)
Most of us, when we want to buy an insurance policy, ask our friends or family members to recommend an insurance agent and buy the policy the agent suggests. So far, in such cases there have been many instances where agents have recommend a product that offers him/her the highest commission, thereby ignoring the needs of the customer. While individuals need to take steps to protect their interests, the rules are also being changed to protect customers.
With respect to protecting their interest, Subrat Mohanty, Senior Executive Vice President & Head-Strategy, HDFC Life Insurance says, customers should always approach the insurance agent from a financial planning point-of-view. And when the agent offers a product customers must check the compatibility of the product with their goals and what instruments the policy invests in (if it is an investment product).
Higher transparency and stricter rules will also help bring down mis-selling.
Mohanty has good reason to advice customers on what to ask of agents. The draft regulation on Appointment on Insurance Agents, issued by the Regulatory and Development Authority of India (IRDAI) last week, has listed a specific code of conduct for insurance agents. It also puts the ownership of the code with the insurer. This means that in case of complaints about mis-selling, the insurer cannot escape responsibility by putting the blame on the agent. Also, in case of violation the penalty on the insurer can be up to Rs 1 crore.
Today, it is not mandatory for agents to disclose commissions. But according to the proposed code of conduct, if buyers ask for details about commissions, the agent has to disclose it. Similarly, agents must also disclose details of premiums and explain the importance of disclosing all facts while buying the policy.
Even if the agent does not insist, customers must always disclose any material personal and health-related information at the time of application. "Otherwise there could be problems at the time of claims,'' points out Mahesh Misra, Chief Distribution Officer, Aviva Life Insurance. Customers must also ask their agents the sum assured and charge structure of the policy, he adds.
As per the proposed guidelines, companies may have to resolve more complaints at their level instead of going to the regulator or the Ombudsman, because companies will have to take responsibility of the agent, says Vineet Patni, Chief Distribution Officer with Bharti AXA Life Insurance.
Besides if an agent represents more than one company and both companies offer similar products, then he/she should advise the buyer on products of both the companies and the best product suited to the buyer. For instance, if an agent is representing a health insurance company and a life insurance company, the life insurance company also may have a health insurance product in its portfolio. But the agent should evaluate if it is suitable for the buyer, says the draft regulations.
Agents who keep hopping from one life insurer to another, is a problem for both the company as well as customers. For the company it means having to invest time and resources in training new agents. Customers may miss premiums if their agent leaves the company mid-way. While companies do re-allocate such orphaned policies to other agents, it is a hassle for all involved. This problem may reduce with stricter background checks, a centralised list of black-listed agents, and tighter norms for hiring, as prescribed by the draft regulations, say insurance officials.
"Initially the inflow of agents may be slightly difficult. But the filtering means that non-serious agents will not come. Those who come will stay for longer and will be serious,'' says Mohanty. This will mean better service for insurance buyers.
After guidelines for banks to become brokers, this code of conduct for appointment of individual agents is another attempt by the regulator to bring more transparency to the sales process.
