The games that insurance agents play


“THIS is the third call I’m getting today from an insurance company”, Shashank fretted to his friend Sudhir. Sudhir looked up from his work and just said, ”What’s new? I got four calls today, myself”.

Not surprising. For many it is a new calling (pun unintended). Insurance has become the refuge of many a mutual fund distributor, as that business has folded up since August 2009.

The insurance agents have quite a few tricks up their sleeve. Not everyone is bad and uses these unsavory tricks. But, you better know them. Here they are:

1) Old wine in a new bottle

The agent is constantly on the lookout for business. If organic growth becomes a problem, existing patrons come in handy! That is when you get calls to surrender the three year old ULIP (unit linkedinsurance plan) to put it in, what else but another ULIP or ULIP based pension plan.

Only that the insurance product charges are front loaded and you would have just completed paying most of the charges in the first product and now you could start off with the second one.

2) Government guarantee!

This is a ploy used by LIC (Life Insurance Corporation) agents. They keep talking about sovereign guarantee. Guarantee in a traditional product is only for the sum assured. Everyinsurance company (including private players) guarantees the payout of the sum assured. It is only the bonus payout that is not guaranteed. For ULIPs, this anyway does not apply. So, this is a total con game.

3) New products that no one has heard of

Heard of Jeevan Amrit or Jeevan Sadhana? These are not LIC plans. They are plans conjured-up by putting together a few insurance products of LIC . Also, interestingly, the payouts which come in at various points are assumed to be invested in National Savings Certificate, Public Provident Fund, RBI Bonds etc. Then they calculate the returns and tell you that their Jeeven Amrit or Sadhana gives 8 -10%. Don’t be misled by this. The higher returns are because of these other products, notinsurance. I have still not understood why they should show reinvestment in other products, when they are talking about insurance. And, how someone falls for these.

4) 6 & 10% returns in a traditional product

Recently, I found that a client of mine has gone for Jeeven Saral, a traditional policy of LIC. However, the agent had given an illustration with 6% & 10% returns! This was to be used for ULIP policies, where this is a possibility. In traditional policies, 10% return is virtually impossible. You would readily understand, why they use it then.

5) Insurance on the child

There are products for the benefit of the child, where the child is the insured. It’s absurd, as the child is a dependant and insurance on the child is of no practical use. Yet, these kind of products are sold and are bought by emotionally charged parents, ending up with a bloomer.

Sudhir clutched his head when he came to know of these. He just bought a child insurance on his daughter and he remembers buying a Jeevan Aradhana or some such product, which is one of those ‘intelligently’ packaged ones.

For those buying financial products, a basic level of financial literacy would help. Studying and doing some basic research, is a good idea too. If one is not sure, get an unbiased opinion from someone who knows aboutinsurance. Else, it becomes a costly mistake, which lingers around for years.

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