Looking at the number of people(read agents..) hawking the so called insurance policies everywhere, I wonder if we are living in a country of insurance agents. Anybody with a little cynicism(most of us do have some..) can see the hidden side of it to some extent. These agents are not actually selling insurance products, but bad quality investment products disguised as great investment products. If I have to guess how many of these agents know what term life insurance means, I will put it at 1%. Believe me, it can be much less. Every agent seems to be selling the so called ULIP's (ULP is a better word....). These ULIP's offer little or no insurance, invest predominantly in equities. Believe me, very few people know that their returns are not guaranteed and think they can get 30%+ returns every year. Some insurance companies deduct as much as 30% of the first premium toward expenses. Wondering what those expenses might be? The agent gets anywhere between 8% and 20% of the first premium amount. Sounds outrageous? There is more to come, the devil lies in the fine print. It is common knowledge that these ULIP's entail a lock-in period of 3 years. How many of you know that one can't get 100% of his/her money back even after 3 years? The companies charge anywhere between 1% and 5% of the fund value as surrender charges. Add to this the scale of operations of these agents. If these companies make public the total number of people on their pay rolls, insurance as a sector might well be the largest employer in India. Yes, these guys have penetrated every inch of this country, even to the remotest rural areas. You can imagine the quality of products sold to the villagers!
One would be tempted to blame the unscrupulous agents for all this, as most of the insurance companies are owned by the most respected business houses of this country. Can we really absolve the companies of all the blame? No. Observe the following trends for yourself.
1. How difficult it is to find a job as insurance agent? Dead easy. The companies literally recruit anybody who can bring some business. They have effectively woven a web of agents that is as big as Orkut. At least one of your friends or relatives is an agent and you can't escape from them.
2. Of course, a person has to pass a qualification test to become an agent. Show me one person who flunked the exam.
3. Companies deliberately create dozens of similar products with different names, making it very difficult for consumers to choose from.
Do you know that there is a regulatory body for insurance business? It is IRDA. No one knows what it is doing. On the other hand, SEBI did a commendable job by abolishing entry load on mutual fund units bought directly from the fund house, by limiting marketing expenses as a percentage of corpus....Is IRDA watching? I am joining all those who call for one regulatory body for all financial markets in this country.
Having said all this, I am sorry to say that I have just bought a ULIP today. I just couldn't escape from a friend(?) agent.
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