‘Charges of mis-selling of ULIPs, an exaggeration’

IDBI Federal Life Insurance chief says it is hard to believe that masses of agents will indulge in duping customers. He explains that if the company comes across mis-selling by an agent, it takes appropriate action 

GV Nageswara Rao, managing director and chief executive officer of IDBI Federal Life Insurance Co Ltd, talked to Moneylife about the various aspects of ULIPs since new regulations came into force from 1st September. He discussed agent incentives, the new charges and explained that the company does not hesitate to take action against mis-selling. Here are excerpts from the interview.

Moneylife (ML): What has been the difference in the mix of business (traditional versus ULIPs) before and after 1 September 2010?

GV Nageswara Rao (NR):
Earlier, ULIP was 80% of the business and now it has dropped to 65%. ULIP and traditional life insurance products offer value to different segments of customers. It is good for diversification of portfolio. We are not focussed on promoting any specific policies. In ULIPs too, we have the option for single and non-single premium and we make equal efforts to sell both, even though single premium is easier to sell.

ML: There were instances in the past, where ULIPs were mis-sold. Did you face this issue with your agents?

ULIPs mis-selling is an exaggeration. There are lakhs of agents who sell crores of policies every year. It is hard to believe that masses of agents will indulge in mis-selling to dupe customers. There is a human angle to be considered. Apart from agent training, we rely on giving proper documentation along with the summary of policy to spell out exactly what the customer is buying. We give a ‘Welcome’ call to customers to recheck if the customer has understood the policy. Sometimes, the customer thinks he is buying a single-premium policy rather than a regular ULIP. The customer is free to make changes within the free-look period. If we come across any mis-selling by an agent, we take appropriate action against the agent.

ML: Will the agents make as much commission as prior to 1st September based on persistency in ULIP policy renewals? IRDA has just spread out the first year charges over few years without really reducing charges over a period. (IRDA is the Insurance Regulatory and Development Authority.)

The agents will certainly benefit from policy renewals and hence persistency will increase. There is always risk of policy surrenders and hence discontinuation of commission. Even if policy gets renewed every year, I don’t think agents can make as much commissions as earlier from ULIPs.

ML: What is your plan for a breakeven point? What are your views on the guidelines that require a company to be ten years in business before going for an IPO?

We started in March 2008 and hence are late entrants in this field. We have strong bancassurance with IDBI Bank and Federal Bank that will help us to improve our market share. We should breakeven in seven years. If an insurance company has proved itself with its performance, there can be a case for reducing the number of years in business before going for an IPO.

ML:Why have mortality charges been increased by some insurers for the younger group?

NR:The current LIC mortality tables used by insurers are from 1994-96. New tables will be out in a couple of months. The claims experience in industry shows that there is increased mortality in the younger group due to accidents or other fatal diseases. The reverse is true for the older group that is living longer due to better medical facilities. The new tables reflect the higher mortality for the younger group and lower mortality for the older group.

ML: LIC has the lowest claim repudiation rates. How does IDBI Federal stand with respect to claims settlement?

The repudiation rate will be skewed for insurers who started operations in the last few years. When a life insurance company gets a claim within a few years of the policy start there is always investigation and possibility of claim repudiation. If the policyholder has made all declarations while taking the policy, the claim is genuine and all the claim paperwork is submitted, we don’t delay in making payments.

ML: How do you see business for Health insurance products?

Health insurance products have not done as well as we expect, but we hope the health insurance concept grows in India. Even though we don’t have a mediclaim like policy for reimbursement of expenses, the health insurance products are a great alternative. There are lump-sum benefits for surgery, lump-sum convalescence benefit for longer stay, additional cash benefit for admission in ICU, no bills required daily cash benefit for each day of hospitalisation and receipt of cash benefits up to Rs20 lakh a year.  

 Want to share something about ULIPs?
 We are putting together a document on people's experience with ULIPs.  You too can share your information by providing information in following  manner..
 1. How it was sold to you?
 2. Why you bought? What you were thinking or not thinking at the time of   buying?
 3. What have been your returns for it?
 4. What do you expect to receive, if you want to exit now?
 Send your information to: [email protected] or  [email protected]




Prof Bajaj

6 years ago

Dear Mr. Anand,

I fully agree with you.

The basic problem with ULIP is, it has to be mis-sold. It can never sell if its features are honestly told to the customer. So neither the agents nor the companies reveal the truth at the time of buying.

Yes, I agree that many customers expect a rebate from the agent. But who has got them to this habit ?? Agents only. Same company, same policy but the agent wants the customer to buy it from him, so he offers a rebate and the customers started accepting it. On the contrary, this habit has done some serious damage to investors as they do not invest in MFs, where they have to pay a fees, but invest in ULIPs where they get a rebate.

You may visit a nice article http://professorbajaj.wordpress.com/2010... which tries to highlight the wrong-doings by agents and companies.

The best part is the pride agents take in doing all this mis-selling. They mis-sell and then blame customers for getting fooled or us for pointing it out.

Prof. Bajaj

anand acharya

6 years ago

Dear Mr. Iqbal,
I do not agree with you because he can always second time because second time, there will be a new customer who is not aware of the existence of the first customer and his/her misfortune in being mis-led.
If you ask ULIP agent to bring in a statement of accounts of any existing customer (by hiding his name & address) by showing each & every deposit made by customer, plus each & every charge that has been deducted by Insurance Company for us to counter-check about exactness of his marketing wordings & contents of brochures (whether it is transparent enough) - HE USUALLY REFUSES to part with existing customer's details (despite my mentioning that name & address be kept hidden) - How else do you justify a product/company's ULIP performance when this product segment is not more than 5-10 years old for most of Life Insurance Companies?
Insurance & Investment - rather be kept separate, if one understands the true meaning of INSURANCE. All the wise CFPs & International Authors talk about it the same way. First Year's 20-40% Commission to agent never allows the product to really grow the way it should have grown (do we talk vis-a-vis MF - a similar Investment Product less Mortality Charges) and let us assume, I am wrong, what happens if this commission is trimmed to just about 0.30% to 2.00% as in the case of MFs.
Let us publicly declare (all Life Insurance Companies Invited) an actual Policy Account Statement of Age 35, Male, Rs.1,00,000=00 Premium p.a. for all financial transactions (TOP-UPs be excluded for the time being) from DAY 1 of PRODUCT LAUNCH TILL DATE on Moneylife web site ad then we can re-discuss (I have few pre-defined questions for all L.I. Companies to answer - & when I ask them to an agent, he never comes back with an authentic answer, EVER). WHY (all of them, though, are IRDA qualified)?


6 years ago

Dear Mr. Rao,
People have developed a tendency to behave like a news reporter from a B grade channel.
I fully endorse your views. Having spend just Nine Years in Life Insurance Industry , I have concluded that the customer only rejoice when their one lac become two lacs in three years. Before that they will always blame the ULIP selling insurance agent and compnay.
With the strict anti- mis-selling procedures, it may be easy to sell for once, but not the second time.
The customer are only interseted in accepting rebate (or commissions, remember 30 ka 16, but khaali milaa jhol")
Let's keep doing our duty, i.e. insuring the epole's lives with some investible portion.
Warm Regards


6 years ago

i fully endorse Mr. Anand Acharya and Prof. Bajaj's views.


6 years ago

of course agents do not cheat. The product design ensures cheating. Even the new pricing..it works ONLY if you pay the premium FOR THE WHOLE CONTRACTED period. LOL. It will improve stickiness and HELP the industry, policy holder be damned.

duraisamy P

6 years ago

I don't compromise with the views expressed by the IDBI federal life insurance chief. There were lot of mis selling before sep 2010. No body was disclosing in person about all the charges involved in the ULIPs particulrly about the allocation charges. That was why IRDA took hard steps to restore the cofidence of the people with the Life insurance industry.

duraisamy P

6 years ago

I don't compromise with the views exprfessed by the IDBI federal life insurance chief. There were lot of mis selling before sep 2010. No body was disclosing in person about all the charges involved in the ULIPs particulrly about the allocation charges. That was why IRDA took hard steps restore the cofidence of the people with the Life insurance industry.


6 years ago

As it is seen as a fact that agents are not deliberately selling ULIPS on exaggeration, this is the companies prompting them to do so, by pressurizing to sell more and more ULIPS.

anand acharya

6 years ago

Please inform Mr. GV Nageswara Rao to be my guest. He stays at my house with my family. I will speak to 12 different companies on a speaker-phone and ask them to come and meet us personally and we will secretly record the proceedings and we (alongwith moneylife) will declare our findings publicly. Is he ready?
Please tell him not to make irresponsible statements. He is living in a XXXX's paradise. He must come out & check what field agents of all companies are doing. Just making a statement being a CMD does not impress people. May be a few will be fooled (& doomed over a period of time). Has he genuinely sold a policy ever to an unknown person who is not aware of his status, stature & designation? Is he IRDA qualified?


Prof Bajaj

In Reply to anand acharya 6 years ago

I fully Agree with Mr. Anand Acharya.

Mr. Rao is just making irresponsible statements without knowing ground realities. If Companies were taking suitable actions, agents would not be found selling so recklessly.

On the contrary, its the companies who are encouraging the agents to sell by hook or crook.

Mr. Rao is just happy with his growth figures. Not even bothered to delve deep to see, if this growth has come from rampant mis-selling.

I would appreciate if by some way all these feedback reaches him and other Company heads and wakes them up from a deep sleep.

Prof. Bajaj


6 years ago

Insurance companies must report the action against the agent taken for the benefit of other customers
Financial products are not understood by the larger population hence a statement like misselling is exgagerated is unwarranted infact bancassrance is the channel wherein the maximum misselling happens

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