Archive for September, 2008

Sharia Compliant Insurance Cover For British Motorists

Wednesday, September 10th, 2008

Good news for more than 2million Muslims residing in Britain. No longer do they need to own a motor insurance by compromising with their religious values. According to the Salaam Halal Insurance, motorists in the UK had no option but to take the regular Motor Insurance cover which were in conflict with the Muslim faith. However, analyst’s belief that with the changing face of Britain, British institutions need to change as well. In a normal insurance cover, the risk is passed on from the policyholder to the company. However, in case of a valid claim even though the payment is made one party suffers loss in many instances the policyholder, if the claim is not settled. There is an element of uncertainty and gambling is not permitted in Muslim faith. ?

To combat this problem, Takaful insurance was introduced in Sudan during the 1970s where a Muslim can gain even at the risk of loss of misfortunes and risk is borne by all the policyholders. Takaful means “guaranteeing each other” and is conceived as a co-operative insurance. It means bearing one’s burden. Takaful insurance is almost the same like the traditional insurance cover but functions slightly in a different manner. In this type of insurance cover, the premium is collected in the form of a contribution in a pool and is then invested in sharia-friendly investments ad the profits earned form these investments are given back to the Takaful fund.? If you require protection from this cover, you must be ready to help others when in difficulty. Islamic insurance promotes supporting each other and contributing enough to cover claims of individuals. At the end of the year, if the profits are more in the Takaful fund then, it is distributed equally among policyholders. ?

It is therefore much welcome news for Muslims in Britain that the government has allowed sharia-friendly car insurance. It has even attracted the non-Muslim community who take interest in co-operative nature. In this respect it is however, interesting to note that at the moment the Islamic insurance industry is a mere 1/1000th the size of the traditional insurance industry and more than half of the policies being sold in Iran. So, there is potential for growth of the insurance industry among the Muslim community. However, the rate of growth is considerably low than what the insurance company is hoping for.

Teenagers Are Better Financial Planners Than Their Parents

Friday, September 5th, 2008

Teenagers in the UK have not only become matured but also responsible towards themselves and their education. Children as young as 11 years have started saving towards higher education as they have been witness to older members reeling under the load of university debts. This year about 42 per cent of undergraduates plan to be employed in a part time vocation to meet the increasing costs of higher education as almost 78 per cent parents feel that credit crunch will make them difficult to bear the expenses of higher education.

Education consultants are advising parents that even though the Government is taking steps to Finance higher education for students by creating student finance packages, one way to save yourself against financial nightmares is to start saving now. A research shows that nowadays it is the children who take an active part in financial planning for higher education than their parents. Almost third of children between the ages 11 and 18 have started saving from now to fund their own education

Teenagers of today are far more aware of the expenses for higher education and are taking necessary steps to avoid getting into debts. However, the cost is a whopping GB 40,400 which is huge for teenagers to fund. At present almost four times more youngsters are taking their education seriously and opting for higher education than it was 30 years ago. It has been seen that an average graduate completes his education with a debt of GBP 17,500. Therefore educationists are asking parents to save for higher education for their wards to fulfil their dreams. A report also states that younger siblings are more cautious and saving for their future than their older ones. However, younger men are more likely to save about 32 per cent than their female counterparts (28 per cent).

Bradford and Bingley Suffered Major Losses

Friday, September 5th, 2008

Bradford and Bingley In Most Trying Times

UK lender Bradford and Bingley suffered major losses in investment and writedowns and a setback 155 million pounds. By the end of 2007, debts were up by more than half according to the UK lender. It also send out warning signals to landlords that the condition would through 2008 as there would be a fall in profit margins. However, investors have some good news as they said that they would renegotiate one of the two agreements and also plans to renew contract with GMAC-RFC that improved arrears. The results of Bradford and Bingley no matter how appalling it might be were expected according to analysts. Bradford and Bingley were compelled to raise 400 million pounds in a cut-price cash call in the month of August as the market conditions deteriorated. The lender showed a pre-tax loss of 26.7 million pounds ($48.9 million) this year while last year the profits were 180.4 million. The losses on investments and underlying pre-tax profit amounted to 70.2 million pounds in the first six months of 2008.

Investors are keeping a close watch on the Mortgage book of B& B which comprises of loans given out to landlords. They are also looking at the deteriorating arrears across the whole of UK as there is a fall in property prices and consumers come under burden. The number of mortgages who were 3-4 months in debts worsened from 1.48 percent to 2.29 percent towards the end of last year. However, B&B has released a statement saying that it is doing its best to improve arrears and collection process. It also extended its agreement with Kensington to reduce the amount of loans in 2008 and 2009. So, in the present scenario, it will take only 1.3 billion pounds of loans in 2011 while it was initially supposed to borrow a further 1.15 billion of home loans. Though it was supposed to have talks with GMAC, it gave no further information. The image of Bradford and Bingley has suffered after sending out warning signals on profits and also the surprise exit of its CEO and TPG Capital pulling out of a stake purchase after receiving a bad credit from credit rating agency Moody. Though a new CEO has been appointed, Richard Pym, he said he would plan his strategy only in autumn.

Brit Insurance To Quit UK

Tuesday, September 2nd, 2008

Lack of competitive tax policy may prompt Brit Insurance to quit UK

The London underwriter, Brit Insurance would be taking a decision whether or not to move their tax headquarters from Britain in the next six months. This move by the Brit Insurance will have the Government on its toes to take steps to curb such departures by the corporates. The chief executive of Brit Insurance, Dane Douetil stated that the insurer has taken the subject very seriously for a more reasonable tax system like the one existing in Geneva or Dublin. According to him this move would be taken not only because of the tax factor but also on the fact where they are investing their capital on. In this respect, they are seeking advice of experts like that of an auditor, Ernst & Young and other consultants as well. Mr Douteil is also in charge of implementing modern practices on the biggest insurance market of the world.

This move by the company could have serious repercussions. It could also trigger other firms of Lloyd’s group to take such a similar move since most of them are frustrated with the Governments tax policies and unfriendly regulations towards British companies. Many companies including some high profile ones like WPP have threatened to take such a step. Pharmaceutical company GlaxoSmithKline could follow the lines of other drug groups like Shire and United Business Media. Business sectors especially those in insurance, pharmaceuticals and fund management are unhappy with tax issues like a common rate for capital gains tax, duty on non-British workers and the possibility of imposing tax on overseas profits. Until the uneconomical tax system is take care of by the Government with immediate effect, the country will witness more and more firms moving outside the UK.

The government has taken some steps to reduce tax and make it more corporate friendly. To stop firms against settling abroad, the Treasury has formed a high-level group of experts to explore various options to reduce the tax burden on the corporates. It has also decided not to add any new taxes without reaching a consensus with the companies in Britain. The pre-tax profits of Brit Insurance have been halved in the first six months to £49.9 million from £106.8 million. Brit has about £2 billion in store, partly to compensate for the liabilities that it has in its main business areas namely reinsurance, global markets, and the UK.

Life Insurance Policies Are Expensive

Tuesday, September 2nd, 2008

Breaking the myth: Life Insurance policies are expensive

A survey on life insurance policies has revealed that most consumers feel that policies of Life Insurance are costly without even checking the facts if they are actually expensive in real terms. Among the people who took the poll, about 65 per cent of them have miscalculated the premium for a policy of £150,000. All the people were of the opinion that the premium would be more than what it was and therefore many decided not to take any cover. The high premium rate was the main factor behind declining the insurance policy. According to a life insurance expert, insurance premiums can start from as low as £6 per month which families even with relatively less income can afford. Only a little more than 30% of the Britons have opted for life insurance policy even in the absence of a good economy and increasing funeral costs.

Scottish Mortgage Better Than UK

Tuesday, September 2nd, 2008

Scottish mortgage market slighter better than its UK counterpart

The slowdown which the Scottish mortgage market is experiencing is however, not too harsh to the north of the border as revealed by the latest figures of Council of Mortgage Lenders, Scotland. There has been an 18 per cent rise in home loans in the second quarter of 2008 as compared to only 5 per cent in the rest of the UK. However, there has been a fall of 34 per cent from last year in the same quarter which is less than the UK decrease which is of 46 per cent. Though the mortgage lending showed signs of a downfall in the last quarter all across the UK from 2007 and has been falling constantly since then, in Scotland this fall has been less compared to the UK. Home purchase loans in the UK were at 8 per cent at the beginning of 2007 while that figure is now at 12 per cent. The number of first time buyers is also on the rise. The previous quarter witnessed a rise of 5 per cent which is however, lower by 31 per cent in the same quarter last year. Over the years, the lending conditions have increased and therefore first-time buyers with small deposits find it difficult to enter the field. A year ago, the average first time buyer deposit was 10 per cent while this year it is 13 per cent.

The average price of a house is relatively less compared to the UK house price and therefore mortgage is easily available in Scotland than in the rest of the UK. In Scotland, individuals took home loans for 2.88 times their income in the second quarter, compared to 3.12 across the UK. On an average a borrower in Scotland spends about 16.9 per cent of his income on paying off mortgage interests, compared to 18.1 per cent in the rest of UK.

The market of mortgage lending is definitely on the slowdown trail all over the UK due to paucity of funds but the slowdown is much less in Scotland according to CML chairman. According to other experts the market is very shaky at the moment and needs government support.