Insurance has been on the news since it was opened for private sector. Initially the survey how Indians are underinsured created the wave for insurance companies to penetrate in this sector. Then came the growth numbers and it was heartening to see how companies were infusing capital to ride this wave. Suddenly LIC woke up from a long sleep and there came the competition. ULIPs were introduced and almost 90% of sales of any insurance company were coming from this product.
Within these high growth numbers one thing was happening which ruining most investors hard earned money-misselling. Customers were offered products which do not fit their requirements. ULIPs was bundled as a saving cum investment product giving a feeling to the investors all their gaols can be easily met through this. Few years down the line complaints against insurance agents rose to a level that IRDA has to bring some changes to stop this misselling.
But with so many minds working in this field innovation has its own place. Agents designed new ways to play with investor mind and misselling might have reduced but not gone away. It’s amazing to see that even planners are called up with same ideas. I and some of my friends/clients experienced some of these misselling ideas which are prevalent today and highlighting here. I am sure this will help readers to be aware of these ideas which can ruin your hard earned money in a very nice fashion.
1. Switch to other Scheme: I met one of my old age client who has invested in an Insurance scheme three years back. After knowing the details of the product and compulsion of paying premium till he survives, he called up an agent of the company to know some options. Amazingly the agent gave him advised to switch to other option which will boost his returns. The agent sent him a new insurance policy form. After viewing the form it was clear the agent wanted to subscribe him to new policy. There have been instances like these when agent of an insurance company lures investor to other schemes on guarantee of recovering the loss he has suffered. Who gets the maximum benefit – We all know. Read the policy documents very clearly which list out all the options available in the policy.
2. Lump sum Payment: I know a retired professional who received Rs 3 lakh as his retirement fund. An insurance agent approached him revealing benefits on investing Rs 2 lakh as lump sum and receiving double the value after three years. Seeing the benefit of growing his hard earned retirement fund he subscribe to the policy. Shockingly when the person received the policy statement, the premium was annual. He withdrew the policy but had to suffer a huge loss. Make sure you do not do the same mistake. Read all the documents given by agents clearly and search for the reviews of product from other advisors/friends/relatives before making your decision.
3. Guaranteed Return: Once I answered a query of a reader in Business Bhaskar about returns generated in LIC traditional plans. I received a question on my reply from an LIC agent. I was asked to clarify how can i advise such low returns when IRDA has stipulated minimum guaranteed return of 6% on traditional products. I felt bad for clients of this agent and thought is getting an Insurance License is so easy?. Do remember, no company, including LIC, guarantee any return in any traditional product. Companies declare bonus every year based on the return they have generated from their investments. Hence, do not rely on agents figures and make your calculation to know the exact yield from the product.
4. Pay premiums from your fund value: This is a funny incident where one of my client had an insurance policy. He paid three year premiums and seeing his fund value he was quite disturbed. Unable to pay future premium he called up the company where one of the agent picked up his Query. On asking the agent replied with an advice to withdraw from his fund value every year and pay the next three year premium. Funny to hear but advise like these can be very dangerous for a layman who doesn’t understand the vagaries of ULIP Products.
These are some of the handful advice which is prevalent today. There can be many more, most of which might go unnoticed. ”Buyers Beware” is the most viable solution from saving yourself from these costly mistakes. With information loaded on web and print media, searching for a product review has become easier. Most investors raise their queries to planners through print media. I will be highlighting more experiences like these which will benefit readers of this blog. So next time an advisor knocks your door with some attractive proposal, make sure you do your research.
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This and All the other Articles/Videos on this blog are for general Information and educational purposes and not to be taken as an Investment Advice. Any Action taken by Readers on their Personal finances after reading our articles or listening to our videos will be purely at his/her own risk, with no responsibility on the Writer and the Investment Adviser. Registration Granted by SEBI, membership of BASL and Certification from National Institute of Securities Markets (NISM) in no way guarantee performance of the intermediary or provide any assurance of returns to investors.