Spend, Save and Invest Smartly
I would like to start this article by quoting the famous saying Prevention Is Better Than Cure. In order to prevent misselling from occurring one must know the tricks used against us and the remedial questions we need to ask in order to prevent misselling from happening to us. Don’t we All think it is our duty to prevent misselling from occurring in our society? If you have any complaint regarding misselling you can post your comments on Moneymindz.com. Any problem ignored at its roots tends to be a scourge later on in life. If an insurance agent tends to succeed on a regular basis getting away with misselling, it emboldens him to try it on a larger scale. This tendency to ignore the small problems leads to frauds and scams being committed on a larger scale. Don’t you think it is our moral right to prevent such misselling from occurring in our society…If you have been subjected to misselling you can post your complaints on Moneymindz.com. You can explore this unique Free Advisory Service just by giving a missed call on 022 6211 6588.
Here agents advise us that after paying the premium for the first 3-4 years all we need to look forward to are the returns. This should raise suspicion in our mind when he should be telling us to invest consistently. Here we need to know that there are no shortcuts to success in life.
Here the insurance agent tells us that you will be able to get 10% cash back on Premiums Paid. Here we need to see the irony in this. The amounts returned are our own money. This is just a selling gimmick. Here in a ULIP the premiums are so high they include the charges and commissions paid to the agents. Never Be Penny Wise and Pound Foolish
Here agents tell us not to worry. These are our most selling products. A lot of people have bought these products. Here we need to say , Please Do not tell me about others tell me how these products can help me achieve my long term goals like my retirement goals. Also note the different charges involved in these policies. Always remember the phrase Look before You Leap.
Here we need to have the basic knowledge of insurance in order to prevent misselling from happening to us. We need to ask the following questions.
Do We Need This Policy?
Is This Consistent With Our Needs?
Are We Being Too Greedy And Unrealistic?
Have We Set Our Goals Too High?
Let us now consider how misselling of ULIPS occurred in India before the September 2010 IRDA Regulations :
Lock In Period Increased To Five Years
This is beneficial as it prevents the policy holder from spending the money resulting in a forced saving. Here it ensures the benefits of equity really kick in as there is sufficient time for funds to grow as huge entry costs are involved in these funds.
Level Paying Premiums
Here all regular premium /limited premium ULIPS shall have uniform/level paying premiums.
Even Distribution Of Charges
Charges on ULIPS are mandated to be evenly distributed during the Lock in period. This is to ensure that high entry load is eliminated.
Minimum Premium Paying Term Is Five Years
All limited premium unit linked insurance products, other than single premium products shall have a premium paying term of atleast five years.
Increase In Risk Component
Further all unit linked insurance products other than pension and annuity products shall provide a mortality cover or a health cover thereby increasing the risk cover component in such products.
Minimum Guaranteed Return For Pension Products
As regards pension products all ULIP Pension/Annuity products shall offer a minimum guaranteed return of 4.5% per annum as stated or as specified by IRDA from time to time.
With a view to smoothening the cap on charges, the capping has been rationalized to ensure the difference in yield is capped from the 5TH Year Onwards. This will not only reduce the overall charges on these products , but also smoothens the charge structure for the policyholder. For Further information on IRDA Regulations please lookup www.irda.gov.in.
I would like to end this article with the Honorable Finance minister Mr Chidambaram’s views on this sector telling us why there in no robust growth in the insurance services sector compared to the banking sector in India. Here Mr. Chidambaram states that the insurance sector is struggling despite pressing reforms ,is due to rampant misselling occurring in the sector. He states that if you want to sell insurance in India sell simple products and make it absolutely clear that insurance agents should not missell the products. Insurance agents also need to realize that one of the best sources of business is through word of mouth. Once the insurance agent has enhanced his reputation his products would sell themselves .And for the rest of us "Never Judge A book By Its Cover".