Investing in Unit Linked Protection Products

as written by Vincencius Santoso, Account Manager – Business Development Division

For the past couple of years Indonesia had been a very lucrative target market for many Financial Institutions based in Europe. Instant example for this is the big columns in leading newspapers like Kompas or Jakarta Post posted their financial positions and Profit and loss statement these financial institutions had made within previous years. The questions are, what made these companies big, and what kind of attractions do they offer to the majority of Indonesians?

The answer is financial product, they could be varied in many forms like; easy mortgage, Reksadana, bonds and equity investments, foreign exchange, and insurances. Let us talk about insurance, first of all, we have long known that insurance is a good protective measures for any aspects of life that is fragile, either it’s medical insurance, life insurance, education insurance, car insurance, and many others. The point is protection against forces beyond control that might lead to great devastation for the parties affected, for instance the loss of income caused by the inability of an individual to work due to work hazard, or loss of car caused by crime. People sees insurance as an added value to protect themselves against life’s bitter realities that sometimes is, well, unavoidable and unpredictable. Many people think, it is always better to anticipate things before it actually happens.

However, often times these precautionary measures cost us just way too much and furthermore, people might think it is somehow such a waste to keep on paying premium that vanishes in thin air if it goes unclaimed. That’s the past insurance, insurance nowadays, especially life and medical insurance offers more than just a protection. They created a product, commonly known as unit linked product which enables client to enjoy life or medical protection with an added value of investment where their money is let grown by linking the premium paid to fund in particular.

So what is fund? Fund is one of money market instruments which consists of hundreds portfolio of equities within. The performance of these equities within would then determine yield or performance of fund in particular, while equities themselves would be linked with the performance of the companies within an industry. At this point people would normally buoyed by the fact that their money could grow at higher rates compared to bank’s time deposit, but be aware that since your money is now invested, there are risk associated with it. There is never an actual guarentee by any providers that your money will remain at least the same amount of money you have already paid. So before you get yourself into any unit linked insurance you need to identify your needs first, whether you are looking for a savings plan or you are looking for a protection plan with additional value of investment.

If you are looking for a savings plan and you are in need of this money on daily or periodical basis then the answer is regular saving account at the bank. But if you are looking into long term savings and protection plan, it might be worth looking into Unit linked insurance. The idea of saving on unit linked insurance would be based on this; basically the growth of fund in the long run would eventually grow upright and any downturn are generally happens on the short run only. So, when we are looking for at least 5 to 10 years of investing, it is a great alternative to conventional savings at the bank where the growth rates of this fund are generally grows at higher rates compared to what is offered by banks. Unless of course there is major crunch at money market like what the world is experiencing globally at the moment.

Looking or considering into unit linked insurance people? Id say, why not, you normally enjoys good life and health covers plus a long term saving in form of investment in managed funds or equity funds. But first of all you will need to consider your goals, analyze your financial position carefully so that this financial products able to assist you and giving you an added value rather than a burden caused by lack of information and knowledge on their terms and conditions plus incorrect information about risk associated with it and general understanding of the product features. Always remember to adjust these products to your needs and goals rather than you adjusting your financial positions to these, it is meant to assist you rather to be an unnecessary burden. Happy investing!!

How the financial crisis will affect the outsourcing industry

Oct 9th 2008
From The Economist print edition

IN ONE respect it has been a record couple of weeks for “outsourcing”. Around the world, governments and taxpayers have agreed to help ailing financial firms offload their toxic loans and resolve their liquidity worries. Banks are not the only ones hoping that this will help keep them afloat. The multi-billion-dollar outsourcing industry that runs computer systems and other things on companies’ behalf is keeping its fingers crossed, too. After all, financial giants have helped drive the industry’s stellar growth in the past few years. Now they threaten to undermine it.

Huge outsourcing deals involving banks are still being done—on October 8th Tata Consultancy Services (TCS), a big Indian firm, announced a $2.5 billion, nine-year deal with America’s Citigroup—but they are getting rarer. TPI, a consultancy which tracks outsourcing deals worth over $25m, says that in the first nine months of 2007 financial-services firms signed 132 such deals, worth a total of $17.9 billion; in the first nine months of 2008 there were only 101, worth a total of $10.8 billion.

Some outsourcing folk claim that the financial crisis could ultimately help their business, even though it threatens to harm it in the short term. For one thing, they say, banking survivors that already use outside contractors will give them more to do as they cut costs. For another, banks that have hitherto shunned outsourcing will have to embrace it to protect their margins. And those with their own offshore activities will be more likely to turn them over to specialists. As part of this week’s deal, Citi is selling its Indian back-office operation to TCS for $505m. “This deal sets the stage for a lot of future revenue,” says Subramanian Ramadorai, TCS’s chief executive.

Other industry bosses are more cautious about forecasting the impact of the banking debacle. “It’s like driving blind at the moment,” says Girish Paranjpe, co-chief executive of Wipro, another leading Indian outsourcing firm. As they struggle for survival, many banks have put discussions about outsourcing contracts on hold or just cancelled them altogether. Once the dust settles there will be far fewer financial institutions around, so competition for the remaining contracts will be stiffer.

American outsourcing giants such as Accenture and IBM will suffer from all this too, but India’s behemoths are particularly exposed. Unlike their American rivals they do not have other activities, such as consulting, to fall back on. NASSCOM, a body that represents India’s outsourcing firms, reckons that financial-services work accounts for 30-40% of the industry’s activity. To make matters worse, other areas such as back-office operations for airlines and retailers are also slowing. Hence predictions that contract prices charged by Indian firms are likely to drop. CLSA, a brokerage firm, predicts they will fall by 3-5% in the next fiscal year, starting in April 2009.

Faced with tougher times, more outsourcing firms sitting on piles of cash will turn to acquisitions as a way to boost revenues. Infosys and HCL Technologies, two other big Indian companies, are already locked in a battle for control of Axon, a British firm that provides outsourced computer services. On September 26th HCL bid £441m ($813m) for Axon, trumping an earlier offer of £407m from Infosys.

As they chase new revenues, outsourcing companies will also need to clamp down on costs. These have been soaring, especially in India, where a ferocious war for talent has driven up wages and led to very high staff-turnover rates. But now companies are hiring new staff only once deals are in the bag, and turnover rates are falling, says Mr Paranjpe. That is good news, but it signals trouble ahead.

Source: http://www.economist.com/business/displaystory.cfm?story_id=12376813