The other solicitation business: Life Insurance!
‘Life insurance is a solicitation business…..’ well no comments!
Now Hari Narayan wants the agency channel to close down and only the bancassurance business to survive. Completely from my portfolio point of view, I am very happy. Banks are in a great position to know what you do with your money – and they have software which tells them that regularly. Banks spend a lot of money on seeing what the consumer does. Of course the business friendly (over friendly) regulator RBI knows this and does nothing. Obviously.
When the regulator is in such a nice relationship with the regulated entities, what should you expect?
So banks will sell life insurance. As long as the banks are allowed to set up subsidiaries which can create life insurance policies – the money remains within the group, vow what an incestual relationship. Soon banks will be allowed to sell multiple life insurance policies!
At least a couple of CXOs regularly tell me ‘Subra….we are attempting to reduce the dependence on the banking channel’. One owner said – it was because it was the ego of the MD of the insurance company – he was being treated like a school boy by the bank (obvious?).
Is it good for the customer of the insurance company? Well I do not have too much respect for people who are willing to write Rs. 10 L cheques because they THINK their wives need a ‘big’ locker in a high premium residential location! Or for the SME businessman who is willing to sign a Rs. 50L cheque to hasten the disbursal of a Rs. 38 crore term loan!
However the NRI who is sailing or is a carpenter in Dubai saddled with a Rs. 50,000 per month premium for a product where the bank has 54% commission is a little cruel is it not? Well I am not complaining – I said in the first para I am a shareholder of banks, not mutual funds, life insurance companies or brokerage houses. For my banks these are just tools to earn money. Long live banking! And the banking regulator. See how he regulates savings bank interest. L O L.
krish
Insurance is very attractive for the banks and looks like following the model of Warren Buffet to drive the growth. First of all, cost of procuring the new customer is very low and often bank premises are used for documentation. Approaching the client has never become so easy. Customers are always standing at ATM and visiting the branches for various reasons. Next part is commission which is very attractive. The third part is the float. Bank can use the insurance money for high return categories such as deposits, Gold, MFs and where as it has to pay just 2% for the endowment policies to the customer. It is akin to getting the free money from the customer and earn from it. The new age policies are devised very tricky and just part only whatever customer paid in the event of unfortunate incident.
We can critize the customer for falling pray, I personally feel loan seeking customers are effected badly than the affluent one. The loan seekers outweigh preferred customers by huge number. Ask any loan candidate, do they have any option if every bank is following this trend. The BMs and RMs are acting ruthless on who refused to budge.
VIVEK
The Perception towards Insurance should change from Reluctance to Readiness.
I always advocate Low Cost Term Insurance.
If you have dependents, it is your OBLIGATION (more than Responsibilty) to have Term Insurance cover, so that in case of any untoward unfortunate event, atleast the dependents are secured financially.
To add to my comment, following things really surprise me
1) When you buy any Merchandise/ Product, you ask the Shopkeeper/ Manufacturer, if there is Warantty and Extended Warantty. You always pay extra bucks to get the Warantty and Extended Warantty for an INANIMATE, PERISHABLE OBJECT.
But, when comes to getting Warantty and Extended Warantty (I mean Term Insurance cover) for your Life, people are just reluctant to shell out money, because they think its waste of money.
Remember, the first step to FInancial planning is having Term Cover.