ING Vysya: Transparency at a premium

Venkatachari Jagannathan
22 February 2002

Addressing the press after inaugurating a branch in Chennai, all that Metzelaar was willing to tell is that the company will enroll 2 million policyholders in less than 10 years. "Our best-selling product is our Reassuring Life Endowment Plan."

With competition hotting up the countrys only private limited life insurer, ING Vysya Life Insurance plans to declare a bonus on its policy by infusing additional capital. According to managing director and CEO Ton G M van der Star, the company will decide the quantum of bonus by this yearend.

The three promoters of the Rs 110-crore equity-based ING Vysya Life Vysya Bank (49 per cent), ING International BV (26 per cent) and GMR Technologies (25 per cent) will bring in an additional capital of Rs 90 crore to finance policy bonus and other business operations. "All the new insurers who want to declare a bonus on their policies will have to do that out of additional capital as the actuarial surplus will take some years to happen," Star says.

The company assures payment of cash bonus in two out of four policies in its portfolio. While such a policy will make a policyholder happy in the short run, in the long run cash bonus is actually harmful, both to the company and policyholders.

Payment of cash bonus will impact the liquidity and investment freedom of a life insurer. For the policyholder, cash bonus may be of lesser amount than reversionary bonus. According to an industry official, ING Vysya Life is the first company to start this practice largely prevalent in America.

The company offers policyholders the choice to accumulate and grow the bonus at a non-guaranteed rate of interest revised from time to time or adjust the same against payment of future premium. On the new products front Star says the company will launch a group insurance product and whole-life policy soon.