The life insurance industry is in bad shape. Their past sins of over charging the customer are visiting them, and real hard.

The Irda made some changes, the Income tax made some changes, they themselves made some mistakes, the customer unfortunately woke up, ….so in fine the industry is in trouble. So here is a fictitious meeting of the various departments of a life insurance company…read on.

Managing Director: We have to reduce our losses, can we have some good suggestions please? Mr. Accountant will you present the numbers please:

Accountant: Sir, for the previous year, we received Rs. 8334 as total premium. Out of this Rs. 4556 was renewal premium and the balance was fresh/ new premium.

MD: So we netted Rs. 8334?

Accountant: No Sir, there were redemptions too. About 3234 Rs. cr was refunded to people who surrendered the policies.

MD: So this amount has to be removed from the total premium received…

Accountant: Also the commission that we paid to our biggest agent sir….about 44%. That is about 143o Rs. crores.

MD: Can we have the net amount of CASH that we received?

Accountant: Er Sir, sir, ..we had about Rs. 844 crores!

MD: And our expenses were Rs. 1023 crores. Most of it was spent on commissions, salaries, bonus, rent, staff welfare, etc.!

Accountant: Sir, we should appoint a committee across underwriting, actuary, operations, accounts, sales, marketing, HR, training, recruiting, administration, secretarial, legal, compliance, to do a cost review.

MD: I agree. We do not have much budgets, let us do a small off site for each region at Goa, Kodaikanal, Shimla, and Bhubaneshwar. Once the regional offsites are over, let us do a national brain storming session at Mumbai. Mr. Admin please co-ordinate the efforts.

Accountant: Sir we should also have a target for the claims and settlement departments. I was wondering whether it is possible to say ”this years claims have already been we will not pay your claim”

Md: That is a brilliant idea. Let us ask compliance whether this will work. Any better ideas?

Sales: Sir there is no cap on mortality charges or on rider we can increase the premium.

MD: Great idea, can we have the underwriting team look into it? So far there is no cap on the rider premium…so it might work. Here we can also pay higher commission to the bank.

Sales: Sir, we can also designate one branch in Manipur as the only branch to accept surrender of policies. Also I have checked – we can make it compulsory that the surrender has to be accompanied by the clients photo, attested pancard, passport copy (expired passport not allowed), copy of the cheque, and a bank statement. It is also possible for us to put a pre condition that the customer and the nominee have to go to Manipur branch on Tuesday, Thursday or Saturday between 4pm and 5.30 pm to surrender the policy.

MD: Brilliant, absolutely brilliant.

MD: what about some influential people who may have bought?

Sales head: Sir, in such cases if he  is related to our Board or his surname matches that of a RBI or Irda official we may relax some rules…but for the common man….Manipur branch is a good option.

Md: let us meet again after 2 weeks to brain storm some brilliant ideas like this…

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  1. Surrendering a policy might affect the cash flow for that particular year but I always thought that surrendering is beneficial to insurance company compared to what they need to pay on maturity. I wonder why they make surrender that difficult. When I surrendered my Birla SL policy in Bangalore, there was only one branch in Bangalore where I could surrender it. Thankfully it is not Manipur but I am sure Birla SL will be the first insurer who might implement that idea if at all it is implemented.

  2. Liked the sarcasam.Even some of the mutual funds seem to follow these tricks.When I wanted to redeem one of my daughter’s CGGF investments made a long time ago they kept asking for details one by one which they could have mentioned in one go and i would have furnished.No.that was not to be.First it was cancelled cheque then attestation of Bank Manager then the original Bond

  3. Sir we should also have a target for the claims and settlement departments. I was wondering whether it is possible to say ”this years claims have already been we will not pay your claim”

    Nice post,specially target for claims dept.

  4. I do not know who gets these ideas like surrenders at the designated branch, selective days and limited hours and the management agrees to opt for such ideas. Looks like these are the new indicators of sinking ship.

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