Book Review – Rich Dad Poor Dad – Robert T. Kiyosaki


Finance is an important part in life. Everyone wants to be financially independent. What should be done to be financially independent? What are the skills needed to be financially independent? Why there are so many poor people in world? Why middle-class remain middle-class? Such kind of questions must have arrived to many at various point in life. Finding answers to such questions is can be difficult. But there is a book on personal finance which discusses such questions and provide answers. The Book titled, Rich Dad Poor Dad, written by Robert T. Kyosaki is a worth read which provides answers to such questions and at the same time gives the other way of thinking. This post provides review of that book.

About the Author

Robert T. Kiyosaki is best known as the author of Rich Dad Poor Dad (1997). He was born on 8th April 1947 and is an American businessman and author. He is an entrepreneur, educator and investor who believes the world needs more entrepreneurs who will create jobs. With perspectives on money and investing that often contradict conventional wisdom, Robert Kiyosaki has earned an international reputation for straight talk, irreverence, and courage and has become a passionate and outspoken advocate for financial education.

Robert T. Kiyosaki

His point of view is that “old” advice- go to college, get a good job, save money, get out of debt, invest for the long term, and diversify – has become obsolete advice in today’s fast-paced information age. His Rich Dad philosophies and messages challenge the status quo. His teachings encourage people to become financially educated and to take an active role in investing for their future.

He has authored several books. Some of his notable books includes:

  • Cashflow Quadrant (2000)
  • Rich Dad’s Before You Quit Your Job (2005)
  • An unfair advantage (2011)
  • FAKE: Fake Money, Fake Teachers, Fake Assets: How Lies Are Making the Poor and Middle Class Poorer (2019) etc.

About the Book

This book is considered one of the best books on personal finance. The book boldly advocates the need to have financial literacy. According to the author, people should be financially literate which in turn make them financially intelligent. Lack of financial intelligence is the main cause of poor or middle class to remain poor or middle class.

The book is written in the form of stories which Robert Kiyosaki learnt from his rich dad and poor dad. He considers his friend, Mike’s father, rich dad and his own dad, poor dad. The book is a summary of teachings which he learnt from his rich dad and why his own dad having good academic background was a teacher and never become rich. The book revolves around these two ways of thinking, rich dad and poor dad.

The book starts with an introduction with mention of the classic poem of Robert Frost, “The Road Not Taken” and the below excerpt need a worth mention.

I took the one less travelled by,
And that has made all the differences.

The author had brilliantly explained the path which has made all the difference and the reason how and why people are rich and poor. The introduction itself creates the eager to read the entire book. The book is against the “old school” thinking of going to school/college, earn degrees, do job, pay the debt/bills and make entire life a burden. Instead, he firmly believes that school and college education is important to have basic knowledge to understand the concepts etc. but it is not sufficient to become rich. For that, what is more important is to have financial education over and above school/college education. The book tries to make readers think above having a job and become financially independent. One can become financially independent if he possesses financial intelligence which in turn can be achieved through financial literacy. Kiyosaki is a strong advocate of financial intelligence which can be felt while reading the book.

There are many people who are intelligent and have attained good academic qualification, but do they possess financial intelligence? Everyone should ask this question. The difference between intelligence and financial intelligence should be identified by the person through his financial decisions which one takes during his lifetime. The book has such kind of discussion which makes it an interesting read.  A small excerpt from the book is worth mention here:

Money is one form of power. But what is more powerful is financial education. Money comes and goes, but if you have the education about how money works, you gain power over it and can began building wealth. The reason positive thinking alone does not work is because most went to school and never learned how money works, so they spend their lives working for money.

One of the most important aspect the book figures it out is that one should learn how money should work for him rather than yourself working for money. This is quite interesting. Learning how to have money work for you is a lifetime subject. This is the main difference between the poor and middle-class. “The poor and middle-class work for money. The rich have money work for them.” One has to learn how money work for them to become rich. This is the bottom line.

PC: Google

The book provides a fruitful discussion on assets and liabilities, income and expenses of rich and poor. Need to mention that there are least financial jargons used in the book. The discussion revolves around how rich maintains their assets/liabilities and how poor does so. In general, rich people acquire assets whereas poor and middle class don’t turn their income into assets rather than they convert their income into liabilities which they think are assets. There is a cycle in which poor and middle class are trapped and in turn they remain poor/middle class lifelong. If a young couple would put more money into their assets early on, their later years would be easier.

Most people struggle financially because they do not know the difference between an asset and a liability. Rich people acquire assets. The poor and middle-class acquire liabilities that they think are assets.

The book provides a good insight on the mentality or way of managing expenses of rich and poor people. Rich poor buy luxuries at last, while the poor and middle-class tend to buy luxuries first.

As mentioned earlier, the book advocates a lot on financial intelligence (Financial IQ). Financial IQ is made of four broad areas of expertise:

  • Accounting
  • Investing
  • Understanding markets
  • The Law

Financial IQ is the synergy of many skills and talents. In the words of Robert Kiyosaki, financial IQ is the combination of four skills mentioned above that make up the basic financial intelligence.

Robert Kiyosaki has strongly suggested to focus on building assets through financial intelligence. One should be flexible enough to adjust in the changing environment rather than sticking to the past. One should keep the options open and avoiding limiting the options. Financial intelligence is simply having more options.

The author stresses on overcoming some obstacles after being financially literate. These obstacles are arrogance, cynicism, bad habits, laziness and fear. Fear and ignorance are essential cause of poverty or financial struggle.

The main cause of poverty or financial struggle is fear and ignorance, not the economy or the government. It’s self-inflicted fear and ignorance that keeps people trapped.

The author had beautifully advocated on being financially independent through financial intelligence in this book. The book provides the lessons the author learnt from his rich dad. One should read the book to know the lessons. He does not recommend falling in the trap or rat race which in his words, is a short-term solution to a long-term problem.

A job is only a short-term solution to a long-term problem.

The book is an interesting read as it as it offers the other way of thinking. It is written in simple and easily understandable language and provides some fruitful insights which is worth indeed. While reading the book, one will find many interesting sentences. Some of the interesting lines I have picked and shared below:

  • Intelligence solves problems and produces money. Money without financial intelligence is money soon gone. 
  • Most people fail to realize that in life, it’s not how much money you make. It’s how much money you keep.
  • Today, wealth is in information. And the person who has the most-timely information owns the wealth.
  • People struggle simply because they cling to old ideas. Old ideas are their biggest liability. It is a liability simply because they fail to realize that while that idea or way of doing something was an asset yesterday, yesterday is gone.
  • Great opportunities are not seen with your eyes. They are seen with your mind.
  • Workers work hard enough to not to be fired, and owners pay just enough so that workers won’t quit.
  • Most workers focus on working for pay and benefits that reward them in short-term, but are disastrous in the long run. Instead, I recommend to young people to seek for what they will learn, more than what they will earn.
  • The world is full of talented poor people. All too often, they are poor or struggle financially or earn less than they are capable of, not because of what they know, but because of what they do not know.  

Do read the book for such interesting discussions and share your thoughts. 🙂

-Ashish Kumar

IRDAI (Reinsurance) Regulations, 2018


The Insurance Regulatory and Development Authority of India (IRDAI) came up with the reinsurance regulations recently in December 2018. This is a first kind of regulation of its type, specific to reinsurance repealing IRDAI (General Insurance – Reinsurance) Regulations and IRDAI (Life Insurance – Reinsurance) Regulations which were released in 2016. This regulation will be called as IRDAI (Reinsurance) Regulations, 2018 which will be effective from 1st January 2019. This article will provide some of the insights of this newly released regulation covering some of the basic terminologies, areas like Cross Border Reinsurer (CBR), cession limit, amendment to previous regulations etc.

There are total 12 regulations contained in IRDAI (Reinsurance) Regulations, 2018. Some of the important points which need to be known from these regulations are as follows:

  • Reinsurance Program: Every insurer need to have a reinsurance program with the objective of having maximum retention within the country. The Board approved reinsurance program need to be submitted to the IRDAI before 45 days of the commencement of the financial year. For any changes made to the reinsurance program, insurer need to submit the final board approved reinsurance program within 30 days of the commencement of the financial year. The reinsurance program along with the retention policy (discussed below) need to be submitted to the Authority i.e IRDAI. (Regulation 3)
  • Retention Policy: The first objective of reinsurance as stated in these regulations, is to maximize retention within the country. Keeping this objective in mind insurers need to formulate a retention policy. Every Indian insurer shall maintain the maximum possible retention in commensuration with its financial strength, quality of risks and volume of business ensuring that the reinsurance arrangement is not fronting. (Regulation 3). Life Insurer should maintain a minimum retention of
  1. 25% of sum at risk under pure protection life insurance business portfolio
  2. 50% of sum at risk under other than pure protection life insurance business portfolio

The retention policy also states that “Every Indian Reinsurer shall maintain a minimum retention of 50% of its Indian business”, as mentioned in Regulation 3(2)(C) .

  • Fronting: This is one of the confusing jargons used in reinsurance. Let us try to understand this with an example. An insurer is having motor portfolio and what it does is instead of keeping some portion of risks within itself, the insurer transfers most or all part of the risks to a reinsurer, thus relieving itself from the financial burden. This is an example of fronting. Insurer transferring most or all portion of risks to reinsurers. Generally, new insurers use fronting as a risk transfer tool in order to reduce their financial burden at the time of claims. Fronting is defined as a process of transferring risk in which an Indian Insurer cedes or retro-cedes most of or all of the assumed risk to a Re-insurer or retrocessionaire. (Regulation 2(13))
  • IIOs: IIOs is an acronym of International Financial Service Center (IFSC) Insurance Office. This means a branch office of an insurer or reinsurer domiciled in India or outside, which has been granted a certificate of registration by the Authority to set up its office in IFSC-SEZ, to transact insurance business or reinsurance business or both. IIO has been defined in Regulation 2(17) of these Regulations. This is a new concept which specifies setting up of offices in IFSC Special Economic Zone (SEZ).
  • Foreign Reinsurer Branch (FRB): This means a branch of a Foreign Reinsurer who has been granted certificate of registration by the Authority under the Insurance Regulatory and Development Authority of India (Registration and Operations of Branch Offices of Foreign Reinsurers other than Lloyd’s) Regulations, 2015 or Insurance Regulatory and Development Authority of India (Lloyd’s India) Regulations, 2016, as amended from time to time.

Cross Border Reinsurer (CBR)

CBR, as the name suggests, means a foreign reinsurers including Lloyd’s Syndicates, whose place of business is established outside India and which is supervised by its home country regulator. CBR includes:

  • Parent or Group companies of FRBs (Foreign Reinsurer Branch)
  • Parent or Group companies of IIOs.

CBR can be understood by an example. Consider an Indian insurer wants to transfer its risk to a reinsurer which is not in India but in United Kingdom (UK). Indian insurer can transfer its risk to UK based reinsurer whose place of business is in UK and not in India. Then the UK based reinsurer is a CBR. In order to transact business through CBRs, there are eligibility criteria which a CBR (like the UK based reinsurer) should have. Indian insurer can place their business through CBRs if CBRs meet the following eligibility criteria as defined in Regulation 4:

  • The CBR is an insurance or Re-insurance entity in its home country, duly authorized by its home country regulator to transact re-insurance business during the immediate past three continuous years;
  • The CBR has a credit rating of at least BBB from Standard & Poor or equivalent rating from an international rating agency during the immediate past three continuous years;
  • The home country of the CBR has signed Double Taxation Avoidance Agreement with India;
  • The CBR has minimum solvency margin or capital adequacy, as specified by the home country regulator, during the immediate past three continuous years;
  • The past claims settlement experience of the CBR is found to be satisfactory;
  • Any other requirements as stipulated by the Authority from time to time.

One of the most important aspects related to CBR is what is known as Cession Limits. Cession means transfer of risks and the insurance company which transfers the risks to a reinsurer is known as Cedant. Cession Limits restricts Indian insurer to transfer risks to CBRs based on the rating of CBRs. The rule is simple; better the rating of CBR, more risk can be transferred and vice-versa. The below table provides the maximum cession limit that can be allowed per CBR as defined in Regulation 6.

Rating of the CBR as per Standard & Poor or equivalent Maximum overall cession limits

allowed per CBR

Greater than A+ 20%
Greater than BBB+ and up to and including A+ 15%
BBB and BBB+ 10%
Note: The above percentages are to be calculated on the total reinsurance premium ceded out-side India.

Reinsurance Placements

Regulation 5 describes the way of placing reinsurance placements. According to Regulation 5(1), every insurer (Cedant) shall be free to obtain best terms for its reinsurance protection of domestic risks, subject to the following:

  • Cedants shall seek terms at least from all Indian Re-insurers, who have been transacting Re-insurance business (other than emanating from obligatory cession) during the immediate past three continuous years and at least from four FRBs. (Regulation 5(1)(A) )
  • No Cedant shall seek terms from IIOs and FRBs having credit rating below A- from Standard & Poor’s or equivalent rating from any other International Rating Agency. (Regulation 5(1)(B)(a) and Regulation 5(1)(B)(b) )

Order of Preference

One of the most important aspects of reinsurance placement in Indian context is Order of Preference which has been revised in IRDAI (Reinsurance) Regulations, 2018. Order of preference means in which order, the insurance company in India should place their reinsurance business. In simple terms, which reinsurers should be given preference while placing reinsurance business? As per Regulation 5(2)(A), every cedant shall offer best terms, for participation in the following order of preference:

  1. to Indian Re-insurers, transacting re-insurance business (other than emanating from obligatory cession) during the immediate past three continuous financial years;
  2. to other Indian Re-insurers and FRBs;
  3. to the IIO as under regulation 5(1)(B)(a) which provided the best and lead terms with capacity of not less than 10%;
  4. to the CBR as under regulation 5(1)(B)(b) which provided the best and lead terms with capacity of not less than 10%;
  5. to other IIOs;
  6. To other Indian Insurers (only Facultative) and CBRs.

A thorough look on the above order of preference interprets that the Indian insurers should give first preference to General Insurance Corporation of India, popularly known as GIC Re as it is the only Indian reinsurer transacting reinsurance business for the past consecutive three financial years.  Other Indian reinsurers and FRBs come at second preference followed by IIOs and CBRs.

Reinsurance placements and order of preference as defined in Regulation 5(1) and Regulation 5(2) are not applicable to the following as defined in Regulation 5(3)

  1. Retrocession or reinsurance placements of Indian Re-insurers, FRBs, IIOs and Insurance Pools;
  2. Existing inter-company arrangements of the Indian Insurers transacting direct insurance business;
  3. Obligatory cessions as notified from time to time under Section 101A of the Act;
  4. Re-insurance placements of Indian insurers transacting life insurance business. However, Indian insurers,transacting life insurance business, shall endeavor to utilize the Indian domestic capacity before offering to the CBRs.

Alternative Risk Transfer (ART) and Domestic Insurance Pool

Insurer can initiate the proposal for an insurance pool which needs to be approved by the IRDAI as defined in Regulation 7. IRDAI approval is required for the formation of domestic insurance pool.

As far as Alternative Risk Transfer (ART) is concerned, there is a provision for ART solutions for Indian insurers as per Regulation 8. Insurers intending to adopt ART solutions need to submit their proposal to the IRDAI and after examining various aspects, IRDAI may grant permission to adopt ART solutions. IRDAI approval is required for adopting ART solutions.

What’s new in IRDAI (Reinsurance) Regulations, 2018

After having a walk through on IRDAI (Reinsurance) Regulations, 2018, let us see what is new in these regulations which are mentioned below:

  • Order of preference revised.
  • Order of preference not applicable for life insurers.
  • Every Indian Reinsurer shall maintain a minimum retention of 50% of its Indian business.
  • Amendment to Regulation 4 of IRDAI (Registration and Operations of Branch Offices of Foreign Reinsurance Other than Llyod’s) Regulations, 2015 which has been changed to, An applicant shall make a requisition for registration application under for Re-insurance business wherein the branch office of foreign Re-insurer shall maintain a minimum retention of 50% of the Indian Re-insurance business.”
  • For FRBs, there is no category as such now. The minimum retention is 50%. An applicant shall make a requisition for registration application for Re-insurance business wherein the branch office of foreign Re-insurer shall maintain a minimum retention of 50% of the Indian Re-insurance business. This removes Category B (minimum retention of 30%) of IRDAI (Registration and Operations of Branch Offices of Foreign Reinsurance Other than Llyod’s) Regulations, 2015.
  • Amendment to Regulation 8 of IRDAI (Llyod’s India) Regulations, 2016 which has been changed as, “An applicant shall make a requisition for registration application for Re-insurance business wherein the Lloyd’s India Syndicate shall maintain a minimum retention of 50% of the Indian Re-insurance business.”
  • Provision for Alternate Risk Transfer (ART).

I have attached the IRDAI (Reinsurance) Regulations, 2018 below. One can download the regulation for their reference.

IRDAI (Reinsurance) Regulations 2018

Ashish Kumar