% deduction on investment up to Rs50,000 directly into stocks.

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Rethink loads, make them really zero

Expense Account, Mint

When U.K. Sinha took over as the capital markets regulator in February 2011, there was a pervasive expectation that the upfront commissions embedded in the price of a mutual fund would be back. His UTI Mutual Fund (UTIMF) and Association of Mutual Funds in India (Amfi) stints were taken as an indication that he would be more “reasonable” than his predecessor, C.B. Bhave, who banned loads in mutual funds, stunning the then Rs 6.1 trillion industry. The presence of the load—an invisible payout from the investor’s money at entry or exit—has been proved to encourage sales of the heaviest load products and churning (when the seller moves money in and out of financial products to harvest the charge sitting in the product), both of which are harmful to the investor.

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