basunivesh@gmail.com
Today we will look for the reasons about why your insurance agent not sold you Term Insurance. Each true Financial Advisers recommending you to have it first to cover your life risk, but on the other side your Insurance Agents or Advisers are forcing you to buy the products which are Insurance+Investments where your will fail to cover your basic life risk to the fullest. It happened in past, is happening now and will continue in future too until investors awakes and ask 1000 questions for the reasons of recommending the particular product. Â These are the few reasons which may forcing agents to be away from selling Term Plans.
1) Lack of Knowledge by Agents: When you ask agents about insurance, they usually have standard list of products which they used to sell on daily. Which makes them drawing their own comfortable level about products. When you ask about any older products or odd products, they totally not aware of those things. Primary reason for not having enough knowledge is, major chunk of insurance agents in India works as part time. Which will not let them to have enough time and patience to grab the desired knowledge.
2) Lack of Knowledge by Insurance seekers: Majority of people especially in India think that Insurance is a investment tool rather than a protective tool. It happened so due to no available avenues for investment in past. But presently when you have so many avenues to invest for then why you need to stick to the Insurance format where both insurance and investment mixed? It is also wrong thing to blindly follow your agents suggestion and signing the offer document without knowing the impact it will create on your future financial life. Yesterday itself I came across such a incident where one of my client asked my advise about investing yearly Rs.1,00,000 in any insurance products of one particular company. When I asked for reasons of his investments and choosing the particular company, he told he want to accumulate  some decent money after 10 years and major reason is he want to help the agent who is his friend’s mother. I simply asked him Rs.1,00,000 is what percentage of his yearly income?? He never calculated that too. Finally  advised him, if he really interested to help that agent then better to have term plan with that company. You will find such a cases regularly.
3) Earnings of Agents: When agent selling you the product which is Insurance+Investment, he have good opportunity to earn the handsome income. Like for example, if  he recommend you any Endowment Plan with the premium of around Rs.1,00,000 his income will be around Rs.25,000. This plan with such a high premium may cover your life risk around Rs.20,00,000. But if he sell you the same sum assured product i,e Rs.20,00,000 Term Insurance then premium may be around Rs.6,000. So by selling this Term Plan he will get the commission of around Rs.1,500 (25% of your premium). Then who will loose such a opportunity of selling Endowment Plan rather than Term plan??
4) Future business for Agents: When he sell you the Endowment plans or ULIPs and created your mindset such that insurance products are for investment, he have every opportunity to get continues business from you in the name of investment on regular base. So whenever their is a salary hike, increase in income or new family members entry (like birth and marriage) he uses such opportunities to generate his business. But when he convince you about the benefits of Term Insurance and sell you the product then you will not look back at him to purchase any insurance product for another 15 to 20 years. So he will loose the huge future business opportunity by selling you the term plans.
I think these are the major factors which led your insurance agents not recommending you Term Plans. Hope you now got bit of awareness and cover your life first. I will conclude this article with one example how even wrong media can create wrong perceptions about Insurance. Yesterday when I was watching the super, competitive, breaking news spreading, and unbiased Kananda news channel, they showed one line breaking news that they are airing the programme which is mainly about “INSURANCE INVESTMENT IDEAS”. Strange even few medias also think that Insurance is investment 🙂
Do you suggest a insurance cover till retirement only ( probably till age 60) or cover which could go upto 70 or 75 years possiblly Just wanted to understand the reason for suggestion also . Thank you
Varun-It will be up to your retirement age. Reason is, once you retire, then you don’t have any financial obligations. So no need of insurance.
Thank you
Dear Sir
You are doing a noble job appreciate it.
I have a few doubts I am 30, Smoker.
a) How risky is it to buy from new / small players like Aegon, Aviva, Bharti etc. (Aegon has CSR ~ 90%)
b) Why these companies ICICI / HDFC both have two plans with one being cheaper.. I would offcourse buy the cheaper but in hindsight am I dumb missing an additional clause here?
c) Some say buying policies from two different agent helps since if even if one has rejected your claim the other has to mandatory do it.
d) I am interested in buying for 40 years as it will cover my dependents for longer duration is it worth it?
e) Which one would you choose for yourself and which one would you recommend to me.
f) I have observed for around a 1 Cr. policy HDFC is cheaper but for more than that ICICI becomes cheaper I am not sure which one to buy my salary is 15 ~ LPA.
Regards
Keep the good work on sir!
Also I am interested in taking financial planning help from you.
Babu- a) No risk at all if you are sharing all information correct at your end. b) Premium fixing is entirely depends on individual insurance companies. We can’t argue about why they fixed higher or lower premium. c) What if both companies rejected the claim? Or what if in future all your insurance policies be centralized for easy claim process?? d) Ideal insurance coverage must end at start of retirement. e) I am having term insurance from ICICI. I have chosen it based on my comfort with company and premium. Hence, it is purely your call to chose a company. f) To me, both are BEST.
Boss can you suggest a good term insurance plan for a person age 25 yrs interested for the insurance term of say 25-30 years. I understand the Claim Settlement Ratio (CSR) concept from your other articles but how wise it would be to go with an immature insurer than with the market leader. Also the CSR varies from case to case, so using your expertise could you suggest something that you have insured for yourself or you recommend the most.
Ashish-You can go with HDFC or ICICI online term plans. Or else if your not in a big believer of private insurer then ready to pay a high premium to the offline LIC plan. Best option to reduce the risk will be by diversifying the SA among your mature insurers according to you 🙂
Dear Ashish,
Please assess the needs before you decide on the cover amount. You can use our online calculator to access the ideal life cover: http://bit.ly/12UdTxU
As Mr. Tonagatti has suggested, you may consider ICICI Pru iCare, our online term plan which can easily be purchased online and allows you to get a cover of upto Rs. 1 crore without any medical tests. To know more visit: http://bit.ly/15pbB0V
Regarding claims, we are committed to honor all claims quickly and fairly. In its annual report for FY12 by the industry regulator IRDA, ICICI Prudential has a healthy claims acceptance ratio of 96.5%. You can access the report by clicking http://www.irda.gov.in/ADMINCMS/cms/frmGeneral_NoYearLayout.aspx?page=PageNo1848
Please understand that we only offer suggestions based on your requirements, however choosing a policy most appropriate for you remains at your discretion.
Warm Regards,
Life Insurance Help
ICICI Prudential Life Insurance
Ashish-At the same time please bear in mind that, I am not all in any way associated with either ICICI or HDFC Life Insurance Companies. So it is your decision to take a call on buying on your own.
Hi Basu
Very informative and enlightening post. While people are slowly beginning to realise that commissions are major driver in making agents recommend such products, it is also the knowledge level the agent…if endowment is his area of expertise, and has been paying him well, he wont think of researching term products ever…something called stretching the comfort zone:).
Also, till recently, insurance companies had also been pitching aggressively for insurance cum investment products. Now with focus on protection from IRDA and Finance ministry, things seem to be falling in place.
Again thanks. Good article to create much needed awareness!
Abhinav
Thanks Abhinav for your thought sharing and encouraging words 🙂