Justice is the insurance we take on our lives and property. Obedience is the premium we pay… and Cheating is when the greed of an agent comes in the way
India is a country where ruthless insurance agents dupe innocent people of their hard-earned life savings. But who is to blame? This is a country where people are yet not aware of the difference between life insurance and general insurance, where LIC is considered as a policy rather than a company, where insurance is purchased for tax savings or investments instead of risk protection – mis-selling of insurance policies is a given.
Here are some common reasons why we people often fall prey to this claptrap…
Lack of awareness
among the consumers is the root cause of this problem. There is still a huge chunk of our population that thinks spending on insurance is an unnecessary expense unless and until it helps them save tax. Many don’t understand that insurance is intended primarily for risk protection—not for tax savings and not for investment!
can be best explained by this example: One day Rameshji’s neighbour Sureshji (an Insurance agent) comes to visit him and advises him that as Rameshji is aging towards 30, he should think about his future and savings. He immediately offers him an insurance policy which will give him 1 crore after 30 years by spending only 3 lakh per year. Before Rameshji asks for any clarifications, Sureshji offers him the form, assuring him that there is nothing to worry about as he will take care of everything. Later Rameshji discusses the same with his wife and she replies that there is no other option but to purchase the policy as Sureshji is their neighbour who has helped them in their tough days. So Rameshji ended up making an investment in some product which he is not aware of, with a return which he has not verified and can’t do anything now as he has no other choice, otherwise Sureshji will feel bad.
Like this, there are innumerable such instances across the country where people are emotionally forced to buy insurance policies in the name of an “excellent investment”.
Minimum qualification requirement of the insurance agents,
shockingly, is Standard X, or in certain cases Standard XII, qualified. There are several instances of pan walas and taxi drivers having insurance agency licenses, having absolutely no idea about the policies, and still being able to earn hefty commissions purely based on their marketing skills.
Due to the ever increasing competition and the FDI being increased from 26% to 49% in the insurance sector, more and more companies are looking to acquire maximum agents through unlawful means. According to the IRDA regulations, one person can take an agency license with only one insurance company, and, in turn, claim commissions from that company only, but competitors lure good agents by giving them extra commission.
Short term gains by the agents:
Gopal is an insurance agent who visits Sachin, an IT professional. He convinces Sachin to take life insurance from the point of view of “tax-saving” and from an “investment” perspective. Gopal is finally able to sell a traditional plan, bagging a massive commission of 35% for the first year (out of which he has also passed back 20% to Sachin). Sachin is also happy for the time being, as he has saved tax, insured himself and also got some part of the premium back. So in his calculations, he has got the best deal. 3 years later, Gopal comes back to Sachin, telling him that there is a new plan in the market which is better than the plan he had bought earlier. The new plan will give him much better returns. He recommends that Sachin surrenders the old plan and gets the new one.
Now, on surrendering the old plan, Sachin incurs heavy charges and gets less than 70% of what he had invested (forget getting any return on investment). Now, Sachin invests in a new scheme for which Gopal once again bags a huge commission of 30-40%.
The real reason behind this facade was that Gopal was unhappy with the small renewal commission coming in from Sachin’s policy. So he recommended a change in Sachin’s policy only after every 3 years to ensure that his upfront commission is secured.
When there’s a problem, there’s a way to avoid it…
Hear the opening pitch carefully:
Life insurance is a long-term product and selling a long-term product is more difficult. Some insurance agents often approach you with a short-term insurance policy. If your agent says he has a good short-term savings product of around four to five years, which also gives insurance coverage, then buying a policy from him might be a risky proposition.
Note: Life insurance is not meant to provide short-term benefits!
Check the standard calculation:
Each insurance company has a standard calculation of the plan to avoid any misguidance. So, ask your insurance agent to give you the insurer’s standard illustration of your selected policy instead of a handwritten calculation.
Fill the application form yourself:
Most insurance agents ask you to sign at the relevant places and fill the form for you. But, it may lead to disaster. Read all the details carefully and get complete awareness of documents you are going to sign.
Note: Do not forget to take a copy of every document you have signed!
Check the medical requirements:
Some agents skip offering medical details because if there is a medical issue, the insurer will have follow-up questions that result in delays. Therefore, check whether there is any need for your medical details while buying a life insurance policy. Agents are not really bothered about the claim part, but knowing the medical history of a policy-holder is one of the most important factors toward ensuring a successful claim settlement.
Check the policy name:
Sometimes, you may contact an agent to buy a particular product and end up buying another one after hearing the agent’s pitch. To avoid getting into such a situation, check the need of insurance coverage and policy name while filling the document.
Check the premium receipt:
Few companies also issue fake policies just to increase their sales and pass it on to their existing customer as a freebie. Always ask for the premium receipt even if it’s a free policy as there might be a possibility that the premium is sourced from someone else’s account. You, too, can be a victim.
Ensure that the insurer calls:
Most insurance companies make a call to the policy-holder to ensure that the policy-holder has understood all the terms of the plan. If you do not get a call from an insurer, take initiative and call their customer service number.
Don’t get lured by rewards:
Some agents try to lure you with a few unrealistic rewards to make the plan appear more attractive. Evaluate the policy on the website or ask for the brochure of the plan.
Want to know what remedies are available to consumers who have been cheated by these callous agents? Stay tuned for Part II of this edition…
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