Tata AIA Life refunds Rs2.5 lakh after Moneylife proved contradictory policy terms

After paying annual premium of Rs50,000 for five years, Mr Saxena’s policy was auto surrendered as the fund value was only Rs33,759. Intervention by Moneylife Foundation Insurance Helpline ensured that Tata AIA returned the full premium of five years. Find out how underwriting error was proved

Prakash Saxena (name changed), age 59 years was mis-sold Tata AIG (now called Tata AIA) InvestAssure Gold Whole life ULIP policy in March 2008 for investment purposes. Mr Saxena had paid five premiums with last payment in March 2012. The policy got auto-surrendered in May 2013 as the fund value was lesser than one year of premium of Rs50,000. Tata AIA letter dated 30 May 2013 states that there was non-receipt of premium towards due date of March 2013. Tata AIA sent cheque of Rs33,759 to Mr Saxena as a full and final settlement of all claims and demands under the policy.
 

Mr Saxena wrote to Moneylife Foundation Insurance Helpline as he had no clue what happened with his policy. He was even willing to pay premium to restart the policy, but the insurer had already mailed him the cheque after closing the policy. Moneylife Foundation Insurance Helpline found that something was...

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COMMENTS

Mandira Nayak

5 years ago

Hello,

I am facing the exact issue with TATA AIG Life insurance.

I stopped paying my premium of 2lakh after three years ( min duration)and now since it 5years I called the customer care asking them for the market value of the invested amount so that I can withdraw it without any charges.

To my surprise,they informed me that my policy has lapsed now and infact out of 6lakhs they had sent me a cheque of 1 lakh 63 thousand. I informed them that I was never informed about this auto surrender and that I never received the cheque with all the details of the units.

My policy was started in 2008 and the last 3rd premium was paid by me in April'2010.

As per my knowledge IRDA passed the rule of the auto surrender charges to avoid this kind of sufferings of the customers in June 2010.

Can anyone please suggest if there is anyway I can try to get my money back from these TATA AIG frauds?

Regards,
Mandira Nayak
[email protected]

Rama Kant Singh

5 years ago

The Aadhaar enrolment and its URL system is very slow. The enrollment agencies are playing as Govt. Inspectors. Enrollments be exercised on home service system.
The nation has got only 17% Aadhaar, then how it takes as vital place? That is only a faul play with the nation.

TIHARwale

5 years ago

Good job done by Money Life

PREMNATH N KINI

5 years ago

Great Work by Moneylife Team keep it up. I know TATA AIA are very fast at lapsing policies as I had expirienced this a couple of years back. I had HAND DELIVERED a cheque for the halfyearly premium & had taken an acknowledgement from their Parel office. This cheque was not encashed & three months later I received a letter saying that the policy had lapsed due to non payment of premium.As all the documents were available with me I could fight this case out & have the policy revieved before the next premium became due.

REPLY

raj

In Reply to PREMNATH N KINI 5 years ago

Mr Kini, Write to Moneylife Foundation Insurance Helpline

nilesh prabhu

5 years ago

Great work, just wondering whether we should return back to old raj days. Should all policies bee pre approved by IRDA before been sold ?

raj

5 years ago

Thanks everyone for your support! Yes, IRDA should take it forward. I have written, spoken about it. If they only ask Tata AIA about number of auto surrendered policies and see if the policy terms led to it. Yes, benefit illustration should also reflect the impact of steep mortality charges.

How about simple declaration to the customer that 80% of your premium is going towards charges? It would have cleared everything and Whole life cover is not possible if premium payment term is only 5 years. The insurer took the risk for 5 years and policy was over.

Milind Chitnis

5 years ago


This is great work.

There seems to be major flaw in policy design.

For older clients the benifit illustration itself shold show that the premiums paid in say 5 years will not suffice to give cover for say 15 or 20 years.

Do check what the benifit illustration was showing in this case.

The very fact the company so "generously" and promptly settled the matter is suspicious.

This has to be considered as generaic case and as you have righlty said, ALL policies issued for this (and similiar) products should be checked.

PLEAE take this forward. This could be big.


anil gupta kumar

5 years ago

I am certain that TATA AIA has done the same with many clients. The authority IRDA must ask TATA AIA to furnish details of all such clients whom AUTO surrender cheques have been made out of Invest Assure Gold Whole life Policy. It is because of clauses that are written in tiny letters that fooling of clients is easy.

You have done a marvelous job and returning of 2.5 lacs clearly shows serious flaws.

Mandar Malpure

5 years ago

Well done Raj, keep it up

Dr Pankaj Gupta

5 years ago

kudos to the team , who helped the hapless...

DEEPAK KHEMANI

5 years ago

Great work Raj keep it up I'm sure there are other who do not even know about these terms and conditions and may have unknowingly accepted the payments at a steep loss.
What needs to be done is to find out which adviser MIS-SOLD this policy and what action is taken against them, as they are the ones who must have got fat commissions on a product which has such high charges

Will life insurers offer customised benefit illustration from next month?

Traditional insurance products are set for makeover from October. Insurers will have to provide the prospective policyholder a customised benefit illustration. It is time that insurers’ offers become transparent, instead of them handing out worthless generic benefit illustrations

Consider a prospective customer aged 50 years wanting to buy a 10-year premium payment term (PPT) LIC Jeevan Anand policy. What is the value if he is shown a benefit illustration for a 35-year old buying a 25-year PPT policy? The generic illustration is a worthless piece of data, as the mortality rates increase steeply with age, and the reversionary bonus rate differs with the PPT. A 50-year old policyholder will pay much higher risk cover charges every year than a 35-year old. The impact of it is that the 50-year old policyholder will have much lower returns at the end of policy term than the 35-year old. But the benefit illustration does not reflect this. Moreover, recently declared LIC bonus rates have Jeevan Anand PPT less than 11 years, giving a bonus of Rs37 per thousand sum assured (PTSA), Rs40 PTSA for PPT 11 to 15 years, Rs44 PTSA for PPT 16 to 20 years and Rs48 PTSA for PPT over 20...

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COMMENTS

tarun bansal

5 years ago

Please note in case of LIC agents, most of the agents are gettind advanced. LIC agents know a days uses laptops and tabs equiped with specialize softwares, through which they are not only providing customized presentations to the prospects, but also offers great after sales services.

Tejas shah

5 years ago

Mr.Raj Pradhan,

I observe your articles quite closely and understand that you bring about a lot of new things. I understand that your observation is good. But tell me something... Are you paid for criticizing a co or some agent ???? you are also a citizen of India... Have u ever pointed out to IRDA or an insurance company for any fault and asked them to change some guideline before a dispute comes ?

Be a citizen first... Rather asking questions, Try giving recomendations.

REPLY

raj

In Reply to Tejas shah 5 years ago

Just to add to what Sucheta maam has mentioned here - Customised benefit illustration for traditional products is good move by IRDA. It is up to the life insurance companies to comply with it from next month. The article highlights that none of the top 8 life insurers have any feedback about it.

Sucheta Dalal

In Reply to Tejas shah 5 years ago

Astonishing . Please go to http://foundation.moneylife.in and look at the number of issues and memoranda that are taken up with IRDA. Also check out our helpline and see how many have been helped. And having done that, please tell us your motivation in making such a FALSE, ILL Informed and dubious comment.

DEEPAK KHEMANI

5 years ago

Raj,
Any Agent/Adviser having a simple software either OEM or Company provided can provide a customized benefit illustration about the benefits of the plan the customer is about to take.
I'm sure most of the professional agents are already doing the same.
What changes now is that previously it was 6% and/or 10%, now it becomes 4% and/or 8%
Any person showing an illustration of a 35 yr old to a 50 year old is false misleading and qualifies for mis-selling.
The questions you have asked the Insurance companies are in my view impossible to answer, the reply can only be an approximation, with the new rules in place it may become easier to do so.

REPLY

raj

In Reply to DEEPAK KHEMANI 5 years ago

Deepak,
As mentioned in the article, some private insurer are offering customised benefit illustration and few have it online too. But, LIC agents DON'T have it today even though LIC Direct Marketing may have some software.

I don't agree that the questions were impossible to answer by top 8 insurance companies.

Can you tell me what percent of business today is being done using a customized benefit illustration for traditional products? - IT CAN BE ANSWERED EASILY.

• Is it offered even for rural locations? - IT CAN BE ANSWERED EASILY.

• Will you offer customized benefit illustration for traditional products effective 1 October for all the markets? - THE ANSWER CAN BE THAT IS WORK IN PROGRESS. NOTHING SPECIFIC WAS ASKED.

• Will the initiative of CSC help to implement customized benefit illustrations in rural markets? - ANSWER CAN BE THAT THEY ARE EXPLORING IT. NOTHING SPECIFIC WAS ASKED.

DEEPAK KHEMANI

In Reply to raj 5 years ago

Well Raj we from our side have been offering customized benefit illustrations for LIC policies canvassed by us from the last 6-8 years for all our customers. I can say that for myself with conviction.
There may be many who don't.
What the article implies is that ALL LIC agents are not doing it, there may be a few there maybe many but please don't brush the whole fraternity with one brush.
All the new regulations are of course welcome.

LIC agents’ last hullabol for selling traditional products before service tax regime

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...

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COMMENTS

Amit Kumar Rai

5 years ago

if these policies like jeevan saral and jeevan anand are going to be closed. so what will happen to old jeevan saral and anand policies. i know it will continue but future profit giving in these schemes will less from lic compared to other active policies. if IRDA giving more time to bring new policies in place of all this, why they are not stopping selling of jeevan saral and anand after extension of times or giving of more times. also they ask lic to close all the previous policies of jeevan saral & anand with profit distribution as of now, because all old jeevan saral & anand policies and many other policies which are going to be closed will not be given more profit as their new policies.

Sanjay M Shah

5 years ago

DEAR FELLOW AGENTS THERE ARE TWO SIDES OF A COIN. WE DO NOT KNOW EXISTING PRODUCT WILL COME AGAIN WITH SAME TERMS & CONDITIONS/BENEFITS. MIS-SELLING CAN NOT BE AVOIDED, WHY BLAMING ONLY AGENTS FOR THAT.MOST OF MIS SELLING IS BY BANKS & BROKERS.TO SOME EXTENT IT IS MISTAKE ON PART OF POLICYHOLDER IN SELECTING AGENTS. SOMETIMES WHEN A POLICYHOLDER IS ASKED TO BUY A POLICY HE SAYS THAT SOME RELATIVE HAS TAKEN NEW AGENCY OR SOME AGENTS WANTS TO COMPLETE HIS QUOTA OR TARGET HE HAS GIVEN POLICY TO HIM/HER FOR OBLIGING. IN SUCH CASES MOST OF SALES IS MIS-SALES.
WHEN THINGS WERE AVAILABLE EASILY ON MANY OCCASION PEOPLE DEFER DECISION OF BUYING THE SAME UNLESS IT IS URGENTLY REQUIRE, BUT WHEN RUMOR OR NEWS COMES, ALL OF SUDDEN PEOPLE RUSH TO BUY THEM. LIFE INSU POLICY SELLING REQUIRE SKILLS & NEED IS TO BE CREATED IN MINDS OF PEOPLE, THIS IS NOT PHYSICAL PRODUCT U JUST DISPLAY & SELL. THERE IS NOTHING WRONG IF MARKETING IS DONE WHEN POLICIES R NOT AVAILABLE AFTER 1/10/2013. WHY U HAVE BECOME AGENT? TO SELL & EARN COMMISSION. ONLY THING AGENT SHOULD DO IS TO SELL NEED BASED.

TRILOCHAN KUMAR RAI

5 years ago

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Samira Patel

5 years ago

Thank you MoneyLife, your team is doing a good job in raising issues that affect the general investor in India. Your write-up makes complete sense and I partially agree with the fact that LIC Agents do mis-selling at the time of plan closures. However, me too being an Agent for more than 2 decades, I wish to explain why LIC agents suddenly become aggressive. If you carefully look at the LIC’s Agency force, you will notice that most of the Agents are pure Salesmen. A majority of them are under-graduates or graduates at the most. They do not understand much about what is going on in the financial market and how it will affect their business.

Since 2005 or 2006, the top management of LIC has become unethically aggressive. Every top ranking official wants to show growth in number of policies and premium in order to please his superiors. The Super boss of LIC wants to please his bosses sitting in Delhi. But it is not easy to show genuine growth overnight. They show growth in policies by engaging in splitting of policies. For example, if a policyholder wants to buy a Rs.10 Lakh Insurance policy, then split his policies in to 10 policies of 1 Lakh each or even 20 policies of 50,000 each. Unprofessional Agents take the responsibility of convincing the clients for getting recognition and prizes in the competitions floated by LIC on ‘Policy Basis’. The Agent will get additional incentives for selling more policies even though it is on a ‘Single Life’. The indirect beneficiaries are LIC bosses who show higher penetration of market in their tenure by using such tricks of trade. But the price of this is paid by the policyholders who get lower bonuses as the expenses of the Corporation rise on account of splitting of policies.

Coming to the ‘ Premium’ part of the story. Till a few years ago, LIC used to bifurcate the premiums as Regular Premium, Single Premium, Individual Pension Premium, Pension and Group Savings Premium, Group Insurance Premium, etc. But since the past few years they are showing consolidated Premium figures without any bifurcation. So now even Premium garnered by Group Insurance and Group Annuity Schemes are merged into the Annual Premium Collection figures shown by LIC. If LIC bifurcates each segment of premium as it used to do earlier, then probably everyone, including the policyholders will be in for a rude shock. The truth is that in comparison to earlier times, LIC is now faring poorly in traditional insurance policies where-in a client undertakes to pay renewal premium for 10 or 20 years. Therefore LIC is banking on single premium and group business to show growth on Premium.

As an LIC Agent I have attended many Agent’s meetings where the Branch Managers, Marketing Managers and even Sr.Divisional Managers misguide the Agency force into hard selling or unethical selling at the time of plan closures. We have witnessed it during the ULIP euphoria. Top ranking Managers would visit Branches like Financial Gurus confidently forecasting that the Sensex will attain 50,000 points and LIC being a dominant player in the stock market, the NAVs of its ULIP plans will zoom up beyond anyone’s expectation. They used to distribute pamphlets, brochures and colorful charts to prove their point. Fake news of Agents mobilizing Crores of funds in remote places in India was deliberately spread in order to motivate other Agents to sell ULIP plans. Special Competitions were launched with attractive prizes in order to lure Agents into selling ULIps. Many Agents succumbed to false propaganda and today have lost their credibility in the market as the NAVs of all ULIPs are faring badly.

Now we are facing the second phase of this madness. Senior Managers are quoting the Chairman declaring that the entire Corporation will retire on 30th September and will begin afresh on 1st October. They are tweaking the quote to explain to Agents that from 1st October, LIC policies will become unattractive as it will be loaded with Service Tax which a customer will not be in a mood to pay. Secondly, they are scaring the Agents saying that popular Plans will be withdrawn and Commissions will be slashed drastically. In such a scenario, how do you expect the otherwise un-informed or mis-informed Agency janata to react? They will slog as if its their last few days on the planet earth. Competitions are being floated with Cash prizes up to even Rs.50,000 on single premium policies. Earlier only Agents and Development Officers were paid Incentives. But since 2006 onwards, even Branch Managers and Marketing Managers are given Incentives in the form of expensive gifts like LED TVs, Holiday trips, Smart phones, Laptops, gift coupons, home appliances, etc. These managers try to make the most of it by using unethical sales practices and misguiding Agents and policyholders as their posting in a particular office is for a maximum period of 3 years after which they are transferred to some other place. This is precisely what happened during the ULIP euphoria. The Managers who promised us the moon is nowhere in sight. They just grabbed all the gifts and vanished to some other city. It is we the Agents who are bearing the brunt of policyholder’s wrath.

Friends, LIC is not what it used to be till the 1990s. Earlier, the top bosses were visionaries who carefully crafted LICs growth story. With just a 5 Crore grant from Central govt in 1956, they carefully built a multi-Lakh Crore financial giant with a formidable Sales force of about a million Agents. But today, the picture is exactly the opposite. Scams and Corruption have become common. If LIC in not brought on track soon, it may be forced to go the UTI way.
If reputed teams like MoneyLife can keep a check on financial institutions, then i am sure it will do a lot of good for the common man.

REPLY

GANESH

In Reply to Samira Patel 5 years ago

Thanks .What you said is 100% true. The Splitting of policy is termed as ODC. Definitely not beneficial for policy holder.Even 3 types of policies will be enough if the bonus rates are raised to 60 level from the present 48.Relaxation in 45+ years band on medical terms will do a world of good for LIC. Last but not the least, THE AGENT WORK FORCE on whose back the Organization has built Castle is not well taken care off. What ever percentage commission bla bla mentioned and given ,everybody knows how it is spent.There is no recognition for a 5 year or 10 year or a 15-20 years Agent who has been loyal to the corporation. No 5 year pay commission for them as to employees of LIC . Even if LIC pays starting with 2k/month for all 5 years completed agent as a recognition of his rendered service, LIC will grow manifold times in near future.

Nithya

In Reply to Samira Patel 5 years ago

Thanks for sharing the information.

Aniruddha Sengupta

In Reply to Samira Patel 5 years ago

Kudos for sharing your views with forthrightness!

Ashish Anand Mahajan

In Reply to Samira Patel 5 years ago

Thanks Samira,
i m also an LIC advisor since so many years.

I m completely agree with YOU.
Now a days LIC agents r create a fobia to the clients as LIC is about to getting close.

They don't think that ''Every Change is Inevitable''.

I also asked to my clients to get the policy before 30 sep 2013 but not with wrong commitments.

Here are some good things that Policy holder can switch the exsisting policy in New Form with paying service tax, if it looks attractive to him.

So morally if the same product comes with less premium (as New Mortality Rate Chart is being implemented after 30 Sep 2013,) it's our moral responsibility to convert the existing one into new form.

Ashish Mahajan

raj

In Reply to Ashish Anand Mahajan 5 years ago

Dear Mr Mahajan,

You said - Here are some good things that Policy holder can switch the exsisting policy in New Form with paying service tax, if it looks attractive to him.

Please explain how one can convert existing policy to new product from Oct 1?

You said - So morally if the same product comes with less premium (as New Mortality Rate Chart is being implemented after 30 Sep 2013,)

Will the new mortality rates be lower or higher after 30 Sep?

hitesh budhedeo

In Reply to Samira Patel 5 years ago

Many thanks to you for providing all details . I was forced to check online the details regarding s. tax & closure of policies ,as the agent i felt, was trying to misguide me.
Thanks once again

raj

In Reply to Samira Patel 5 years ago

Dear Samira Patel,

Many thanks for your knowledgeable feedback!

Nikhil Dhami

5 years ago


People are being mislead by agents.

Thank You Money Life bring this to Notice. Service tax was any way being paid from policy holders pocket..Premium would increase with this change so do the bonus from LIC.

Hello

5 years ago

if any one want to purchess LIC policie...so he should wait for new policies or should buy any one of old policy before 30-09...from customer profit perspective

G Srikanth

5 years ago

This is definitely, to boom private insurance companies, our traditional products of LIC has been withdrawn in the name of Service Tax, Commission to agents etc.

Dilip Kokane

5 years ago

Dear Raj, Please check new commission rates of IRDA guidelines and compare with existing rates payable to LIC agents. You will find that the agent will get more commission after 30-09-2013, so why he will make hullabol? It is service tax issue and not our commission.If any doubt write me [email protected]
Dilip Kokane

REPLY

raj

In Reply to Dilip Kokane 5 years ago

Dear Dilip,

I hope you read the IRDA guidelines correctly. Today, LIC agents get 35% first year commission for traditional products irrespective of the policy term. Please explain how agents will get more commission post Sep 2013?

New guidelines - In case of regular premium insurance policies, a policy with a premium paying term (PPT) of five years will not pay more than 15% in the first year. Products with PPT of 12 years or more will have first year commissions up to 35% in case the company has completed 10 years of existence and 40% for the company in business for less than 10 years.

DEEPAK KHEMANI

In Reply to raj 5 years ago

Raj,
what Dilip is saying is correct, there is effectively no change in Commission structure even after 1-10-13.
What you need to know is that today also the agent has a similar payout structure on lower ppt. What changes is the Surrender value payable to the client, BUT here does anyone buy an Insurance policy Traditional version so that he can surrender it?
Then he oe she is better off in ULIPS or Mutual funds!

Nikhil Dhami

In Reply to Dilip Kokane 5 years ago

Helo Dilip

Please read point no 2. there will be no commission for online sales and benefit will be passed on to policy holders.

i am sure this article has hit below the belt.

Thanks Moneylife for highlighting this.

Regards
Nikhil

Deepak Gupta

5 years ago

Other than pure term insurance, insurance in our country has remained a legal form of thuggery. And the industry - public+private - has always acted as a cartel of thugs.

So, this behaviour is not surprising. Kudos to Monelife for highlighting it.

REPLY

Yogesh

In Reply to Deepak Gupta 5 years ago

This changes will be good, as I heard there will be term insurance can be clubbed to Mediclam policy. I think we whould wait and see what new policies these companies bring into market due to compitetion. I we can old policies and then if we can club mediclam with term insurance it will be good for us.

Nikhil Dhami

In Reply to Deepak Gupta 5 years ago

Sorry Deepak,

This response was meant for Dilip..

i can not recall this :)

Regards
Nikhil

Nikhil Dhami

In Reply to Deepak Gupta 5 years ago

Mr. Gupta..

Did you read point no 2. there will be no commission fro online sales.

I am sure this article has hit below the belt.

Regards
Nikhil

sivasankaran

5 years ago

THE AGENTS ARE AT THEIR BEST IN EXPLOITING THE SITUATION TO THEIR BENEFIT LETTING THE LAY/HAPLESS MEN SUCCUMB TO THEIR DIRTY TRICKS

RAJENDRA P

5 years ago

whether service tax will be levied on the old policies taken on or before 30/09/2013 by the insurer

REPLY

raj

In Reply to RAJENDRA P 5 years ago

no

Parag Mehta

5 years ago

Needed clarification on the hearsay that in case of mediclaim policies also, service tax is to be collected separately from policy holders and it will be on new policies taken subsequent of october 2013 and not on existing policies.
Kindly clarify.

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