Unscrupulous ‘agents’ are trying new ways to sell insurance products by peddling unauthorised schemes which have no approval from insurers
It looks like peddlers of snake oil are now focussing on insurance products. Local trains in Mumbai are plastered with advertisements of an ‘incredible’ deal being offered for selling life insurance products of a leading insurance company.
According to the advertisements, an agent who goes in for this scheme will have to work for two hours a day at two appointments a day, sell five policies a month—which would lead to 60 policies being sold in a year. For doing all this, the agent will get a commission of Rs6,000 per policy, amounting to Rs 3.6 lakh a year, claims the advertisement. What’s more, the ad also offers you a club membership and bonuses. All these advertisements are purported to be policies from Birla Sun Life Insurance.
Moneylife called up the number listed in the advertisement. Kishore Kamale answered our call and said that he could offer this correspondent the post of a ‘financial consultant’.
According to Mr Kamale, anyone seeking employment would have to undergo two days of training and then give an Insurance Regulatory and Development Authority (IRDA) certification exam, in order to get the license. Added to that, the potential ‘financial consultant’ would have to pay Rs800 to register for the exam and get the license.
Mr Kamale invited Moneylife to his office in Thane, (on the outskirts of Mumbai), and told us to bring along documents like 12th standard mark sheets, PAN card, a cancelled cheque, address proof and six passport size photographs.
Mr Kamale told us that he is offering 35% commission on premium for any insurance product sold (mainly traditional plans and Unit-linked Insurance Plans). ”From any of the insurance products you sell, you will get a commission of 35% on premiums,” Mr Kamale said. No mention was made of the club membership or bonuses.
A Birla Sun Life Insurance spokesperson we spoke to said that these schemes were not according to the company’s rules and regulations. When we told them about our conversation with Mr Kamale, the spokesperson said, “Our legal and compliance officer is already in action. He (Mr Kamale) is just misguiding somebody. We will be taking appropriate action against the person involved.”
This is just one such example of how unscrupulous agents are going to town with fancy schemes which are expressly illegal and are openly duping the public.
Such schemes are proliferating. A few days back, an ‘agent’ started sending SMS messages to the public offering high returns on insurance schemes. The message (not corrected for grammar) said: “SBI Life: Just Pay Monthly Rs1,500 for 5 years, 20th year take Rs10 lakh Child Saving Pension Plan."
When will these rackets stop?
Corporate houses are moving from south Mumbai to the central suburbs and Navi Mumbai due to low rentals and higher space availability
In the Mumbai Metropolitan Region (MMR), corporate houses are looking at occupying offices in the extended central business district (ECBD)—which includes areas like Grant Road, Lower Parel and Worli in central Mumbai—and the alternative central business district (ACBD), which includes areas in the western suburbs of Mumbai like Bandra and Santa Cruz—for their new corporate destinations. Low rentals and huge space availability are attracting banks and other financial institutions to these areas, rather than the traditional hub of south Mumbai.
The traditional central business district (CBD) includes places like Fort, Churchgate, Ballard Estate, Colaba and Nariman Point.
At CBD, rentals range between Rs250 per sq ft-Rs325 per sq ft; while at the ECBD, rentals vary between Rs180 per sq ft-Rs275 per sq ft. ACBD rentals range between Rs175 per sq ft-Rs300 per sq ft.
“There is a continuous movement of corporate occupiers from CBD to ECBD & ACBD areas of Mumbai, especially in the banking and financial services industry. Due to this, the vacancy level is increasing in CBD, and it is expected that this level will touch 25% by end-June 2010. This will put downward pressure on leasing rents and capital values at CBD,” said BNP Paribas Real Estate in its ‘City Report–Mumbai Office Market Q1 2010’.
“ACBD is now a popular destination among corporate houses. The demand is mainly from banking and financial services companies, for occupying large offices in the range of 25,000-50,000 sq ft. Besides this, there is also demand from the telecom and pharmaceutical sector for small and medium offices,” said Raja Kaushal, executive director and chief operating officer, BNP Paribas Real Estate.
Out of the 16 key transactions which took place in the fourth quarter, only one transaction was made in the CBD. Bank of America had occupied 15,000 sq ft at the Mafatlal Centre in Nariman Point in the last quarter of the last fiscal. Some other key transactions were Reliance Media (120,000 sq ft at R Tech Park Nirlon, Goregaon, a western Mumbai suburb) and Morgan Stanley Advantage Services (39,204 sq ft at Nirlon Knowledge Park, also at Goregaon). Citrix Systems occupied 6,000 sq ft in Maker Maxity at Bandra-Kurla Complex.
“There is very less absorption capacity remaining in the CBD. Therefore, Thane and Powai (at central Mumbai) are emerging as the new business districts for corporate houses,” said Pranay Vakil, chairman, Knight Frank (India).
After the 3G rollout, the possibility of massive increase in data-based services will give mobile operators an opportunity to create products and tariff plans with data-based services as the base product instead of voice-based services, thus unlocking new revenue segments
With the impending launch of third generation (3G) spectrum for mobile services and robust response to the ongoing broadband and wireless access (BWA) auction, data-based services like short message service (SMS), multimedia messaging service (MMS), Internet, music, video or games are likely to rule in future. This will be a paradigm shift from call making and receiving (voice-based) model that every mobile service provider has followed till date.
Whether it was a tariff of Rs16 per minute per call (the rate prevailing when mobile services were launched in India for both incoming and outgoing calls) or pay-per-second tariff—most of the time subscribers are lured by voice-based tariff plans. Traditionally, voice calling has always been the basic service offered by mobile operators. The industry has used average revenues per minute (ARM) as a benchmark for their earnings. This will be no longer there in the future. Instead, the industry will have to use average revenues per kilobyte (KB) as a benchmark over the long term.
"In a 4G (3G for India) flat-IP world, where voice is just another application, households and businesses want a data 'bucket' they can use to view any content they want like Internet, music, video or games on any device they own,” said Nielsen in a research note.
According to Nielsen’s ‘Customer Value Metrics’ research, which analyses the wireless services bills of 60,000 mobile subscribers from the US, customers in the age bracket of 18 to 34 have increased their text messaging to 845 messages per month from 138 messages per month between the first quarter of 2006 and the fourth quarter of 2009. During that same time, their voice minutes decreased to 943 from 1,094.
Back home, similar trends can be seen. Although many service providers such as Reliance Communications introduced the unlimited SMS concept, it did not show any real increase in the number of subscribers just because of access to unlimited messages. Apart from SMS, not many mobile operators focus on other data-based services. While all operators claim to provide uninterrupted calling service, due to lack of superior network coverage, the same is not true for data-based services.
Over the years, lack of spectrum or rather uneven allocation of spectrum and competition has resulted in poor network performance which has not kept pace with increased demand. To gain market share, these operators resorted to price wars and reduced their tariffs to such an extent that today India has the lowest average revenue per user (ARPUs) at Rs150.23, in the world.
“Indian service providers are in a frenzy to capture market share as quickly as possible. Thus, new service providers will find it difficult to gain market share in the crowded wireless market. They will face challenges in terms of high subscriber acquisition costs, lower ARPU customers and lack of adequate spectrum quality. Getting superior network quality and communicating the same to the consumers will prove helpful,” said Shankari Panchapakesan, executive director for telecom practice, Nielsen, in a research report.
Given the aggressive bidding for 3G auctions, BWA auctions are also attracting equal attention from operators. Ratings agency CRISIL feels that winning 3G spectrum blocks in their key circles will help the players retain their market positions, reduce congestion in traffic through the use of additional spectrum and thereby enhance the quality of their services. Besides the higher spending and lower returns estimates, telecom operators will have to face the impact of mobile number portability (MNP) and 2G spectrum management and licensing norms.
MNP, which allows subscribers to retain their existing mobile telephone number when they move from one access provider to another, has been delayed for the third time. According to industry experts, implementation of MNP will not happen before 3G. They say with 3G, all major operators would upgrade their existing networks, technologies and prevent high-value subscribers from migrating to other operators. (see: http://www.moneylife.in/article/8/5586.html)
The telecom industry is going through an unprecedented phase of hyper-intensive competition resulting in a sharp fall in operating metrics, slowing down of revenue growth and declining profitability.
However, one thing is sure. The rollout of 3G will put data-based services on a fast track. Looking at the way ARPUs have been falling across subscribers and given the present call rates, mobile service providers will soon have to explore other avenues in order to earn money. The possibility of massive increase in data-based services give operators an opportunity to create products and tariff plans with data-based services as base products instead of voice-based services, thus unlocking new revenue segments.
Another way mobile service providers can take advantage of these paradigm shifts in the long run is to switch to offering total communication solutions, especially for families, from just selling subscriber identification module (SIM) cards to individuals. Till date, not a single operator has targeted a family to sell a complete communications package, including mobile, broadband internet, Internet Protocol Television (IPTV) and so on. With 3G, they can even add video calls in the package.
Whether mobile operators can explore new opportunities to earn revenues will be revealed in the next few months. Those who can, will survive. The rest will be merged with some player who is earning money through innovative product offerings.