“The only constant is change, continuing change, inevitable
change, that is the dominant factor in society today. No sensible decision can
be made any longer without taking into account not only the world as it is, but
the world as it will be,” - Isaac Asimov
I will change, if I have the power, the procedure, process,
eligibility and guidelines relating to recruitment of insurance agents and
their scope of association with the insurer. Insurance has become unavoidable
in all aspects of life.
As a financial planner, I have had several clients who were
not adequately covered for life and health insurance. Moreover, they did not
even purchase the right kind of product based on goals for the future. We have
come across clients having 20 to 25 insurance policies, but when we total the
sum assured it will hardly be 25% of the total requirement. People just buy
life insurance policies and pay premium up to Rs 0.1 million to get the tax
benefit available.
At times agents too, knowingly or unknowingly, sell
unsuitable products. Most insurance agents are not qualified enough to advise
investors. At best, they are salesmen. They are not advisors and many are not
qualified because our testing is not stringent. Mis-selling of insurance
policies continues to be rampant. Agents may be tempted to sell high commission
products at the expense of the client`s money.
Often,
agents show a performance chart to the investor which is invented by
themselves. The performance chart shows impressive compounded annual growth
rate (CAGR) returns of 20%-25% over a period of one year. None of that is true.
To improve the weakened reputation of insurance industry, we strongly recommend
that far greater focus should be laid on a minimum standard of training and
education to be completed before a person can achieve the status of an
insurance advisor.
Before beginning the hiring process an insurance company
should consider if the candidate’s qualifications, experience and salary needs
are congruent with the position offered as an insurance advisor. If we recruit
the right people then there is a possibility for things to change in future.
I propose the following changes before a person can achieve
the status of an insurance advisor:
* At present, anyone who is at least 18 years of age and has
passed HSC can become agent. I will propose to change this lower limit to at
least 21 years of age; also the minimum eligibility should be graduation.
* IRDA licensing
should be parallel with mutual fund empanelment. There should be no sponsorship
requirement from insurer for getting IRDA license.
* Person who wants to get the IRDA license has to undergo 50
hour training from independent houses appointed by the IRDA. Insurers will have
no role in this. Post graduates and professionals should to undergo 25 hours
training.
*Online training should be abolished and classroom training
should be made compulsory.
* After completing training, candidate should to pass an
exam. After passing examination, candidate can take the agency with any insurer
of his choice.
* Currently, an insurance agent can act as an insurance agent
for one life insurer, one general insurer, or both. I propose after 3 years of
practice from 1st renewal of license he should be given an option to apply for
agency with more than one insurer.
* Post graduates, professionals and employees of insurer,
banks, corporate brokers or other institutions selling insurance products for
more than one year should be given an option to apply for more than one
insurer, if they start their own consultancy.
* Certified financial planners, holding valid certification
from Financial Planning Standard Board of India, should be able to apply for
the license directly without undergoing training or passing the exam. They can
empanel them with one or more insurers from the day of license.
*Before
selling products, candidate should take the necessary product training. Exams
should be held by the insurer.
* All the employees of the insurer should to pass the IRDA
exam within three months of recruitment.
* All employees of
banks, insurance brokers and any other institution selling insurance products
should to pass the IRDA exam within three months of recruitment
This article first appeared at faaida.com on 25th October'2010
