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Insurance Advisor - Equipped well to undertake turnkey job!

The number of lapse policies are increasing year on year inspite of the rise in the insurance products. The reasons could be many but most important one could be selection of misfit Insurance Advisor.

Balwant Jain

21 May 2010

Recently I came across a newspaper report mentioning the number of insurance policies being lapsed. According to the said report, during the year 2009, insurance policies worth Rs. One trillion had lapsed and their number was over 9 lacs. And this number did not account Unit Linked insurance Plans (ULIPS). In the same year, 1.73 million policies of Private Insurers worth Rs. 47,000 crore lapsed as against 1.28 million policies worth Rs. 25,000 crore lapsed during 2008.

The lapse ratio (a proportion of policies lapsed during a year vis--vis

policies in force at that time) in respect of one of the leading Private Insurance company stood at 53% in 2009, implying that 53% of the insurance policies were not renewed when they fell due for renewal. The reasons could be many but most important one which I could figure out is the selection of misfit insurance advisor, which is the first step we make towards insuring our lives.

This way we see that the number of insurance policies as well as the amount of lapsed policies is on the rise and the major reason for this as mentioned above is wrong selection of insurance advisor who indulge in misselling. This mis selling happens when an insurance advisor sells an Insurance product without evaluating and matcing the insurance needs and financial strength of the customer.

The above statistics of lapse ratio made me appreciate how important it is to select a right insurance advisor which is equivalent to selecting your family physician.

So what qualities/ merits one should look into while selecting the insurance advisor?

  • He/ She should possess financial integrity. A person with intergiety will only put a customer's interest before his own interest. Integrity of an insurance agent should be verified by checking with mimimum two strong refernces provided by the insurance advisor who are known to you also.

  • He/ She should possess good level of enthusisam and dynamism.

  • He/ She should have excellent analystical skills which makes him competent enough to evaluate various insurance products available in the market.

  • He/ She should be abreast with latest developments in the insurance industry as well at his company level as insurance is a dynamic sector and keeps on changing constantly.

  • He/ She should be into full time insurance business. This is important as only a full time person can spend time to keep himself abreast on the various products available in the market as well as to give you after sales service. Inadequate after sales services is another major factor leading to lapse of policies .

To quote my own experience here, I had taken an insurance policy from a new entrant in the business through an insruance advisor. After debiting my first premium amount, I have not heard from him since then. I myself serviced my own policy by finding ways and means of keeping it alive. A lay person may not be able to ensure that his life insurance policy remains in force in case there is no one to provide after sales service.

Thus it is very important that you select the person who can understand your financial position and insurance needs. Do not retain a person who does big ticket insurance only because later on he may not be able to provide you after sales service. Moreover the big ticket insurance advisor may even persuade you to buy insurance beyond your insurance needs.

It is always good to verify that the insurance advisor has been in this field for a reasonable period of time. Many insurance policies are taken by first year insurance agents and when they are not able to fulfil the criteria for continuance as an insurance advisor, you are left with no one to take care of after sales service of policies taken through them.

It is not advisable to select the advisor only because he/she has been referred to you by one of your relatives or friends, overlooking all the above mentioned merits.

Also do not buy insurance products from an insurance advisor, who is operating from place other than the place where you reside say in a different city. I know number of insurance agents coming to Mumbai on annual pilgrimage to solicit and get insurance business from their friends and relatives staying in Mumbai. Buying an insurance policy from an insurance advisor from a place other than place of your residence creates administrative problems of payment of premiums year after year. Getting after sales service becomes another big limitation in such long distnace relationships.

This is also important when a claim in resepct of such insurance product arises. A local insurance advisor will be able to give you better services than an insurance advisor loacted in a different city.

Thus above pointers will enable you to appreciate the importance of having a right person as an Insurance advisor, who can help you in identifying the proper insurance product for you at the selection stage.

A good insurance advisor plays an equally important role in servicing the insurance policy during continuance of the policy. His role is most important at final stage of an insurance product, when a claim in respect of an insurance policy is to be made. Unless you have someone to run around for you in the eventuality of you not being around.

Ensure that you have an insurance advisor who will walk an extra mile to help you dependents.

To Summarise here, I will say that it is very important to have a good insurance advisor not only at the stage of buying an insurance product but also, during the currency of the insurance policy till the final stage of of claim.

All in all your insurance advisor should be able to work right for concept to commissioning'till After Sales Service!