There is a huge anti IFA and anti life insurance agent in the media. Half baked people with even lesser knowledge do think that the financial advisory business ought not to exist and they can all DIY. DIY stands for Do It Yourself. No person howsoever intelligent and well read can do it all by themselves without bringing bias into their portfolio. Exactly why I have an broker who has shaped a big part of my portfolio.
Having said that let me tell you what my peeve or rant against life insurance agents is. If you are an agent stop doing this, and if you are a client, be warned.
Underselling or not selling TERM insurance:
This is nothing less than a crime. Most agents cannot think beyond Rs. 25L or going up to a Rs. 100L. They do not do a proper analysis about how much of term insurance a person needs. I have seen doctors and lawyers being pitched Rs. 50L term insurance – and when I did a need analysis, they needed life insurance in excess of Rs. 4 crores. They need to take into account the guarantees given, the partnerships, the bank loans, the hospital loan ….etc. Why agents undersell term insurance has 2 angles – one is lack of knowledge of the agent, the second more sinister motive is to keep place to sell endowment insurance. Both are very bad reasons, so be careful.
2. Overselling Endowment Insurance:
This is an outcome of the earlier one of underselling term insurance, and therefore selling more endowment. Endowment means both classic endowment and ulips. Unit linked plans are normally better than a classic endowment. However the greed of the life insurance companies have ensured that the endowment plans give pathetic return. One product by a Honest life insurance company has given less than savings bank account returns over a 10 year period. When I say endowment I mean all its siblings, children, and cousins – Whole life insurance, universal life, unit linked endowment, variable life, variable universal life, classic endowment…). I am saying this because most clients are happy to hear their agents say “this is not unit linked” – then they tell me “but Subra this is not unit linked”. Be careful about nomenclature. There should only be a few agents in any company who become experts in it and then sell this and you can just refer the rare client who needs it to them. Some clients who are not eligible for Term because of health conditions for example.
3. Selling variants of Term Insurance and its Riders:
As trainers and some more writers have screamed ‘for’ term insurance, most companies have created bastardized version of term insurance – Return of Premium, with expensive riders, etc. Selling such stuff is just like selling endowment insurance – a cheaper variation. One newspaper even carried an article on “how to buy term with RoP” – lol. Well insurance agents are not going to win any popularity award selling such stuff, I can assure you.
4. Selling Life Insurance on Children’s Lives:
This is a pure emotional, foolish and stupid product. You will miss your children only emotionally, never financially. There is only one exception to this – when you pay for your child’s education with a big loan or with a Provident Fund withdrawal. All your life you have saved/invested / borrowed for your kid’s education – and just paid US $ 100,000 as fees. Then a term insurance for about Rs. 1 crore makes sense – just in case the kid …no other time does this make sense. This is a favorite product and makes a great emotional pitch.
some more….but another post…
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