Twisted logic of MetLife’s Wealth Plus

The deluge of schemes offered by mutual fund houses, insurance companies and other financial services providers have only served to confuse investors rather than easing their troubled minds. Various schemes with colourful names have been vying for investors’ attention, without actually offering a glimpse of respectable returns on investment. While returns have been scant at best, product offerings have adopted fancier propositions, with service providers desperate to sell at all costs. What is compromised is the investors’ real need. 

The latest example is a brand new offering from MetLife India. Its product, MetLife Wealth Plus, is another unit-linked offering that claims to provide a cost-effective wealth-creation solution for customers. But MetLife, which positions itself as a one-stop-shop for all customer needs, has trouble distinguishing which products serve what particular needs of the customer and how its offering meets those needs. MetLife’s sales strategy is a testimony to this.
 
Moneylife Digital has seen an internal presentation that shows how agents and sales teams are indoctrinated in selling unit-linked insurance plans (ULIPs) by highlighting the positive aspects, running down a competing product and presenting some half-truths. The presentation is in the form of check boxes under which mutual funds are shown as products designed to meet the short-term savings needs of the customer. Even lay investors would be aware that mutual funds are meant to provide capital appreciation over the medium- to long-term. Also, while MetLife considers ULIPs not to be cost-effective, as per its internal presentation, it still argues that MetLife Wealth Plus is cost-effective, while the product is just another ULIP. The presentation does not explain how this is so.
 
The Met Wealth Plus plan claims to be cost-effective while providing good returns, liquidity and tax benefits to the customer. Add to this, it offers a guaranteed minimum return of 5%, five years from the end of the subscription period. This is only designed to meet the widespread customer worry about the safety of the principal amount. Of course, even when the product claims to provide a liquid and cost-effective avenue of investment, the costs associated with surrendering the policy are quite high, if one has not paid the requisite annualised premiums. This is not highlighted in the presentation, but the guarantee is.
 
The guaranteed return also tilts the field against a better investment product, mutual funds. The current perverse regulations allow insurance companies to provide a guarantee on ULIP products but mutual fund schemes have not yet been given such leeway. Customers easily fall for this ploy, without realising that this really means little to two products both of which would have the same stock market exposure. Despite repeated efforts, we could not get MetLife to respond to this story.
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COMMENTS

G Vijaya Kumar

7 years ago

I had some bitter experience with Metlife, that initially I preferred for a single term policy but issued with a term policy. Further on querying about the mismatch of my needs they simply evaded my question with a standard answer that the free-look periode over even they had committed several mistakes in the processing of related documents. On being asked for surrender benefit as per the policy terms and conditions, in which some literary mistake/omission committed by the company, they cleverly said that it will be read as conversely though the policy terms and conditions is an indemnified one. The IRDA also becomes a mere spectator as well as the insurance ombudsman who rejected my complaint merely stating that it is not coming in to his purview. The ombudsman till date not replied my mail for the exact reason to reject my complaint. If this the situation where will be end answer for such fraudulent business practices. For the past two years I am fighting with the company for surrender benefit as p[er the terms and conditions.

Param

7 years ago

Use the "free-look" period to your utmost advantage - that is the only arrow in the quiver of an ordinary customer...

In my case, I was thankful to insurance company for pathetic customer service (not even sending the policy document on time), which led me to cancel the policy as soon as I received it. Cheers!

Arhant Jain

9 years ago

What a scam and what a shame. Each instance of Mis-selling found should lead to compounded penalties levied to these firms

dhrubogupta

9 years ago

I have been thru this farce. In my case it was Tata-AIG that I got wacked by and the benificiary was my Banker, HSBC, who had hawked the ULIP. It seems the the scam was imported by the US counterparts whose names appear to give a sense of honest dealings - and we fall for the farang names and never read the very fine print. Is it a wonder that they think India is "untapped" .

Types of Insurance Plans

Life insurance comes in a variety of plans to suit the needs of different individuals. Each insurer claims to offer its customers unique plans. Most of these are designed around some basic plans with add-on features. Here are some basic plans offered by most life insurance companies.

Term Insurance: Term insurance is perhaps the simplest form of life insurance as it offers only risk...

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Insurance paints a worrying picture
 

 

 

 

 

 

Paresh Parasnis, executive director at HDFC Standard Life attributed the continuing losses to inadequate risk management and insufficient capital. He explained, “What happened over the past few years was the result of inadequate focus on risk management. Going forward, insurers have to look at capturing all possible risks and dynamically managing these risks. They must ensure they have enough capital to back the kind of risks they are taking on their books.” He also highlighted the absence of an efficient long-term debt market as a hindrance to the growth of this sector. He said, “The fact that we have more than Rs700,000 crore of invested money in debt instruments and the fact that we don’t have a long-term debt market is an obvious problem for the insurance industry. We are writing contracts which are for 20/30 years duration, but at the same time investing in near term securities.”

Mayank Bathwal, CFO, Birla Sunlife Insurance, put the blame of high costs on the agency model of insurance. He explained that the high cost of commissions paid to agents was cutting into insurers’ profitability. He added, “Other than the variable component of commissions, there is a huge fixed cost component paid to management level executives that is affecting the sector as they continue earning high salary despite low business procurement.” He proposed a variable model to this category to improve efficiency.

Meanwhile, the regulator, IRDA, is considering major regulatory changes. First on its radar is introduction of disclosure norms for insurers to bring in greater transparency. IRDA chairman, J Hari Narayan said, “We are concerned about the disclosures of insurers, and should be able to come out with disclosure norms by the end of this month.”
 
The regulator is also mulling over guidelines for firms valuing insurance companies, which would bring greater clarity to valuations of insurers planning to come up with IPOs in the future. Mr Narayan said, “We are in discussion with SEBI to frame the IPO guidelines for insurers.” Some changes are also sought to be introduced in the bancassurance model. Another significant policy change is the proposed capping of premium charges.
Apart from these, the new Direct Tax Code (DTC) is also set to change the scenario in insurance. One aspect of the new DTC proposes to remove the tax benefit on insurance premium on certain policies. This is giving sleepless nights to insurers as it will significantly affect the policy off-take with consumers preferring to shift to other savings instruments providing tax relief. Said Paresh Parasnis, “The fact that tax benefit will be available only for small number of policies will bring a large part of the current market outside this area. Customers who were buying insurance policies purely for tax benefit will rethink their preferences. This will force insurers to redesign products and find ways to provide good value to customers.”
Sanket Dhanorkar
[email protected]

 

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