Page 10 - Life Insurance Today May 2016
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is the average sum assured under the online selling, thus element of commission in the area of insurance
proving another point that Insurance is bought, never sold. distribution. Instead, the buyer should pay 'Service
As a matter of fact, 80% of the Term Insurance plans sold Charges' for the services rendered, if he/she is satisfied.
are through online and the Term Insurance market has Then only the evil of mis-selling can be removed.
grown 30% since 2014.
Conservation of policies or Retention of the policies is
Policy Churning and complicated products result in high another area, which needs the attention of all the
lapsation of policies. Distributors should be penalized for insurance companies. In the words of Horstmann ( 1998
lapsation. ), " there is a strong and positive relationship between
customer satisfaction and loyalty. A Satisfied customer is
IRDAI Draft has suggested 15% maximum cap for six times more likely to repurchase a product and share
commission for Brokers for retail products and this his/her experience with five or six other people".
percentage varies across segments.
Customers are our Stakeholders
IRDAI Chairman is in favour of a cap for commission for
distributors and it can't be left to be decided by the market Stakeholders have a quest for value.
forces, which may lead to a cut throat competition among Customers need to be in touch with their insurance
the Players. companies.
The Regulator in the loop Their policies have to 'Stay Sold'- the policyholders need
to feel that their premiums are well-cared for and they can
The IRDAI is the link between the insurance companies, always connect with their insurers, if needed.
their intermediaries and the insurance customers.
But at the same time, while the Customer is the King, the
The number of agents has drastically come down as on Distributor is the Enabler since he is the bridge between
March 2015. There was a time when LIC itself had nearly the insured and the insurer.
30 lacs of the agents- now the number for the entire
industry has come down just to 20 lacs and LIC has only Even as per Regulation 11 of the Policyholders' Protection
11 lacs of agents. Despite a lot of malpractices prevailing- Guidelines 2002, the customers have the responsibility of
like the maintenance of bogus attendance registers just to informing the IRDAI in case they come across any mal-
wood wink the Regulator and the help rendered at the practice, either by the intermediary or the insurer. They
examination hall for copying etc- the new aspirants could can't turn a blind eye to it, saying that it does not affect
not get through the mandatory test. It is really a great them.
relief that this mandatory training of 50 hours has been
dispensed with by the IRDAI & this job of training has been After all, Eternal Vigilance is the Price of Liberty.
now left to the insurance companies.
The policyholders have to be watchful- they can't leave
Mis-selling is rampant in the field. This will continue as everything to the IRDAI.
long as the intermediaries are paid by the insurance
companies, because the loyalty of the intermediaries will Just as only when 2 hands join together, a clap comes, it
be with the insurers and not with the customers. Because is only when the customer and the Regulator join together,
selling and distribution are different. Seller sells anything Justice prevails.
that is tangible whereas the distributor sells the financial
services which are intangible. Insurance is the only It is the dual and joint responsibility of both the customer
exception where sellers are accepted as distributors. The and the Regulator.
seller is a fiduciary, who works for a commission whereas
a true distributor or advisor operates in the interest of the Then there are Great Times ahead for the life insurance
customer. IRDAI may take steps to slowly remove the industry in general and its policyholders in particular.
Let us hope it is not far off.
10 May 2016 Life Insurance Today
