Fortunately or unfortunately, IRDA has decided to give more time to both Bajaj Allianz and Aviva to take off the insurance policies from the market, which had quite complex charge structure.
In a way, it is good because now the phasing out of the policies would be in a much better manner.
However, the bad point is that the insurance companies can still continue to sell the policies as long as they are not instructed with a deadline to withdraw it. God knows when that deadline will come. Any reader of this blog who may have bought these policies and received any communication from the insurance company or agents, please post the communication in the comments section.
Another important but unfortunate development that has happened is that IRDA/SEBI have reduced the number of training hours for the insurance agents from 100 & 75 to just 50 hours. Readers may note that to become an insurance agent at a certain level, one is required to undergo training.
This training was initially set at 75 and 100 hours, while now it has been reduced to just 50 hours. After doing a fulltime masters course in finance and management and with over 6 years of experience, many-a-times I find it difficult to understand a policy. I am just not able to understand how a 12th class passout (min. qualification required for insurance agents) can be trained in a matter of 50 hours and be let loose to suggest & sell insurance policies to the common public. All he/she ends up doing is suggesting and selling policies that earn them high commission and not necessarily the ones that are beneficial and really required by the customer.
You may be interested in reading my previous articles. Here is the link to Table of Contents in a chronological order.
4 comments:
Hi Shobit,
You are doing a real good job, and your way of simplifying the complex things is amazing. I am the regular visitor of your blog and this is the first time i am writing a comment.
After reading one of your previous article about BMTC IPO i was wondering that recently we saw a trend of large realstate firms coming up with IPOs, do you think that they anticipate a slowdown in the real state market or the real state bubble in india is about to burst?
It may not be necessary that the there is a slowdown, but the slowdown in expected. Real estate sector is directly affected by the banking sector in terms of interest rates. Sureg in interest rates will make it diffciult for real estate to maintain its pace.
It's a wave of highrise, where companies are trying to encash the boom.
What has happened to the Parshvnath IPO recently? Due to subprime mortage crisis, it was forced to extend the IPO dates. It shows how much the companies are dependent on timing for encashing in the boomtime.
Hi Shobhit,
I am not sure if my query belongs in this article, but if you see and respond it will make my day.
My Wife was investing 25K PA in PPF. When our LIC agent came to know about it, he suggested a better way (in terms of returns) of investing that sum.
He suggested a combination of the following 3 LIC policies:
1. Endowment Policy for 4.5Lac. Premium 15K for 29years
2. Endowment Policy for 4Lac. Premium 11.8K for 34years
3.Jeevan Anand Policy for 4.5Lacs. Premium 8.8K for 44years.
His point was these 3policies will mature with a space of 5years. The maturity amount can be taken as a lumpsum or yearly or monthly.
Your articles has thrown light on what the endowment policies are and what is the result of mixing up insurance and investment.
We have paid 2 premia (2006 & 2007) and the 3rd premium will be paid during Apr 2008. Please analyse this and let us know what we should be doing (terminate them or continue)?
We greately appreciate your time.
Thanks
Vinay+
Hi Vinay,
How can the polciies mature in 3 years time when the agent is asking for investments for 29, 34 and 44 years?
Secondly, dont just surrender your policies blindly by reading 1 or 2 articles.
Please find out what are the conditions for surrender, how much will you loose if you surrender the policy earlier. Only if it is profitable to switch the money from the policy to PPF, then only invest.
If you can afford to invest the money for long term, like 29, 34, 44 years, better to go for ETF...you can find a few articles on my blog for ETFs or exchange traded funds. Dont just blindly invest in ETFs. Set a target and exit when your target is achieved.
Let me know if you need any more details.
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