Minister hangs up on praised cellphone plan tool

 

Treasury Board President Tony Clement killed the tool before its launch in 2009.

Photograph by: Chris Wattie, Reuters , Ottawa Citizen

Industry Canada privately defended its cellphone plan calculator as an "important consumer-education tool" even as the minister's office publicly claimed the initiative was killed because it didn't work, internal records show.
After the government spent $1.4 million over three years to develop an online calculator allowing consumers to compare cellphone plans tailored to their usage patterns, then-industry minister Tony Clement killed the initiative just before its launch in 2009. At the time, his spokesman said it would have been "irresponsible" to launch it with "inaccurate" information.
Internal departmental records, only now released to Postmedia News under access to information after a long delay, show the department's Office of Consumer Affairs held a different view and defended the calculator against an aggressive lobby campaign by industry giants.
Clement sided with the companies after his office was lobbied directly by Rogers Communications, Telus Communications and the Canadian Wireless Telecommunications Association (CWTA), the records show.
The revelations come just as Industry Minister Christian Paradis, Clement's successor, is set to announce new rules for its latest auction of wireless spectrum.
Consumer groups, such as the Public Interest Advocacy Centre, are worried the Conservative government won't impose set-asides for new entrants to improve competition in the wireless market dominated by a few big telecoms, and instead opt for capping companies' total spectrum.
In a 10-page rebuttal drafted by Industry Canada in response to the industry association's criticisms of the online calculator, written just days before Clement pulled the plug on the project, the department said consumers were looking for a cellphone plan calculator from a trusted and impartial source.
"The Office of Consumer Affairs believes that the market distortion lies in the complexity of the marketplace which inhibits consumers' ability to make educated and informed choices. The Calculator mitigates this by providing consumers with a means to effectively and rationally analyze the marketplace and assess features and options based on their assessment of their own usage patterns. In the absence of such a tool, consumers would have great difficulty in performing this type of complex mathematical analysis," according to the rebuttal drafted May 13, 2009.
Two weeks later, Clement informed the department he had "decided not to proceed with the product," the records show.
The records show Industry Canada's deputy minister had "instructed" the Office of Consumer Affairs to prepare the calculator for release "in advance of the Christmas holidays" in 2008. The launch of the calculator was then scheduled for April 21, 2009, but pushed to June in response to CWTA's "request for further engagement."
"For us to put a tool out there that didn't accurately measure the marketplace would actually be irresponsible. We would be putting out a product that wasn't doing what we said it does," Clement's spokesman told the media after news of the cancellation of the calculator trickled out in the summer of 2009.

CWTA made a similar argument in a submission to Industry Canada, dated April 30, 2009.
In addition to not being clear "as to the nature of the 'problem' that the project is designed to rectify," the industry group complained the calculator didn't include data plans, handset prices and bundling packages.
It also objected to being "considered an afterthought in the development of a tool that targets our customers and pricing plans."
In response, Industry Canada's Office of Consumer Affairs said the department made a deliberate choice to compare voice and text plans because the calculator was geared to low-income, slow-adopter consumers. The departmental rebuttal also cited CWTA research showing the top interests of consumers were talking and texting, and pointed out consumers were directed to company websites for details on data plans and any additional information before they chose a plan.
"Simply put, CWTA's research supports the public policy rationale for offering a calculator that helps those who can only afford basic voice and text services increase their ability to make an educated and informed choice."
John Lawford, a lawyer with the Public Interest Advocacy Centre, tested the online calculator as part of Industry's Canada's pre-launch consultation.
In an interview Friday, he said "it worked fantastically. It was just like doing comparison shopping on the Internet where you can plug in what you're looking for and it compares everything and brings it up in a list."
The discount brands "were always at the top, and the main plans, unless you said you sent a bazillion texts and wanted a North American calling plan, then the Bell, Telus, Rogers plans were way at the bottom because they were more expensive," added Lawford, who characterized the government's decision to the kill the online calculator as "purely political."
sschmidt@postmedia.com

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Gold is old, credit card users opt for rewards, cashback

Only a couple of years earlier, gold and platinum cards were perceived as enhancing the social status of cardholders.

However, customers are now exploring value propositions while selecting credit cards.

This has prompted foreign and private sector banks in the country to alter their marketing strategies for new cards.

Instead of branding the cards using names of metals, banks are now focusing on benefits to be offered with these.

Anand Selva, country business manager, global consumer group, Citi India [ Images ], said, "Clearly, customers' preferences are changing, and there is a shift away from metals. Earlier, gold or platinum cards were important.

"While metals are still relevant, these are no longer the primary incentive for customers to choose a card. They now question the value and services offered."

Citibank currently has 2.2 million cards in India and around 20 per cent market share on card spends, which it claims is among the highest in the industry.

"We have worked on value propositions. We have identified four key areas — miles, rewards, cash back and affinity.

"We believe we are in the right customer segments, with the right value propositions. That is why spends per card are the highest in our case," Selva said.

The bank has launched a Citibank Premier Miles Card.

Through this, customers can earn miles, which can then be redeemed from six international and domestic airlines.

The bank's Delhi [ Images ] Metro Citibank Credit Card allows customers to exchange reward points for metro rides.

Last year, HDFC Bank [ Get Quote ], the second-largest private sector lender and the largest issuer of credit cards in the country, launched no-limit Infinia cards for the uber-rich, high net worth community.

Shyamal Saxena, general manager (retail banking products and consumer banking), Standard Chartered Bank (India and South Asia), said, "Customers have become more aware of their core requirements.

"They want products that would suit their needs.

"The customer is not fussy about whether it is a gold card or a silver card, as long as it meets his requirements. So, frequent travellers prefer cards that offer air miles."

The foreign lender, which acquired a part of Barclays Bank's credit cards portfolio last year, offers Manhattan Platinum Credit Cards through which customers can avail of five per cent cash back every time they use the card at supermarkets and departmental stores.

These cards also provide reward points on other purchases.

Hongkong and Shanghai Banking Corporation had recently launched the HSBC-Make My Trip Credit Card for Indian travellers.

The bank had tied up with travel portal Make My Trip to offer features that cater to the specific requirements in this segment.

Manish Sinha, head (consumer assets), HSBC India, said, "When cards were first introduced, naming these after precious metals was a good way to differentiate between offerings for various customer segments.

"As the market evolves, there is a greater degree of customisation required and value propositions are introduced, keeping in mind specific needs of customers.

"We look forward to offering value propositions to different segments of customers through various tie-ups."

Banks promoting credit card use for big purchases

Credit card companies are encouraging existing customers to revolve their credit and promoting card use by reducing interest rates and going in for co-branding of cards.

Last month HSBC reduced the annual interest rate on its credit cards by 600 basis points to 31.2-33.6 per cent. SBI Cards too recently reduced the interest rate on its fixed deposit-linked credit cards to as low as 18-27 per cent per annum, from 37 per cent earlier.

The move by the companies came at a time when the credit card companies were struggling to add numbers. The total outstanding credit cards in the country have remained stagnant at 17.60 million levels since April 2011, compared with the 27 million-levels seen at the peak of the business in 2007-08. Debit cards on the other hand have been seeing growth every passing month with 263 million debit cards outstanding, as of December 2011.

“Unlike the peak of the credit card crisis in 2007-08, when delinquencies were as high as 17 per cent, delinquencies in the credit card business has fallen significantly. The industry average is at about 4 per cent. Users have become more responsible and we encourage them to use their credit cards to make big purchases and revolve their credit payment cycle,” says Kadambi Narahari, CEO, SBI Cards.

Revolving a credit cycle in a card means paying the minimum balance or above it and repaying the remaining outstanding amount in the subsequent cycles. In such cases, an interest rate will be chargeable on the unpaid amount. By reducing this interest rate, companies are hopeful of encouraging the customer to make large purchases and repay it slowly.

For credit card companies, a larger part of their revenues come from such interest rates that they can charge on customers using a revolving payment cycle. Customers who repay entirely every month help only in getting transaction commission from the trading agency.

Industry members admit that credit card users have become highly responsible unlike the reckless spenders and borrowers of cash against credit card as seen during the crisis in 2008.

Credit card companies have also identified launching co-branded cards as a way to add more value and attract a newer target market. Banks like HDFC and Indian Overseas Bank have tied-up with American Express Cards to launch premium cards for their customers.

“We have undertaken several initiatives especially in the card space to improve our card propositions to potential card customers. Our new co-branded card with MakeMyTrip offers great benefits to our customers as well as our partner,” says Manish Sinha, Head, Consumer assets, HSBC India.</div>

Demystifying life insurance

Enough is enough! It’s time to call time on misleading, hyperbolic nonsense that life insurance marketing has become. It’s also time to demystify life insurance and make it simple, easy-to-understand, meaningful and really useful.

If you verbalise the current thinking of the Insurance Regulatory and Development Authority of India (Irda) on the state of life insurance, that is probably how it would read.

The missionary zeal with which the insurance regulator has proposed a set of suggestions and recommendations to the life insurance industry exemplifies the regulator’s intent to bring in more clarity and transparency to the way insurers design life insurance products.

From now on, Irda’s February 16 letter to insurers and the Life Insurance Council said, complicated products are a strict no-no. The way they are peddled now is also a cause for concern, it stated.

What got Irda’s goat was that more and more new “complex products” were lined up for its approval. The products’ features, an irate Irda found, were not in alignment with the prescribed best practices.

Worse, they lacked clarity. Irda did not mince words when it dashed off the said letter. “Greater amount of clarity is required to ensure policy-holders’ protection and sound insurance principles.”

The Irda letter has now become something of a talking point in industry circles.For, it addresses various issues relating to design and structure of life insurance products. The key points are instructive indeed:

Limited life cover
Certain products like single premium Ulips (unit-linked insurance plans) and endowment plans offer limited life cover in proportion to the premium paid. For instance, these policies provide a sum assured (SA) that is just five or six times the premium paid annually. (Example: if annual premium is Rs1,000, then the SA would be around Rs6,000.) This is laughable, according to Irda. The SA should be at least ten times the premium paid, it believes. Irda also suggests there be a minimum life cover for life insurance policies at the event of death or on completion of term or tenure.

Participating and non-participating policies
Insurance companies file new products with Irda classifying them as eitherparticipating (par) or non-participating. Under par (or with- profit) products, policy-holders are entitled to receive the surplus of the company. Premiums collected from these products are pooled and invested. Policy-holders will be entitled to receive part of the company’s surplus as bonuses. All traditional products other than pure term policies come under this category.</div>

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