The Telegraph
Monday , December 10 , 2012
Since 1st March, 1999
CIMA Gallary

Risk shopping

The word misselling is frequently associated with the financial services industry and more so with the life insurance sector.

Very often we hear instances of a life insurance agent deceiving a customer about the product features, benefits and charges. Misselling typically stems from two facts:

nMost consumers lack basic knowledge of life insurance

nSome life insurance agents follow unethical practices

To ensure that you don’t fall prey to similar questionable practices, run the following checks while purchasing a life insurance policy:

Financial need

A financial adviser or a life insurance agent is well aware of the importance of a financial need analysis. As a customer, you must insist on this analysis to understand the gap in your financial portfolio. This helps you fill it up by opting for an insurance solution best suited for you.

The analysis studies your liabilities, assets, future goals along with your income, age and risk appetite. By gauging these factors it suggests the ideal insurance solution for you. It also ensures that you opt for the right amount of cover. Remember, under-insurance is as good as no insurance.

Product details

It is imperative for any customer to thoroughly understand the insurance plan details before finalising on a purchase. You must study the product brochures; compare similar plans from other insurers and know its features, benefits and charges.

Understand the factors that are included and excluded in the policy. Always remember, any insurance policy offers only what the product brochure states.

After deciding on a particular plan, always ask for a quote or a ‘benefit illustration’. This illustration gives you a clear indication on the policy details such as the amount of premium you pay annually, policy term and the charges you incur.

For example, in case of a unit-linked plan, it depicts the fund allocation percentage, fund management charges and an expected return at 6 per cent per annum and at 10 per cent per annum for the policy term.

Once you are confident of the ‘benefit illustration’ or the quote, you should move to the next step of applying for the policy.

Proposal Form

While applying for the policy, always insist on filling the proposal form yourself. A proposal form binds the customer with the insurance company. It is critical to fill the form with accurate and complete information. Misinformation or incomplete representation in the proposal form will not only hamper the process of claim but also impact the insurer's communication with you.

Ensure that you answer all the questions about the medical information accurately. A few minutes spent in filling the form yourself will go a long way in ensuring a smooth claim settlement process, if the need arises.

Policy document

Once you purchase the policy, the insurer shares a welcome kit with you that carries the policy document. A policy document carries:

Policy schedule

Policy terms and conditions

Photocopy of the proposal form and benefit illustration

First premium receipt

Unit statement (incase of a unit linked plan)

It is important to go through the document and check for accuracy of all details such as policy, name and contact as well as details of your nominee.

Understand the policy terms and conditions of the product. Most of the insurers share a photocopy of your proposal form and the benefit illustration with the policy document. Ensure the details are accurate and matches your agreement.

Free look

In case you are not satisfied with the policy, you have the option of cancelling it within 15 days from its issuance, or the free-look period. The insurer is bound to return your premium if you approach them for cancellation within this period.

Always check for credentials and insist on an identity proof of the individual you are dealing with while buying a life insurance policy. It is advisable to not get blinded by luring offers by unknown financial advisers. You must always compare charges and features of competing insurers and never rely on a single person’s opinion completely.

In case you have any complaint against the insurer, you should approach the customer service department of the insurance company. If your request remains unresolved for more than a week, you have the option of taking up the matter with the insurer's grievance manager.

You can also write to the insurance ombudsmen if you don't hear from the insurer.

The central government has set up offices of insurance ombudsmen in various cities who are empowered to resolve complaints regarding life insurance.

The complaint to the ombudsman can be made if the grievance has been rejected by the grievance manager of the insurer, is within a period of one year from the date of rejection by the insurer and is not under any litigation.

Keeping these factors in mind will not only help you to make the right decision but also secure you and your loved ones for life.

Remember, insurance is a long-term savings instrument for protection of your family and it is worth spending the extra time with your financial adviser before you buy the policy.

The author is managing director & chief executive officer of AEGON Religare Life Insurance