I did not realise how big is the menace of mis selling till I spoke to a few bankers. Given the aggressive targets that these kids have, misselling has reached enormous heights. I would dare say that almost all the selling is mis-selling unless it is term insurance!! Not sure how many people in the industry will agree with this. What with so many salesmen, trainers, …etc. saying that there is NO misselling I have no clue what are the numbers!

We clearly have to stop blaming the agent for the misselling. The life insurance products are poorly designed. If all the commission is paid up front, there is no incentive at all for the agent to keep the policy alive. The product structure has to include a far more uniform commission, a retention bonus (for the customer and the agent), penal clawback provisions,….etc.  A detailed feedback should be collected from the client and this document used for keeping or removing agents. Or even incentivising them.

When a customer buys a policy other than a term policy, the chances are he is buying a wrong policy. It is as simple as that. If the client MUST buy a ULIP he/ she should at least be able to break up the costs, know the hidden costs (brokerage and amc charges for e.g.) etc. A person who can do all that can always go for a Term + mutual fund combination….why ULIP?

Mis-selling is riding a bicycle! It does not matter whether it is the mistake of the car, the truck, or the pothole, the guy to get hurt is the cyclist!! So the victim is always the cyclist! So the policy holder will be found holding the baby and for a long time. If you have already bought a ULIP please pay the premium for the minimum period – mostly 3 years, but sometimes 5. In 5 years time, hopefully you will get what you ‘invested’….but even if you do not, just jump to the land! You will be wet, but not drowned!!

There is no great redressal system for you once you have bought an ULIP…so even though  Insurance companies have their own redressal system but these redressal system are manned by their own employee so will they come out in favor of  the consumer? No. Never.

The Insurance Regulator has ( like all regulators) spoken the language of the biggest player – the LIC.  However, have they added much value to the policy holder?

Your guess is as good as mine….

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  1. I agree with you – selling of all insurance is mis-selling unless it is term insurance.
    Both the agent and the client are to blame since the agent is not being honest and the client does not understand the product before signing it. In the past,
    it was very difficult for a client to understand the concept of a ULIP due to lack of information but now with the availability of many financial magazines and websites and subramoney.com, everyone has become wise.
    A ULIP consists of premium allocation charges, mortality charges, fund management charges, switching charges and the remaining gets invested in equities. Except for a NAV being declared daily, there is nothing transparent about the product. The portfolio of holdings is not made public and there is no liquidity. You should continue the premiums at least for a minimum period of three or five years with the brokerage charges/commission all paid up front.
    A mutual fund is more transparent with a disclosure of portfolio holdings and easy liquidity. You can always stop a SIP if you feel that the fund is underperforming. You can choose between funds with lower expense ratio
    and a good previous track record and a good fund manager/AMC.
    ULIPs and endowment plans have lost their credibility among
    people who are well informed about financial planning. But there are a lot of
    suckers who believe their insurance agents blindly. Trying to educate these
    people is also difficult – they defend themselves with excuses like LIC (backed
    by Govt of India), tax saving and compulsory saving.

  2. “I would dare say that almost all the selling is mis-selling unless it is term insurance!! Not sure how many people in the industry will agree with this.”

    100% agreed. I too share the same view.

  3. One of ny colleague who is one of victims of ULIP misseling is talking about an LIC policy. I raised about his ULIP menace & he says this is not a ULIP but an ENDOWMENT POLICY. I talk about MF+Term & he is not listening to me.

    Policies are not only mis-sold, but are also mis-bought. Ppl search online for LIC POLICIES & call their agents to invest.

  4. for me , i kept a rule, that i would not see the details of any life insurance policy except term insurance. if any body asks me opinion about any life insurance proposal except term insurance, i always advise him that it could not be better than term insurance plus any saving avenue , without going into details! the reason is my conviction and to keep it safe, silly!

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