How to create a truth
It is quite surprising that there is a BIG rich much higher stake financial stake life insurance industry which is being made to look like a villain. The Mutual fund industry is supposed to be a good one which charges much lesser than the life insurance industry. Amusing.
Ask a distributor, it is far more attractive to sell mutual funds than sell life insurance products if YOU ARE A OWNER of a distribution business. However if you are a manager who is judged on the quarterly commissions then the life insurance business is better. However to understand this you need to understand ‘compounding’ and trail commission calculation. If you are in the media you have to make your voice shrill and say ‘IRDA is a lobby not a regulator’ or ‘School boys cannot take on Cowboys’ – surely looks sexy :).
For the past 55 years LIC paid 40% commissions to its agents. If it was so attractive a business why is it that no self respecting MBA becomes an agent to sell life insurance? After all if you can bring Rs. 1 crore as premium, you can take home Rs. 40 lakhs, correct. LOL. MBA students in ‘G’ grade schools HATE attending a sales interview even if it pays Rs. 5 lakhs. Difficult to reconcile all this data, correct.
Let us get the facts. Is there any life insurance product with 40% commissions? Theoretically yes, but today it hardly sells. Does any media article tell you this? NO.
What is the lowest commission in selling a life insurance product? Assuming the worst in this are is Hdfc Standard life insurance, the minimum commission is (believe it or not) about 1%. Has any media article told you about this? NO.
Have life insurance companies paid settlement claims and kept many children in school, repaid many home loans (and kept families in houses), paid for weddings of children, etc. Has any media article told you about this? No.
Why do so many questions have NO as an answer? Simply because negative news sells far, far, far better than ordinary news or good news. How many people will be excited if a child is kept in school? Not many. How many people will be excited if a teacher beats a child? Maybe many.
After all North East West South is about excitement is it not?
Brijesh
Apt one. Normal is boring ( The lines of a 7Up ad). What catches the eyeball is the norm.And will be the norm.
Puneet
Let’s see if you can believe this:
I bought a life term policy from Birla Sun Life via Citibank.
They made me sign a form acknowledging payment of 40% commission from Birla to Citi.
40% on term policies…I am still trying to digest the kind of agreement BSL has with Citi. They push really hard for their products.
Nakul Bajaj
Dear Puneet,
I am a Financial Advisor, so if i may tell yous something
I would like you to review if your Advisor is giving you the best advise for your benefit or not.
Rgds
subra
Puneet
You should have shopped around seen on the net checked out Religare Ageon – and then decided. Before people scream they should look what they have done. I have done a story for Money Today – saying ‘Mis-buying is a bigger problem than Mis-selling’. A good thumb rule is to see who is selling what product – that itself tells you whether a product will be cheap or expensive. You do not expect to find a cup of tea for Rs.5 at Taj, Oberoi or an ITC hotel, correct? You need to be in a budget hotel, or at the footpath to get tea for Rs. 5
Puneet
@Nakul: Thanks. I have tried to scrib some of my thoughts here:http://imposters.blogspot.com/2010/05/investment-horoscopeakafinancial-plan.html
@Subra: I 100% areee with you. And I have learnt now. Thanks to your posts in last couple of months.
I am much more cautious in my financial decisions now. Learning never stops.