We need products that help us make money, not lose it

Since this is the pre-budget lobbying season, here is a pitch for an investor-friendly product that also collects money for the government. At the moment, banks and insurance companies are the octopus arms of the government that suck money out of households, destroy purchasing power with negative returns and hand over the money to the government to finance its deficit. I looked deeper into the numbers and found that the investment of just life insurance companies in central government securities as on 31 March 2013 was a huge Rs.5.1 trillion, or 5% of gross domestic product (GDP), for that year. Another Rs.10 trillion is in “state government and approved investments” and “approved investments”; and another Rs.2 trillion in “other investments”. The total investment by life insurance companies as on 31 March 2013 stood at Rs.17.44 trillion. Given that the total premium income of all life insurance companies was Rs.2.8 trillion for the year, the investment number must be the cumulative figure held by life insurance companies as on 31 March 2013.

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Court takes a hard stand on insurance mis-selling

The way life insurance is manufactured and sold in India is much like a trap, with regulators, companies, sellers and ombudsmen all colluding to defraud households of their money. The trap works like this: you have a bank that you’ve banked with for years. There is trust. The bank has a relationship manager. This manager pitches a product to you. He may do so because he sees a balance that is investible or a sudden inflow of retirement money or a bonus or some other lump sum. But a product is pitched. The pitch is verbal. The merits of buying this product are explained in great detail. Brochures are shown, numbers are circled, final return values are discussed. Words like ‘mutual fund with free insurance’ and ‘guarantee’ are commonly used. You trust your bank. You believe the manager and say yes. Thirty seconds later the money is transferred to the product—the paperwork will happen. We’ll fill the forms and you just sign. Because you trust your bank, you agree. The policy documents come after the money has been invested, you try and read, but they are so complicated that you get on with your life. It was your banker who sold you the product and he said, ‘We’re there for you. Don’t worry.’ You believed him.

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They say the Sensex will touch 40,000. Will it?

They’re saying that the Sensex will touch 12,000?” She said in a hushed whisper. It is 2005 and I am talking to a senior citizen couple who have come as guests to get their financial plan made in my first television show called Show Me the Money with NDTV. I remember being unhappy with their 100% stock allocation at a time when their had unmet lifestyle costs. I had wanted a rejig of the portfolio towards some regular income products while leaving at least half the portfolio in stocks. But the thought that the markets will keep rising kept them from doing anything about their portfolio. The next decade saw the same index soar to just over 20,000 in January 2008, then drop like a stone in water to just over 8,000, 14 months later in March 2009. The Sensex is flying at almost 25,000 now and the question remains the same, with just a change in value. “They say the Sensex will go to 40,000 soon; will it?”

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