A Perfect Example of ULIP misselling

POSTED BY manish ON July 10, 2009 COMMENTS (30)

Recently I saw a perfect example of ULIP misselling. One of my friend’s parents gave their money to a close friend who was working for some Investment firm and assured them of doing great investments on their behalf.

The total money involved was more than 10 Lacs. I don’t know what else he did, but he bought a ULIP from their money and its the perfect example of miss-selling here. Lets see it in details.

ULIP misseling

So this agent buys a Canara HSBC ULIP.

  • The total premium yearly was around Rs 3 Lacs.
  • Premium Allocation charges are 48% in the first year.
  • The policy was stopped after 1 yr by the Family.
  • The Allocation chosen in the start was 70:30 (Equity : Debt).
  • Charges were not communicated while taking the policy.
  • No statement was sent them for next 8-9 months.

So may be they were not aware of important questions they should have asked a ULIP Agent.

Some Points

  1. Now 48% goes in Premium Allocation charges, rest of the money will grow at moderate return because it was mix of bear and bull market which the money was invested.
  2. Why was it invested in ULIP first of all and that too Rs 3 lacs as premium!! This is one of the costliest ULIPS in market and has to track record. Why was family financial needs not considered before investing? Why was their risk-appetite not considered?
  3. What kind of agent is this? He takes advantage of trust and invests in something which gives him maximum commission. There was no proper communication about charges and no statements reached them on time.

What is miss-selling here?

Giving “Wrong-Information” is not a big issue, the bigger issue is not giving “any information”. One of the reasons why this kind of things happen is lack of accountability on agents side. You take the product and sign the documents means you are responsible for your decision. While that is true legally, its totally unacceptable morally.

The only thing the investor can do here is make an issue out of it and tell the Insurance company that’s agent miss-sold the policy to him and did not tell him about the charges. Worst thing is investors don’t even know about the “Free Lookup Period”, which is 15 days from purchase of policy before which Investor can cancel the policy of they don’t like it or change their mind.

UPDATE

This is an update after my friend Rishi, whose case we are discussing commented on this article, I am putting up some more thoughts in this below. In case he takes some legal action on this matter. I can think of following things which will be useful and important to quote.

1. As everything was done legally, documentation and signatures taken from investor etc etc. The one thing which can make your case stronger is “explaination” from HSBC people that on what grounds “that Ulip” suited your needs.

How did they come up that this ULIP was the best choice for your family, I hope being the “trusted” and “portfolio managers” they think of your profits and hence they must have figured out why this ULIP was the best in the industry for you guys.

2. How do HSBC products best for you people (i hope 70-80 products they choose were HSBC products)?

3. as per IRDA “it is the moral obligation of the insurer to maintain the ethics and spirit of business across its workforce”. The mere fact that premiums were stopped after 1 yr and now your people are not happy with this shows that obviously you people were not informed well about the cost structure in the start.

Finally this is more of a matter of “Unprofessional Behaviour” than miss-selling per se. I am not sure how much HSBC will help you, as they generally pass the buck on “agent” and “investor who invested”.

You might have to take this case with IRDA. You must first talk to Bank, agent etc and then after you are not satisfied with them, you should go complain at the IRDA ombudsman: https://www.irdaindia.org/ins_ombusman.htm

The ground of plea should be based on “monetary + psychological loss”.

You can read here Confession of an Insurance agent in his own words

Please share if you think there is a good way for getting justice on this matter. Your comments are valuable? Should this is taken into court?

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30 replies on this article “A Perfect Example of ULIP misselling”

  1. ICICI Prudential Life Insurance says:

    Dear Mani,

    We regret the inconvenience caused. We request you to help us with your contact and policy details to assist you .

    Alternatively, you may also post your concern along with your policy details on https://onlinelifeinsurance.iciciprulife.com/digital/ipru/GrievanceRedressal.htm?execution=e1s1
    Request you to quote the reference number 159934 whilst sharing the details. Post receipt of the requirement, our representative will get in touch with you within 48 hours.

    Regards,
    http://www.iciciprulife.com

  2. Mani says:

    Let me tell you how icici bank tried to sell me ulip.
    I went to icici jadavpur, kolkata branch to open nps.
    They told, why nps, we have better plan( I was like, ok let’s hear them for fun)
    They started like: we have product which invests in equity,gives you life cover and tax free(i did not get what they were talking about).I told them, I am sipping in mf, I have more than enough term insurance cover.They told, mf is taxable(?????? wrong or atleast partially wrong info. don’t know whether it was their lack of knowledge or they tried to misguide me) and what is the problem if I get some additonal life cover.Then they showed icici elit life ulip.

    Now, they knew
    I had enough insurance
    I was sipping in equity mf.
    Still they were offering me ULIP.
    Isn’t is misselling?

  3. P S KARTHIKEYAN says:

    To
    AVIVA Life Insurance Co Ltd.

    Sub : Complaint – Policy return & Money Return
    Ref : Policy No. LSP 1615324 – Client ID 1223117

    In the year 2007 your agent Mr. Mukul : Rep. INDUSIND BANK, Sector 16 NOIDA approached me several time to take a policy. On his assurance and discussion I had a taken the above mentioned policy. Presently he is working in INDUSIND Bank near to Udaipur. He and you i.e. AVIVA Life Insurance company cheated me. I am explaining how you cheated:

    1. He (Mr. Mukul) explained for the insurance of Rs.3,00,000/- he gave me this policy on the premium payment of Rs.15,000/- every year for 15 year & he has explained how my money will grow in the following manner
    First yr premium Rs.15,000/- (2007 payment)
    Growth @ 40% Rs. 6,000/-
    Sub-total Rs. 21,000/-
    Add 2nd yr Rs. 15,000/- (2008 payment)
    Subtotal Rs. 36,000/-
    Growth amt Rs. 14400/-
    Sub total Rs. 50400
    Add 3rd yr Rs. 15000 (2009 payment
    Sub-total Rs. 65400
    Growth amt Rs. 27000
    At 2010 total Rs.92400 will be there
    Like this he explained. Photo copy of his hand writing sheet (dt. 03/072007) is attached with this complaint. I have paid total four installment premium of Rs.60,000 from 2007, 2008, 2009 and 2010 @ Rs.15,000/- every year. On observing the fact I stopped and not interested to continue to vanish my money. DO YOU KNOW WHAT IS TODAY’S VALUE, i.e. around Rs.29,000/- only, whenever I call your call center people, their limited reply this much only. As well as in your illustration you informed after the payment of total premium of Rs. 2,25,000/- you may give around either Rs.1,87,393 or 2,67,179. What is this?
    2 He never told, informed or mentioned that there will be deduction of some amount like, admn. Charges, mortality charges, premium allocation charges etc. Whereas you deducted all my money for your growth. You may say, you can read the policy. How many people read & understand the policy as well as hidden information which always hidden. No body can understand thru’ this. I can challenge.
    3. You had given the policy like, Abhimanyu Chakraview, none of the policy holder can escape. Whenever I try to surrender I will have to lose high amount & no other option.

    4 On his assurance (your agent INDUSIND BANK – Mr. Mukul), as well as Bank trust I had taken this policy. Otherwise I have no interest on this. You may say, this is long term policy. I am telling you, there are so may ways to invest for long time benefit. Not like this.
    5. He/you made me mad, I am totally dissatisfied, disturbed, under stress because my money has gone. You (+he) cheated me, bluffed and committed wrong to the customer.
    6. I enclose some papers for your ready reference, as well as his hand written sheet dt. 03/07/2007.
    7. Now I need only my money of Rs.60,000/- which I paid @ Rs. 15,000/- for four installment to you. Other than this nothing I need. No insurance required. No interest/bonus required. I am not satisfied, you cheated (you too brutus) me.
    8. Every day the value is going down, because you are eating fast, deduction is more. There is no use of keeping this policy. Even the SENSEX 19000 and 16000, there is no difference in loss. The loss ratio is same. I want close the policy at the earliest.
    9 You can stop insurance coverage on payment of Rs.60,000/- to me and you need not to pay any other benefits to me. I will return all the documents including his hand writing sheet to you on receipt of my payment.
    10. I expect your reply within 15 days time. Next course of my action will be publishing this article to all news paper in Delhi, Calcutta, Chennai and Mumbai as well as approaching IRDA & Consumer court (claiming full damage).

    KARTHIKEYAN / NOIDA

  4. Nagarajan Santhan says:

    Hi Manish,

    First of all, i thank you so much for this kind of site… Really Good.

    I have Canara HSBC ULIP for 5 yrs (14000 annual premium X 5 yrs = 700000 Sum Assured) and my premium option is every quarter.

    Totally 5 yrs = 4 quarter X 5 yrs = 20 payments X 3500 = 700000.

    As of now i paid 6 premiums and 7th due is in April 2011.

    I have a plan to buy Term Insurance for 15 laks from LIC.

    Can i continue this ULIP?
    After 3 yrs only no charges for exit. So can i wait for 3 yrs completion ?

    Note: Total paid amt is 21000 and my current value is 15000

    Thanks in advance…
    Regards
    Nagarajan S

  5. Hari says:

    Hello Manish,

    I am looking at an investment in ULIP and I have been considering Canara HSBC. Could you please let me know whether it would be a good decision to invest in Canara HSBC ULIP?

    Thanks,
    Hari

    1. Hari

      I look at this ULIP once long back , they had very high charges. If you have completed 3-5 yrs better get out of it and reinvest in mutual funds , This is assuming you are not a market person and wont be able to monitor and handle hte investments

  6. Santosh Gupta says:

    Hi Manish,

    Last year I bought Aviva ULIP for 70K (annual premium) as this is the only company provided back date as I bought in April 1st week. As being a compulsive investor I could not investigate much on the returns. Still i dont have clear picture on ULIP. I am planning to withdraw from the scheme after paying the 5th premium. Is it a good decision?

    1. Santosh

      You should get out of it , thats for sure , but when to get out ? After 1st payment or after 5th , why dont you see if you stop after 1st and use the 4 yrs premium somewhere else , can you do better , i am sure it would be a good idea

      Manish

      1. Santosh Gupta says:

        I was told that I should pay minimum 5 premiums (earlier it was 3 premiums) otherwise the money I invested will be lapsed. Sorry if it sounds funny. What if I withdraw now as I paid only 1 premium? will i lose lot of money as penalty? Please suggest Manish.

        1. Santosh

          Actually you can stop paying the premiums , but can not withdraw it before 3rd year as there is lock in period of 3 yrs

          Manish

  7. Vaibhav says:

    ULIPS are much hated due to their high allocation charges but take a look at this:
    I invested Rs 1,00,000 in ELSS in Jan 2008 : net funds value today is 96000
    I have been investing in a ULIP since Dec 2006 via Rs 2,000 monthly premium (net amount invested is 96,000): ULIP value today 92,000

    So the fund and the ULIP are nearly giving equal (though negative 🙁 ) returns.
    This is despite the agonizingly high initial allocation charges of the ULIP.

    1. Vaibhav

      its a worth discussion topic and example, can you give more detials like name of ELSS and ULIP , because this purely is an example of individual product performance .

      Manish

      1. Vaibhav says:

        ULIP is MNYL Life Maker with allocation as 50% Balanced Fund and 50% Growth Fund.
        ELSS : SBI Magnum Tax Gain , Franklin Templeton Tax Shield, Sundaram Tax Saver and Reliance Tax saver , near equal allocation in all four. (Fund names may be slightly inaccurate)

        While on the topic , can you advise me if I should sell the ULIP or keep it . The cover offered seems inadequate (under 2 lac).
        I’m single, healthy 28 yr old software professional with no dependants as of now.

        1. Vaibhav

          More than what you should do with ULIP , you should be concerned what you should do with your life cover , so first thing is get a term plan asap for required cover and then think about ULIP

          For ULIP , you can discuss it at our forum : https://www.jagoinvestor.com/forum/

          Manish

  8. Manish Chauhan says:

    @Anonymous

    Look at this to increase your anger level for HSBC : http://fryol.net/?p=448

    Manish

  9. Anonymous says:

    HSBC sent a couple of thugs (agents) to my place advising a ULIP (about 3 years back). I didnt know about ULIPS then but luckily googled ULIPS and found advice that I should not be buying them. After that, I lost trust in HSBC, now I wouldnt take their advice on buying a needle

    1. ravina mehta says:

      I joined this HSBC-Canara Bank ulip scheme..name ‘Canara HSBC Oriental Bank of Commerce Life Stay Smart Plan on the 25-jun-10. I have already paid two premiums..1.5 lacs annually. What shall I do…stick on for another 3 yrs i.e pay another 3 premiums and then get out or opt out immediately. I would say i am a victim of mis selling.

      1. Ravina

        You will have to evaluate which would be a better option for you mathematically .. can you do the math on what will you get in both the cases . Start a thread on our forum for better answers : https://www.jagoinvestor.com/forum

  10. Anonymous says:

    dear all,for any querry or more info.on your ulips which are already taken, kindly post the life co. name,and policy name(product).each policy cost structure is different. write policy name, i can help you.
    thanks

  11. Manish Chauhan says:

    @Manickkam

    Your post on "agents not your friend" is much appreciated . the other one was also good .

    Everyone teaches something in life and from your "agents not your friend" i learned a very good term which you mention as "Marketable product" , It was a nice thing to read . thanks for that .

    I feel happy that you are an informed investor . Keep going . However There are some flaws which i would like to bring up .

    In the example of John on the "why avoid ulip" post . John is paying 1 lakh of premium with cover of 1 lakh , thats actually not possible because from the start only ULIPS have the rule that the premiums will always be 5 times of yearly premium .

    May be you missed this point in your post ,anyways not a great deal . Everything else looks nice 🙂

    Good Job . So what do you think this person should do (the person who was mis-sold the ULIP in my example ,he is my teammate in my company) .

    Your comments are valuable 🙂

    Manish

  12. Manickkam says:

    Manish,

    I have written posts on Agents as well on ULIPs before.

    Thought quoting here would help.

    Agents are certainly not our friends

    Regarding ULIPs,
    Why we should avoid ULIPs.,
    http://manickkam.blogspot.com/2008/09/why-avoid-ulip.html

    Let me know your comments.

    Manickkam

  13. Manish Chauhan says:

    @Rishi

    i have updated the article with more inputs , have a look .

  14. Rishi says:

    http://fryol.net/?p=448
    ——
    @Manish: Thanks for taking up my cause. I have posted my story above and hope that HSBC reverses the damage they've done to us. I am sure, pressure from your and other blogs in cyber-space will help us in some way. I just wonder if they can reverse the allocation charges to some extent. That money is actually in their own pockets. I am planning for other actions against them too. Let's see.

  15. Manish Chauhan says:

    @Manickkam

    Yeah , we need to have better accountability from agents in india .

    Manish

  16. Manickkam says:

    I too have a similar view..

    Agents are certainly not our friends and its certainly our duty to safeguard ourselves.
    I think, We can't go to court for these things though!

  17. Zindagi says:

    Manish, would like some suggestion from you. actually i have bought a ULIP 3 years back. I was paying 20,000 p.a for, The term is 10 years and cover is just 1,50,000. I was so foolish to buy such a plan. But now i don't know what to do? whether to continue or change or just withdraw.

    I am single living with my parents, since both of them work, so as such dont have any finanicial dependent. But i am paying for my brother degree and his expenses which will be completed in next 2 years

    Kindly advice

    Zindagi
    gaurkullu@gmail.com

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