India Development Debate: Covid and Health Insurance. ET Now

With health insurance becoming more important than ever amidst the harsh second wave of covid-19, data from states across the country suggests that only 51% of the covid-19 claims received from the beginning of the pandemic have been settled. Tamanna Inamdar breaks down how to make your health insurance policy work for you on the India Development Debate tonight with Monika Halan, Author, Let’s Talk Money, Tarun Mathur, Co-Founder, and Naval Goel, CEO & Founder,

See the show here.

Read the story here.

On the India Development Debate, I spoke about the fact that insurance firms are not paying covid claims in full. The problem is only half with insurance contracts and firms. The other half has to do with hospitals padding costs. @TamannaInamdar@ETNOWlive

The problem with the insurance contracts are that they are mostly one-sided with the individual having very little bargaining power. Companies can refuse to pay or deduct the payout by interpreting the policy provisions in their own way. This is market failure. When there is market failure government needs to intervene to put down road rules. Insurance regulator needs an upgrade – that’s an easier part. India needs a regulator for hospitals urgently.

See the show here: India Development Debate

COVID-19 insurance complexity: Good time for regulator to set things right, says Monika Halan. CNBC

Insurance companies are in focus as the Insurance Regulatory and Development Authority of India (IRDAI) has received complaints about COVID policies not being offered and renewed. Atul Sahai, CMD of the New India Assurance Company and Monika Halan, Author of Let’s Talk Money shared their views.

“As far as New India Assurance is concerned, I don’t see this happening. This could be the approach adopted by some of the companies but in the wake of COVID, no new guidelines have been issued as far as we are concerned,” said Sahai.

“The need for health insurance has suddenly increased for most people. The new insurance buyer has got afraid that something may happen and is now running to buy insurance. Globally, insurance companies are struggling to understand this risk and to price this into premiums. So, different companies approach the cooling-off period differently. COVID-19 pandemic is a new event and everyone is struggling to find their balance with it and people seeking health insurance cover for the first time post COVID are in for a little bit of a rough ride unfortunately,” Halan added.

“This is a great time for the government and the regulator to set things right in terms of insurance,” Halan mentioned.

According to Halan, higher loading is expected for the new policy entrants.

“The companies will have to probably increase the premium for the entire age bucket. The price rise will be across the board and not specific to a person,” she mentioned.

Incurred Claim Ratio (ICR) is used to gauge whether this market is fair or not. The number is obtained by total claims paid divided by the total premium.

While explaining the current market condition, Halan shared, “If the net number is at 100 percent, then we are seeing a fair marketplace where after profit and cost, insurance companies are neutral.”

“According to data, the private insurance companies’ ICR is 53 percent, the standalone insurance companies’ number is 56 percent, and the PSUs are 92 percent, which means they are doing well. I think it is a complete regulatory failure because you are not being able to ensure that there is no gouging of the customer,” she further mentioned.

“We are not going to increase the premium till we tide over this crisis,” Sahai shared.


E-Baithak – ‘Personal Finance Q&A with Monika Halan’ Vittashala SRCC

“Financial freedom is available to those who learn about it and work for it.” – Robert Kiyosaki Coronavirus pandemic has made us realize true importance of managing our own finances. In times like these when people are losing jobs, experiencing salary cuts, businesses suffering due to country wide lockdowns etc. we can understand why knowing about concepts like Emergency Funds is crucial. Vittshala, the financial literacy cell SRCC had the privilege to have ‘Monika Halan’ ma’am with us for E-Baithak- ‘Personal Finance Q&A with Monika Halan’ where she answered our queries and gave her insights in the field of personal finance. Monika Halan is a best selling author – “Let’s Talk Money”, adjunct Professor at Indian Institute of Corporate Affairs, finance journalist a speaker and a writer on financial literacy, regulation, inclusion and consumer issues in retail finance.

Franklin Templeton is now a fund house risk for investors

Photo by Karolina Grabowska on

The Franklin Templeton (FT) story gets worse every few weeks. Reena Zachariah reports in The Economic Times that the fund house is trying to make a domestic capital market regulatory issue into a foreign policy issue for India. She reports that the global and Indian senior management of the fund house has reached out to the India’s US Ambassador to complain about India’s capital market regulator Sebi. The trigger, says the newspaper report, seems to be the show-cause notice to FT staff who pulled money out of the distressed schemes ahead of the freeze in April 2020 and a disgorgement bill of Rs 440 crore in management fees to be clawed back. The threat of exit, even if made as an arm-twist move, by FT brass has caused a fund house risk (the risk of the fund house shutting down or exiting the business) for investors.

Quick recap: In April 2020 FT froze six debt funds due to corona induced liquidity issues. In my opinion then, this was a good move since large investors have earlier exited distressed debt schemes due to better access to information and advice, leaving the pure retail investor holding the worst paper in the portfolio. By freezing the schemes, both large and small investors were on the same page, and as the money would be recovered, both would get it back pro rata. The case then went to court and a good summary of events can be read in this report by Manoj Nagpal.

But since then several worms have been pulled out of the can. But what has moved the story from a pure mis-managed scheme and true-to-label issues to a very serious regulatory issue and an even more serious foreign policy issue, are two things. One, In a superb story Jayshree P Upadhyay wrote how the fund house allowed senior insiders and their families to exit the distressed schemes ahead of the scheme freeze. This now becomes a possible insider trading issue that has serious consequences for the fund house. Sebi, according to newspaper reports, has sent a show cause notice to the fund house. This has triggered the invocation of the Indian ambassador to the US by the management leaders of FT to complain about Sebi and to threaten a closure of business in India. This makes it a foreign policy issue.

Two, by making it a foreign policy issue, FT has crossed another line. According to the Economic Times story cited above, the complaint to the Indian US Ambassador is around the disgorgement of fees for the six mismanaged schemes, plus fines and some other regulatory strictures. The letter cited by the paper reads more like a threat. It says that FT is one of the few foreign owned fund houses in India that has not decided to cease operations (possibly referring to Fidelity’s exit in 2012) and were it to pull out there would be job losses. The unsaid is that there would be a loss of face for India globally.

When Fidelity exited India in 2012 the commentary was that tighter Sebi rules around charges and disclosures were making the industry and business unviable. Instead of looking at Fidelity’s high costs, the narrative was on Sebi being a very strict regulator. FT is possibly thinking of similar narrative today of the regulator getting blamed for taking action on insider trading and for tighter regulation. But what FT needs to remember is that not only did the industry grow exponentially to about 5 times the 2012 AUM, but the market regulator has increased the pace and depth of regulation to which the industry is subject to make funds investor friendly for no loss of pace of growth of the industry. Also, there is a hungry breed of domestic asset managers who are in the process of applying for or readying the mutual fund offerings. A new wave of passive fund managers should be en-route as well. By trying to step over Sebi’s head and hoping to make it a bi-lateral foreign policy issue, FT has showed very poor judgement. Worse, it now makes investors in FT subject to a fund house risk.

What happens if FT carries out its implicit threat and actually exits India? Nothing much really for the industry, but for investors there is a fund house risk due to the threat of exit. According to Amfi data, FT is the 11th largest out of 43 asset management companies (AMCs), with around 3% of the assets under management of the industry. If FT decides to sell, it has two options. One, it can shut shop and return the money at current NAV to investors. Remember that the mutual fund industry in India is set up with the money held in a trust in the name of retail investors. It does not belong to the AMC – they cannot run away with it. Two, FT can sell the AMC to another sponsor. Also remember that the AMC is just a fee-for service provider whose job is to manage money. Another sponsor can buy out the AMC business from FT. Given Sebi’s regulations on one scheme per category, it would not make sense for another large AMC to buy FT schemes since they all have their own categories filled and will have to merge these schemes. It would make sense for a new sponsor (domestic or foreign) wanting to enter the business to buy the AMC. Maybe we’ll see Fidelity coming back. Or maybe one of India’s largest business houses will sniff this as an opportunity to get size and scale in the Indian mutual fund market. 

But for investors in FT schemes, there is now, what is called, a fund house risk. This is the risk of the fund house exiting the business and either returning investors’ money or finding a buyer. For investors this would mean taking a call to stay with the fund house and wait for the new buyer or to exit. Exit means a reinvestment risk and a tax impact for any capital gains. It is not certain that this is what FT will do, but by threatening to quit and taking the battle out of the Indian regulatory jurisdiction to the US, the fund house just moved the uncertainty level up several notches for the Indian investors.

Monika Halan is India’s trusted personal finance writer, speaker and author who helps families get their money decisions right.