For this blog post, I have picked up two recent developments from our universe of Personal Finance.
The first is about the amazing (but completely baffling) response to the two recent public issues of tax free bonds.
And the other, on the alleged misuse of the claim settlement discharge vouchers by the insurance companies.
Let's investigate:
As against the total issue size of Rs.700 crores, NTPC received bids worth Rs.4400 crores. In fact, it was oversubscribed within the first half an hour of opening of the issue. Few days later, PFC surpassed the NTPC's collection... by a stupendous margin. It too was planning to raise Rs.700 crores. But, ended up receiving bids worth around an unbelievable Rs.8500 crores.
Tax free bonds are indeed a great investment product. No doubt about it. So, this craze for such bonds is quite understandable.
But, what absolutely confuses me is, why this rush for public issues? Why not simply buy the tax free bonds listed on the BSE and NSE?
- Same companies, that are issuing the bonds now, have their earlier issues listed on the exchanges.
- Effective returns, from both the new and old bonds, are almost the same.
- In both, your interest income would be totally tax free.
- In secondary market, your amount gets fully invested; unlike oversubscribed public issues, where you will get only a proportionate allotment.
- Such listed bonds can be conveniently bought online, with just a few clicks of your mouse.
- You don't have to keep the money idle till some public issue opens for subscription. As and when you have cash, you can simply place your order at the exchange.
In short, both old and new bonds are exactly the same. Rather, due to full allotment and not having any idle time, old bonds have an edge over the new ones.
In view of the foregoing, this reluctance among investors to buy tax free bonds from the secondary market and extraordinary craze for the primary issues, is totally and absolutely inexplicable. Their behaviour completely baffles me.
[Must Read : Still Craving For Tax Free Bonds?]
However, it may so happen, that you are not happy with the amount paid. In your opinion, certain deductions made by the insurance company are incorrect. Consequently, you should receive a higher claim amount. In short... there is a dispute.
And, you take this dispute to the court of law:
In this regards, IRDAI has been receiving certain complaints. Insurance companies are taking a stand that, by signing the Discharge Vouchers, policyholders have given a full and final discharge to the claim. Thus, the policyholders have no further right to contest the claim in the court.
IRDAI has taken a view that Discharge Vouchers are fine to keep the books of accounts in order. However, insurers cannot use the same as a "means of estoppel against the aggrieved policyholders" who wish to take the legal route to settle the dispute.
Accordingly, it has issued a circular [Ref: IRDA/NL/CIR/Misc/173/09/2015 Date: 24-09-2015] to all the insurers.
As per the same,
(a) Insurance companies have been advised not to withhold any claim payment, where the liability has been established and the claim amount quantified.
(b) Signing the discharge voucher will NOT foreclose the rights of the policyholders to approach the court and take legal recourse, in case they believe that they are entitled to a higher compensation.
The first is about the amazing (but completely baffling) response to the two recent public issues of tax free bonds.
And the other, on the alleged misuse of the claim settlement discharge vouchers by the insurance companies.
Let's investigate:
1. Why are people running crazy after the public issues of tax free bonds?
Recently, NTPC and PFC came out with their public issues of Tax Free Bonds. Both received an overwhelming and extraordinary response.As against the total issue size of Rs.700 crores, NTPC received bids worth Rs.4400 crores. In fact, it was oversubscribed within the first half an hour of opening of the issue. Few days later, PFC surpassed the NTPC's collection... by a stupendous margin. It too was planning to raise Rs.700 crores. But, ended up receiving bids worth around an unbelievable Rs.8500 crores.
Tax free bonds are indeed a great investment product. No doubt about it. So, this craze for such bonds is quite understandable.
But, what absolutely confuses me is, why this rush for public issues? Why not simply buy the tax free bonds listed on the BSE and NSE?
- Same companies, that are issuing the bonds now, have their earlier issues listed on the exchanges.
- Effective returns, from both the new and old bonds, are almost the same.
- In both, your interest income would be totally tax free.
- In secondary market, your amount gets fully invested; unlike oversubscribed public issues, where you will get only a proportionate allotment.
- Such listed bonds can be conveniently bought online, with just a few clicks of your mouse.
- You don't have to keep the money idle till some public issue opens for subscription. As and when you have cash, you can simply place your order at the exchange.
In short, both old and new bonds are exactly the same. Rather, due to full allotment and not having any idle time, old bonds have an edge over the new ones.
In view of the foregoing, this reluctance among investors to buy tax free bonds from the secondary market and extraordinary craze for the primary issues, is totally and absolutely inexplicable. Their behaviour completely baffles me.
[Must Read : Still Craving For Tax Free Bonds?]
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| Two recent developments from our universe of Personal Finance. |
2. Signing the insurance claim Discharge Voucher does not foreclose your rights
As you may be aware, you have to sign the Discharge Voucher when you receive any payment as settlement of your insurance claim. This 'discharge voucher' or 'settlement intimation voucher' or some such document, enables the insurance company to close the particular case and not have any outstanding in its books of accounts.However, it may so happen, that you are not happy with the amount paid. In your opinion, certain deductions made by the insurance company are incorrect. Consequently, you should receive a higher claim amount. In short... there is a dispute.
And, you take this dispute to the court of law:
In this regards, IRDAI has been receiving certain complaints. Insurance companies are taking a stand that, by signing the Discharge Vouchers, policyholders have given a full and final discharge to the claim. Thus, the policyholders have no further right to contest the claim in the court.
IRDAI has taken a view that Discharge Vouchers are fine to keep the books of accounts in order. However, insurers cannot use the same as a "means of estoppel against the aggrieved policyholders" who wish to take the legal route to settle the dispute.
Accordingly, it has issued a circular [Ref: IRDA/NL/CIR/Misc/173/09/2015 Date: 24-09-2015] to all the insurers.
As per the same,
(a) Insurance companies have been advised not to withhold any claim payment, where the liability has been established and the claim amount quantified.
(b) Signing the discharge voucher will NOT foreclose the rights of the policyholders to approach the court and take legal recourse, in case they believe that they are entitled to a higher compensation.
