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Sunday, July 29, 2007

The charges of insurance companies

Gautam Chikermane has a great article in Indian Express yesterday, on the high fees and expenses of products sold by insurance companies. You may want to also see this older blog entry on a related subject. While I'm on this subject, see this Bloomberg column by John Wasik on how the expenses of actively managed funds rack up.

Some critics of the NPS propose going for a pure private sector solution to pensions, where a bunch of pension products are sold by (say) insurance companies. Insurance companies are selling pension products in India today in such an environment, and the results are visible for all to see in terms of massive fees and expenses. As Raju Chitale once said to me, the New Pension System (NPS) is an attempt at utilising public policy to solve the market failures of the natural outcomes with pure private sector pension fund management.

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