The year that was for the life insurance industry ...

The year 2010 will be well remembered by the life industry & the policy holders alike for the tussle between SEBI & IRDA regarding who will regulate one of the most mis-sold products in the universe - Unit Linked Insurance products. The entire insurance industry (or I would put it as private players) were in for a rude shock as SEBI banned sales of all ULIPs offered by private insurers on April 9th 2010. IRDA asked insurers to ignore SEBI's order, finance ministry came in between to sort out issues, an ordinance was passed & lot of things happened in the next few weeks. In the end it was IRDA who won the battle against SEBI - but this win actually turned out a win for the customer who should always be the only beneficiary. Lot of changes were brought about in ULIPs since then by IRDA - lowering of charges & amortizing the charges across the premium payment period, lowering of surrender charges, extension of the lock-in period for ULIPs from 3 years to 5 years resulted in lesser scope for agents to mis-sell ULIPs. Lot of insurance agents went out of the industry as they cannot operate with lower commission structures & even few of the private insurers shut their branch offices to cut costs. The paradigm of (mis)selling have undergone a sea change since then - though mis-selling could not be strictly eliminated. Since mortality charges were kept out of the maximum charges that an insurance company can levy, couple of private insurers ensured they took charges from customers by charging them extra as mortality charges. God only knows how come the mortality experience of Indian population under-went a sea change in just few months that few of the private insurers had to charge double the rates they were charging couple of months ago! Also agents now say - "sir pay 20,000/- for 5 years & get 3 lakhs @ the end of 5 years!". the only change in the statement was change in number of years from 3 to 5 years. Though no new changes are expected in regulation of ULIPs in 2011 it is a fact that the new business premium of insurers have dropped due to the new regime.

The only way to prevent mis-selling will be ensure stricter norms for entry as a life insurance agent - a mere 12th standard pass & an examination will not be sufficient to prevent such happenings. The objective of such agents is always to make some extra income through commissions & not to establish a business that will develop selling & servicing strategies for long-term. A professional certification from a reputable financial institution should be made mandatory & ongoing renewal of the certifications should also be in place. Part-time agents should be taken out of the system & an option to switch over to other agents in the event of poor service should be put in place. The above things in my opinion will ensure in the long run that only professionals are involved in financial industry & servicing standards will be enhanced by every agent as he has to fight out to retain his clients. But I know I am only too optimistic for these things to become a reality in 2011. Till such things are in place, it is up to the customer to ensure that he takes advice from a full-time professional agent with relevant experience & also lodge complaints with the insurance ombudsman & grievance cell of IRDA against mis-selling (or) poor service standards of the insurance company / agent.