Spend, Save and Invest Smartly
Consider a situation you pay 500 rupees for a pen which has the name “PARKER” on it. You go home and take out the pen to write. It comes as a shock to you when you see that this pen has a refill of Cello Gripper inside. You start fuming and rush to the shop and yell at the shopkeeper. The shopkeeper says that he never guaranteed you about that pen and you never asked for a guarantee, and shows the board which reads “goods once sold cannot be returned or exchanged”. You may say that this situation is an exaggerated one but this is somewhat very similar to what happens in the insurance industry when claims of policy holders are rejected.
All the organizations in the world have a rule book which decides the actions that all the employees have to perform and which differentiates DO’s and Don’ts and insurance companies are not an exception to this. Each and every country has a regulating body to monitor and regulate the insurance companies. In India the regulating body is IRDA (Insurance Regulatory & Development Authority). As it happens in almost all businesses even this industry has got some disputes and many times in the news paper we see policy holder suing his insurance provider. Now there may be many reasons for such a thing happening and one of the factor which is widely accepted and debated is the role of the insurance agents. There have been many reports where the insurance agent has not provided the complete information or unwanted information or mis-informed the prospective customer in order to close the sales. As a result of this policy holder is at the receiving end when his claims are rejected by the insurance companies.
Although we have given some of the possibilities these cannot be generalized. It cannot be concluded that all the insurance agents are alike. There are some who have taken their work seriously and have come up in this field, but we cannot disagree with the fact that the attrition rate is pretty high in this particular field which leads to companies recruiting people very often and which results into this situation. There are various situations during which the prospective customer is foxed by the insurance agent. In this article we will be discussing some of them and try to find out the ways by which we can overcome such situations.
We all receive such calls day in and day out. The only answer that the receiver should say is “I’m not interested”. Have no doubts the lady speaking on the other side will have a very sweet voice but our concern is we are the ones who will be investing our hard earned money. A basic rule put down by IRDA is that to sell a policy you should have passed the exam conducted by the same body. Now the person who is speaking over the phone with the client may or may not have this certification and most of the times it’s seen that they don’t have any certification. They will just try to persuade you to accept to the offer and collect all the details of your credit card number. If you give all the details you will blame yourself whole life for doing that. The person calling us may not have any certification and hence experience and will not have the full knowledge of the policy that she is selling to customer. In the process they end up over promising or adding some of the features or do not give you the full details.
This will be also one of the greatest lies and the most often heard by customers. Not only this along with this agents will add up sentences like “you are the selected one” or “our company is giving this offer only for this month” or “limited period offer”. Agents will say anything and everything to lure the customer which in reality will be far from the truth. This will be utter lie more than 90% of times. We know that insurance agents get commission for business that they have got for the company. Commission is decided on percentage basis. For example an agent sells a policy of 3,00,000 rupees and if the commission is 2% then he will be getting commission of 6000 rupees. Now if the premium that customer pays for the first year is 10,000 rupees and agent has told the customer that 10% of premium is refunded, and then the amount will be 1000 rupees. Agent won’t mind paying one thousand when they can get 5000 rupees because of that one policy.
This is one of the dialogues which insurance agent says. He will take your sign and then move. But have you seen the offer document, illustration sheet, prospectus etc. if no then there is always a possibility that you may have missed something which would obstruct you from claiming the insurance money later. Never ever just sign on any piece of paper that the agent gives you. Go through all the documents that he is showing you make sure that you have read all the clauses that are printed and then only go ahead and sign.
If the insurance agent tells you this then you may have a loud laugh at it. Do not agree to all that he says. What if tomorrow he comes to you with documents in which it has been printed that your insurance cover is for 4 lakhs whereas on the previous day agent had said that it would provide cover of 6 lakhs. You may feel that these things will never happen, but there have been many instances where such cases have occurred and the policy holders have taken a legal action and have got justice. This would take a lot of your valuable time and energy. That’s the reason it is always better to prevent than to cure.
There are health insurance policies and they cover your treatment charges. Insurance agents sell these to customers and this is the only dialogue that they tell them. If the customer knows about insurances then he will surely ask agent about all the diseases that this particular policy covers. If in case you get any disease not covered under this policy then you will have to shell out your own money for the treatment. Hence it becomes very important for a customer to know of all the diseases that policy covers. What is the use of taking a medical insurance policy which does not cover diseases such as diabetes, arthritis, brain tumor etc and your family has had a history of diabetes. It is very important because there are various policies such as Mediclaim, GIC’s medical insurances policies which does not cover a host of diseases ranging from asthma to hypertension. Customer should go through the fine print very carefully. Now-a-days idea of just opting for insurance cover is getting outdated. Due to want of earning more and more money and advancement of financial system there has come an investment which will take care of both your investment and insurance cover, its ULIPS (Unit Linked Insurance Plan). Let’s look at some of the things that agents say while selling ULIPS.
This sentence is used to attract the customers because agents know that customer will definitely fall for this sentence. One thing the customer needs to understand that there are more than ten investment avenues that will give you guaranteed returns, the reason why you have opted to invest here is you want more returns and insurance cover. Customer must enquire about the premiums paid to existing customers. If it’s not suiting your investment objectives then opt for another plan or approach for another service provider.
At the outside the percentage looks damn good and attractive for a customer to opt for this plan. But they have to be careful and not fall for the percentage figure, because what he is saying is the total returns given over the four years. Using a concept called as CAGR
(Compounded Annual Growth Rate) you can easily say that agent is fooling you.
(1+i)4 = 1.361+i = 1.0799
i = .0799 or 7.99%
Once you dissect the figures you get to know that all he is saying that plan is giving you returns of 7.99% per year. Most of the investment avenues assure you more than this one.
The truth is that the period that agent is referring here is lock in period and an investor can stop paying the premium even before three years. ULIPS are considered to be long term investments and agent is telling customer that he may stop paying premium after three years which is against the investment objectives.