Date:04/02/2006 URL: http://www.thehindubusinessline.com/2006/02/04/stories/2006020403380600.htm

Back `Insurance agents must deliver more than they promise'

Radhika Menon

Customers should be made aware that an investment-linked product should not be purchased unless one has an added 25-year life expectancy.

Mumbai , Feb 3

THE President of the Million Dollar Round Table (MDRT) - an exclusive club for high performing insurance agents - Mr Stephen Rothschild, believes that it is better for an insurance agent to under-promise rather than under-deliver. Mr Rothschild, who was recently in Mumbai, shared his thoughts on how to prevent "mis-selling". Excerpts from an interview:

The number of Indian MDRT members has risen from 390 in 2004 to 682 in 2005. What would you attribute the rise to?

There has been a tremendous awareness that has been generated about MDRT. Insurance companies have been co-operating with MDRT because they want to raise the standards of excellence with respect to their agents. I think Indian MDRT members will touch 1,000 by 2006.

While as many as 2,000 have qualified for MDRT, only 682 have registered? Why the discrepancy?

The phrase "MDRT qualified" is misleading. An agent does not qualify for MDRT by merely meeting the criteria in terms of premium and commission. One has to apply and meet all the ethical standards prescribed by MDRT to qualify.

The attrition rate of insurance agents in India is 15-30 per cent. Comment.

Poaching exists everywhere. In the US for instance, only 10 per cent of the agents remain in a company after five years. The incentive structure has also to be appropriate.Payment to insurance agents should partly be renewal commission and partly the service fee. This is because the agent often has to service old policies of the client as well.

IRDA has shown concern about the `mis-selling' of investment-linked products by insurance agents. What can be done to prevent this?

From the companies' point of view, there has to be selectivity in terms of recruitment of agents. Also, younger agents should be working with older agents, as they do while learning any other trade.

Emphasis on training and licence is not enough. MDRT is yet another tool that would help in terms of raising the bar.

With respect to customers, they should be made aware that an investment-linked product should not be purchased unless one has an added 25-year life expectancy.

In the long term, equities outperform fixed instruments. What is the regulation in the US in terms of selling investment-linked products?

In case of the US, the regulation does not permit insurance agents to show interest rate of more than 12 per cent. It is always better for an agent to under-promise rather than under-deliver. The insurance company should also seek compliance from their agents because equity-linked products require far more control.

Do you think the word `agent' carries a negative connotation?

According to a recent survey, when people were asked to compare an agent and a doctor, the doctor was rated much above the agent.

On the other hand, when they were asked to evaluate their insurance agent, he or she was highly rated. Hence, an image is not reality.