Subramoney

I hope to God no underwriter or actuary is reading this article. It is just a collection of the channels through which life insurance is sold these days. If some retired people cannot recognize some of the channels, please stop shaking your heads! Let us look at the channels:

1. The life insurance agent: the old, tried tested method. An agent is appointed then there is a manager to look after this agents requirement. This manager is given a lot of fancy names - Unit manager, business development manager, sales manager, etc. The agent has to first pass an exam - “conducted” by IRDA approved institutions. In the English dictionary the closest word to this exam is Joke.

2. The “relationship manager”: Employed by banks these guys (and gals too) know your bank balance, your salary, your credit card payment….so they know how much of life insurance you need, so they sell to you. A very aggressive channel, training, if any is strictly optional. If anything it is a hindrance - 3 training days means 3 sales days less
3. The “relationship manager” who works in brokerage houses like Indiainfoline, Kotak securities, Edelweiss, Motilal Oswal, Sharekhan, Angel broking, etc. more or less similar to 2.

4. Wives of agents: Unlike doctors, lawyers, Chartered Accountants, once a person becomes an agent his whole family can start selling life insurance products. So the wife of an agent, mother, father, major son, major daughter, partner, neighbor all pitch life insurance products.

5. MLM: Multi Level Marketing agencies like Amway, enroll new members on a daily basis. So when you are enrolled as a “sales officer” - you need to get say 2500 points to start. Of course you can do this by simply buying a life insurance with a premium of Rs. 15000! So here is a fantastic way to sell life insurance - every day if you enroll 200 members a day, you would be selling (rather the new sales officer would be buying) a life policy to “qualify” as a member! So this channel works like a sales and back office processing factory. There is a large no. of people selling and a million people filling up the form, etc. Here there is no requirement of training. Simple.

6. Agents of other companies selling life insurance: All the old Indian names who have entered the life insurance business got a lot of “walk-in” agents. These are the old Indian hands who were selling equities, mutual funds, equities, etc. Now since these guys are MDRT agents, TOT agents, COT agents (titles for high life insurance sales people). The competitor companies put a plan in place to “attract” these high title agents with fantastic schemes so that they start selling the competitors’ products also. Let me explain - suppose Ms. K N is a top agent of ABC life insurance company. DEF Life insurance company knows about Ms. KN. They approach her to sell their product - and this is without her having to do any paper work. So a new channel has been set up :).

the flow just continues…

A friend called me to say he is buying a new life insurance policy. Luckily he called me before he signed the cheque. I asked him why did he have to buy a policy - his son and daughter have just completed good top class education and are in nice jobs.

Well the whole thing started because his manager called him and sought a meeting. He had all the print outs of all the policies that he had bought from one particular life insurance company. My friend flipped and asked him “How come you have all my statements, when I actually bought these from somebody else”

Without a convincing answer…they went ahead.

The RM told him “Sir your endowment plans have both MATURED” - as you have paid for 3 years. Moreover the NAV of the units is also attractive at about 67, so please surrender it” and then you can use the same money to buy a new policy which is available at a nav of 7 (you see markets have fallen, and will soon go up)..blah, blah…

My friend has a pretty high IQ in pharma, training, retail, and almost an apologetic IQ in finance.

Luckily unlike other friends, HE called before signing the chek!

I asked him to chill out. Like in most circumstances, for this guy also inaction was far, far, more profitable than such stupid action as suggested!

The jokes are just not stopping. A friend had bought a unit linked insurance plan from a company. As is wont with friends, he called me a month after he had received the statement. He was shocked to find that he had paid Rs. 200,000 and the statement was showing an investment of only Rs. 86,000. This was invested in a “balanced fund”.

He asked me what it means. I asked him to check with the “salesman” who sold it to him. The truth was there was an entry load of 55% (obviously figures have been changed to keep all concerned happy). Which means only Rs. 90k got invested, and then risk charges, etc. were removed. Thus the amount being shown was Rs. 86000.

The client got a reply which said “Sir, it is a balanced fund, so the amount that is invested in the market is shown as an investment, and the balance is put in safe government bonds etc.” so actually all your money is invested, but since the gov bonds do not change in value, they are not included in the statement”

I was impressed!

I do a lot of training and little of teaching. Normally i refrain from sharing their answer sheets. However, some were just too hilarious.

The answer for a question “What are the common mistakes a person does while planning his retirement” was

SPENDING TOO MUCH MONEY AT SPOUSE’S WEDDING!! - actually it comes from the concept that I told them that Indians spend too much money at their kids marriages and kids education.

One student seems to have thought spouse and children are perhaps the same?

Imagine a pyt comes to you and is selling you a complex currency and interest rate derivative. Your Director Finance and CFO do not understand the product after 3 rounds of explaining. So the pyt goes to a rating agency and gets a certificate saying this product is “Category B”.

Now the ego of the CFO and Director Finance takes over.

They have now got to accept that they understand the product! Once the interest / currency moves in a direction OPPOSITE and your company starts making losses, panic steps in.

The pyt has just put in her papers and moved to a bank - to handle a bigger desk because she brought your account (oh lala la). She just had a party for her friends in Marriott out of the bonus she received.

The consultancy company (or bank) have already shown the income in their books and justified the p/e of 50 to the press.

The CFO is anyway on notice period, because she is moving to another life insurance company to handle portfolio risk (Oh my God!).

Your Director Finance is red in the face when the lawyer shows some clauses which are patently stupid.

But you have to face the Board - not that it matters because they are all your Dad’s friends. However, one of them was your prospective father in law. He is re-considering. That is worrisome.

Your Merchant Banker has just called to reprice your rights issue. Your auditor is talking about MTM…and some mumbo jumbo about his institute. They luckily also call your Dad a member, and he is reconsidering whether to let you handle finance. That is a bother.

Your shareholders..ha ha..they watch business channels do they not? After all when an anchor tells them they should do a “fundamental analysis” before investing why did they not listen? Their fault. The should know sub prime, interest rate derivatives, mark to market, naked positions, open positions, open interest, melt down, mark down,…etc. come on they listen to it everyday, do they not?

This is a joke on financial advisors.   A rich man changed his advisor and was not to happy. While at a club, his friend asked him - hey how is your new advisor. The rich man said “Oh! he is good. After shifting to him, I sleep like a baby. I cry every hour!!

A new agent joined a private life insurance company. He took about one month to start and then started blazing all records in sales. Like they say “Din Dhugni raat Chougni” sales was happening. He was brilliant, absolutely brilliant. His immediate manager wanted to go with him on a sales call - one does not know whether out of sheer admiration, or take credit, or sheer jealousy.

The call started…the client agreed to buy a policy. Then the client asked the most hated, but most asked question   “Is it not better to buy from Life Insurance Corporation of India” (a.k.a LIC?)

So, the agent gave a billion dollar reply…”Sir India is a growing market. LIC is unable to reach all places, so the government has asked LIC to open many divisions…so we are all “ABC Life insurance coroporation of India”. “DEF Life insurance corporation of India”….

so sir now LIC has 14 more divisions….that is all.

Obviously everybody is happy with the sale….who will complain?

A senior executive from a leading private sector bank met up for lunch. One of the topics that came up was “Will gold prices go up?”. He immediately said, YES, it will shoot up if we sell more gold. Intrigued, I asked him to explain.

He told me a story of one PYT that the bank had recruited for the front counter. She was supposed to sell gold coins. The first 6 customers came with cash, and bought the gold. The 7th customer got a credit card. She sold to him also.

5 days later the reconiciliation was attempted. There were 10 coins short. On being asked the PYT said, of course I have the details of the card sales - she had faithfullly recorded the card names, and the card numbers!

Why did this happen?

Is it the employee’s mistake happen? Because of the employee? No.

think about it..and leave a thought!

Many clients, students and friends call back saying “This xyz person offerred me 36% returns on life insurance policies” is it possible?

My answer has been “The fact that you are asking me shows you do not believe it”. After all you do not call me every day for every thing, do you? - is my jibe!

I once told a client “here is a mutual fund where you will get 40% return, SURELY, in 36 years time”. He was a little stunned and perhaps a little amused. So I told him a story.

Once a poor man was sentenced to death, unjustly, by King Akbar. He came running to Birbal for help. Birbal told him, please tell the king, “I can make your favourite horse fly in 2 years time”. The poor chap did not know what to say, but trusting Birbal he went off to tell the client as instructed by Birbal.

Birbal’s wife who was standing nearby asked Birbal “How will you save this poor man…will the horse fly?” Birbal’s reply was stunning. He said “Look I have asked for 2 years time. In this period there a few things that can happen:

1. This man can die of natural causes

2. King Akbar may die, and this guy may get pardon!

3. The horse may die or

4. The damn horse may fly!!

So similarly when i was telling the client that he will achieve 40% returns in 36 years time, the following things can happen:

1. The client may die during this period.

2. I will surely be DEAD by that time

3. The client may forget

4. The fund may actually perform!!!

So when clients ask you for indicative returns, promise them indicative returns over 40-50 years…but do not promise returns for 1-2 years!!