The media has done enough to make it known that Life Insurance agents work on a commission basis – they receive a commission on the Life Insurance policy sold. The commission is highest in the first year that the policy is taken and it goes down subsequently until the policy matures. Essentially, for most policies, agents receive commission every year until the policy lapses. So, it would appear that agents are incentivised to make the most money out of selling more and more Insurance policies. If this is the case, how can you be sure that the agent has your best interests at heart? How can you judge whether the policy suggested actually suits your family requirements? The answer is pretty simple. You need to do due diligence while choosing a Life Insurance agent and also after choosing one. Read on to find out how to do this.
Judging Before Choosing
- Ask around – The best way to choose a Life Insurance agent is to ask your family and friends about one. Ideally, they should have known them for at least 4-5 years. Ask about how the agent works, whether they were satisfied with their service, why they think they might be the best around. Everybody has an opinion. Get them to spill the beans!
- Tip: Ask your financial planner for a Life Insurance agent that they might know or work with. They will have sufficient knowledge to judge and choose the right agents. Also, they already know your financial situation and could recommend one who is right for you.
- Full time or part time? – There are Life Insurance agents who run this profession as a full-time business while there are others who take this up during their leisure hours. You can choose either one of them based on their qualifications and years of experience.
- Tip: Even though both types of agents have their own pros and cons, a part-time adviser might have an edge over a full-time adviser given that money from selling Life Insurance may not be their primary income.
- Check for a license – It is important to choose an agent who has a license from the Insurance Regulatory and Development Authority of India (IRDA). To get this license, the agent needs to undergo training and pass an examination. Also, the IRDA mandates that agents assist policyholders not only during sales but also at the time claims are made. Check whether the license is for Life Insurance. The IRDA provides licenses for both Life as well as General Insurance. So, ask for their license as well as an identity card.
- Tip: The IRDA allows a Life Insurance agent to represent one Life Insurance and one non-Life Insurance company, apart from one standalone Health Insurance firm. So, if your agent represents multiple Life Insurance firms, you can be sure that they are not the right agent.
Judge After Choosing
Once you have chosen your agent, ensure that he/she:
- Begins with family talk – Every agent needs to get details about your family before they even start speaking about products to you. This is precisely the reason why it is better to go for an agent that your family or friends use. If an agent starts talking about a policy even before discussing your family, number of members and other related details, you can be sure that they have vested interests.
- Tip: Ensure that the Life Insurance agent asks you about your finances as it is important to determine your sum assured.
- Takes a goal-based approach – The IRDA, in its code of conduct for agents, says that agents should take into account the needs of the customer before recommending any products. So, the agent needs to discuss your goals and how Life Insurance is an important part of it. Recommending products without doing this would mean that the agent is trying to sell the product that fetches the maximum commission.
- Tip: The more dependents you have, the higher should be your sum assured. Make sure that your agent explains this concept to you.
- Makes disclosures – Check if your agent discloses their qualifications, experience and most importantly, commissions when asked. If they are reluctant to give you any information that you might need to make the right decision, you should think twice about taking on the agent.
- Tip: The IRDA states that the agent needs to disclose the ‘scales of commission’ offered to the agent by the insurance company when questioned by the customer. If your agent fails to disclose these details, point it out to them.
- Listens and answers – You can ask as many questions as you like in order to understand your agent and the products that they are trying to sell. Your agent is obliged to answer all your questions patiently after listening to them, without interrupting.
- Tip: Ask them about the claim process and how they will assist you. The IRDA requires that every agent assist the customer when a claim arises.
At the end of the day, it’s your money and you need to take care that you choose the right products recommended by a competent person.
That said, here’s one more important tip for you: If you find all this too much of a hassle, buy insurance online from a neutral financial marketplace. You get to compare quotes from different insurers, explore the details and fine print of each plan and choose one that is perfect for you. Allo this with just a few clicks and in the comfort of your own home. Simple, isn’t it?