Hi!
I have subscribed to 2 ULIPs of Shriram Life Insurance Company (SLIC). One commenced in Dec 2008 and the other in March 2009.
The Premium Allocation Charge (PAC) for the first year is sky high with SLIC at 60% of the premium. From the 2nd year it is 5%.
My yearly premium for one of my ULIPs is Rs 50,000. PAC on that comes to Rs 30,000. Now, all charges- PAC, Fund Management, Mortality, Rider Premium- are liable to taxed under Service Tax (ST) @ 12.36%.
At this rate ST on my PAC comes to Rs 3708 and other charges for the first month come to Rs 302.59. So the total payable by me after deducting PAC will be Rs 4010.60.
Now, SLIC has deducted 564.2758 from my alloted units to compensate for the ST of Rs 3708. Then the NAV of the fund was 7.1075. As of today the NAV of the fund stands at 12.4352, which means that the value of the deducted units is Rs 7016.60 today.
What SLIC does is pay Rs 3708 to the government as ST on PAC and then deduct my units to cover that. In that process they have made Rs 3000 (approx) additionally with my money.
Assuming, by a conservative estimate, that SLIC has 1 lakh such policies, the amount of money misappropriated by them comes to Rs 30 Crores!
ST is a GoI stipulation to be levied on my PAC every year. Isn't it a fixed charge supposed to be paid for from my fund value in cash and not in the form of units? Deducting units to pay for ST on PAC is a felony, I guess.
While the policy document says that all monthly charges will be accounted for by cancelling equivalent alloted units, no where does the document say that ST on PAC will be accounted for by cancelling alloted units. As far as Service Tax is concerned, the document says, "Service Tax as applicable at prevailing rates will be levied".
I have been on the warpath with these guys since July 17, 2009 and have received vague replies from the Manager (Operations) regarding deduction of the units. At one stage, he even addressed the AGM with a Cc to me saying that he, the AGM, should address the issue as the Manager (Operations) does not have the authority to disclose the information to the policyholder!!
It is only recently that I came to know through a search on the Net that PAC is liable for ST @ 12.36%.
I have mailed IRDA and the Insurance Ombudsman at Hyderabad pointing out the daylight robbery at SLIC. I'll follow this up to every concerned government agency/authority. Someone, somewhere will probably sit up and take note of this misappropriation at SLIC.
While SLIC is probably well within it's rights to cancel alloted units for it's internal charges, it has no authority to use the GoI's ST stipulation to deduct units and get fat on it.
I don't know about other insurers. Maybe everyone is as crooked as SLIC. Or maybe others' processes are more transparent and legal. Please do let me know.
Best Regards
Suresh Kumar
I have subscribed to 2 ULIPs of Shriram Life Insurance Company (SLIC). One commenced in Dec 2008 and the other in March 2009.
The Premium Allocation Charge (PAC) for the first year is sky high with SLIC at 60% of the premium. From the 2nd year it is 5%.
My yearly premium for one of my ULIPs is Rs 50,000. PAC on that comes to Rs 30,000. Now, all charges- PAC, Fund Management, Mortality, Rider Premium- are liable to taxed under Service Tax (ST) @ 12.36%.
At this rate ST on my PAC comes to Rs 3708 and other charges for the first month come to Rs 302.59. So the total payable by me after deducting PAC will be Rs 4010.60.
Now, SLIC has deducted 564.2758 from my alloted units to compensate for the ST of Rs 3708. Then the NAV of the fund was 7.1075. As of today the NAV of the fund stands at 12.4352, which means that the value of the deducted units is Rs 7016.60 today.
What SLIC does is pay Rs 3708 to the government as ST on PAC and then deduct my units to cover that. In that process they have made Rs 3000 (approx) additionally with my money.
Assuming, by a conservative estimate, that SLIC has 1 lakh such policies, the amount of money misappropriated by them comes to Rs 30 Crores!
ST is a GoI stipulation to be levied on my PAC every year. Isn't it a fixed charge supposed to be paid for from my fund value in cash and not in the form of units? Deducting units to pay for ST on PAC is a felony, I guess.
While the policy document says that all monthly charges will be accounted for by cancelling equivalent alloted units, no where does the document say that ST on PAC will be accounted for by cancelling alloted units. As far as Service Tax is concerned, the document says, "Service Tax as applicable at prevailing rates will be levied".
I have been on the warpath with these guys since July 17, 2009 and have received vague replies from the Manager (Operations) regarding deduction of the units. At one stage, he even addressed the AGM with a Cc to me saying that he, the AGM, should address the issue as the Manager (Operations) does not have the authority to disclose the information to the policyholder!!
It is only recently that I came to know through a search on the Net that PAC is liable for ST @ 12.36%.
I have mailed IRDA and the Insurance Ombudsman at Hyderabad pointing out the daylight robbery at SLIC. I'll follow this up to every concerned government agency/authority. Someone, somewhere will probably sit up and take note of this misappropriation at SLIC.
While SLIC is probably well within it's rights to cancel alloted units for it's internal charges, it has no authority to use the GoI's ST stipulation to deduct units and get fat on it.
I don't know about other insurers. Maybe everyone is as crooked as SLIC. Or maybe others' processes are more transparent and legal. Please do let me know.
Best Regards
Suresh Kumar