By, S Jayaprakash
While purchasing any insurance policy, barring online policies, interacting with an agent or broker is inevitable. Given the fact that mis-selling is more prevalent in the insurance industry, it is important for any investor to know certain basic aspects before the interaction. Let us discuss certain important points to ensure that the investor has an enriching experience throughout the policy period.
Agent is only an enabler
Insurance is a long-term contract between the customer and the insurance company. In fact, policy bonds are printed in the contract format with proper stamping. Hence, utmost care and attention should be paid to the agreement. If required, one can ask the insurance company about the complete policy terms and conditions in detail.
An agent or a broker is only an enabler and he cannot be expected to be a one-stop shop for any service requirements till the end of the contract. So, it is better to understand the ways and means to directly service your policy through various authorised service gateways offered by the insurer.
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Assess seriousness of the agent
It is important to note that an agent or broker knocks on our doors in the interest of our risk coverage. So, it is not good to undermine their abilities. However, to ascertain their abilities, one should check about the level of involvement and dedication of the person in his profession.
This can be done by asking a few questions, like: (a) how long he has been into this profession, (b) how many policies he sells in a year, (c) how many policies are in force right now and percentage of lapses, (d) is it a part-time or full time work for the agent, (e ) what are his career plans to continue in this profession for the next 5-10 years, (f) what type of trainings he has undergone to ascertain the financial planning requirements of the customer, (g) how many times in a year does his insurance company or broker agency provide training and the like. It is more like an interview. But, be careful not to ask questions that step on the privacy of the intermediaries and his existing customers.
Avoid getting rebate from agent
Often, investors ask the agent to pay the first month/quarter premium out of his/her pocket. Avoid getting such rebate from the agent or broker, since this means that the agent is diluting his professionalism due to vested interests. If he can dilute his fee or commission, it also means that he is not banking on this profession for a long time or may not provide the service levels that you expect.
Try to get the toll-free number of the insurance company that sells the product; every insurance company has a toll-free number /training division which can help you to understand the products in a better manner. Investors should contact them to cross-verify the details told by the agent.
Insurance companies never design any product to mis-sell and the products are designed with utmost care and it is reviewed by the regulatory authority before it is floated in the market. So, if the customers understand the product conditions clearly, then there should not be a problem of mis-selling. But the technical jargons of the product terms and conditions may be complex for a lay person that makes him/her dependent on the intermediaries. Insurance is a serious business, but the product sold is intangible. Before buying a policy, one should consider the above points.
P. Saravanan is professor of finance & accounting, in IIM Tiruchirappalli and S.Jayaprakash is co-founder of
Nanobi Analytics, Bangalore