LIC’s problems
Many people ask me why I suggest New India for medical insurance, but never suggest LIC for life insurance. The answers are simple. Medical insurance is a simple product and the probability of getting a good interpretation of the policy is quite high with New India. In fact if you have not lied in the policy application, and paid your premium on time, the chances of a genuine claim getting passed is very high with New India. My personal experience with Cholamandalam in medical insurance was not very good – they tried a million excuses to drop my mother from the plan after she crossed 67 years of age. So it was back to just New India for all of us.
However if my money has to be invested I prefer good mutual funds like Templeton, Icici, Dsp or Hdfc. Look at the recent Ntpc FPO. Personally I do not like to invest in psu shares – the only 3 exceptions were companies which had built up scale. These companies were Ntpc, Ongc, and SBI. However a Goldman Sachs report says how the government took away $ 20 billion to subsidise the downstream units. Similarly when Narasimha Rao’s son cheated SBI – by an amount of Rs. 130 crores, the matter was hushed up.
Now the NTPC FPO. Personally the shares were attractively priced. However the market did not think so, and rejected it. Companies, merchant bankers, investors, speculators, traders, all have to respect the market. Pranab Mukherjee need not respect the market. LIC and SBI were forced to buy the shares. In the longer run LIC and SBI may make money, but now neither did SBI ask its shareholders nor did LIC ask its policyholders! So once again the shareholders of SBI have funded Mr. Pranab Mukherjee’s deficit.
So if you are worried about ‘directed’ investments, stay away from PSU shares and PSU ‘money managers’. Like it or lump it LIC, SBI, NTPC, BSNL, WILL all be governed by managers who bow to the ‘babu’ and do what he / she says is. Look at the BSNL employee union. They are asking for a good top management that will not bow to the babu and the ministers, the government is not too pleased with this request. Subir Raha stood up to the babus when he ran ONGC….but such stories are rare. So if you want to buy a term plan go to google..and you will find Religare ageon plan on the net. For managing money there is always I Pru Discovery, Franklin India Blue chip, Hdfc top 200, Hdfc prudence…
NPR
Yes, even I dont like PSU companies, which are under the nose of Babus. However, a few PSU Banks are run well. Union Bank of India, Bank of India, Corporation Bank, etc. I recently subscribed to REC, which I thought was attractively priced and in a good niche (Infrastructure financing). I also hold Indraprastha Gas (another PSU) with decent prospects. But, as the PSUs get big or famous, they will be invariably arm twisted by the Babus. I doubt any PSU can be a long term hold due to the same.
Actually, its Subir Raha (not Rana). You know, names can be tricky and it would be huge disservce to somebody like Raha.
Ranjan
Agree totally with your points. But the only apprehension I have is that when it comes to claims, Religare Aegon may dilly-dally (similar to your cholamandaklam experience with medical insurance)
subra
no Ranjan, I do not agree with you. Death is death. Thank God IRDA does not allow death to be interpreted. So if a guy is drunk, he is involved in anti-social activities, …or ..or…it does not matter. So if a person has said all the truth – health, illness, etc. and there is a genuine claim, surely the claim will be paid. If it is a false information that was provided – NO LIFE INSUR CO. WILL PAY THE CLAIM. So for honest clients, it should not matter…
Abhishek
I defer abt investing in PSU, Promoter play dirty game, join hands with operators, instead of shareholder gain they run for personal gain. R* group, both are perfect example so be it Akruti or HDIL or JP group or DLF (most of them Nifty50 stock) any other, I personally know two different company promoter’s have 100+ crore m cap (+ cash flow company) belong to my native city, they ran their black money-white money conversion business well in name of listed company ..
At least in case of PSU all this doesn’t hold true… Definitely Babus are big bottleneck so be it Govt Policy/political interference … But it give me piece of mind that I would not be cheated by handful greedy people (Promoter, operator)…You might say PSU stock also ran by operator but a few (% chances are less) and for only some time
My 2 cents
Anu
Just started reading your articles. I cannot take my eyes off your site……. This was an excellent article. Finished reading ‘rich dad poor dad, rich dad smart kid-how to teach your kids to be financially smart (i think all parents should read this book especially in India, where the kid is so pressurised to study study n study at shcool as well as home…)
Manish
Subra
I would like to argue a bit, it may be my ignorance .
I respect AR as a company and personally I would prefer to go with it , I understand that the cheapest term insurance is the best one . However my readers on my blog were somewhat successful in shaking my confidence and made me beleive that private companies are atleast less better than PSU like LIC when it comes to honouring the claim .
The recent IRDA report says that AR has not settled even a single claim out of 7 , 5 are rejected and 2 are pending , now I understand that there can be genuine reasons to reject the claim and the sample data is not so big to make any judgement , but still this makes me feel somewhere that things are better off with LIC or say SBI .
My readers biggest worry is “Little extra premium is fine but the claim procedure and probability of getting the claim should be very high” .
Please enlighten me .. I am confused seriously for the first time 🙂
So finally what are your points which would prove me that “Cheapest term insurance is the best one” and its equivalent to any of the companies policies” ?
Manish
Dr Mohammed Ali Khan
@ Manish
“My readers biggest worry is “Little extra premium is fine but the claim procedure and probability of getting the claim should be very high”
Exactly
subra
Manish,
being confused is good – normally thinking causes it! Dr. Khan there is not enuf data to say who will settle the claim. The quality of data available in the public domain is of dubious.
Hi Anu, thanks. I like Kiyosaki, but there are many, many in fact too many contradictions in what he says :). The US is a great place to create one concept and build an industry around it. On google you will find anti Kiyosaki stuff – lots of it.See both sides.
Anu
I completely agree with you. Infact i registered for a course with them since i live in Canada, but bcoz of the internet review and some other stuff i backed out. Neverthless, the book is worth a read.
Anoop PK
Hi Subra,
I almost a regular reader of your blog. But I missed a topic related to ‘medical-insurance’. Can you publish it here please. I have many queries related to medical insurance. I think your blog will help you to solve all. Waiting for your reply.
Thanks..