Here is a round up of key developments in personal finance.
Insurance companies can change rates by up to 15% without IRDAI nod
Insurance Regulatory and Development Authority (IRDAI) has allowed the freedom to insurance companies in revising rates. Insurance companies can now increase or decrease the premium by 15% depending on their claims experience in a specific sector.
In case, an insurer has received high claims and experiences high loss ratios in health or motor sector, then the IRDAI move makes it easier for them to hike the premiums without having to file with the regulator.
In the same way, if an insurer experiences a better than expected experience in a certain insurance product category, then the IRDAI move also makes it possible to pass on the benefits in the form of lower premiums.
Labour Ministry notifies 8.65% interest rate on Employees Provident Fund for 2018-19
Interest on provident fund deposits for 2018-19 will soon be credited to the accounts of more than six crore subscribers of retirement fund body Employees Provident Fund Organisation (EPFO). The Labour Ministry has notified 8.65% interest rate on EPF or Employees Provident Fund for the 2018-19 year.
It is estimated that Rs 54,000 crore as 8.65% interest for 2018-19 will flow into the accounts of more than six crore EPFO subscribers.
Do note that now EPF withdrawal claims for 2018-19 will also be settled at a higher rate of 8.65% for 2018-19. EPFO had been previously settling claims for 2018-19 at 8.55%, the interest rate for 2017-18.
EPFO had approved the higher 8.65% interest rate on February 22, 2019.
PSU banks to rework repo linked home loan products
Public sector banks that have announced repo linked home loans will have to rework their individual products after Reserve Bank of India (RBI) guidelines have not allowed setting any income criterion.
After disbursing about Rs 2,000 crore worth of loans under its repo linked home loans, SBI was the first to recall the scheme. Following in SBI’s footsteps, many PSU banks had launched repo rate linked home loan rates. All of them are said to revisit their products.
The Reserve Bank of India came out with elaborate norms on the need for banks to link all their new retail loans and MSME loans to an external benchmark. SBI’s repo linked home loans were open only to people with a certain income level.
Rating agency Moody’s has said that repo linked loan products are credit negative for Indian banks and will limit their flexibility in managing interest rate risk.
It is becoming increasingly clear that the reworked offerings may not be linked to the repo rate, which is relatively more volatile than other benchmarks. It is likely that other benchmarks mentioned by the RBI will be considered.
Now, you can pay medical insurance premium monthly, quarterly or half-yearly
Policyholders will soon have the option of paying the health insurance premium in not just annual mode. You can pay monthly and quarterly instalments as well.
Earlier health insurance premium was collected by insurers only on an annual basis.
According to IRDAI norms, the premium mode can be monthly, quarterly or half-yearly provided there is no change in the premium structure or charge.
The inflation in health care costs is high. This is pushing the need and demand for high sum insured in case of health insurance. Paying premium in one go is expensive. So, paying the premium in small parts can solve the cash flow problems of health insurance customers.
The norms also allow the addition of more critical illnesses to the cover, as well as increasing the maximum age limit from 65 years, with permission from the regulator.