What do you have to say about misselling that is rampant in insurance?I acknowledge that there is misselling of policies but it is not alarming. I feel the main reason for misselling is when the sales force does not follow the concept of giving correct advice. The incidences of misselling cannot be ruled out, as over 1.5 lakh agents have joined this business in the last four years. Besides this, over 90 percent of sales managers with the private insurers have no prior experience of life insurance. However, the important things to note are the steps taken by the industry with the help of the regulator. The insurers follow a stringent recruitment process and provide continuous training to the sales force. The sales force has to undergo 100 hours statutory training and has to clear an exam before obtaining a license to sell. This is just to get inducted into the business. All agents are required to get the license renewed every three years. n Policies like money back and endowment are quite opaque and the buyers don’t really know what their costs and returns are. Why has the industry been so reluctant to disclose the charges?Earlier the differentiation of costs was not there as there wasn’t any competition. With the advent of private players, consumers have an alternative and there has been an effort to differentiate in all spheres whether features, costs or value-adds. With new products like unit-linked insurance, concepts of flexibility and transparency have emerged reflecting the latent needs of consumers. The charges on all ULIPs products are disclosed in the product brochures.n Insurance is a high cost way to investment, since only 60 to 70 percent of the premium is invested, the rest are charges. Should investors look at pure investment products and use insurance only for protection?It is important to understand that insurance products are long-term savings products with expected tenure of over 10 years. The charges are front-loaded and are applicable on the first year premium with or without low recurring charge on subsequent premiums. The charges vary from a customer allocation starting from almost 98 percent depending upon the plans. The fund management charge is generally lower compared to a comparative asset management class. If you take into account the longer tenure of the plan the charges on the life insurance products may work out cheaper compared to any other asset management class. At the same time if a customer cuts short tenure of his policy mid way than the effective charges may work out higher for him.n Why isn’t there disability insurance or an income protection insurance which is quite popular abroad? Why is the industry so focused on ULIPs, are using insurance as a ‘wrapper’ to get the tax benefit?These are specialized products and indicate a mature market. India is still hugely underinsured. The industry has just opened up to products like unit linked insurance and to add on options like critical illness, disability need pioneering by private players. Slowly we will see the emergence of products offered worldwide in established markets.
