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.
Agents get commissions out of your premiums
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.
Because of the competition and wrong attitude of clients
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.
Purely as a bait to the client
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.
Because it plays with clients psychology
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.
Meeting targets and urge to win incentives
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.
Conclusion
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!
{ 107 comments… read them below or add one }
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….
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.
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 !
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..
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
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
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
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
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
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.
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.
Prem
Thats really a good point and worth mentioning .. i will do that .. thanks for sharing
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
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
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
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 
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
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
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 !
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..
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 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 ?
@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.”
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
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.
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.
Above conversations is itself a post that should be shared with all readers.
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.
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 .
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
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.
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 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
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
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 !
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
Thanks a lot for this useful article….!!!
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 !
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 ?
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 !