UNCLAIMED MONEY WITH LIFE INSURERS

 UNCLAIMED MONEY WITH LIFE 

INSURERS

Suspect a loved one had bought a policy? Search insurers’ websites

Unclaimed amounts with life insurers declined by Rs 1018 crore but still stood at a staggering Rs 20,062 crore at the end of 2023-24, according to the Insurance Regulatory and Development Authority of India’s (Irdai) annual report. If a breadwinner passes away without informing their family about existing life insurance policies, it can have dire consequences, including loss of home if a mortgage remains unpaid.

Why money remains unclaimed

Unclaimed amounts often result from outdated customer details, making it difficult for insurers to trace policyholders or their nominees. Many customers shift addresses, even move abroad, without updating their new address with the insurance company. Outdated phone numbers and email addresses add to the problem.

Sometimes, families of policyholders are in the dark. Family members are unaware that a policy was purchased and hence are unable to make the claim.

People at times even forget about policies. In many policies, premiums are payable for 10 years, with the policy maturing after another 10 years. People often forget about such policies once they stop paying the premium. Lapsed policies with surrender or paid-up value also tend to be overlooked.

How to prevent this?

Update your bank account, address, email, and mobile number whenever they change. If you close a salary account (shared with the insurer) on changing jobs, or move house, update the insurance company.

Inform close family members and nominees about the policies you hold. If you buy a policy on another person’s life, the latter must be informed. Keep all policy documents at the same place where you keep share certificates, bank statements, and other financial documents.

Opening an e-insurance account can help. When the relatives or nominees open the CDSL or NSDL statements of their loved one, they will get information about the insurance policy.

Currently, e-insurance is mandatory only for new policies. It should also apply to existing policies.

If you suspect there’s a policy

If you suspect a loved one bought a policy but lack the details, search online. Every life insurer is mandated to disclose any unclaimed amount of Rs 1000 and above on their website. A nominee or beneficiary can search for the policy by providing a few details, such as the policyholder’s date of birth, along with their Aadhaar number or registered mobile number.

Currently, nominees must search each insurer’s website. The regulator should create a universal searchable database that will make searching easy. Checking the policyholder’s bank account statements for premium payments can offer clues.

Making the claim

To claim a deceased relative’s policy that is found, nominees must submit a claim form, policy document, death certificate, and bank details. For accidental deaths, a police report may be required. For death due to illness, hospital records might be needed. Claimants must also prove their entitlement to the money.

OPEN AN E-INSURANCE ACCOUNT

• E-insurance, an electronic insurance account, is a digital repository that allows policyholders to store and manage all their insurance policies (life, health, motor etc.) in a secure electronic format (akin to a demat account for securities) via a single account
• E-insurance account can be opened with one of the approved insurance repositories: NSDL, CDSL, Karvy or CAMS
• All policies are stored in one place, making it easier for policyholders and their nominees to locate them
• Family members or nominees can access policy details through the e-insurance account in case of the policyholder’s demise, provided they have the required credentials or identifiers

 

 

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New rules for EPFO pensioners now in effect

New rules for EPFO pensioners now in effect

Starting January 1, 2025, pensioners under the Employees’ Pension Scheme, 1995, have the flexibility to access their pensions from any bank branch in India, under the Centralised Pension Payment System. Here are the new Employees PF Organization rules:

ATM withdrawal facility  

The EPFO will soon issue ATM cards to members, allowing 24x7 access to their provident fund savings for quicker withdrawals, especially during emergencies.

Higher pension deadline

EPFO announced a final deadline of January 31, 2025, for employers to submit wage details and January 15, to respond to clarifications.

New rule for EPF death claim

The new rule allows temporary acceptance of EPF death claims without Aadhaar seeding, subject to verification.

Change in contribution limit

EPFO is considering the removal of contribution cap, allowing employees to contribute based on their actual salary and helping build a larger retirement corpus.

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NPS FUND RETURNS

 NPS FUND RETURNS

Equity-debt allocation: Let risk appetite, not past-yr returns, 

decide

Funds under the National Pension System (NPS) have delivered strong returns over the past year across all assets classes, exceeding their longer-term average. Equity (E) schemes generated average returns of 18 per cent; corporate bond (C) schemes offered 9.4 per cent, while government bond (G) schemes provided 10.4 per cent.

Past year returns have been exceptional where all the asset classes outperformed their 3-, 5-, and 10-year returns by a wide margin. 

The equity market showed remarkable strength, with the Sensex delivering 8.7 per cent over the past year, while the midcap and smallcap indices returned 26.7 per cent and 30.6 per cent, respectively. This robust equity performance boosted NPS equity funds. On the debt side, declining interest rates played a critical role. “Returns have been better than usual over the past year due to declining interest rates, both internationally and in India, as inflation started coming under control.

Experts caution against expecting a repeat. Returns of all asset classes tend to revert to mean sooner or later.

Equity allocation

The active choice option allows investors to change their asset allocation, but decisions should not be based solely on recent performance. The decision on equity allocation should be based on the investor’s risk appetite and ability to handle volatility, while equities have delivered strong gains, they may underperform during certain periods. Younger investors can afford higher equity exposure early in their investment journey but should gradually reduce this allocation as they near retirement reviewing equity allocation every 5-10 years.

 If recent gains have caused equity allocation to rise disproportionately, rebalancing may be necessary.

Debt allocation

Debt allocation requires understanding the nuances of different schemes. C schemes are more stable because they hold shorter-duration bonds.

However, they carry slightly higher credit risk as they are not issued by the government. On the other hand, G schemes have minimal credit risk but are more sensitive to interest rate volatility due to the longer duration of the bonds in the portfolio.

Choice between C and G schemes on the investor’s time horizon. Investors with longer horizons may allocate more to G.

What should new investors do?

New investors entering NPS should be aware of its benefits and limitations. Its low-cost structure and tax-free rebalancing feature. Taxes only apply when you exit NPS. NPS as part of a broader portfolio, and using it strategically to rebalance, thereby minimising tax liabilities.

Before joining NPS, however, investors must understand the restrictions on withdrawal.

Only three partial withdrawals can be made, for up to 25 per cent of the investor’s own contributions, for specified purposes.

Over the long term, portfolios with higher equity exposure tend to outperform, but this comes with volatility. Investors who are comfortable with volatility may benefit from allocating more to equity in their portfolios. For those who find managing volatility challenging, opting for the auto choice option may be a better alternative.

Past returns don’t guarantee future outperformance. Select NPS funds with lower expense ratios and decent AUM sizes.

 

 

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ALGO TRADING : Understand risks, have realistic expectations

 ALGO TRADING

Understand risks, have realistic expectations

The Securities and Exchange Board of India (SEBI) has proposed a framework to enable retail investors to participate in algorithmic (algo) trading. The draft circular, titled Participation of retail investors in algorithmic trading, outlines the process for approval and registration of algos.

Platforms which offer algos or readymade strategies will need to get them approved through the broker. The broker will, in turn, have to register all algos and strategies with the exchanges. The circular is expected to provide retail investors access to registered and approved algos, ensuring their interests are protected. 

How it works

Algo trading automates decision-making in the trading process. The key difference from traditional trading is that all decisions-what, when, and how much to buy or sell – are made by a computer system through an algorithm. Algorithms operate based on preset parameters, removing emotional biases of traders.

Brokers facilitate automation through an Application Programming Interface (API), which connects the trader’s algo to the broker’s platform. Popular platforms like Zerodha and Upstox Pro offer APIs to retail investors. Algorithms can handle huge volumes of trade at incredible speeds.  More than 50 per cent of the trade volume in the market comes from algos.

 

Disciplined trading

Algo trading offers several advantages. Algo trading eliminates biases by adhering to a predefined risk model. It ensures structured and disciplined trades. Delays in manual execution can result in slippage. But algos execute trades almost instantaneously, minimizing this issue.

Algos allow reads to occur 24 X 7 without requiring constant monitoring. Algos can also analyses tones of data in real-time and make decisions faster than any human.

Back-tested results may not be replicated

Algo trading comes with its share of risks. Algos can falter when systemic failures, API errors, and market anomalies occur. Algo trading is hands-free but not risk-free. Investors need to monitor it and intervene when necessary.

Rare and unpredictable market shocks can disrupt the performance of algos, especially amid high volatility. When the market plummets, algos may act only at the stop-loss limit, potentially after significant losses. A human, knowing the market may go down, can respond preemptively. Investors should not treat the results of back-testing as being predictive. Back-testing as being predictive. Back-testing provides insights, but past performance is not always indicative of future results.

Understand before you invest

Many enter this arena without a detailed understanding of how their algo works. Diligently review information on the strategy, risk profile, potential losses, and expected gains before investing. Unrealistic expectations are also common. Investors hear stories of quant funds like Renaissance Technologies delivering astronomical returns and assume similar returns are guaranteed.

Should you go for it?

Algo trading suits investors who prefer a data-driven, objective approach and are comfortable with technology.

A basic understanding of markets and risk management is essential. Risk-averse investors may go for traditional trading or algos with lower risks. They could go for algos with maximum drawdown of 10 per cent.

 

TRADING FRAMEWORK DECODED

Brokers can offer algo trading facilities to retail investors only after obtaining the stock exchange’s approval for each algo

Orders above a specific threshold (of orders per second) will be categorized as algo orders

Algo orders will have a unique identifier

Modifications to an algo must be approved by the exchange

Retail investors, who develop their own algos, must register them through brokers and can extend usage to immediate family members

Exchanges will have a kill switch for malfunctioning algos

 

Govt. staff can get reimbursement for emergency care at non-CGHS hospitals

The Delhi High Court has ruled that government employees are entitled to medical reimbursement in an emergency, even if the hospital is not empaneled under the Central Government Health Scheme (CGHS).

How will this case benefit government employees?

This judgment will ensure that the employees are not subject to any undue hardship or distress during emergencies.

 

How to find CGHS empaneled hospitals?

You can find a comprehensive list of empaneled hospitals and diagnostic centres at cghs.nic.in.

On the website, there is an option to search for hospitals by city. You can select your city from a dropdown list to view the hospitals available in that area. The site provides detailed information about each empaneled hospital, including their addresses, contact numbers, and the services they offer. This can help you determine which hospital meets your medical needs. Once you identify potential hospitals, it is advisable to contact them directly to confirm empanelment status and inquire about specific services covered under CGHS.

 

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