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SBI Life tests scheme for VRS takers

Freny Patel

SBI Life Insurance Company launched the first of its products, a single premium policy-Sanjeevan on Friday at State Bank of India's (SBI) branches. The policy targets employees who have opted for the voluntary retirement scheme (VRS). The official launch is scheduled for May 22.

"The product has been test-marketed internally to ensure that the underwriting and IT systems are in place," said SBI Life's chief executive officer and managing director, R Krishnamurthy.

The firm is the first private sector insurance player to commence operations targetting the huge VRS corpus, estimated at over Rs 100 billion in the banking sector alone. Following the public launch of this product, company officials will capitalise on SBI's relationship with other public sector banks and market the insurance cover through heads of these banks.

'Sanjeevan' single premium policy is directed at those in the age group of 40-60, who have opted for the golden hand-shake and are looking for secure, investible avenues. It offers life covers from Rs 100,000 to Rs 1 million as well as survival benefit payments.

The payments commence after a deferment period of five years from the date of policy, in the case of those aged 55-65 and 10 years for those below 55 years.

Survival benefit payments range from a minimum of Rs 10,000 to a maximum of Rs 150,000 per annum for a period of five years in the case of those above 60 and 10 years for those below 60. At the same time, one's life continues to be insured for the full term of the policy.

On a share capital of Rs 1.75 billion, SBI Life can write as much as Rs 100 billion worth of business, said an insurance analyst. "There is a need for this product at this time, as bank employees who have opted for early retirement are looking for safe instruments that offer good returns as well as a life cover," said Krishnamurthy.

Premium paid is eligible for tax rebate under Section 88 of the Income Tax Act. The survival benefit payment, bonuses and claims are tax free in the hands of the policy holder as also in the hands of the nominee.

A senior SBI ex-official, however, said the returns from SBI Life's single premium policy were 1.5 per cent lower than that offered by the Life Insurance Corporation of India.

Nevertheless, Krishnamurthy maintained that SBI Life's insurance product offered life cover up to a maximum age of 75. "At this age, no good cover is normally available," he said.

SBI Life has filed around 12 products with the Insurance Regulatory and Development Authority (IRDA) and hopes to launch them shortly. K

rishnamurthy said SBI Life would invest the premium income in debt securities and not in the equity markets, in view of the present conditions. "We need to build up skills for investment in the equity market," he pointed out.

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