6 years of private insurers,are we better?. Review on Choosing an Insurance Provider

I  share here my practical experience with the companies I have  dealt with and their status, vis-a-vis the old government companies  The deductions are yours to make.

First the general insurance . The entry of private operators into the general sector is the best thing that happened to our country. The performance of the  erstwhile govt owned companies were pathetic. Premia were not collected on time, claims took months to clear, lots of bribes, kick backs and so on. All that has now changed. Car insurances are renewed easily, with executives coming to collect the cheques.

House insurance baskets got bigger with new innovations. Overseas medical insurances have become simpler, with self declaration upto a certain age, no medical exam. the mediclaim offers have got better, with the introduction of cashless claims. Actually the entry of private operators have forced the state owned ones to raise the bar higher.

Now let me come to life ins . Has it improved? Yes it has! Is the private sector responsible for improvement? It has opened the competition wider, brought a few innovations , new  technology to a greater extent. However it has confused the consumer. The life insurance sector is in a mess. The social fabric of insurance has been diluted. Let me clarify.

LIC of India was considered as a holy cow, our partner for old age, death, illness, loss of security. It was a social net.  No problem what you could pay as premium. All great institutes were encouraged to ensure that fresh employees were first insured, even before they paid their first provident fund instalment. Agents kept track of his insurance needs till either of the two died. That was the level of dedication.

Today the social fabric has gone. Insurance is touted as an investment product. No one talks of death benfits. Critical illness riders yes but no death talks at all. Illustrations are made showing rosy returns on those laptops. T HNI is the name of the target. Agent  word is long dead. She is now called relationship manager. Once she has sold you the policy, her cell phone will not be accessible to your calls. Not one agent of private insurance industry has ever reminded me to pay my premium.

Life insurance is no longer about brand loyalty, transparency and service. It is about investments, returns, false-hoods, mis-representations.

In LIC  the reason you bought an insurance was

a) investment.

b) old age security.

c) premium saved taxes.

So you were told 1). insure for a target. 2). options were endowment and money back .  It was saving with a plus. If you live you get money which was more than the sum total of your contributions. Either returned at the end of the tenure or every 5 years in case of money back.

Now there are policies which differ in names, no one bothers to tell you the difference. Illustrations on returns are made but no one tells you these are not on your actual investments but on returns net of administrative charges.

I  was sold a  birla policy by citibank -flexi life line. I invested 2.5 lacs as the 1st annual instalment. Only 84 thousand of this was deposited to my policy account. Rest was deducted as administrative charges and large part of it paid to citibank for getting the business. Now 3 percent return is assured on 84 k and not on 2.5 lacs.  this  was not explained.

In another policy of birla sunlife called classic, only 7.5 percent was deducted as admin charge  but that option was not offered..

Pru ICICI has  named products like prulink, prulifetime and so on. What do they mean, what are the differences, no one explained. Are the returns better than the endowment or money back of l.i.c. --no they are not. Aviva sold me a product where , fortunately, admin charges were only 5 percent and returns were 30 percent in 1 year on entire invested amount.That was the agent's diligence and honesty which paid.

I took a money back from l.i.c.Premium 8000 rs per annum.After 5  years I got back 25 thousand, (so paid 40000, back 25000). Now 5 years back I took a money back product called flexi-cash flow from birla sunlife. Premium 23thousand per annum. Got back 780000 after 5 years(paid 1lac 15 thousand, back 78000). Any better than l.i.c.? No way.

All that talk about private being better is only that--talk.It all is left to the insurance advisors which product he touts. Your requirements are not analysed as in the western countries.

I have taken my losses in the insurance industry as a learning curve. Now I am wiser. I do not equate ULIPs with mutual funds.The latter is for investments , the former for insurance with a slight return which is not market linked but compare it to a savings account.

My wish list for the private insurers is

1.  Administrative charges should be uniform across the industry.

1. Modify those computer projections to include deductible administrative charges.

   
   




2. Reduce the 1st year admin charges and spread them over 5 years. This will force the advisors to service the existing customers as well as ensure that bulk of the money goes into our investment account like a S.I.P.

   
   




3. Train your advisors to service the existing clients. They run after new business only.

   
   




4. Emphasize that your products are more for safety and less for investment.

   
   




5. Make your profits from volumes by diversifying into low end products and going to rural sectors.

   
   




6. Get that social service label back into insurance and focus on death and retirement products.

   
   

For the consumer the strategy advised is

1. must buy insurance for safety of family and your own retirement.

   
   




2. Pure term may not be as thrilling so opt for endowment or money back products.

   
   




3. for investments go to mutual funds or stocks but not into ULIPs.

   
   




4. do not look to insurance as a tax saving instrument only.

   
   




5. Chose your advisor and company carefully .