The key to quality insurance is in choosing a good quality Agent. The word agent comes from the Indian Contract Act, 1872 and it is the Christian name for the guy who brings insurance / mutual fund product to your door step. Nowadays they have various names like Consultant, advisor, and the like, but I will use the word in its real meaning!
Very many people do not think it is really material as to whether you select a good quality agent or a friendly neighborhood agent. Risk cover and wealth management are both things that you need to plan for much, much in advance before the event. Imagine thinking you have cover for medical emergencies….but realizing that it is not renewed AFTER you have had an accident. Imagine getting up on your 55th birthday and realizing your retirement target amount is 15 years away. It will be too late to react. So choose an agent carefully. He / she can make your sunset years golden or red! Lets’ look at reasons for NOT selecting a person as an agent:
1. He is a neighbor. This can mean he is available for you, not that he is best. Typically if he has meandered in his career and at last (?) decided that selling insurance or mutual fund is his calling that may not be sufficient.
2. The brother-in-law, sister-in-law, father-in-law syndrome. Same as above. If they have built a business over a long period of time that is a good basis for selection. Not otherwise.
3. length of being in the business – normally this is an excellent reason to buy from a person. However in some cases it might mean that these are not enough reasons. Check if he / she is unbiased. Normally such people get stuck to one company and so many years brainwashing has lulled them into believing all good things happen only in that company and other companies are bad. For e.g. in India you will find enough insurance agents saying “private companies may not pay the claim”. This is hogwash. All private companies are reputed and have come with very, very strong partners. Lets not kid ourselves. They will all pay. In case they decide to leave India, they will sell their portfolio to an Indian company and then leave. Look at Sanmar.
4. Its’ the bosses’ wife: I have absolutely no excuses to offer! Play it by the ear, or get your CV ready!
5. It is a customer’s wife: keep the premium to the diwali gift level!
6. Its your bank: They know the exact amount of money in the bank, they know where you eat, how you travel, what school your kids go to, which credit card you have, but if they cannot plan your finances, be careful.
7. The guy who does not talk about term insurance at all. It is not to say that TERM insurance is the best, or it is most suitable, but he should offer it to you. He should tell you that there is something called top up in an unit linked plan. He should tell you about single premium products. You choose the end product. He should give you the choice.
8. The agent / bank / advisor who sold you a plan which somebody knowledgeable called a lemon! If you have been had once, that is enough. Do not repeat it.
Having said what CANNOT be the reasons NOT to buy from a set of people, lets look at what you can do to protect / save yourself from trouble:
1. Ask to see the agent’s insurance (IRDA) / mutual fund (AMFI) license. You actually want to be treated by a doctor, not the doctor’s husband, wife, daughter, father…..A license is personal not transferable. See it check for validity. It is yours by right.
2. Ask how many companies the agent represents– if an agent represents a number of mutual funds / insurance companies, he has the ability to look for the best policy to fit your unique needs and to find the best value for your money. PLEASE note in Indian conditions the agency system is some kind of a irrelevant condition. In one house you will find agents for 4 companies. An agent is supposed to be tied a broker is free to choose any solution for you.
3. How long has the agent been in business? How long has the agent been associated with the agency? Check the length of the association. Longer need not be better. It is only an indicator that the agent will not leave it for another business.
4. Has the agent earned any designations signifying that she has received advanced training in the business of insurance / wealth management..
5. Did you learn about this agent from someone you trust and respect?
7. What are the other things he does along with this business? In Indian conditions there are very, very few people who make a full time income by selling only insurance. If he is also selling other wealth products, that may be acceptable. However if he is a PCO owner, real estate agent, or such other businesses you might need to ask yourself “Why is he an agent”.
8. Who will handle your account on a daily basis? If it is not the agent, ask to meet the other person. Ask about his background, length of service with the agency, etc.
9. Ask how the agent perceives his role in handling claims. In case of general insurance you will live to learn! In case of life insurance you cannot even ask him for a reference! Telling him your ghost will haunt him may not be enough.
11. Ask him his educational qualifications. There is nothing to say that a qualified person is more up to date than a person who is not qualified, but it might help. CFA, CFP, CA, CWA, ACS, are all selling life insurance and mutual funds. It is an alphabet soup out there! No single qualification really means that the person understands all your financial needs. Equip yourself with knowledge. That is the real protection.
12. Is the agent a member of any local / national body of professionals which is subject to some code of conduct?
13. Has any action been taken against him in any forum? Does he have any commendation given to him by say, a neutral body?
14. If he criticizes the competition, beware of him. It may be sheer lack of knowledge. Ask him to say good things about the competition. That is a great test at being balanced. Believe me, its tough!
15. Ask him whether the money that he earns from the product that he sells is significant part of his earnings. If it is not, he is likely to give it up.
16. Make sure he understands risk cover, asset allocation, risk profiling, switching between funds, and equip yourself enough to ask all these questions.
Start with a prayer that always helps!
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