Traditional insurance products are set for a makeover from October. While there are some positives with new regulations, insurance agents are mis-selling existing products as a limited time opportunity. LIC agents have an additional incentive of service tax levy to push products before the deadline
From October 2013, Life Insurance Corporation of India (LIC) will charge policyholders service tax on the premium of traditional products. Until now, this tax was absorbed by the insurer. The service tax for traditional products is 3.09% of the first-year premium and 1.545% in subsequent years. In a recent announcement, Insurance Regulatory and Development Authority (IRDA) mandated that service tax will not be included in the contractual premium, but it is to be collected from policyholders separately. It is expected, that with service tax being charged separately from the policyholder, the bonus on the product would improve. But, LIC agents are using the service tax levy as an excuse to push sales before the October 2013 deadline.
Today, LIC agents are just as busy as they are during the tax-savings season due to additional reason i.e. existing traditional products will be discontinued after September 2013. While there are some positives for customers with new regulations like higher surrender value, lower agent commission and better insurance cover, agents are mis-selling existing traditional products as a limited time opportunity. An insurance agent of any company trying to shove life insurance policy, as a deal worth grabbing, is only talking baloney. After all, reduced agent commissions next month cannot be something agents look forward to.
According to one ethical LIC agent, “There is confusion among agents and hence the strategy is to go for the kill as they are unsure about their effectiveness to sell new traditional products next month. Moreover, we don’t know about the new products LIC has lined-up. But, if I hard-sell to my customers today, then how do I sell them products next month?”
Life Insurance Council, the industry body of life insurers in India, has proposed to Insurance Regulatory and Development Authority (IRDA) an extension of reasonable time for new traditional products regime to take place. V Manickam, secretary general, Life Insurance Council says that he has not asked for specific number of days/months of extension, but looks confident that insurance companies will get reasonable extension. IRDA making an extension before end of September will hardly be a surprise. In March 2013, IRDA had said that ‘standard proposal form’ guidelines would be effective from 16 February 2013. It has already been extended for life insurance companies to 1 April 2014.
There are media reports about LIC portfolio reducing from 52 products to just seven next month plus four new launches. While LIC is tight lipped about new product details to agency force, it may be doing so to mop up as much premium this month as possible, before unveiling the products next month. While insurance companies are in the process of product re-filing, we have to see how many products IRDA can approve.
Here are some important changes for traditional insurance products coming next month:
India is an economy based on services sector. However, do we really provide even basic services to consumers in our own country? In a country, where the system and service providers care little about the customer, the solution lies in self-empowerment
India is a service sector dominated economy. We are one of the few large economies in the world, which skipped the phase of large-scale industrialisation, and became a service-based economy from an agriculture-based one. More than 60% of the economy is service sector in India. We have everything that the service sector can boast of. We have insurance, banking, telecom and airlines (the service component, as we do not manufacture it). We outperformed China in becoming a hub of business process outsourcing, a component of the service sector. While we continue to grow as a service sector economy; we do not have what is required to run the service sector, i.e. spirit of service. Let us look at some examples to understand how service-focused we are.
When you buy a product or service in India, you are the king. You are pampered, you get royal treatment and for a moment, you get enamoured by the standard set by the company or service provider. So if you, fill an online form to buy an air ticket and do not complete the transaction but have entered your telephone number, you may end up getting a call from the portal, which will ask you if you had any issue, while booking the ticket.
Now, imagine that you have bought a Jet Airways ticket and you are having an issue in web check in. You call Jet Airways, the consumer care line. On more than 90% of occasions, you will get a message, which is, “We are experiencing heavy traffic volume. Your expected wait time is 15 minutes”. Is this heavy traffic or lack of adequate staff to take care of customers? An airline knows how many tickets are booked on a daily basis and the number of calls that it gets on a daily basis. The number of calls can also be well assessed by an airline in India. Can’t it plan accordingly?
This is not against a company or a sector. You trying lodging a complaint with Vodafone on their customer care line, the customer care executive will avoid giving you a complaint number, which can be used by you by for writing a mail to the nodal officer. Recently, I tried to call a number displayed on IDBI Samruddhi portal, for some queries. After dialling 40 times between 10am to 2pm, I gave up because the number was continuously engaged. I bought a cupboard from a Godrej showroom in Vashi and asked the employee over there, how much time it will take to deliver the cupboard? His response was three to four weeks. However, the work was not completed on scheduled time.
There are several such experiences, which I am sure most of us have. This reflects poorly on our service sector. The service sector focuses on sales with little attention on after sales service. Everybody wants to pay attention to where the money is made. After all, post-sales service is not a money spinner. Also in many cases sales and after sales service providers are two different entities. This is in contradiction to what you see in many other countries across the world, especially the advanced economy. In India, we say that the consumer is the king, but he is at the receiving end when it comes to delivering services.
Why does this happen? There are many reasons. The legal system is heavily skewed against the consumer. Today, if you have to file a complaint against a bank, you may have to run from pillar to the post. Banking ombudsman does exist but the focus of the system is in reducing the number of cases pending with it, rather than anything else. The ombudsman will never go out of the way to help you. There are consumer courts. You can approach them also. But it requires resource, like time and some money. Most of us do not have the first one and hence, end up ignoring the issue that we face. This is where the consumer apathy comes into picture. We do not even want to write an email and expect others to solve our problem. Moneylife receives many such queries where consumers expect Moneylife to fight on their behalf.
Recently I wrote an email to Air India on the problem displayed on their website regarding missing miles. The facility is not available for months but the website has the standard message, which says it is not available temporarily.
I have received a reply from them, but if I find that the issue is not resolved, RTI could be the next action from my side.
However, where is the solution? It is time to fight for what is our right. A consumer forum or an association can only provide help in a limited way. Every consumer needs to be an activist to ensure that he raises service deficiency issues. In a country, where the system and service providers little care about the customer, the solution lies in empowerment of self.
(Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post-graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.)
Asian equities, currencies and bonds have taken a beating over the last few months after the U.S. Federal Reserve hinted it would halt its nearly five-year policy of flooding markets with cheap cash, points out Reuters in its release on its Asia Business Sentiment survey
Business sentiment among Asia's top companies deteriorated in the third quarter, interrupting three consecutive quarters of an improvement, with global economic uncertainty remaining the biggest concern for the region's firms, the latest Thomson Reuters/INSEAD Asia Business Sentiment survey showed. The Thomson Reuters/INSEAD Asia Business Sentiment Index fell to 66 in the third quarter from 71 in the second quarter when it reached the highest level in more than a year. An index reading above 50 indicates an overall positive outlook. The survey showed that shipping and financial sectors were the most negative with a third-quarter score of 50, a sharp drop from the shipping industry's reading of 80 and financials' reading of 78 in the second quarter.
Asian equities, currencies and bonds have taken a beating over the last few months after the U.S. Federal Reserve hinted it would halt its nearly five-year policy of flooding markets with cheap cash, points out Reuters in its release on its Asia Business Sentiment survey.
Some of the weakest readings came from north Asia's export-orientated economies of China, South Korea and Taiwan, and regional trading hub Singapore, all of which turned in readings of 50 – highlighting the impact of a stuttering global economy. “Asian companies are still maintaining a relatively cautious outlook regarding their earnings growth prospects,” said Fan Cheuk Wan, chief investment officer for the Asia-Pacific region at Credit Suisse's private banking and wealth management unit. “It could be partly related to the recent volatility across the emerging economies over the past three months.”
As recently as a month ago, investors were worried that China's economy was slipping into a deeper-than-expected downturn. But policymakers have stepped in with measures to steady the economy, from quicker railway investment and public housing construction to introducing policies to help smaller companies with financing needs, according to Reuters.
The poll conducted by Thomson Reuters News in association with INSEAD, a global business and management school, surveyed more than 100 executives in 11 Asia-Pacific countries across sectors including autos, financials, resources, food and retail.
Of the 90 companies that replied to the poll, held from 2 September 2013 to 13 September 2013, two-thirds reported a neutral outlook, just less than one-third were positive on their prospects and about 1% reported a negative outlook.