AEGON Religare has been cautioning the masses against ending up with a low insurance cover. But then why does it insist on selling you a lower insurance cover at a higher premium?
Pradip Kumar Paul, age 43, with an annual income of Rs5,10,024 made an online purchase of Rs50 lakh sum assured (SA) of AEGON Religare iTerm for policy term of 25 years, with a premium of Rs10,449 on April 5, 2012. After the medical test on 14th April, the customer was told that "The requested cover is not justified based on the income evidence supported" and they offered SA of Rs 30 lakh at premium of Rs9,876. Religare was actually asking Mr Paul to take a lower cover! Why is that ironic? Because AEGON Religare, of course, has had a long-running campaign trying to 'educate' the general public on the need to take sufficient insurance cover. The advertisement shows Bollywood star Irrfan Khan highlighting the fact that the Indian masses tend to take less life insurance cover than what they need. According to the ad, not taking sufficient life cover is a disease in itself or 'Kum Insurance lene ki bimari' or KILB. So why was Mr Paul offered kum insurance?
The reason was simple. AEGON Religare was keen to offer 40% lower insurance at almost same premium. It seems the insurer itself is suffering from a disease: KIDB (Kum Insurance dene ki bimari, the disease of giving less life cover).
Stumped by the fact that an insurance company that has been pushing you to buy a higher cover is asking him to take a lower one, Mr Paul asked a lot of hard questions about what is the salary level required for getting Rs50 lakh SA. AEGON Religare, then made a counter offer 28 April 2012 of Rs40 lakh SA at premium of whopping Rs12,494, which is Rs2,000 (or 20%) more than the premium for Rs50 lakh SA. How did Insurance Regulatory and Development Authority (IRDA) approve such a product feature?
Again, Mr Paul protested against the absurd offering and talked with the insurer over the phone. On 14 May 2012, he received email stating that Rs50 lakh SA can be offered only if he cancels an existing ICICI Pru Life term plan of Rs10 lakh SA expiring on July 2012. He argued that there is no point in cancelling before the date even though he will not renew the ICICI Life policy. AEGON Religare stated that they cannot hold the proposal till that time and hence either the customer pays additional premium for Rs40 SA or cancel his ICICI Pru Life policy to get refund after deduction of medical tests and other charges. Either way the customer is at loss. A classic approach from an insurer: either my way or highway.
The question is whether Mr Paul who earns Rs5.10 lakh per annum is entitled to Rs50 lakh SA from AEGON Religare and Rs10 lakh SA from ICICI Pru Life. The answer is an emphatically 'YyeEsS'. Financial planners talk about life insurance cover being of minimum 10-12 times the annual income. That means at least a total cover of Rs60 lakh. AEGON Religare seems to have their own way of deciding how much life cover the person should be entitled. The ad of course says that you should contact AEGON Religare to find out what is your 'right' insurance amount. Now we know the reason behind it. 'Right' insurance from AEGON Religare does not have to be the right insurance. Check its response - "AEGON Religare Life Insurance is not strict about offering a life cover. Depending on the eligibility of a customer, we offer the correct life cover that is 10 times the annual income in this case".
According to Aviva Life, “For a typical 35 year old with an annual income of Rs5 lakhs, he can opt for a Sum Assured up to Rs 1.1 cr (22 times of the annual income)”.
HDFC Life says, “For a Rs5 lacs salary income , a person can have ATLEAST 10 times coverage (Rs50 lakhs). However, the actual coverage will depend on his/her age and underwriting and previous coverage level”.
ARLI restricting the customer to maximum of 10 times annual salary is poor cover offering.
Mr Paul had declared his existing ICICI Pru Life term plan of Rs10 lakh SA while trying to buy the new plan. Why did AEGON Religare not stop the customer from buying a Rs50 lakh policy? Why was he made to go through medical tests and then bargaining of how much insurance cover he really needed? This leads to a crucial issue. Are the rates from online term insurance bait for customers? Is it less for selling and more for publicity? Many times the customer premium is hiked after medical test without giving the report. Companies have innovative ways of trapping the customer.
The most amazing aspect of the whole thing is, of course, pricing. The premium for Rs40 lakh SA is higher by 20% than the premium of Rs50 lakh SA! This cannot be justified by anyone, including IRDA. It beats the basic logic of risk pricing. According to AEGON Religare, "One needs to understand that an increased cover of insurance would make it difficult for the life assured to pay the life insurance premium. To mitigate that risk it is important to go for the correct amount of life cover". Did anyone tell them at AEGON Religare that its Rs40 lakh SA is 20% more expensive than Rs50 lakh SA in this case? They seemed to have missed the point.
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam
Fiercely independent and pro-consumer information on personal finance.
1-year online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
30-day online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
Complete access to Moneylife archives since inception ( till the date of your subscription )
i have got a 75 lacs term insurance from hdfc click 2 protect.We insisted for medical strongly but the policy was approved without medicals.I am suspicious pls. help me if there is something fishy about it.
thanks,
uttam
We are really confused what to do? What is IRDA's stand in this regard? For settlement of the issue it is very much necessary.What did ultimately happen to him? Did he able to get the policy of his choice? Eager to know.Follow-up article Please.
It would be better if we know the IRDA's stand in this regard.
Can any one please guide on this subject ?
Thanks
Moreover Aegon's point of argument "an increased cover of insurance would make it difficult for the life assured to pay the life insurance premium" sounds ridiculous! Crocodile’s Tear! How can Aegon disallow a person's choice to determine the insurance value when (i) he has ability to pay the premium, (ii) medical test conducted and there is no loading, (iii) he really needs it as far as inflation is concerned.
Moneylife has done a good job highlighting the case. It will be helpful for many more future customers of term insurance. By the way, what is IRDA's stand in this regard?
My first one was Religare. I had 10 lakh term plan with a premium of Rs 2700. Aegon came up with online policy wherein the premium was 6100+service tax for a sum assured of Rs 50 lakhs. When i tried to sign up for the same, the same was denied saying I reside in a rural area where online policy cannot be issued. When I called the toll free number they told i could take an offline policy for a higher premium or give my address in the select cities where the policy could be issue. I declined I did not pursue the matter further.
I later on went to PruICICI which then came up with its Online term offering with same premium for an similar amount. When, I applied, I got the same reply that the online policy was not available to people who reside in rural areas. An email by them said "With regards to your concern we wish to inform you that at an initial stage the policy is launched in 54 cities. On viewing the response from the customers it will be launched in the other cities further. Also the policy can be opted online and this facility or infrastructure may not be available in those areas. Hence it is not available for rural areas now." I could not but laugh at this as Reliance Netconnects covers 75000 towns and villages and BSNL broadband more than a 1 lakh exchanges.
This time I countered by saying no policy in India could be issued to people who reside only in cities and asked them to give me a copy of the approval of plan given by IRDA. PruICICI finally gave in and asked me to fill in the online form using the nearest location from my mailing address. Their mail stated "I wish to inform you that the product is currently available in 54 cities, however we request you to provide your location details, so that we can facilitate the availability of the product to you." and further In reference to your concern pertaining to ICICI Pru IProtect Option II offered by the company, I wish to inform you that the product is currently available in 54 cities.We request you to apply for the product online and select your nearest location from your mailing address."
But if I thought I had won easily I was wrong. I was now informed that the medical test reports had indicated that I am a smoker and now I had to pay up an additional amount of Rs 2262/-. I now asked for the copies of the reports and offered to undergo similar test at any independent lab as i am a teetotaller. After a few threating mails, I was asked to undergo the whole medical test once again at same lab. Surprisingly this time its was ALL IS WELL. Finally after 6 months of paying my premium I got my policy.
Anyone interested to see the mails exchanged between Aegon, PruICICI and me are welcome to get in touch with me at [email protected]. I shall provide all possible help to fight it out.
The standards replies from PruICICI
23rd Oct - Your concern pertaining to the i-protect policy online has been noted by us. We are looking into the matter and shall revert to you shortly
25th Oct - We are sorry for the disappointment and assure you that we will take the necessary steps to minimize occurrence of such instance in the future. Your concern pertaining to the ICICI Pru i Protect has been noted by us. We are looking into the matter and one of our representative will contact you in 2 working days.
26th Oct - In order to address your concern one of our service representatives tried to contact you but was unable to establish the contact. Request you to kindly provide any contact number and convenient time to contact you in order to resolve your concern.
Buyers Beware is the mantra and just dont give up
Also, as we say at each of our financial literacy seminar - what you need to know about insurance is that buying it is always smooth and extremely NICE! It is when you make a claim that you are in a position to judge. Or, when you compare what you get against what is in the market. This is a general statement and not connected to this specific article.
However I'm intrigued to know the claims on the settlement ratio for my own records and understanding. If the authors can provide the necessary link, it would be great.
http://www.moneylife.in/article/indiafir...
Now I understand.
This is an interesting story, but I am absolutely surprised.
I have been owning an Aegon Religare iTerm plan for 51 lacs assured amount since 2+ years now. A few months ago, I was pleasantly surprised that they actually increased by cover by another 13 odd lacs AND gave critical illness cover without any increase in premium!!!
I was pleasantly surprised. My experience with this Company has been good so far.....While neither I endorse nor condemn this Company, it would well be worth in identifying if this has been an isolated case of Mr. Paul?
As a laymen / prospective buyer of term policy I am really eager to know all these.
Lets take this forward, does a doctor prescribe the cheapest medicine?
Will an interior designer buy the cheapest fittings?
Will a dress designer use the cheapest material?
When someone goes out to eat does he or she eat at the cheapest Restaurant ?
Then why in financial services the cheapest is always the best?
The article on Religare however reeks of opportunistic bias and sensationalism.
I'm an iTerm customer and purchased one last year and this renewed the same. ARLI in fact walked the extra mile by providing significant reduction in my premium as well as avoided inconveniencing me by endorsing the same medicals.
Even without that fact, their constant interaction and feedback as well as pro-activity has made me feel comfortable as well as assured.
FYI, I had evaluated some of the competing term policies and I can say with authority that theirs was the best premium paid to cover ratio. Plus the interactivity was a huge plus given the difficulty I had communicating with at least one of the competitors.
Therefore taking a case in isolation and painting the entire company black is patently wrongful.Similar written communication available with me would show the company in extra ordinary positive light.
One needs to completely understand the case rather than write a quick story because it can create controversy. We expect Moneylife to do extensive research before going to print.
I would love to reciprocate. Would you be kind enough to give me your full name as well as links to twitter and facebook/linked-in. Those are the only forums on which I am and would love to reciprocate.
best
best
Your article appears very strange to me. I agree that you have heard one customer but there are so many who are happy with the company. The idea is to have sufficient cover and not get over insured. Infact they educated all masses with their advertisement of knowing the correct insurance. such educational ads actually make us customers wonder if we are sufficiently insured. I dont think a company like them would do such thing to earn a quick buck.
IRDA must look this types of issues.
ML already gave the representation on health nd life insurance. Its really very nice,all the issues are perfectly covered.
I must say, those who are not read plz. read.