Page 31 - Insurance Times August 2020

Government co-contribution returns and the fund has a good reputation. The charges
must be reasonable and death, disability and income
The Government encourages eligible individuals to save for
their retirement and makes matching contribution to protection benefits are provided.
members' contribution till a maximum limit. This
contribution depends on income of individual. How is SA different from Retirement?
SA means getting released from one's service after reaching
Choosing a Super Fund a pre-defined age - example 58 years. Retirement can
a) Employers choose a 'default' fund for employees who happen when one attains SA age of 58 years or it can
do not exercise their choice. happen through voluntary or compulsory means.
b) Identify those employees who have a right to choose
their superannuation fund. How is SA different from Gratuity?
SA scheme is only for certain categories of employees. As
c) When a new employee joins work, he should be given the
per payment of gratuity act, payment of gratuity is
SA form within 28 days of a new employee joining work. If
employee doesn't choose within 28 days, the employer will compulsory to any employee who completes 5 years of
pay superannuation funds into the default fund. service in a particular company. DA = Dearness Allowance.
d) Employees can make a new choice of fund once a year. Gratuity =(Basic Pay + DA) x 15 days x No. of years of service
While choosing a fund, ensure that the fund gives good 26

Insurance sector likely to see move mergers, consolidations

The proposed merger of Bharti AXA’s non-life insurance business with that of ICICI Lombard General Insurance is just
one of the latest in the insurance sector, which has seen quite a few such developments in recent months. The gen-
eral insurance segment has seen two big-ticket announcements in as many months, while the life insurance segment,
too, has been witnessing hectic activity. According to analysts, with a large number of players in both sectors, more
mergers and consolidations could take place in the coming months.
Noting that the country’s general insurance industry has 34 players in 2020 against 26 in 2010 and 29 in 2015, a note
by ICICI Securities said: “Only 14 out of 34 players have both healthy combined ratio (less than 110) and comfortable
solvency (greater than 180). As such, the industry is rife for consolidation.” Earlier in July, Paytm had announced plans
to acquire Raheja QBE General Insurance. “Going forward, we expect more mergers and consolidations in the Indian
insurance sector, especially in the non-life space. “This is primarily because there are very few players with large
market share in the non-life space.
“Further, issues such as low non-life insurance penetration, increased operating costs, difficulty to maintain the pre-
scribed solvency ratio, fierce competition, and inadequate distribution channels pose a challenge for smaller insur-
ance players in the market,” said Amrit Mehta, Partner, Majumdar & Partners, adding that consolidation can help
leverage better on well established distribution network and reduce operating costs. In the life insurance sector, too,
there has been a move towards acquisitions and stake sales.
Earlier this month, IDBI Bank said it had executed an agreement to sell up to 27 per cent of its stake in the life insurer
to its joint venture partners – Ageas Insurance International and Federal Bank. While 23 per cent stake would be sold
to Ageas, Federal Bank would acquire up to 4 per cent stake, leaving IDBI Bank with 21 per cent stake. Similarly, Axis
Bank and Max Financial Services had, in April, announced the signing of definitive agreements to become joint ven-
ture partners in Max Life Insurance.
There are two dozen life insurance companies, including Life Insurance Corporation of India. With mergers of public
sector banks, many of which own stakes in insurance companies, stake sales and consolidations in the insurance sector
could see more activity. Union Bank, which has a stake in Star Union Dai-Ichi Life Insurance, plans to sell the 30 per
cent stake it got in IndiaFirst Life Insurance company post-merger of Andhra Bank with it by December.

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