Insuring own life is the primary responsibility of every earning person of a family. But, in India insurance related awareness is very less. Even most of the educated are least bothered about insurance. Possible objections to postpone are, I am healthy/I don’t need insurance/I need time/will decide later etc. If earning person dies, their family becomes financially unstable. But still, Indians give least priority to life insurance. That’s why in India, insurance is sold not bought. Generally, life insurance policy is purchased with agent’s pressure.

There have been many changes in Indian insurance industry in the recent past. Customers can choose policies which are matching with their priorities, profile, age etc. But still, customer’s opinion regarding insurance is not changed. In most of the instances, customers blindly sign a blank proposal and give cash to agents. Hence, for the sake of getting the higher commission, agents may take undue advantage & mis-sell life insurance policy. Insurance policies are considered as intangible products. That means a customer can neither see the product not enjoy the benefits. So, generally, selling such products is very difficult. In order to sell an insurance product, agents may give false promises like assuring double the invested amount within short periods like 3 to 5 years. In India, generally, an insurance agent is from our relatives or from friends circle. Hence, most of the customers believe agents & even they don’t check basic details of policy bond.

Few instances of mis-selling of life insurance:

We all know that agent gets the commission on life insurance policy. Important thing is that commission % depends on the term of the policy. So, higher term, there is the chance of getting the higher commission. As far as single premium policies are concerned, agents get only 2% commission. Hence, generally, agents show less interest in recommending single premium policies. There is a possibility of selling the regular premium policy as single premium policy so that agents get their commission and also convincing for a single premium policy is relatively easy. If further premiums are not paid, the policy will become lapse and risk coverage and other benefits will be stopped. Once policy bond is received, please check term of the policy. If you find any difference within 15 days from the date of receipt of policy, you may approach concerned insurance company for canceling the policy. This provision is called free look period. Once the period is completed, canceling a policy is difficult. Policy bond is a legal document. Even if the customer goes legally after free look period, the chance of winning is very less.

Unit Linked Policies (ULIP) are market linked policies. The risk is borne by the customer. In the majority of the cases, agents assure almost double the invested amount in short durations like 3 to 5 years. Investing in ULIP is almost like investing in mutual funds. In case if the market grows, fund vale also increases & at the same time, if market crashes, there is a chance of loss in fund value. So, if you are ready to face market fluctuations, you may opt for ULIP, otherwise, please don’t prefer such policies.

Traditional policies are long-term policies. Insurance coverage is the main benefit of traditional policies. If you want to cancel (surrender) policy during a term of the policy, it will be the loss to you. You may get 30% of the premiums paid by you. Pension policies have no surrender benefit. The main purpose of taking pension policy should be getting the pension in regular installments after a certain period.

Whenever customers want to take the personal loan or any other loans or want to invest in Banks / financial institutions, concerned Banks / financial institute sales employees pressurize to take a life insurance policy. Sometimes, without customer’s knowledge, life insurance policy is sold.

Important Points to remember while taking life insurance:

The main benefit of taking a life insurance policy should be risk coverage. Savings is an additional benefit. If a life insurance policy is taken only for the purpose of savings, you may be disappointed at the time of withdrawing benefits.

Life insurance policy is a long-term investment. Please don’t expect higher profits in short terms

Please have a glance at life insurance plan which you are taking. Like other investments, spend some time to understand life insurance product. Please don’t opt life insurance policy just because of others pressure.

As per IRDA which is the regulator in India, every customer has to sign on benefit illustration document. It consists of benefits which you receive during a term of the policy & after maturity. Please take one copy of benefit illustration and keep it with you. If anybody is assuring higher benefits, then obtain written documents from the concerned company. If it is not possible, please obtain plan brochure.

Please don’t sign blank proposal forms

At the time of taking the personal loan or other loans or at the time of investing in other financial investments, please get confirmation regarding the purpose of submission of documents.  

Once the policy is issued, please go through the policy bond and check whether details are matching. If you are not convinced, you can go for free look cancellation within 15 days from the date of receipt of policy bond.

If you have any complaint during the term of the policy, please submit written complaint & obtain acknowledgment. If you are not getting acknowledgment, send the complaint by speed post and keep proof with you. You can send your complaint over mail to the concerned authority of insurance company.

If you have not received any reply or if you are not satisfied with the reply, you can register a complaint in IRDA website. As all insurance companies are regulated by IRDA, they need to answer IRDA within the specified time.

If you are still not satisfied with the reply & if the sum assured is less than or equal to 20 lakh, you can approach insurance ombudsman and submit the complaint. You need to submit a written complaint and necessary proofs available with you. You can find insurance ombudsman address in your policy bonds. You need not pay any amount at the time of processing complaint.

As far as insurance companies are concerned, whatever be the judgment of ombudsman, insurance companies have to strictly follow. They cannot fight legally. But, if a customer is not satisfied with ombudsman decision, he/she may go legally and approach consumer forum. But, here, customer needs to pay certain amount & entire process may take time.

One most important suggestion is that we spend a lot of time in buying a cell phone / TV etc. Please spend sufficient time at the time of investing in a long-term life insurance policies. We have the lot of websites which can give you better idea and comparison between benefits and premium rates of different companies.

Life insurance is purely a dry technical subject. We may take a wrong decision even if we misunderstand what agent explains us. Hence, please analyze few points before signing a life insurance policy.

• Whether the life insurance plan proposed by agent suits to us?
• What are the main benefits of the policy?
• What are our expectations of opting the policy? Whether the plan proposed to us is meeting our expectations or not?
• Whether the benefits assured to us are really possible?

Happy investing…

Thanks,

Ravi V
Life Insurance Functional Expert