Citizens' Issues
Mass mis-selling: 59,000 investors in Kolhapur are alleged to have lost money in LIC ULIPs

A CPI(M) leader from Kolhapur has alleged that 59,000 investors in Kolhapur have lost money in LIC ULIPs. Agents had created a rosy picture of almost doubling the money in five years. CVC has forwarded the issues to CVO of LIC. Is the lack of understanding about ULIPs to be blamed?

CPI(M) leader Com. Chandrakant Yadav from Kolhapur has written to Central Vigilance Commission (CVC) alleging that 59,000 investors from Kolhapur who received 15%-20% less than their invested amount after five years of investment in Money Plus and Market Plus ULIPs of Life Insurance Corporation of India (LIC). In response to Mr Yadav, CVC has asked the LIC’s chief vigilance officer (CVO) to look into the complaints and take necessary action in the matter.

The letter claims that investors were given impression by LIC agents that their money will be almost doubled in five years. While we cannot corroborate on what agents may have promised, we have come across LIC agents who often mis-sell about a product giving 10% guaranteed returns even though the benefit calculation with respect to 6% and 10% are only for illustration purposes.

As per LIC sources the Kolhapur, investors had put in over Rs104 crore in such schemes. According to Moneylife, this is a case of mass mis-selling to investors who were used to traditional LIC products. They were not told, neither did they find out on their own, the complexities of ULIP, especially of the numerous charges and market linked performance. But, Mr Yadav has a different explanation.

Mr Yadav’s letter states, “Most of the companies (approximately 140) wherein LIC claims to have invested money from these schemes have made tremendous profits during this period. In such a case, where is the money earned by LIC used? Is it being used on fat salaries, bonuses and luxuries of officials and staff? The finance department of Government of India should get a hold and investigate the working of these new schemes launched by LIC and why they are making losses as they claim. LIC is making overall profit. They can very well pay the investors of these schemes and pay them the assured amount. To regain the confidence and credibility LIC should pay the amounts assured to the investors of the above schemes which are profitable, rather than based on stock market.”

The assured amount may be something agents wrongly promise. ULIP do not assure anything, unlike traditional products wherein you can expect some bonus and hence positive returns.

Yadav argues that LIC has earned billions of rupees during the last 60 years. If a particular scheme has failed, LIC should make the arrangements to make the assured payments, rather than making its agents face angry investors. Moneylife has asked LIC about its views on this issue, but there has been no response.

 

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COMMENTS

Vineeth

4 years ago

My personal opinion, we must be careful of two companies in LI sector-LIC & RLIC.
More than the TRADE, Fleet on Street are taught the Tricks of closing.
Having said that, I would blame the consumers also for their lack of interest in learning the basics of various investment instruments.
To understand the bare minimum, they need not go to London School of Economics. Spend an hour everyday learning the trade. If its their hard earned money, they would be concerned and start now.
Anyway, everything is not lost, we can always earn back money lost but its painful to loose a lifetime of healthy relation with agents.

I have given more importance to long term relationship than nearly 11 lacs swindled by MLM Companies. I'm not a RICH person 11 lacs is a big amount, but, I consider myself as WEALTHY, since, I'm willing to forget it as mistakes in Judgement by my close friend.

One concept to remember, so that none of the financial agents can promote wrong information for Quick close is "RULE of 72". Indian Stock market growth for past 20 years would be b/w 17% to 19%. Despite, Harshad/Ketan Scam (madam was the person who stood for truth).

I feel she is the better person to help correlate the connections mentioned above. Like all of you, I am also an eternal learner.

Hope she does...

Regards

REPLY

DEEPAK KHEMANI

In Reply to Vineeth 4 years ago

who is this SHE you are talking about? In LI sector all other Insurance companies are above Board? No mis-selling by their agents?

Parmod Sachdeva

4 years ago

It is the lack of logical thinking of general masses and blind chasing for guarantee, which is responsible for this. We never question the marketing person an agent or bank RM. More over LIC has never guaranteed any returns in ULIP but people believe as it is is PSU hence fully secured and assured returns. Same thing happened with UTI US 64. Nothing new in it.

We lack the basic education what to talk of financial eduction. Bhagwan will save us, hence we will not do any thing logical.

DEEPAK KHEMANI

4 years ago

This Mr Yadav does not have any financial background it seems,
asking LIC to make good of losses of unit holders in ULIP plans! The person who needs to be questioned is the Agent/Advisor,
who sold these polices, on what promises and that to under which option, debt balanced secured or growth?
Just because LIC has earned billions of rupees!
That is the property of lakhs of endowment policy holders
What type of precedent will this set?

REPLY

Vivek Agrawal

In Reply to DEEPAK KHEMANI 4 years ago

The agents are trained by LIC to mis sell the products. If rampant mis selling is happening, then LIC should be held responsible and should be made to pay the policy holders

Suresh Ramasubramanian

In Reply to Vivek Agrawal 4 years ago

LIC is also to be blamed for creating products and commission structures that are a massive incentive for their agents to missell.

DEEPAK KHEMANI

In Reply to Vivek Agrawal 4 years ago

Are you agreeing to what this person is demanding?

Vaibhav Dhoka

4 years ago

L.I.C.has not promised anything,it is case of mass mi selling.The fact is all ulips are market related and there is big expenditure attached to such ULIPS.Lastly it is GREED that draws one to such ugly situation.

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