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POSTED BY ON January 30, 2012 COMMENTS (203)
While replying to some of the comments 2 days back, something caught my attention. One of the reader wanted my opinion on what he should do with his Jeevan Saral Policy for which the first premium was paid by the agent and future premiums were to be paid by him. As this happened recently in Jan 2012 only, the first premium had been invested (by agent) and he had to pay his future premiums (monthly). What caught my attention is that his agent paid his first month premium.
In addition to this i recently taken Lic Jeevan saral policy in the month of Jan 2012 (First premium payed by agent) and i need to pay from feburary 2012 thru ECS. After i read the article i realized the returns will 6 ~ 7%. My doubt is.. Do lic returns 6~7% any proof or evidence? If it is sure 6 ~ 7% what i need to do whether to continue or stop? (source)
You might be aware that many agents offer to pay first month premium and at times the whole first year premium. Many a times hungry investors shamelessly ask their agents if any pass-back can be earned out of it! So in such scenario, agents have to pay premiums from their own pocket. Now to many of us this whole “agent paying premium” might look very shocking and confusing because what can be the reason for an agent to pay your premium? So lets see why this happens.
One reason as to why an agent might be ready or eager or forced to pay your 1-2-3 months of premiums is because he earns commissions out of your premium. He earns around 25% of the premiums as commission in first year, 7.5% in 2nd and 3rd year and 5% for all the other years. Hence agents can safely afford to pay up to 25% of the premiums (which he gets back in form of commission) from his own pocket. So he can pay up to 3 months of premium without loosing any money.
Another reason why most of the agents are forced to do this is because of the competition in the agent business. If one agent does not offer the pass-back of premiums in form of paying the first few months of premiums then some other agent will and the agent will lose the customer and all the future commissions he might have earned. Even the customers want to choose agents based on how much commissions he can pass back to them rather than how he will serve his clients. While writing this article, I came across this yahoo answers link where the question topic was “Where Can I find a LIC agent who returns the commission?” and then these clients will blame agents for miss-selling.
Who in India does not like the word FREE? When someone else pays your premium, you are so tempted to take it and ignore the fact if it’s really a worthy product or not. So if the agent feels that a client might be interested in a product, well and good. If he feels a little hesitation or sees that a client might get stopped because of some reason, then an offer of paying first few months premium is really an ace move. That really stumbles the client’s rational thinking ability.
It’s very simple. I don’t need to sell you anything, just start the policy and pay first 2 months premium. I tell you that “Sir, your policy is started, don’t worry for the first premium as I will pay it”. Then comes next month and then I say “Sir, I have already paid your two month premiums now all you need to do is continue it”… So this gives you a feeling that you already got 2 premium payments for FREE. This in a way attracts you to make future commitments and the agent had to part away for some of this first year premium commission, but in a long run, he will make money out of it.
A lot of investors have no idea on this point, but companies have load of sales targets and even bigger incentives for meeting these targets. For example – Foreign trips for top 100 top Development officers, a CAR to the agent selling maximum policies and many more like these. So at times in order to meet these targets and be eligible for those incentives some agents pay the first year premiums for some of the client.
As this trend to pass-back commissions is totally disallowed by IRDA. Its illegal for agent to pay clients premium or give him excessive gifts to lure him in taking the policy. An agent should totally avoid paying his clients premium. Also as a client, one has to understand that it’s not in his best interest to ask an agent to pay their hard-earned money for your policy. In the case an agent is offering to pay your premiums please ignore it!
2021 © Jagoinvestor.com All Right Reserved
Your Article is good . I would like to mention that being an LIC agent is hard to survive , i feel like as we(LIC Agent) are doing charity . LIC agent pay back commission some even from their pocket . Some time i ask myself what are we ? If we compare ourselves with private insurer advisor those people get fixed income + Incentives and LIC advisor their commission even don’t belongs to them. How is responsible for this practice . We have hardly left anything with us . Commission we pay back and at the end 5% , kindly calculate Rs 100/200/300 maximum 500 . Is this amount is satisfactory for survival of a family ?
Investor demanding shamelessly from agent should see the fact . Do these people share their salary with other ?
100%true,we should not pay back
Can we have modification in making any Policy suitable to us like for e.g LIC Money Back Policy is more 20 Years, so can I make it for 10 Years (When I take Policy it would be for 10 Years for Sum Assured) and get Half the time what they Guarantee for 20 Years?
OR IS it 20 Years Means it should be 20 Years?
It has to be 20 yrs
After reading article what I understand is that even Private Insurance Companies Agent do get commission same in line with LIC Agents.
Am I True?
Its not true . All companies give commission in almost same way
Hi Friends,
I have a small doubt, need your advice for the same, kindly help,
I have purchased following LIC Policy,
“PLAN:0815 New Jeevan Anand TERM:26 AGE:31 SumAssured:500000, Monthly (Rs): 1773” – details as per online LIC website Premium calculator, excluding service tax.
Where as Monthly Premium : 1815 is what I pay for the same policy as I have taken the policy from a Agent.
Is this possible, that the premium is different for the same policy if you buy online or if you buy from an agent.
As what I had assumed is that premium must be same irrespective of whether you buy online or from an agent. instead LIC would be paying to the agent from his profits and not by increasing our premium and paying to the agent.
So my doubt here is can there be a difference in premium for the same policy, if you buy online vs agent?
Also as per the agent the premium will reduce from next year onwards due to decrease in service tax which is currently 3.5% for the 1st year and from the next year onwards it will become 1.75%. then what about the ECS instruction given to the bank will if automatically agjust as per the decreased premium rate or the premium rate remain constant even if the premium decreases ?
Thanks,
SG
Only in case of term plan I know that online is a bit cheaper than through agent , not otherwise
Any way by which i can cut sort my term
What do you mean by that ?
my term if 30 years of new jivan anand i want it to be 15 years
Hi dharam
The best answer you can get only from the agent you invested through or just contact the company. The thing is your case is a bit personalised and other than company, no one can give accurate information
Manish
What are your views on Sumit Bose Committee?
I think you should write an article on the recommendations of Sumit Bose Committee and well send me a link when you do so.
I have not seen it yet . Can you send me some link for it
You can read the full report here: http://mintne.ws/1NeFMNj .
I have received new hdfc policy document today, what can i do cancel the same ?
kindly suggest me.
Policy adviser committed to me this policy is directly from company not through agent but agent code mention in policy document.
You can go to HDFC life and cancel the policy .
Hi Manish,
Is there a way where I remove the agent assigned to my policy. if yes how do I do it.
I recently got a call from some agency saying that If I get the Agent name removed from my policy, the insurance company will send his commission amount back to me. How far is this true.
Jayesh
Its a fraud call .. This just cant happen .. If agent is removed, the company just does not have to give any commission , thats all . For you , nothing changes !
Manish
Thanks Mr Manish,
I get alteast 5 calls daily saying that my agent is not helping me. They say please help me for existing policy also say want to take new policy.
There are many Clients knowing that we are getting paid for our job, do not ask for anything from our commission. For them I say “My services are there would be there till marturity of the policy or till I live in this world”, whichever is higher”.
I salute my clients for their support and trusting me.
Thats great 🙂 .. thats the right spirit ! ..
One the other note, wanted to share with you about our 2 days advisor training program – advisorhub.in/success-120/
I agree with the Author. In Insurance field around 75% of Agents are part time. They work for only when they require Minimum business guarantee i.e. 12 policies and Rs. 1 lakh premium.
The most affected are Agents like us who are full time and fully depend on Insurance commission and services. These part time agents take business by giving their full commission and forget the customer once cheque is collected. Some times Customer also agree for this and say WHAT SERVICE YOU ARE GOING TO GIVE, PAY ME AND I WOULD TAKE CARE OF MY POLICY.
Thanks for sharing that Shivakumar 🙂 .. I know what you are facing ..
if 25% save from our packet, then why should deny if agent is ready to pay our premium. person who deny this is a fool.
Hi RS
Did you read the full article ?
If you are 100% sure that he is selling you the right thing in your interest, then you can go ahead, but its against their own code of conduct.
Dude ,
What do you mean by shamelessly ask the agents if there is any pass back, of course, who doesnot like value added offers.
You speak as if you have never enquired the price of a product at two or more diferrent shops before purchasing.
If you come across an agent who claims to give you back 5% and another agent is approching you for the same insurance, whats the harm in askingfor the pass back.
One can ask what are his benefittes from buying through an agent.
Its a humbe request when you post blog, please be soft, you might hurt some body.
Thanks and have a graet day
Hi Sagar
Its a service which cant be quantified and anyways its not allowed by regulator .
Mr sagar investing in lic is itself a big mistake , lic plans are not meant for investment and your lured by agents for the stupid plans , if you ask same agent to sell a term policy he will never give you single buck as its not profitable,and offers are on those products which are not worthy,
Venky and Manish
Both of you are right in your opinion.
As an Investor, I met many agents who offered me some discount on some products…and I went to one…why? Why didn’t I tell bhayee dont give me yr 20 or 25% ?
The above can easily understood…what we buy?…any product or any product with same features or more with some added advantage? can you think of…No No I dont want some product with some added features or at discounted price? Here lies the answer…
People dont invest, say 50,000*25=Rs 125,00,00 just because they are getting Rs 12,500 back….rather they are looking for some additional advantage that they can receive over the same product…and here all this activity comes from….some1 is promising to pay almost 12.5 Lac just becuase Rs 12.5 thousand is senseless…can not be even think of…the base lies that they are interested in getting this additional benefit over the features of policies…and some1 is paying only because he has to survive in the market. Thats all!
Yes, its just info , you can decide if it makes sense in your case.
only greedy customers ask rebate from agents ..some times agents forced to give rebate for greedy customers . so in that case agent will propose highest commission policy to customers …..agents dont pay the first year premium .suppose customer payng yearly 10000 …for 10 years term .total commsion get by the agent is 8000 only ….
if agent doesnt have the knowledge to sell the policies then only he will pay the first year premium . LIC is helpng indian govt as well as customers also ..rejection rate is higher in private companies ..but still jago invester supports private insurance only i dont understand the motto of jago investor …giving wrong information to online readers ….who doesnt have the knowledge of insurance .
i always suggest term insurance but 99% customers reject term insurance even educated fools in india also ….they want returns and insurance .greedy customers always go for endowment and money back …
educated fools asked me some strange question …if i take term insurance for 20 years ..and suppose i survived for 20 years i lost my money !!!!!!
my request to jagoinvestor is dont degrade life insurance or LIC whatever ….
Where did degrading come here ? Its a information passed on to investors that some agents do this . Thats all ?
What it is guidelines about collection of premium of LIC policy. Is it a mandatory duty of LIC agent to collect premium from the door-step of Policy holder if policy holder have not interested in ETC/net banking/courier services?
No , its not the responsibility of the agent to collect premium. Its your responsibility to pay the premium yourself . Agents just assist you so that you keep paying and do not forget paying it , because his premium depends on that .
Agent should not pay the premium on behalf of the customer at all….And if he is getting the commission that is from LIC not from the customer…also the agent is working & getting the business for LIC. So it is a salary for him…then why paying on behalf of the customer.
If a customer is paying the LIC premium that is for his own benefit & interest also whatever the premium he is paying he is getting the receipt of the same amount. Then why agent should pay his premium.
Agents should not increase this as this would be a direct attack on their salary(Commission).
Yes , same thoughts !
suppose monthly premium is rs 5000 so agents pays =5000*3
=15000rs now agents gets 25% of first year premium tht means annual premium comes out rs=5000*12=60000 25% of 60000 is rs 15000 he covered the money which he paid from his own pocket now if clients countinue to pays the future premium then agent will continue to get the commission as mentioned by u clearly research is very imp while analyzing any product whether it is insurance or m.f thnks for the info.
Correct 🙂
in my dictionary nothing is impossible. but i am not aware about financial market kindly give me batter suggestion,
What is your question ?
how many cases is given to LIC in one year by a LIC agent
I think that should depend on the agent capability
ATLEST TWELVE CASES WITH A MINIMUM OF ONE LAKH RUPEES FIRST PREMIUM
Dear manish, i would like to go for children plan of kotak either aviva tell me which company is good ,which can give me better return without any risk.
no company can give you any better return withotu extra risk , do you think its possible ?
what happen Mr. Manish could you give me solution
It will depend which policy is it , LIC does not have policies where you can go online .
i having a policy of Lic, i am not satisfy with agent service .could u tell me which is the best option , online either through agent…. i want to invest 1 lakh per year .
hi Manish could u guide me, should i go for online or through agetnts
lic ki policy kabhi ni leni chahiye
KAmine hai LIC agent, M ro reha hu agent se policy kera k,
What happened ?
ya people can ask for discount provided can the same people make their agent nominee
or if he is asking 25% of agent’s bread and butter can this person can give 25% of his maturity amount?
these ppl are spoiling the whole structure and concept of insurance.
Yes
Partially agree. Investor cannot be wrong in choosing maximum discount. The agent has got the full right to refuse (he is not on the Gun-Point). If all Agents sincerely disagree to indulge into miss-selling (paying back commission) they will be forced to give better service to retain their client. But if the agent can’t give good service, they agree to pay back some part of commission to retain the business from being taken away by some other, better agent. Thus spoiling the whole structure and concept of insurance and compitition.
Dear Manish and everybody on the blog..
IRDA in its endevour to empower and educate the public, has launched the following website:
http://www.policyholder.gov.in/
Please click on the link and check out the contents..
Thanks Dhawal..
I saw this one .. looks good !
When you have identified after enough research that the product suits you, you can go ahead and buy the product.We shall not fall into the gamble played by agents who in general suggest some thing that is good for them and not for you.When your goals are clear,you shall start thinking about realizing them with systematic and regular investments and of course this depends on the risk profile of the individual.
To whom is your comment for ?
hai,
i am a new agent, how can i overcome from this (REBATE)problem,what are the positive points that will help to satisfy customer without rebate
Prabu
All you need to do is serve your clients properly and once you make sure you are talking in clients favor , they will not expect any cut anyways !
ya manish, i agree for this…. i have 112 clients and i have not even given a single rupee as rebate… rebate is spoiling insurance concept. somany agents hanged themselves by giving rebates and failed to run their family
HI PRABHU
SERVICE TO CUSTOMERS, PRODUCT KNOWLEDGE AND GOOD RELATIONS WITH CUSTOMERS WILL HELP YOU OVERCOME THIS
PROBLEM MOSTLY, THOUGH NOT COMPLETLEY. GIVE SERVICE TO
NEEDY AND GIVE THEM YOUR BUSINESS CARD (VISITING CARD).DO NOT EXPECT A POLICY FROM THEM IMMEDIATELY. SO MANY POLICIES WILL COME TO YOU FROM WHOM YOU SERVED. THIS
IS FACT AND MY PERSONAL EXPERIENCE. THERE ARE SO MANY PERSONS WHO DO NOT EXPECT ANYTHING WHICH IS NOT THEIRS.
CHKLNMURTHY
Yea .. there are good people too 🙂
Thanks a lot for this useful article….!!!
Hello Manish,
Kudos to you for explaining the things very clear and simple terms. As Vijay pointed can we take the LIC policy directly and get a reduction in the premiums which the agents used to get in the form of commissions.
No , you cant do that ..
Manish…Can I know why it is like that.
Kumar
LIC does not give the policy directly like term plans .. You need to go through the agent only
Can we take LIC policy- Jeenvan Saral without any Agent from LIC office.
If yes/No, there is no need to give agent Commission LIC premium, if taken from LIC Office?
VIjay
No , you need to go through agent only and in that case you dont need to pay anything to agent . he will get his commission anyways !
Manish,
Just a week ago, My friend was waiting for the medical test procedure for the 50 Lac online term plan from Aviva Ilife.
Instead he got the policy itself and on further follow up, they sent a mail that as per company’s guidline medical test is not required. Is the insured person free from his medical fitness obligation ?.
Daniel Madre
Daniel
Yes . if company says so , then he does not need to go through medical exams .. generally companies ask for it in case of higher sum assured (50 lacs is small now a days)
Manish
Hi Manish
Got the book yesterday.I just glanced through it.I liked the contents and visuals. Will offer my comments after I finish reading.
Anil
Great , Will ask you about it soon .. also please write review on flipkart too
hi manish
i need ur help.Before reading ur article i was planning to take a lic plan ,actually i had finalised a plan and paid 10,000/- to the agent out of 50,000/-. After going through ur articles,i decided not to take the plan and i asked the agent to return my money.instead of returning my money,the agent did the policy of 10,000/- premium per year,i came to know this from LIC office.till now i have not received policy bond.should i receive the policy bond
I have receipt of the 10,000/-..i went to LIC office two times to give application for “cooling off” but NB branch manager was not there.
kindly advice me what should i do,what reason should i give for cooling off.
can i complain in IRDA.
some information i) Rs 10,000/- is submitted in the name of mine by agent on 12.01.2012. ii)policy done on 30.01.2012.
KINDLY REPLY AS SOON AS POSSIBLE
THANKS
Hi dhaval, all agents are appriciated by the client untill people like manish or good advisor tell them their mistake, today in this field for the last 8yrs, i need not find new client, chat with any guy and ask for his insurance product, you get an opportunity to educate him, times are changing people will start asking questions, we need to be ready, i love my clients to ask question. 9 yrs back i worked as agent advisor, the first year i sold some traditonal plan, my client actually wanted some investment plan, i realised after 1 yr the mistakes i made, i went to my clinte and discussed it, stopped it and replaned it. So friends dont fight over a simple reason, agents are required, but we need quality agent who can think from client view.
People,
a) Don’t blame the messenger for providing a platform to discuss the issues openly. Manish is doing a good job and it is not a fault to express his opinions freely and others express theirs without abusing each other. One can’t be judgemental about this and freedom of expression is a fundamental right.
b) Why this Kolaveri about agency commission? This is not a fundamental right of any one. It is only a business model that the manufacturer is adopting to increase the business. If the menace is too much (as obviously is the case in this instance), it should be regulated. Asking right questions is also legitimate. No regulator has given licence to anyone to hide the agency cost. Let it come in open and let the buyer decide.
c) Buyers have right to demand a ‘no agency’ product from any product manufacturer in the similar way Govt. of India does not allow any middle man in arms deal or NPS has no agents. Some companies make it their business model to deal with the end user directly (electricity boards etc.). If Govt. minds dealing with the citizenry directly for the basic services such as education, power, water etc. what is wrong if the citizenry demands that should happen in the area of insurance as well. Buyers are also not responsible for other’s livelihood, job guarantee etc. They can always demand to know the remuneration ‘agent’ would receive. All regulations enable this.
d) Buyers can also be their own agents if options are available. Even an accused or murderer can argue his own case in the court of law. So what is wrong if the individual wants to act as his own agent and wishes to deal with the manufacturer directly? It is not good if the agent of the manufacturer arrogates himself and says that people are naïve. Information/knowledge is now an ‘open source’ item. Taking advantage of asymmetry of information/knowledge availability is an unethical act, especially in personal financial area because in the changed environment clients and regulators expect even the manufacturer’s agents to have fiduciary responsibility towards the clients.
e) Agency profession is full of conflict of interest. This can’t be denied on any grounds and it is as true as any physical law. It is also not specific about financial services. It is only that financial services regulators consider that area as an area of importance. All regulators world over are trying their level best to reduce the conflict of interest through disclosures, education and other tools available to them. Recent changes IRDA is making to the customer engagement process or the changes SEBI is proposing are leading actions towards that. For sure, ‘manufacturer’s agent’ profession is dying in financial services. Buyer can be his own agent with more available technology at fingertips or he can choose his agent from the available professionals. This should not cause any heartburn to the existing ‘manufacturer’s agents’. It is good if they see writing on the wall and try to change themselves. No one is asking for a ban. Every one is talking of transperancy and disclosure which is perfect in a open democracy.
f) There is very subtle difference between being the agent of a manufacturer and being the agent of a buyer. Job is same but effect is vastly different. Financial services arena is especially moving towards ‘agent of the buyer/service receiver’ regime and this is a most welcome development. Only argument here would be let the people make the choice and let the regulator not force a particular view point (like how they allowed earlier ‘agent of the manufacturer’) on the people. I have strongly opposed the changes through unilateral imposition. Not because someone may lose their remuneration but because it should be decided by the buyer/user and should be based on sound data with proper application of mind. Let there be all types of players with level playing field and let the buyer/user decide what is best for him.
g) Any profession has its uses and mis-uses. No one can say the mis-uses should not be highlighted because they are not palatable. It is funny to find that though pass back is illegal, no one is punished so far (out of >3 million) or at least it is not known publicly. Let us not develop such a willing-suspension-of-disbelief attitude to say that no one passes back. It is happening and it is happening with hand-in-glove arrangement.
h) Removing the conflict of interest is a two a way proces. It is not the duty of conflicted agent alone. An agent is also buyer/receiver many times and vice versa. Transperancy can’t be established/demanded in isolation and it should be a concerted effort.
i) Blogosphere is a personal space even if public issues are debated. Opinionating is a very important feature of blogs. Participants should have the mind to appreciate others opinions and be able to digest that. No point in ending up with personal acrimony. The space is wide open for everyone including an agent of manufacturer to start his own blog evangelising the saintliness of the profession or any other views that someone wants to express. What is the big deal? Getting popularity and credibility is another issue though.
Thanks for your views Narendra
Very balanced and logical points .. I really think this blame game happens only when one does not understand the whole structure or does not get rational in their thinking process .
Manish
Most of the time, the insured does not have the clear picture of the insurance policy being offered by the agent…. The agent looks at his own benefit while selling a insurance product to the customers….
To Stop this, there is a waiting period during which insured can cancel the policy after reading all the terms and conditions… If i am not wrong, IRDA now allows to shift from one insuarance company to other… Please correct if i am wrong in the second point…..
Yes you are wrong in second part .. there is no portability in life insurance, its only in health insurance .
sir, according to Murphy s laws-
all the GUARENTEES are VOID once the invoices is paid.
There is no way the agent is accountable- He will simply say –I HAVE EXPLAINED YOU- or YOU DID NOT TELL ALL THESE FACTS.
What is the conclusion of your statement ?
I agree with nandish. The article is good.But the comments sections really give a broad and interesting perspective. My opinions regarding agents has changed after seeing the conversations. What I think is that there are good agents and bad ones.The problem is that good agents are in minority and we rarely meets them. Also there is great amount of financial illiteracy in India.People buys financial products without doing any proper R&D about it.
GEO and SOUGATO have hit the nail on the head. Clients prefer to spend time while white goods and cars or visiting a restaurant but when it comes to insurance, how many of us really and willingly give him/her time to explain. The sole purpose becomes to save tax and get a some payback too. Once pay back is received though it is illegal, do not expect service from agent.
I would like to ask a very mute question, having worked for all 365 days, how many of us spend even a day with family to do a serious financial planning. It would be dismal percentage.
Yes, if the fee structure also comes to India, then scenario would change for better provided intentions remain honourable.
Thank you.
Sir, You safely forget one thing. Wether – your client earns or not your earning is FIXED & DIS PROPORTIONATE TO YOUR WORK. By the nature of your JOB you have to meet people when they are free-. Secondly – after selling the policy – what is meant by SERVICE????
I have taken so far 6 to 7 policies in the last 20 yrs. Till date- I am only paying them on time/ the LIC office – regularly reminds me. Worse once or twice I gave the premium to the agent . He said – sir you can pay directly /
Imagine- to this agent still LIC pay commission from my PREMIUM.
Above conversations is itself a post that should be shared with all readers.
The question is everybody is blaming the agent, i am asking how many of you bought an lic plan knowing the features, i have seen clients having 40 plans, the agent has done his financial planning, now who has done the mistake, the client does not have a clear cut goal, now the agent role is to sell, he will sell, it was ur duty to check, when we ask for a fee for the best advice, you would go to the agent who would do passback. It is not only lic all private companies does this. That is misselling, i will blame the private agent as he gets good training where as in lic only the few top gets training and that also how to sell a plan . So stop cribbing abt agent getting commission, it is his salary, if the agent mis sells that is ur ur prb.many client does mutual fund online through icici direct and icici charges a fee for it and the client is ready to pay for no advice, we all require a good teacher, you have to choose.
I still ponder over two issues. The first is that some LIC policies do not offer fixed returns to the investors but offer fixed commission to the agents and in instances the returns to the agents can be higher and is such a scenario ethical. the second is that do agents offer you the infornation that a certain policy is best for you or do they simply want to push policies which offer them better returns.
Jeevan Saral was given the Golden Peackock award due to the diverse features in its plan. Being an endowment type of plan it did away with the rigidity on liquidity as with a traditional endowment plan.
No penalty on partial / full withdrawal of funds after 5 years. Low premium upto the age of 49 it is the same for all the age groups be it 24 or 48. Risk cover continues even after non payment of premium for 2 yrs.
Only question mark is the loyalty addition , which LIC promises to pay after completion of 10 yrs of the policy.the quantum is not known and therefore no prediction can really be made reg it and projecting the loyalty addition to be increasing proportionately with the no. of yrs @ 6 or 10% may not be a correct estimate as loyalty is declared on the basis of the profits earned in the last yr. only.
Purtely from insurance point of view , nothing can beat a term plan…
Sunil
Thanks for your views .. i think if people are aware of all features and are happy about it . then every investment is good
@Manish
A great article. I always wait for such articles, in fact a platform to let out my anguish and fury…
I have a lot many things to say but first, Thanks to you for raising such issue and double thanks to Mr DK Bhardwaj who have the courage to say things in my favor. Courage, because everybody in their heart of hearts know that asking for somebody else’ remuneration is wrong but they dont admit to it openly..
I believe me being an Agent is in more practical position to tell you whys and hows of the equation. Firstly for the knowledge sake, there is an agent and there is an MDRT agent. MDRT stands for MILLION DOLLAR ROUND TABLE. Its a prestigious award, given to the top life insurance agents across the world in USA. Hardly 1% of the total insurance agents in the world qualify for MDRT. Criteria for achieving MDRT this year (2012) is Rs 32,74,000 fresh premium for Indian insurance agents. For more details, check out http://www.mdrt.org/
now I dare EVERY and ANYBODY on this blog to ask an MDRT agent for passback the commission and see what happens..So very first thing is – this passback of commission is carried out by non-serious/part-time insurance agents. They have no knowledge of the product or financial planning. They just rely on PASSBACK route to generate insurance business and get some extra bucks as commission for themselves..
how is it a win-win situation for the insurance company and only insurance company?? Commission is shared by the AGENT (Agent’s loss) and wrong product is purchased by the CLIENT (Client’s loss). Insurance company is getting NEW business (Insurance company’s gain) and if down the line, after say 5 or 6 years, client realized his folly of buying wrong product and cancel/surrender the policy, its again INSURANCE COMPANY which will be benefiting out of this whole transaction because they have already earned through initial year charges and earn more by deducting surrender charges (insurance company’s gain). To expect something stringent from the insurance company then would be a folly..
Out of my experience of interacting with the clients and public at large, the ones who have got PASSBACK are the ones suffering the most right now. They dont know what their policy is; they say that they were under the impression that they have to pay only for 3 years but its a whole life policy; nobody has reminded them of pending premium date; and above all, they have not seen their agent after the transaction..So either be PENNY WISE and POUND FOOLISH, or respect someone else’ knowledge and effort.
Selling targets and pressure?? there is no pressure on me to meet any deadline or target – because AGENT is not on the payroll of the company. If I feel like resting, then i will rest this month and not work. So these queries of TARGETS and PRESSURE is on insurance company EMPLOYEES and bank’s RELATIONSHIP MANAGERS. They are the biggest source of mis-selling. So my first advice would be to STOP buying insurance from any BANK. As the saying goes in Hindi – “jiska kaam, ussi ko saaje..”
Second advice would be – Please make a cross-check of the insurance agent as to when did he get his license (Preferably at least 2-3 years old); is he a full time or part-time (avoid past-timers because for sure, they are doing it for some quick extra bucks), and his education qualifications (although 12th pass is allowed to appear for IRDA exam, but your agent should at least be Graduate. CA or MBA would be a bonus). When agent is asking so many family and financial questions to you, you can at least ask these 3 questions. If your agent fulfill all these criteria, go ahead and you yourself will not be able to ask for PASSBACK then, because you will know that you are dealing with a professional.
lastly, Selling takes a big toll on an agent. I share my daily routine with you. I start my day, calling and meeting different people in whole of DELHI; went to meet different prospects (by metro/bike/car), give them presentations (laptop/brouchers), follow up with them; and as Mr BHARDWAJ rightly said, my success ratio is 4 out of 10. And for all these efforst and expenses, i get my commission which is FIXED by Insurance company and ALLOWED by IRDA (23% for KOTAK TERM PLAN – 6.5% for KOTAK HEADSTART ASSURE ULIP etc). Not sure how come, i am making a KILLING 🙁
So please concentrate on the value you are getting from your agent and dont frown/worry about his remuneration.
PS: Just concluded a sale for TERM PLAN for one of my client and he said, “Dhawal ji, mere liye to aap bhi bhagwan baraabar ho, kyunki kal mein nahi raha to mere biwi-baccho ko paisa aap hi dilaoge.” So there are people who acknowledge my efforts too. World is not such a bad place after all..
Hi dhaval, an agent doea not want his client to read this jago investor blog becos such blog helps them to ask question and get the best, you should not feel bad abt it, if you are right on ur advice why you should be worried, lot of client buys mutual fund online without understanding why they are doing it and for what purpose, let them do online they will realise sooner why get the best advisor. So dont take tension, be proud of being a agent.
@GEO
May i dare say that an INCOMPLETE/INCOMPETENT agent does not want his clients to read JAGOINVESTOR. I keep a lot of these articles posted on my FB wall and constantly mail them to my prospects/clients. I am quite sure of myself and what i am doing. And i am a proud AGENT at that..
I feel aggrieved or agitated only when i see people with half-cooked knowledge and understanding of INUSRANCE or FINANCIAL SECTOR, call the agents or associated people as cheats.
Thanks for your encouraging words, cheers 🙂
Dhaval bhai times are changing, we need to change, there will be many blog suggesting term with mutual fund, i feel unitlinked insurance isf used properlly can create wealth and give you adequate insurance and tax free returns, we are in this field for the last 10yrs, we know the clients better just a few upgrade from our side, i know many lic advisor who are mdrt they feel training on other product is not necessary. Any way if clients read manish blog it is going to help us as you said ur client thanked you for the advice and suggestion. So chill, thanks to manish atleast it is helping me in guiding my clients.
Mr Sharma;
Thank you for your good words which I appreciate though did not get in to the discussion for that reason. Yes, I did expect some mature comment from Mr Manish.
I recall, I did some investments in a P.O. The lady agent came to my house to deliver the documents and offered me an envelop. I enquired as to what was in it? Her reply was 1% commission. I refused to accept the money and returned it. She had wet eyes as I was in total minority among her clients. She had 2 school going daughters and confessed that she does the job to educate her daughters so that they do not have to stand in rain, sun and cold like her to earn a livelihood. She also told me that P.O. staff takes another 1/2% to let her work smoothly leaving her with mere 0.5%. What a shame that today P&T department has either curtailed or totally stopped the commission for P.O. agents. It is a systematic attempt to kill a profession and for what reason, I find it difficult to fathom.
Mr Sharma, you are off the mark as far as MDRT numbers go. Please visit the site again, I did. In India out of a total insurance work force of nearly 30-50 Lacs, it has a mere 5000 MDRT thus forming a miniscule number and these MDRT at best may not be earning more than Rs.40000-50000 per month. One can visualise the status of other millions and you have clients trying to ask for their pound of flesh from this poorer lot.
I would like to request all on the blog to please share your views but with diligence and proper knowledge and grasp of the subject and NOT in an arm chair critic style.
Mr Manish is also requested to please be more thorough on the subject rather than professing personal view points and goading the unwary in to darker lanes towards investments and protection.
Thank you.
DK Bhardwaj
I only mailed Dhawal to comment on this issue . And I agree with Dhawal and yours points . I have also raised point that investors as well as agents both are responsible for this situation .
What else are you expecting from me on comments ?
Manish
@DK Bhardwaj
I wrote that hardly 1% of the total agent population of India is MDRT. May i know how am i OFF THE MARK??
Hi Dhawal, Sir, calculations are simple, if you estimate the number of agents in India, it is somewhere 40-50 lacs and a mere 5000 are MDRT, percentage would be easy to gather.
The basic issue was never MDRTs but passing on the commission resulting in mis-selling.
Regards.
whatever you said is partially true…I didn’t said 100% true because there are flaws in the way insurance get sold to the customer. In the early years, when the insurance concept got introduced in india it was totally new to people over here and some kind of guidance was required…and there agent played important role.
But in today’s time the whole idea has got screwed up by agents…I won’t call “all agents” but most of them do unethical and unfair practices and at the end client suffer a lot…unwillingly end up buying something which is not suitable for him.
When you want to respect agents work then you MUST respect clients hard earn money too. Does agent do what he suppose to do…that’s the question…
While filing the application itself he do not explain you the process. His statements like “koi itna dekhata nahi, bimari hai phir bhi NO bol do…” what kind of guidance is this ? Does he get paid 35% commission for all this crap ?
Now, todays time many people are aware of insurance concept the insurance company should have medium wherein people can directly deal with them…file the application at one of their center and get the insurance.
Company can host minimum set of employees there to answer you query while filing a form…
There are online ways to do that but not able to buy online…
but there are enough people in our country who understand about filling a form…
if people can pay electricity bill every two month…can’t they pay the premium by visiting insurance company center…
the only paperwork is required at the start…
in case of claim settlement, company will do what it wants to do…agent never bargain with company in-case company do not want to settle the claim…
at claim settlement time, nominee has to show the policy papers to the company…
this model could also add more knowledge to the person…
overall, many industry have got screwed up being agent base model…
just correcting one of my statement
“There are online ways to buy insurance but not many people have access to internet but there are literate enough to fill the form properly.”
SIR, IT IS TRUE. but to comment in general any INSURANCE PLAN is better the NO INSURANCE. secondly – there are no such GREAT – SUSTRAS or complicated plans in any bodys work plan . Sir to day life is much uncertain My father retired form Railway after 40 yrs of service. Now my sons have changed their Jobs for 3 times in 2 years.One son wants to start a business. Now what about your plan theory?? Sir changes are permanet. We can plan to some extent only not as you say. Prices change / company policy change – look big banks get insolvent- disappear. ALL OUR LIFE DEPEND ON INTERNATIONAL NEWS & BUSINESS ALSO. iN THIS SENIRIO- WHAT is that you can fix correctly for your customer. It is all a HYPE perpetuated by the agents . As long as you insure you are ok.- All agent hide or do not say any thing why they are paid so much of commission – including you. You are staying because you have not parted with money wheras the other had done so he is lost. Besides – the basic difference is the agent do not know his work . In this case any person will have the same – fate in any job -No wonder. – VIJAYAKUMAR- CHENNAI
@vijayakuamr,
May i dare ask what did “AGENT do not know his work” and YOU know that you have come to this conclusion?? As you have commented “All agents hide or do not say anything…”, may i know how many agents have you interacted with in your LIFE – 6/10/20 or 50?? and based on YOUR experience with those 6/10/50 agents – you are saying ALL AGENTS?? Sorry to disappoint you, ALL agents are not like that..There are professional and upright AGENTS as well..
I take up your challenge of “Why no agent disclose his commission”. You tell me what plans (LIC table number etc) and i will tell you exactly how much your agent have made/will made during the ENTIRE duration of the policy, over a period of 10 years/15 years/20 years..and YOU will be astonished to see these HAFTY figures…
Please dont go by FIRST YEAR COMMISSION figures. If someone tells you that he will charge you Rs 100 over a period of 20 years but take Rs 60 in first year – it may look SO MUCH in that 1 year. But when you will consider the entire period of 20 years and Rs 100 for that time, you yourself will realise that its nothing..
Sir, sorry you have misunderstood. 10 or 5 yrs ago even if we ask – the agent do NOT DISCLOSE WHAT IS THE COMMISSION HE GETS. This is what I had said. Sir to day the story is different. Even if you do not say – or even willing to disclose – we can find out how much commission you will get. This is what I was emphasising. Supposing I take a policy for 10 lacs – – can you deny that that the agent will get at least 5 % of this amount over the term of the policy. that is 50 thousand. You are silent on my point – what is the service for the agent from second year onwards????
@vijayakumar
Can you please let me know how much commission your KIRANASTORE guy is making on sales of namak, haldi, atta?? Are you able to make out how much commission doctor is getting to refer you medical tests or how much a chemist is making by selling medicines??..and in case you do, you must have known that it is as same as an insurance agent’s commission..
Commission is just part of the total cost – that is it..Every product and component from auto parts to medicines to consumer goods have commission inbuilt in their cost..Suppose a company is asking for a premium of Rs 10,000 for a particular plan and that is it..Its nobody’s business how much is going to commission, company expenses, company’s infrastructure etc. You remove commission today and suddenly tomorrow you will feel even company expenses are too high – why the policyholder should bear that and so on..It does not work like that my dear..
Servicing in AGENT FRATERNITY does not mean SERVICING the policy but SERVICING the client. Its me who tell my client when to switch from equity fund to debt and vice-versa in ULIP; when to take loan from the policy itself (I hope you must have heard of LIC POLICY LOAN) instead from bank or any other source; when to make partial withdrawl from the total fund instead of taking out cash from bank balance, letting him know about the current status of his overall insurance portfolio (Fund value/surrender value of insurance policies from other companies such as bajaj/tata/birla) etc..
Agents have family relations with their client and so they know when my client needs investment in MF – Insurance – Gold..In fact , about a few days back i told my client that if he is looking for safe returns from bank deposit, then he could opt for LAKSHMI VILAS bank which is offering the highest return, more than his ICICI BANK for same duration..
These are a few of the services offered by an agent to his client from 2nd year onwards (Not to mention renewal premium collection and deposit – tax premium certificate – change of contact details etc)..I hope i am not SILENT and pretty LOUD on your concern on SERVICING..
For that you need to have a professional/full-time agent and this time, even you will agree that hiring a professional is COSTLY affair – you need to pay for his services (Even if in the form of commission)..
ya truly said sir… is that agents should no run their family? lets go back to 15 or 20 yrs before. there was a sum assured for 10,000 also and qly premium is rs.250 now also i have seen agents collect chq or cash from that person and stand in front of counter and pay the premiums. and for the customers kind information for Rs.250 agent will get a renewal commission of 5% i.e., rs.12.50. what abt todays value for Rs.12.50. dont you think that agent is prompt with his service. people has to know that if the person had taken rebate from the agent. will the same agent still gives service to him…. dont they have minimum commonsense of Inflating cost of living?
I have gone through the discussion about Commission to Agent. The word Agent itself is not in good taste of the work. This word was prestigious because of British Raj when there were British Agents. Even Branch Mangers were also called Agent of the Branch till Nationalization. Unfortunately, the term Agent means not only a DALAL but also broker. Agent word denotes Agency like a Gas Agency.
I fail to understand why LIC and other Cos still deploy Agents when they are employing scores of staff. The culture of outsourcing is again a revised product of Agency based services. The word Commission is also not in good taste. It is a fee. Anyway, I think that not only LIC, all those who are basking in outsourcing work culture are tossing/ dodging out their responsibility on others by throwing out bucks which circulate viciously. I am totally against all these services which are outsourced because outsourcing means you want no responsibility of your business fundamentals, but create individuals who should develop/ harness your business for an amount. This is an exploitation of your own business. Finally, I believe that individual/outsourcing has limitations of being self centered and can’t be institution with some ethical, sociological, humanitarian agenda.
AV Gosavi
On based on your comment, what do you suggest should be done ? What shoudl LIC and other companies do ?
lic offices it self can give free or paid advice -make the person to choose a correct policy – & reduce the premium ( of the agent )
As ccorrectly said by Mr Gosavi – agent is a different term.My point is wether the agent is justified for so much commission for the one time advice ????
VIJAYAKUMAR- CHENNAI
No he is not , but as I said that the commission he gets is not for advice , its a incentive to bring a customer .
@vijayakumar/Manish,
Please show me SO MUCH COMMISSION for one time advice on any one policy from LIC or any PRIVATE company??
When commission on any or every product is 5%-7% over a period of 20 years, why is everybody so kicked up about the remuneration of an agent?? I bet if LIC will say we will charge 5% “Paid advice and service” over a period of 20 years – all the shouting will die down (might be Mr Vijayakumar too will enroll with those services).
Its your way to look at it and thats it. Problem is with the investor also who is not willing to stay put for 20 years. He surrenders/paid up his policy within 3 to 5 years and feels the pinch of charges. Over the entire course of the policy, commission will be nothing..Look at it from this prospective and you yourself will see differently..
Sir – do you have any logic / or Do you speak justice??- TAKE ANY BUSINESS IN THE WORLD . We buy a product / pay for this that is ll. We never pay for this for 10 / 20 years..
True – if the person discontinues during the course of the policy – it is a problem. But sir – the agent can also pay them over the years- keeping some thing for him & parting some thing for the policy holder. every year or when ever the person pays. ie the agent should not also loose his money. I am not against – the agent gets his commission – but the amount is too high . If the amount is camofluoged also we do not know. But LIC – blaringly pays from clients – money as commission . That i s the hit.
@vijayakumar
“You buy a product and pay for this – and that is it.” This statement hold true for ONE-TIME CONSUMPTION of consumable goods but NOT for insurance products. Insurance are long-term agreement where benefit is provided to the policyholder over a period of time and thus NO “buy and pay – that is it.”
Everything in this world is moving from quadrant to another. According to ROBERT KIYOSAKI – One person’s expense is other person’s income…If you have paid Rs 10,000 as premium, you are looking at ONLY one part – Rs 1000 as commission. There is also Rs 1000 office expenses (Branch expenses – staff salary – stationary etc), and Rs 1000 for infrastructure etc..Today its commission and tomorrow it will be office expenses, and then it will be infrastructure..Somebody will say keep 100 people in TOTAL in entire DELHI CITY. 50 will sit in the branch and sell policy when people will come to them in the branch and 50 will roam in the city and meet public (Understand their financial needs and goals, suggest them insurance products, follow up with them, collect documents and again come back and do the processing in the branch) for sales. They should go walking because if they travel by bus/metro/car, their expenses cannot be met by the company as no part of the premium is available for such functions..
Imagine such a scenario and say honestly – do you really think INSURANCE at all will be sold in the country that day??
Insurance works on the “principal of large numbers.” A number of people come together, pool their money for a common cause, and in the case of unfortunate happening, anyone suffering from the incident is paid by
Sir, sir– your argu- is NOT AT ALL CONVINCING. Arbitrarily you say this is not like any selling. eg we buy a plot – house – we pay the broker -1 % commission. WE do not pay for 20 yrs. Sir for your office – staff – why LIC robs us pays you . This is the question. Secondly you can keep staff or not htat is not customers question. Sir – we do business. We take risk- we earn or not – custommer – goes away= we loose money even after we spend our labour / money etc. But in Your case – what is the risk you take. You are hyping – the info as FINANCIAL ADVICE- -WHICH ARE ALL AVAILABLE IN LIC – web site. True – all people may not be able to decide on their own. But my question is why SHOULD WE BE FORCED TO COME TO YOU. WE DO NOT HAVE CHOICE. I f not you some body but we have to go thro AGENT . & PAY FOR THIS.
Sir, sir– your argu- is NOT AT ALL CONVINCING. Arbitrarily you say this is not like any selling. eg we buy a plot – house – we pay the broker -1 % commission. WE do not pay for 20 yrs. Sir for your office – staff – why LIC robs us pays you . This is the question. Secondly you can keep staff or not htat is not customers question. Sir – we do business. We take risk- we earn or not – customer – goes away= we loose money even after we spend our labour / money etc. But in Your case – what is the risk you take. You are hyping – the info as FINANCIAL ADVICE- -WHICH ARE ALL AVAILABLE IN LIC – web site. True – all people may not be able to decide on their own. But my question is why SHOULD WE BE FORCED TO COME TO YOU. WE DO NOT HAVE CHOICE. I f not you some body but we have to go thro AGENT . & PAY FOR THIS.
Sir,
You always have a choice of going to the company’s site and buy the product ONLINE..Now a days, you can buy MUTUAL FUND in the ONLINE mode as well..Now that PPF commission has been abolished, you can directly go to bank and start operating PPF account..So yes, people like you have choice – of not paying the commission of the agent..
At the same time, when all the information about disease/symptoms/medications are available on the web, why go doctor then?? lets google about the disease and buy medicines/get diagnostic tests done..Dont think feasable, either in INSURANCE or in any other sales…
Sir . THIS IS EXACTLY WHAT I am saying . You have perfectly reflect my point of view. Sir – I have a choice in Investing Min MUTUAL FUND, I have a choice in even buying a medicine , knowing about the dieases, I have a choice in making a PPF account, but I DO NOT HAVE A CHOICE IN INSURANCE .- NO CHOICE . I HAVE TO PAY THE AGENT – HIS COMMISSION . I suggest LIC to make available -at least one policy that the customer can buy directly ,. Then the whole game will change.
That is what exactly I am telling. Let them disclose openly in the policy – terms & conditions – clearly – why they are afraid?????? OR YOU CAN INSIST ON THIS?
Even as per you argument – if the person surrenders his policy he will get his money only after the said term & not in between I f the person could not afford policy there is no meaning- when he is starving where is the question of Insurance?/ If he can afford still – discontinues the policy – you can convince him – as even if he decides to take another policy later – he has to pay more – as he will fit in a different – age – group / table- He has to pay more premium. . EVEN THEN — EVEN THEN – WHAT IS THE LOSS FOR THE AGENT ????
Might be you are not aware that in illustration – that is part of your policy bond in ULIP – commissions are disclosed side by side, giving you details about exactly how much the agent will be earning through the tenure..Nobody is afraid of disclosing these facts. Its just that public will jump to half-cooked conclusions and start crying over commission..
You do have a choice for ONLINE mode. You only have to adjust your vision from LIC to other options available in the market..By the way, i believe you know that NAV of the funds are adjusted after adjusting expenses (including distributor commission) whether or not you have taken mutual fund ONLINE or through a distributor..
My LOSS, you ask..My loss would be that i have advice a decent product to my client and he is not continuing with it and consequently going to suffer in the absence of insurance. In fact, about a few months back – i have posted the same thing on my FACEBOOK wall. One of my client discontinued his premium, despite my several attempts to get it renewed and suddenly, one fine day; i got a call from her wife asking if she can expect something from the policy as the client has expired a few days back..This is my loss..Dear Mr Vijayakumar, there are something in life which are not measured by MONETARY TERMS..For me, professional and personal relationship with the client count for much more than 5% commission i will be earning from him after 15 years from now, and my loss would be like a personal loss if his family is not able to get compensation, just because he missed paying premium in the absence of agent…
Commission for me is very important YES but please do take note of the time value of money which i will be getting over a period of 20 years and your grudge – against Agents and their commission – will subside somewhat…
Sir, sir, I am very sorry. UN FORTUNATELY YOU ARE ALWAYS DRIFTING YOUR AREA. Sir , we are talking only only about – LIC . Not even about any other Instruments. Millions have been cheated in Share market – Let us NOT DISCUSS OVER THEM . Sir – always – always – EMOTIONAL INVOLVEMENT IS A PROFESSIONAL HAZARD. They do not go together. When I talk about profession – you are talking emotion,. Sir we are talking only about finance / premium etc, Of course Insurance involves about death – which is emotional. Please do not gross over mutual funds- they are different. I do not know much about them – but only I know nothing even assures 11 to 12 % returns.So I do not go there at all. Probably people who put their money could not take – or what ever reasons – they continue. We are talkng only ONLY about LIC & its commission to their agents. I am repeatedly telling – I do not have choice- NO CHOICE-
Secondly – as you say – many a times good advice is not taken due so many reasons. Besides only in INDIA – STRANGLY – INSURANCE is seen as an INVESTEMENT. We have this mind set – we cannot blame any body.
Thirdly even in my 59 years of life I only go for LIC- as this is Govt & CAN BE TRUSTED.—-“Dear Mr Vijayakumar, there are something in life which are not measured by MONETARY TERMS..For me, professional and personal relationship with the client count for much more than 5% commission i will be earning from him a”– Sir – you have to be like this . Electrician should have tester, Accountant should have pen / paper – for you nice words- good advice – constant touch with the customer – IS THE WAY – THIS IS THE INVESTEMENT..
“Its just that public will jump to half-cooked conclusions and start crying over commission..” — SIR it is not disclosed by LIC In their policy . Now with INTERNET/ RTA – so many things only we know . Even 5 yrs ago it was difficult to know. Besides – why any body should be up set in (the customer) knowing the fact.There is NO HALF COOK – AS NO INFO IS AVAILABLE – PEOPLE MAY ASSUME ANY THING. Even to day – LIC – do not disclose/ also all the other guys- them selves – what is the commission they pay to their agents- themselves.. I am also asking why cant they do like – ULIP ???
It seems that electrician/subziwala making Rs 4 in a transaction of Rs 40 (One time) is okay to you but Insurance agent making Rs 40,000 (Over a period of 20 years) from a transaction of Rs 4 L is HAFETY/UNREASONABLE/ASSURED to you..Not sure why??
now coming to YOUR specific case..You trust LIC because of its HIGHEST claim settlement ratio in the world, built by sales force (agents) and yet, you envy the earnings of AGENTS..and at the same time when options are available for you to take ONLINE plan from private companies (Where you can save Agent’s commission as well), you are not ready to move over there as well..Quite confusing and contradicting to me..
If you have seen any private companies policy document, you must have noticed a proper policy booklet containing photocopy of the proposal form in it whereas LIC just issue a 4-page bond with no clearity whatsoever. So who is forcing/asking you to stick with LIC..Moveover to more transparent company and have full information according to your liking..
Nobody disclose the total cost break up of their product so why single out insurance..You see the total cost of AMUL GOLD 1 kg pack at Rs 40, and thats it..Do they disclose the commissions to the middle man, advertising cost, official expenses etc..So why you want all the details in Insurance policy ONLY?? and now that they have started showing commission in ULIP, you say WHY ULIP only and why not traditional policies also..and then you say why not LIC only and so on and so forth..The list is endless sir..If you start searching for each and every component of the cost of a product, even the “world is not enough”
Sir,
LIC is- – according to you max claim settling – due its policy – BUT NOT DUCE TO THEIR AGENTS. I am not buyin any private poilcy though it is transparent – in the out set – but in reality – when you go for claim – they will ask me to prove I am the son of my father. Sitr – you are quating – wrong- – or taking wrong credit – sir – sir – you are selling only the policy of LIC – but YOU DO NOT DECIDE THE POLICY OF LIC. How can you say they have grown due to the agents.
Please compare the last 10 yrs / 5 yrs/ last 30 yrs og growth of LIC. you will understand the difference. There was only one AMBASSIDOR , ONLY ONE SCOOTER – NOW Bajai has not only closed scooter unit- but also NOT IN NUMBER ONE POSITION IN Motor cycles.Sir – again & again your are NOT ANSEREING THE POINT. I have a chopice in Buying AMUL I can even manufacture AMUL MILK POWDER – bUT in you LIC – I am refused – NO CHOICE.- WHY this KOLAVERI ????
@vijayakumar,
Just read from one of your comment that you are 59-year-old gentleman..So i please request you to refer to me as sir as i am almost half your age..in fact, i would be referring you as Appa from here on 🙂
Let me tell you one more thing about me..I am an Agent of KOTAK LIFE INSURANCE and i have nothing to do with LIC..But even then i give credit to LIC where it is due..And just to add to your knowledge, after 12 years of privatization of insurance sector and with 24 players in the fray, LIC still holds 71% of the market share..So no Bajaj scooter – Ambassador comparison here is equivelant. You may have your personal opinion but LIC says that its a household name, even in the remotest parts of INDIA, because of its Agent force.
And yes, if you will check the claim settlement ratio of KOTAK is in mid 90S..So you can go for KOTAK policy and i guarantee that no body will ask you or your nominee to prove that he/she is her/his father’s son/daughter 😉
..And now coming to your latest response, i have one good news and one bad news for you..
Good news: Even you can start your Insurance business (Just as you said i can manufacture Amul Milk powder) if you are willing to invest Rs 1,000 crore as seed capital along with IRDA and catching a foreign collaborator who is at least 100 years old in the insurance sector. Same as ICICI + PRUDENTIAL, KOTAK + OLD MUTUAL, or HDFC + STANDARD LIFE…Sounds very difficult for you or for anybody..
Bad News: Even if you start your own business for MILK POWDER, i doubt if you can sell even 10 packs in your entire locality 😉
Ultimate solution to your query – Sir, please consider raising this query to LIC head honchos and they might be able to answer WHY THIS KOLAVERI DI..Me and Kotak will be upfront in our disclosure as to how much i am making out of the premium 😉
Its a very sad thing that people are still trying to act smart and discuss on something without having proper knowledge regarding the subject.
Being a teacher in maths can write a book in telugu??????????? In the same way without having proper knowledge in insurance and its products how can u comment on them?????????????? jeevan saral is the best plan which was awarded THE GOLDEN PEACOCK AWARD and even jeevan anad is a unique plan which offers risk coverage till 100yrs.
even term assurance is a excellent plan.
remember one thing every plan in LIC is having its own special features.so before commenting better consult any financial consultant and go for plans suitable to you.
LIC is serving 23 crore policies and having 12lakh crores of life fund with 18 zones, 103 divisons,2048 branch offices and 1000 satellite sampark offices. so without commenting better consult a good LIC agent.
I think pass back is a good thing to do and every customer should demand for maximum pass back. Frankly speaking in today’s world when people prefer online purchase and sell of anything and everything paying hefty commissions for any service doesn’t make sense.
Why can’t I buy an insurance policy online with no commission paid at all?
Commission is like a salary given to agents for their work. Its their choice what to do with it.
Its a right of buyer to get policies or any product for that matter @fair price and huge commissions means unfair price since the profits are made on the money customer pays.
Share brokers offer different brokerage rates so why not insurance agents?? Depending on the services each agent provides his service charge should defer.
If a agent comes to my house, collects documents, sends reminder and charges something for that its his hard earned money.
But I want buy insurance policy and only way open is to buy it through an agent so thus I have to pay him for his service is helplessness of customer and free money for agent and if he is ready to share some of it I think that’s a great idea.
@Sachin/Manish,
Nice thoughts indeed..
Me as an agent would like to ask, if you take back the entire commission from me or as you put it “MAXIMUM POSSIBLE PASSBACK,” would you mind telling me how am i suppose to run my day to day expenses plus servicing the client?? And i am pretty sure that you were there supporting ANNA HAZAARE in full stream against CORRUPTION but here you are fully in support of CORRUPT practices..Strange..
What if you superior is asking a part of your salary or entire salary of a particular month to give you good appraisal or salary hike?? and if some collegue (and i really mean the NALAAYAK KARAMCHARI whom you hate) named RAJNI part with it and get promotion over you, how will you feel?? After all, its the salary of RAJNI and she can do anything with it, right?? You will definitely feel bad..but you have your own strange ideas..
I can make out that your knowledge about INSURANCE AGENT COMMISSION is NIL when you say HAFTY COMMISSIONs. Would you throw some light on how much an agent is getting as Commissions on TERM PLAN or for that matter, ULIP CHILD PLAN?? Please dont faint but believe that agent will be getting not more than 7% on such ULIPs..
You want fair price?? then compare the price of 2-3 different companies and buy the one with the cheapest price. That is how FAIR PRICE for the consumer is decided. You compare price of PEPE jeans with WRANGLER, LEVIS, LEE and the one you find the cheapest or fitting your budget, you go ahead and buy. Its not like you are visiting two or three different showrooms and asking “Ki bhaiya LEVIS ke showroom main to 1500 ki mil rahi hai, tum bhi 1500 ki kar do to mein tum se le lunga.” Commission is an inbuilt componet. If you buy from the cheapest price (According to you – the FAIR PRICE), even that policy too will have commission in it. What would you do then..
The agent whom you are talking about (Coming to your place – deposit documents – gets you receipt for your account department) is NOT charging you anything. He is content with whatever he is getting from the insurance company. The things which you have mentioned above are NOT the roles of the agent (Collecting documents/cheques and depositing them etc). He, in anyway is already giving you services over and above his role but you have never paid him anything..But in role reversal, you are bold enough to ask for passback of his earnings..Besharmi ya bahaduri – you decide on your own..
You are the first person i have seen after a long time on this blog who is saying – “Why cant i have COMMISSION PASSBACK in online mode” – when the entire blog for last so many months is choc-a-block with people being happy that now they will be saving the COMMISSION part by buying it online. and yes, my dear..You are not helpless with ONLY OPTION. Buy it ONLINE from SO MANY options available.
In one sentence, you are writing PAY him for his SERVICES and in other sentence you are saying FREE MONEY..Either you are confused or..
Strange world this and strange person you are..
What Mr Dhawal Sharma writes has a lot of sense. I find the debate is going hay wire. My personal opinion is majority of viewers are sitting pretty in drawing room thus puncturing the seriousness out of a very serious subject- LIVELIHOOD OF A PERSON. In my opinion if one does not know about the functioning of a system, it can be a good idea to learn and then come on the forum.
Does the majority know the success rate or closing rate of a case. iIt is a mere 10-15% for best agents. Similar is the percentage of people who pass the IRDA exam? Are they aware of exact commission accruing to the agent in each policy though I consider it a bad practice to eye someone’s earnings. However, let me share at an average an active successful agent would not make more than Rs.15K/month at best.
The vociferous lot among us are even eying the earnings of insurers. How will a company honour the commitment unless it makes profit. Is there any business without profit. An insurance company has a gestation period of 7-10 years. Would any of the insured come to the rescue of insurers when Tsunamis and Mumbai type attacks take place. Would they fore-go their claims out of pity for the bleeding company.
I also would like to be educated as to how many of writers approach the morning store and ask the salesman, buying and selling price of milk, eggs, bread etc and seek discount or enquire about the profitability.
Newspapers are flooded with differential in petroleum product prices in India and neighbouring countries. Do they go to a petrol pump and seek a rate cut or protest for such a high price being charged.
So what are we talking about except being clapper boys for a blog.
Mr Manish would do a yeoman’s service to the readers, insurers, agents and IRDA if he takes up the cudgels to educate people in right earnest rather than opening a Pandora Box with deficient knowledge to arouse the sentiments of people who may not be fully conversant with the insurance sector. Let’s remember INSURANCE is the most difficult product to sell as no one goes in the morning to buy insurance. Do we know the reason for mentioning ,”Insurance is the subject matter of solicitation” and has to accompany each leaflet or propaganda exhibit for insurance.
Thank you.
Mr.Dhawal, No need to get personal and comment on how am I. I am not agent so I don’t know what hard work you do. But I am a customer and I know I can’t buy LIC policy online because there is a network of agents who get commission for what I buy.
You are agent and you want commission. I am customer who wants insurance from LIC and I want it at the lowest price possible.
The point I want to make is this agent business model itself is not beneficial for customer.
LIC wanted to sell policies online but due to strong opposition from agents it could not and finally unnecessarily customer is paying for agent’s bread and butter. If agent’s are removed from the chain or agent’s commission is reduced customer will get the insurance at lower price.
When big bazar can sell the same product at lower price than reliance fresh why can’t LIC agents? That is what is fair price.
Big shot Amitabh bachchan buys LIC insurance from Abhishek or Aiswarya (I am not exactly sure who but one of them) to keep the commission within the family so can you ask him why is he taking away your business? Because your business itself is unfair.
Getting Insurance policy from Govt run org is a right of every citizen and it should reach them @lowest possible price.
@SACHIN
Insurance sales is a case of PUSH PRODUCT sales and not a PULL PRODUCT. That means, everybody would wake up on one fine day and decide to shop for shirt, pants, shoes, bike, car etc but nobody will say that i will go and buy INSURANCE today..To sell insurance, an agent has to push the client, awaken him to his financial needs, and then sell. So you can not compare a RELIANCE FRESH and BIG BAZAAR example here. Any 5th class pass student can stand in those stores and sell Eggs/Bread/butter/rice etc. but same is not the case with INSURANCE..
Even in Advance economies like USA, UK, FRANCE, AUSTRALIA; more than 75% of insurance sales take place through Agents and not ONLINE mode. So its your thinking which is flawed and not the Agency model.
Every citizen is free to buy from the govt run organization, who is stopping them from buying the product?? mind you, insurance products from LIC are standardized product with FIXED premium price for a specific SUM ASSURED – whether you check it LIC site or from LIC Agent’s table. Its not like you are buying ALOO/GHOBHI that you can bargain for prices. Take it or leave it..
And finally some good news for you. LIC is soon going to launch ONLINE TERM PLAN. So you can buy one without any Agent involved in between. But please dont crib if you find the ONLINE PREMIUM for TERM PLAN of LIC (Which is minus agent’s commission) is more than ONLINE PREMIUM for TERM PLAN of other companies such as KOTAK/ICICI PRU/AVIVA etc. Because you will not have any reason than to sulk..May be then you can raise the slogan that PVT COMPANIES mode is not fair..
many people today buy insurance willingly without buggers (Insurance agents ) making their lives measurable…many people compare the policies online , study them online, understand and select which one to buy..
Just because advance countries are doing something doesn’t mean we should also do it blindly…
Every citizen is definitely free to buy LIC policy but not without paying you for your bread and butter which is absolutely unnecessary. I work hard to earn, I want to secure my and my family’s future but at the same time I am forced to secure bread and butter for people like you who get free share of my money.
You answer this question for me: If insurance is made available online & premiums are calculated deducting agent’s commission, Don’t you think it will benefit customer who is paying his hard earned money to secure his life?
Concept remains the same whether it is Big Bazar- reliance fresh or the farmers in country making no money after all the hard work because of agent chain eating all the profit in between since there is no direct marketplace available.
Lesser the chain between seller and buyer of the product better for both.
Anyways I just expressed my thoughts with logic and expect you to express yours with some logical reasoning but I guess you prefer shouting on and blaming others.
Most important thing is no matter what happens agents will be there and customers will pay for them. Another point I want to make clear here is I have never taken back any premium from any insurance agent since I feel that every one has choice of selecting their profession and if somebody chooses to be insurance agent he should get what is rightfully belongs to him.
But there are people who are really poor and struggle badly to secure their future, secure their children and family’s future. For whom this commission if given back would really mean something and for them there should be a way to buy policy from LIC without paying any commission or atleast getting it back as a passback.
@Sachin
Great to see you admitting that you have never taken back Commission from agents but find it extremely hard to understand when you start this comment thread with, “I THINK PASSBACK is a good thing..” (Check above, the very first line of your comment). So either you are repenting that you have missed out an opportunity to fleece the agent or you are writing it here and doing something else in practice..
You seem hellbent on closing your eyes on LOGIC but even then i will try with one more logic one more time. I am answering your question as to eliminating commission part from the premium in ONLINE mode. Total premium to the company includes, not only the Agent’s commission but also the insurance companies administrative expenses like BUILDING RENT/STATIONARY/ELECTRICITY/MANAGEMENT+EMPLOYEE SALARY etc. So lets take out Managers or employees remuneration, and premium will further come down. And then we’ll ask the Insurance companies to start their operations from TENTs at every galli-nukkad and PREMIUM will come down further. This way, all the expenses are rooted out and people like you will be getting the policies at FAIREST PRICE, right?? Wrong..Agent ka bread-butter band bhi kara do ge to bhi company ke employee ki bread-butter nahi band kara pao ge..
Do you know that LIC is the BIGGEST real estate owner in the country after RAILWAYs. And where did this money for LIC to purchase such offices/buildings in primest locations like C.P. in New delhi come from?? Its from the premium after paying Agent’s commission. No idea na?? Get idea..
Retail sector chain include 3-4 middleman who are adding their margin, not in insurance. But in insurance, Agent is not adding any margin whatsoever. For eg, you want to buy a TERM PLAN from LIC for 50 lakh sum assure and LIC ask you a premium of Rs 10,000. Is the agent adding his margin and asking for Rs 12,000, like it happens in FRUITs RETAIL CHAIN like RELIANCE or BIG BAZAAR?? You are happy to pay that Rs 10,000 to LIC..So how come you are bothered that out of those Rs 10,000 – Rs 2,500 is going to agent’s commission; Rs 1,500 is going towards employee salary; Rs 1,200 company’s administrative expenses; and Rs 900 for electricity+water+other aminities??
Now you answer me one thing. Why is TERM PLAN or SINGLE-PAYMENT PLANs are available online and why not ENDOWMENT or MONEYBACK or CHILD PLANs available online?? Because other plans need understanding – understanding of charges/options of funds/switching or redirecting/bonuses/insurance cover etc. So for them, you need to have an Agent. What will you suggest in this case?? Please dont say that everybody should GOOGLE SEARCH for these things and start buying from the COMPANY directly. Its not feasible..
In ONLINE TERM PLAN mania too, every TOM-DICK-HARRY started buying the TERM PLAN by reading/understanding something from somewhere from AEGON RELIGARE (Who first started the trend of this ONLINE fad) and see the CLAIM SETTLEMENT RATIO of AEGON – its pathetic 55% according to the latest IRDA report. What do you say now?? AEGON plan was cheapest (Fair price to the public) – no middle man involved (No agent); who will answer to the ones whose claims have been rejected in these plans??
Me too have no inclination to get into mud-slinging match with anybody, more so on a blog..I explained each and every point with example and details but if you are not understanding them, that would not be my fault.
I am not blaming anybody because my practice is going very good and strong by God’s grace. ALL of my clients are happy with my skill level, knowledge, and servicing which i give them – in return, they never asked me for any passback. They never felt that i am doing any favor to them and nor do i get a feeling that they are paying for my bread/butter.
and yes, world at large is full of BUGGERS (Insurance Agents) and BEGGERS (The ones demanding passback from them)
I think you can’t think anything beyond the commission you get…
I still think pass back is a good thing and its a win-win situation for both customer and agent, Why I have not demanded it?? reason is mentioned if you can read and I am living a life where asking for a peanuts doesn’t matter..
The scenario to do business from a tent shows the emptiness of your thinking…when companies make profits then the economy, shareholders and many people get benefited…each business will have operating costs..maximizing the profits is the motive behind every business and if LIC is doing good nothing is wrong.. It was LIC who pumped in money when sharemarkets were crashing to support economy as per govt directives. So asking why they are making money is a meaningless question.
Talking about removing employees doesn’t make any sense since they are getting their salaries for doing their job..What you agents are getting is not a salary its a cut from the profit company would have made by selling the product..less the cut more the benefit to business and consumer..
Like any other product Policies should have MRP and agents should get it @ the rate which is less than MRP and then you sell it with the profit and charge for the consultation you give..based on your service and knowledge people will pay..that is what is called as fair practice..
Who will answer for the claims which got rejected?? Why someone should answer?? claims must have been rejected based on the terms and conditions … what religare did has nothing to do with LIC..LIC is govt run org and govt is answerable to people..
if a claim is rejected by LIC office can an agent give the money to customer?? can he be held responsible?? Is he answerable?? Its a business run based on the proper agreements and documentation…and its a duty of customer to read them before signing..
I read you mentioning your customer calling you GOD..I request you to get out of that imagination ASAP and start behaving like human beings..
buying something for cheap doesn’t mean it is @fair price…if you read my post I am talking about “lowest possible price” every time, that simply means company should reduce the overheads and burdens to the maximum possible extent…in order to attain their profit margins and keeping the interest of the consumer intact by offering him the service @fair price..
Beggers are better than leechers…..at least they accept what they do
Dhawal/Sachin
I am not seeing any productive output or any result other than person attacks and more hatred .. it will not help anyone .. I am sure we can keep commenting and somehow make oneself right . So the best thing I see is lets get back to our real work and create useful conversations from this point ..
I hope you guys will appreciate it . Lets stop.
Manish
This thread is going on and on, much like HANUMAN JI KI POONCH..
but this is my last try on this topic for Mr Sachin, for sure 🙂
I am ONLY concerned about FINANCIAL PLANNING, suggesting suitable for my client according to his LIFE STAGE and FINANCIAL CAPABILITIES. If he finds my product suitable, he goes ahead and buy that..In the whole process, a part of the payment by client is utilized for Agent’s Commission. To some, this part is the most irksome..How to get it straight – is the YAKSH PRASHAN – only YUDISHTIR can answer this now..
Now you have confused me to the brink with your meaningless, self-contradictory statments – “I dont take passback from my agent..” then “I think passback is good for every one…”, then “I dont take passback because its peanuts to me..” You mean, all this while, you are writing these long posts, justifying for peanuts?? quite strange..To me, it all looks like when a typical Indian says that, “ye doctor to bahot chaalu hai, 2 minute dekhne ke iss ne 500 rupayee jhaad liye. Bagal waala doctor to 200 rupayee leta hai aur piney ki laal dawai muft deta hai.”
can you please tell how can a company, especially an insurance company makes PROFIT without its agent force, as you yourself has put it?? The stakeholders – employees – management does not go out in the field and do the selling, its the efforts of the Agent that sales happen, and each and every stakeholder makes marry. Mind you, i am talking of only insurance sector right now, so please dont compare an example of PETROLEUM INDUSTRY into all this, this time..
By the way, what are your views on MLM companies who do not have any employee-setup kind of thing; only Agents to push their products, like AMWAY etc. Even in that case, it looks like AGENTS/DISTRIBUTORS are making a killing..
Try to understand the functioning of INSURANCE COMPANY. Today, after being 24 insurance companies doing business in the market, still the penetration rate is 4.5% in INDIA. How is INSURANCE suppose to spread in interiors, tier-2 and tier-3 cities of India?? Only through the effots of an Agent, not by ONLINE mode. See what happens to the MF industry/NPS without adequate remuneration to the Agents. NPS has totally flopped where actually NPS is the real mode for Pension. You must also have read somewhere just a day or two ago that FIDELITY INVESTMENTS are planning to pack their bags from INDIAN MF industry, and SEBI itself is exhtrolling MF comapnies to expand base to other than top 10 metro cities..And in all this effort of mine trying to impress upon you the importance of intermediary, i am in no way saying that his remuneration or commission should be unjustifiable. But let me tell you, whatsoever be his commission amount – it will always pinch the investor; if not Mr Sachin, then somebody else. So there would be no end to this debate..The last point of importance is INSURANCE is not something which an average indian understands and buy. It has to be told – explained – cajoled – followed by somebody and then only the sales materialized. It cannot be like somebody going to a store and buying the insurance [Except in Tax-Saving Season when people actually look for insurance agent to buy the policy 😉 ].
I have quoted an example of one of my client who is saying good things about me but nowhere did I even think of something more than a mere mortal, and i am very happy this way.
Do you really believe in your heart of hearts that LIC or any other insurance company remove its agents and just advertise that we are offering JEEVAN SARAL/JEEVAN ANAND/JEEVEN ANKUR, come and buy it from the nearest branch (Obviously premium would be lower because of absence of Agent’s commission or Employee’s salary) – people will throng the nearest branches to buy insurance for PROTECTION/SAVINGS/INVESTMENTS/TAX-SAVING. If you really answer this honestly, you will get the REAL ANSWER..
Last thing – DOs in LIC/SALES MANAGERS and UNIT MANAGERS in private companies – their profile is to built a team of agents and through the agents, get the business for the company. (How do i know this – i started my career with Max Newyork Life as a Sales Manager for 1-1/2 years, moved to HDFC Standard life as Senior Sales Manager for 1 year, and then worked as Area Sales Manager at SMC INSURANCE Brokers for 2 years). So even their salary is also justified by the sales made by an Agent.
Beggers/leechers/cheechars – all are bad; especially if they dont know how a particular industry works..
Last comment…all this time what I was expecting was a simple rational justification from Mr.Dhawal for the commission agents get… the commission that any agent in insurance or MLM business gets is typically a saved cost on marketing & advertisements but since he understands the industry so well he was busy telling how great an agent he is and how many companies he has changed with his titles and bla blah bla…
its Manish’s forum and he is requesting to stop so I stop here..
Ditto..No more comments from me on this topic..
Just a last thought – nowhere did i say that ALL agents are good ADVISORs. And nor did i want to portray myself as KNOW-ALL agent. I was just expressing my thoughts as like any other member of JAGOINVESTOR.
Mentioned my designations for the sake of letting it be known that people from all walks of life, and every levels of management are into Agency mode; and framing ALL of them as BEGGERS/LEECHERS etc is not good..
Me too is putting full stop over here..
Sir. PLEASE SIR- your comparison is totally wrong. 1) Reliance or any fruit / kirana seller has INVESTED HIS MONEY- if fruit is rotten he is at loss. Similarly against LIC we do not have any grudge. If any thing happens to the person — they have to PAY. ie they do business- they are RUNNING / TAKING RISK – SIR RISK. what is the agent doing – WHAT risk he is taking. Actually he / his income is insured- No matter – in what condition the person pays the premium – -The agent gets his cut. FOR NOT TAKING ANY RISK – NO INVESTMENT – Any deposit is taken form LIC from the agent ???? What he will loose ????
@Vijayakumar
Let me try to explain this INSURANCE business model in as simple terms as i can..
INSURANCE is entirely different from KIRANA STORE/RELIANCE outlets as these outlets are selling consumable goods which you can see/feel/check and buy for ONE-TIME consumption. Insurance is an intangible product which is a TERM-SPECIFIC agreement based on some rules and regulations. Insurance is a knowledge based product, nobody can just wake up one fine day and start selling insurance – whereas even you can open a KIRANA STORE and start selling haldi/namak immediately from today..So no comparison between these two segments..
Now let me explain the AGENCY MODEL to you..A person has to be atleast 12th pass or graduate to appear for IRDA exam to be an agent. He has to pay a fee of Rs 1,200 for this examination and attend 50 hour COMPULSORY training for IRDA course (Please dont be in any illusion that this exam is very ease. If you think so, do try to clear this exam at least once and you yourself will know)..
Now lets assume that Mr X has cleared IRDA agency exam and got his license to sell insurance products. So how did he do that?? Did he open an insurance store (just like kirana store) and people start coming in and buy insurance?? Do they give him call for home delivery of policy?? Do they step in to understand what are his products and how can they be useful to the public?? Unfortunately, insurance awareness level and financial literacy is almost ZERO in our country..
So this Mr X has to meet at least 10 people to sell 1 policy (Success rate of very old agents at the most is 4/10)..In meeting these 10 people, he is making phone calls – sending presentations through email/courier – physical meeting from one part of the city to another..These expenses are his day to day cost or you can say his INVESTMENTS. If he is not knowledgeable enough to answer all queries of his prospect/client, he is considered incompetent by that client (Or you can say ROTTEN)..After making a sale, he is still SERVICING the CLIENT, which again need recurring expenses or investment..Then he has to renew his license after 3 years for a fee..He is taking RISK that this client will run his policy for next 20 years but 40% of the time, this policyholder withdraw/surrender/stop the policy and all the efforts of the agent go waste..
I can bet earlier you were thinking selling insurance is the easiest job in the world which will fetch you HEFTY + ASSURED INCOME but try doing the above routine for just a week and you will have a different picture of the agency concept..I dont have any personal grudge against you because its not only you. Almost everybody thinks on the same lines. They think that even if they are paying a premium of Rs 5k, agent will be getting 70% or what not..Sorry, in practical world it does not work that way…
Dear sir, grass always looks greener on the other side – “DOOSRE KI THAALI KA LADOO HAMESHA BADA DIKHTA HAI.”
I completely agree with Sachin on this one. An agent’s job is to advise clients and sell policies and only then can he rightfully claim compensation in the form of commission.
If a person is willing to avail the services of an agent, I believe the agent should definitely be compensated. But what about those of us who are willing to do our own research and legwork and purchase policies directly from LIC by filling up the forms ourselves without anyone’s help? Surely, every citizen of India has a right to DIRECTLY buy insurance from the PSU behemoth, you agree right? But why is this option not available to us? Why should we pay commission to agents for not availing his services?
Your logic is very much flawed. Let’s say Big Bazaar is employing sales agent for door to door selling of product. Do you think such agents should be compensated by us even when we directly go to Big Bazaar and buy products ourselves?
Any customer who is capable of doing his own legwork will always want to eradicate any many middle men as possible to get what he wants at the fairest possible price. Why do you think its wrong?
Your logic of stripping away salaries of LIC employees and managers is stupid. They are getting paid to do their job and we are indeed available of their services for premium and claims processing. What job is an agent doing if a customer does not want to avail his services?
I am hopeful that very soon LIC will start launching online versions of all products minus the agent commission. There will always be old people who will require agent services, so you won’t go hungry either hehe 🙂
Sir, IT IS TOTALLY WRONG. WHY CANT THE LIC or any comppany for that matter – say come directly to us w- we will reduce the premium . SIR – I DO NOT HAVE A CHOICE. Suppose I know all my requirements – I decide the policy – then why should I require agent ??/ What we are agruing is for a simple advice – I am penalised to pay you a hefty sum through out the life of the policy. Actually the AGENT IS INSURED OF A STEADY INCOME. We can buy things less than MRP price. Why cant it be done ??
vijayakumar- chennai
@Vijayakumar –
Sir, this is precisely the misconception i went to dispel..Do you know how much me (A private company agent) or LIC agent will be earning throughout the life of the policy – which you have mentioned as HEFTY SUM throughout?? I know you have NIL/NO IDEA about the commission structure of insurance policy and that is why you have written such thing..
Without going into the details of each and every insurance plan commission, would like to add to your knowledge that according to IRDA any company which is operating for more than 10 years cannot pay more than 35% in first year – 3% to 5% in 2nd to 4th year – and 2% or less from 5th year..So if you have paid me (private company agent) or LIC agent (For Jeevan Saral or Jeevan Anand) Rs 20,000 for 20 years then he will be earning Rs 7,000 in first year – 1,000 in 3 years – and 800 for rest of the tenure…It comes around to be roughly Rs 22,000; equivalent to one premium or 5% of overall investment (Rs 22,000 commission in 20 years against Rs 4 lakh invested in 20 years). Can you please show me the HAFTY component over here?? How am i ensure of steady income??
Now my question to you, what is the guarantee that you will run your policy for full 20 years?? what if you surrender/paid-up your policy after 6 years?? how will i get my HAFTY and STEADY INCOME than??
Insurance is a different matter all together where 95% of the people do not know about insurance requirement and concepts but the investor community is more mature and they know which stock to buy and sell. So why dont the government allow them to go to the company directly and buy shares?? I hope you know that you cannot go to RELIANCE company’s office and buy 500 shares. Why did those so called MATURE INVESTOR have to open demat account with the broker/intermediary (Banks) to do such investments?? Please provide answer to this issue today..
You may be an educated elite who know about insurance concept, and so go and buy ONLINE plan. If you think HUMAN FACTOR is not required in financial transactions – there is always an avenue for you to buy it ONLINE. but dont just put an agent’s effort and his remuneration as loot when you yourself know NOTHING about the intricacies of insurance sales..Hope i have dispelled some of your FALSE notions of hafty commissions or ensured income..
Sir,
I am sorry you are contradicting your own words. 1) When you do so much of work to fix a customer – if he discontinues the policy after some years – why dont you offer your service to continue this policy? If your answer is – NO – then you must agree that your judjment about the customer is wrong. Even then – the QUESTION is you have recd you commission – to the extent the customer has paid his premium. Sir , I am not against the commission– to the agent – but only my question is this for every year. When we buy any goods – we pay margin / commission to the dealer only one time . Take another eg- when I go & ask my auditior – who is my financial adviser – to file my tax – for each year he charges only once. For one year service I do not pay for 5 or 10 years. Next year I may file tax on my own or go to any body_ THE BASIC POINT IS I- HAVE CHOICE – I have choice.Here I do not have choice.Even coming to your agrgument – for the LIC – exam – your investement is only 1200 Rs & renewal of this after 3 years. This can be covered even buy selling one policy. Sir , every job- requires some work, effort. If you say Every morning I have to get up / brush my teeth , require Tooth paste etc – sir ???. Why should I subsidise. pay you . Your advice to your customer – that LAKSHMI VILAS BANK – sir – fantastic. But sir – all this are available in GOOGLE. In fact your advice( is also not entirely true. There are some more people – offer 11.5 % interest. This is guarenteed & this has been existing over 150 years.) may be true – every body may not be aware – or your customers – friends / contacts are not informative.Sir , the commission – the LIC pays to their agent is AVAILABLE IN GOOGLE. Wether it is 100 Rs or any amount – the basic question is why should it be for the WHOLE TERM , when you have given the SO CALLED SERVICE ONLY ONCE????
Manish , I have a question .
Let us say everyone goes for Term plans only.Will LIC or any other private co. be able to generate profits and continue their businesses ?
Normally LIC discourages agents from selling a lot of Term plans – reason – huge liability for a small premium….
Sunil
The profit margin will definately go down , because even with term plans companies make profit , if the premium collection is more than the claim settlements in a year, thats a profit , right !
But this will not happen because all kind of plans will be bought and sold by companies .. Do you have a different view on this ?
Manish
Manish.
I am assuming that slowly and gradually as financial literacy gains further ground (with your kind of efforts) the no of subscribers to term plans would increase multifold.
Hopefully ‘all kinds of plans’ as mentioned by you would come down drastically. These plans, be it ULIPs, or endowments would be at a reasonably low cost and with a clear mandate as to costs and the kinds of returns that could be expected out of them and the instances of mis-selling would be drastically lower…
Sunil
I hope the same to happen .. slowely things will change !
You are absolutely right Mr. Manish.
I have met such a cheap selling agent of LIC, who may be working under pressure of meeting target, that i just checked him whether he can pay some part of commisiion to me? and he replied in yes after some debat. He is despirate in selling anything which may i need or not….
i regularly read your feeds, i told him that i won’t buy any endowment plan, but i will go for term plan. He tried a lot to change my view…….
Thanks to you….
KUDOS to you & your job.
Pranav
Good to hear that .. note that a lot of these agents started with good intention , but somewhere we investors also diluted their way of working with our greed !
Manish
Thanks Manish for sharing these details. First of all, IRDA has to ban these policies because these policies are not at all worth investing and its only benefit to company and not to the policy holders. First place IRDA has to take this step. Second thing comes to the agents commission. If the first thing is implemented, second thing is taken care. Many people are prone to investing in life insurance products only because some of their friends/ relatives have asked them to do so. For eg: In order to buy a household thing we tend to put in more time in knowing what it is all about. Why not in financial products ?
Sayi
True .. I agree with each bit of what you said .. IRDA has to take this into effect .. however agents commission is something I would say is ok , but it should be disclosed and the misselling should not happen just because of the commissions ..
Manish
It is all beyond my comprehension. Can an agent offer the commission on his own accord? To my mind some issues come up which caused the evil practice to germinate; Reason a) When only LIC was the insurer and licences were doled out without consideration of competence thus bread winners of a family, particularly government servants who were in commercially active departments sought proxy licenses. The tool was misused to coerce public who came in contact with them and were forced to buy insurance plans to oblige for whatever consideration. And invariably, the agent was the wife or a family member. Since a regular source of income was in place, the commission was an icing on the cake thus sharing commissions was adopted as a norm. The trend continues and got entrenched in the system. With private sector emergence, population had got used to accepting money from insurance agent. I understand private sector does not make such like offers because of stiff regulations as guided by IRDA. b) Sadly, insurance was rarely taken as a protective tool but a tax saving instrument and that’s how it was marketed. Even today, though disposable incomes are becoming larger, the threshold of savings still hovers around around sec 80 (C).
The malaise set in and will continues till IRDA stands up with a tough stand.
As I wrote earlier, why do people hover around commission structure. For God’s sake avoid looking in to somebody’s plate. Yesterday economic reports suggested a huge downtrend in premium collections. Message is clear, IRDA like SEBI has caused much harm, inadvertently or otherwise to the insurance sector as a whole. I would go a step further by suggesting a very strict action against the agent as well as clients if exchange of commission takes place.
Yes DK
Agree that agents and investor both are to be blamed and this system has become like this because of investors greed and mentality …
Manish
Hi Manish
Ordered your book yesterday. Looking for gems like this.
Anil
Good to hear that 🙂 .. would wait to read your review on flipkart 🙂
Sir,
please COME TO THE POINT. WETHER THE AGENTS DESERVE SO MUCH COMMISSION ? Why their – parting of commission is not correct?? ( it is done for car/ fridge – several things are sold less than MRP – PRICE.) There is no justification of paying this much of commission to the agent. Or they can reduce the premiums.As long as the customer is benefited – no body should have any grouse. – After all – the LIC is robbing the customer & paying the agent .
Vijayakumar- chennai
This has been a practice in LIC policies for some time now. The earlier practice was to ask for 50% of the first premium/ first years premium. The agents (as they were called) used to pay this primarily due to the reasons enumerated in the article. But this practice is frowned upon by the LIC and is deemed unethical by them. But in the interest of getting business volumes and to make it to the BM’s club, DM’s club, ZM’s club etc the agents readily agreed. One of the main reasons why this practice must not be permitted is this leads to misselling of insurance especially in the Private Insurance bouquet of products like ULIP.
Yea CM Vyas
I agree to those points .. do you have real life experience on seeing all these ?
Manish
sir, why the hell – LIC is bothered. they should be concerned only – wether the facts are correct / there is no cheating- ( unlike vechile insurance ) In the case of FRIDGE / CAR -/ AC MACHINE – MANY DEALERS SELL BELOW THE MRP price. Is that wrong ??? In fact it should be encouraged.- vijayakumar- chennai
Dear Manish,
Could you review the LIC Jeevan Anand plan? Because many people bought this product include my cousin too.
Thanks in Advance,
Sekhar
Sekhar
Would try to do that soon
Manish
Hi
Manish
Thanks for this information…I hope ur message passes to as many people…I will pass this information to my contacts and friends and tell them not to be fooled…Manish U also try to publish this superb article of urs in a good Newspaper or Some channel so that More and More people get to know about this misselling…In this blog only limited people would know about this….Also pls let us know about ULIPS…r they good product for insurance and investment…Still lots of my friends are buying ULIPS…Would appreaciate if u give us ur opinion on these ULIPS…
Thanks Again Manish and to ur team too..
Continue this good work…we all r with u…
Take care
Shiraz
SHiraz
Why dont you pass on this blog to your friends ?
Manish
We may add another fact to this issue- Insurance companies have a criteria of minimum business in terms of no. of policies, no. of years of such commitment which agents have to complete. If they do not, they loose commission on the premia paid by the insured for the future years. Insurance companies do earn sizable premia without paying any prescribed commission to the agents on the above grounds.
Another point is old agents who do not have any preconditions stated above, are sort of guaranteed of their commissions for the next 20 – 30 years depending on the term.
They also do not have any fear of being discontinued.
Prem
Thats really a good point and worth mentioning .. i will do that .. thanks for sharing 🙂
Dear Manish,
I was just on the verge of getting trapped into Jeevan Saral policy after a very lucrative hard to believe presentation promising money in crores. just then I tried to search internet and hit upon jagoinvestor and was enlightened about so many things. I have already taken a term insurance and planning for PPF and mutual funds SIPs.
Sachin
Thats good .. a lot of people do not do this kind of search and get trapped 🙂 .
We may add another fact to this issue- Insurance companies have a criteria of minimum business in terms of no. of policies, no. of years of such commitment which agents have to complete. If they do not, they loose commission on the premia paid by the insured for the future years. Insurance companies do earn sizable premia without paying any prescribed commission to the agents on the above grounds.
Another point is old agents who do not have any preconditions stated above, are sort of guaranteed of their commissions for the next 20 – 30 years depending on the term.
They also do not have any fear of being discontinued from the commissions as the insured persons have no option to disqualify undeserving agents.
An important related issue is once you commit to a policy, the agent keeps earning the commissions out of the premia paid by you for a period equal to term of the policy which may be 20 to 30 years. The agent will not show his face to you, once he sells the policy to you as it does not result in direct cash benefit. The repeat visits to a same customer may build up rappo and future prospects but visit to a new prospective customer has more possibilities of resulting in new business and 25% commission.
IRDA must plug this loophole and give option to all insured persons to disqualify an undeserving agent who has sold the policy on the grounds of no service or bad service.
Prem
Yea , that point is valid .. but a lot of agents give good service and keep a regular contact with his old clients .. Not sure if you had some bad experience .
Manish
Sir, once we take the policy – what is the service ?? Only if the man who had taken the insu – dies the agent may give service to the survivour. With on line payment facility / net banking etc – there is no practical service ?? IT IS ONLY A MYTH.
Secondly – if one has to take 50 lac policy – why dont we become an agent our selves,, We can also offer 50 % commission discount – so the we get good volume- ( only we pay this amount when the party pays the premium – or it can be paid thro the agent – so that – the agent gives service / as well as earns commission also.
As you rightly pointed out it is used as bait. It’s like those small toys earrings, tattoo, sold with biscuits, shampoo, bubble gum etc. or 0% EMI at the shops (Newspapers on major days like Republic Day have a BIG supplement offering you make down payment of Rs 62 and take a LCD free)” Muft Muft Muft”(free free free) are like magic words and they work for all kind of products : Financial and Non Financial.
There are many factors stacked up against a buyer: Big adverting campaigns, reputed institutions like LIC, salesman, peer pressure etc. “Chakko chahe tarbooz pe padhe ya trabooz chakkoo pe katda tu bechara tarbooz hi hain”(Whether knife falls on water melon or water melon falls on knife it is water-melon that gets cut)
We don’t allow people to drive without taking a driving test yet allow them to enter complex financial world without much financial education I am reminded of the quote of Warren Buffett Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway
We start need to take responsibility – it is my money it is my responsibility. As your website name says Jago investor. Yes we might make mistakes or have made them in past but now we have to start taking ownership of our decisions. Your website is a great platform to start.
Yea
I agree that final responsibility has to be on the investor , he cant escape this ..
Manish
Dear Manish,
Every thing I get from you are Very informative and make us aware of doing thing with caution and you are leading us to an excellent investment knowledge.
If really blessing carries value, then i do bless you ‘LONG LIVE’ Manish.
ChandraSekaran
Chandrasekaran
Good to hear that .. keep coming and reading
Because there are givers, there are takers and vice-a-verca. Both need to be blamed
Raju
100% true .. i would personally believe that investors are more to blame than agents !
Manish, While I appreciate and respect everyone’s views and there has been quite a few views and perceptions about the entire issue, there still seems to be no outcome on who is responsible and who is not … an unending subject. From the perspective of the agent he is right and from the perspective of an investor, he is right. This is, I am sure, not going to lead to any decision .. I hope you will agree with me
Sir,
There should not be any question of sharing the commission as no one has any right to encroach upon one’s earning and more importantly Insurance Act as mentioned by Mr Manish too clearly stipulates no commission is to be shared, if done, both insurer and agent would be penalised. Under the circumstances, why should an agent part with his legitimate earnings and also be penalised by IRDA.
In advanced coutires if an agent offers to part with his earnings, he is looked down upon and mostly shown the door by the prospect.
The discussion should cease henceforth all keen to take up insurance must pay the stipulated premium and be happy.
Regards.
Raju
True .. better not drag this conversation and get back to work
that is true
I just cannot believe the comments people above discuss- just a thought -do you people give 5% or 25% of your salary to your boss .
Hi Bertrand
In your country, do insurance agents do not pass back the commission to the customers ?
Very true. To add – many agents have also left the business on following this practise. Reason – the policy holder has defaulted the 2nd yr payment either on purpose or due to death. The practice has been so rampant that even if a sincere advise ( say suggestion of term plan or a single premium plan or hilighting the cost structure of a ULIP) does not receive any appreciation. It again boils down to- how much will u give me. The customer is just not ready to accept that in a single premium the commission is only 2%. A term plan also involves a lot of work in co-ordinating the medicals for the client , answering to queries from the lic.
Also in the mind of the agent- he is taking commision from me. My level of service will not be the same to that client. Normally the agent should help in death claim settlement but many a time the agent is no longer in the business.
Sunil
Very beautifully put in ! .. Investors are as much to be blamed as Agents .. infact more ! ..
Manish
Thks for agreeing that Investors are infact to be blamed more than the agents.
The agent has come to earn his bread and butter through selling policies.
It is the system and the competition created by the investors in asking for a rebate that forces him to follow this practise. however that does not mean all investors do this.
What the agent should really do is to give a very sincere advise on the products he is recommending to the client and how he will add value to the client by aiding him with good service on claims, help in loans ( against the policy) andshould really work as a financial doctor rather than limit himself to an insurance doctor for the client. In this way he should try and convince his client not to ask for a rebate…
Manish,
Its not always 25% but 2% to 25% depending on the type of policy (single premium or regular), whether traditional or ulip, and the term of the policy. Further, there is a TDS of 10%. And not to forget the administration and travelling cost. So in some cases it may be not only forfeiting his income but paying from own pocket also for that year. Rather than understanding the product and its merits/demerits often the first thing is “Mera dho premium bharega kya ?
Daniel Madre
Daniel
Yes , i am agreeing with you .. I am also on favour with agents , its mistake of both investor and advisor both in this topic
Agreed but who is forcing the Agent to pay the premiums for the clients? If the client demand’s the Agent to pay all the premiums till maturity, poor agent don’t have choice it seems. Can you site any law that binds the Agent to pay premiums on behalf of their clients and agree to any bullshit that the client demands? Agents are part of the industry and clients/investors are only customers. It’s the Insurance Agent’s responsibility to observe business ethics.
Sir, Dont you think the commission is simply atrocious? for the piece of so called advice— for life time – LIC or who ever- – ROBES the customer & pays the agent say a min of 5 %. Suppose I take 10 lac policy – & pay this to LIC – the agent gets-50 thousand. For what ??? WHAT IS THE SERVICE THROUGHT THE TERM HE DOES. Even IN the case of discontinue of the policy – THE ACTUAL BENEFICIARY IS LIC only. You can get an RTA answer also from LIC – how much % of policy is discontinued/ lapsed? how much is matured ? how much is settled ( death). The % for lapses will be very less. So there is no loss for the AGENT. In 1980- I took a policy from PUNE – the agent paid 6 months premium. Now a days – the agents weep to give even 1- 2 premium. Eg – I want to take 50 lacs premium for my son- the agent says he will pay 15 T only . See according to the above info – – in first year ( premium ~41 thousand ) – the agent will get 6000 Rs back & totally he will get around 2 lacs 9 over the period – but constant in come ). This is certainly very attractive. The agent did not do any thing but a small piece of advice. for which he is handsomely rewarded.
In a way it is , note that the commissions are not a compensation to sell , but an incentive to sell .. If there is no high commission , no one would sell it and no one is going to buy it anyways because people dont believe in it !
Is this more prevalent by LIC agents? or other private insurance agents also indulge in this game? I thought it was mandatory for the check to be paid from the account of either the proposer or the insured. Why do insurance companies even allow other forms of payment? OR make it mandatory like MF where the account has to belong to the MF investor, else there is a big documentation to be filled up for 3rd party checks, also no cash allowed.
Its by everyone.
Private agents also return a part of premium for selling you the ULIPs
@Ashwin/Ashish
Yes, this practice is followed by AGENTS from all across but MAJORITY is from LIC.
I want to share a real life, personal experience with you. I am an AGENT of KOTAK LIFE and i was sitting with a client and discussing some insurance and investment avaneus. He took a TERM POLICY from me and for some other PLAN, asked me if i knew someone in LIC too. I have my friends in all insurance companies and so i say yes..And to my surprise of surprises, he asked me how much that guy will pass him back.
So this image is more of an LIC agent..
It is true that IRDA does impose restrictions on agents offfering any portion to their prospective clients. What is most surprising is that why IRDA does not impose any restrictions on the commissions paid to the agents and the minimum assured guarntees on the returns to the investor. I see no rational for the exorbitantly high assured returns to the commission agents, especially when they do not provide proper guidance and services to their clients.
RK
The limits are there , but even those limits are very high !
manish you said the agent earns only 25% , it is 35 to 40% commission, thats why where ever i go for training, clients come to me with jeevan saral, why is that lic agent is selling this product, its only 35% to 40% commission. one of my client told me that she would get 1.25cr after 25 years by putting 5000 rs monthly, she saw a pamplet which showed these return, i would blame the investor as she didnot do any research or didnot enquire abt it.
Geo
I actually had term plans in mind 🙂 …
@THOMAS/MANISH,
Lets get this FACT straight, once and for all. According to an IRDA guideline, any INSURANCE COMPANY who is in business for more than 10 years – can not distribute more than 35% commission to its agents. So all this BULLSHIT of 40% or so are wrong.
Yes, JEEVAN SARAL and JEEVAN ANAND are the two traditional policies with the highest commission (35%) and that is why, the first thing an LIC agent will say is JEEVAN ANAND or JEEVAN SARAL.
And these brouchers and phemplets are just pure SHAM..Nobody should trust them..
Hi dhaval, what i have written is of jeevan saral plan, i know the best insurance advisor of lic, they get 35% and they get additional 5% if they attain their target, as an advisor, i have said i will blame the client for not doing research and not not asking questions, i meet clients who are young doing 5000/- rs monthly for jeevan saral thinking that he will get good returns for his retirement or he can withdraw money when required, this is a wealth creation stage, here he should not buy such insurance, he should also think abt liquidity. Every one does marketing, here also it is promoting fee based advice, i can say from my experience, now agents have started charging fees and are also selling jeevan saral, so such kind of blog will help awareness.
Whose interest is most? An insured or an agent? If it’s an agent then I have nothing to say but if it is an insured then I must ask to see his/her benefits. In our country still insurance is sold as an investment!
Uttamm
Agree that investors have more interest in getting the policy, but sad that its still not in the mindset.
I don’t understand, what benefit an investor gets? Pay most and get least, i.e. coverage!!!! But slogan of this decade should be least for the most, i.e. pay less and get adequate coverage. Insurance is for the family, whom an insured loves & cares. For investment he should put in other baskets where he/she can get inflation adjusted return-let the money work for an investor. If a family needs 4 lakhs in a year without considering inflation and tax he should leave at least 50 lakhs to his family. What would be the cost? Conventional Insurance & Pure Insurance!!! We always ask our clients to get adequate coverage, which is the foundation, then we can think of savings & investment……An Agent is in a noble profession, he/she works like missionary. We are not against an Agent as an Agent has too many responsibilities in our society. Without insurance the world can’t move for a fraction of second! We hope for the best in near future….