Tweets on 2011-12-21

An excerpt from an interview published in a recent issue of Outlook Money:

The biggest challenge for my company [Star Union Dai-ichi] is how to sell Ulips and give good returns to our intermediaries who are our corporate agents. At present, big banks that are giving us distribution business includes Bank of India and seven regional banks with whom we have tie-ups in about 7,300 outlets to market life insurance products.

Banks have been very comfortable in selling Ulip products for the last 7-8 years. But, post the 1 September 2010 new Ulip guidelines, we had to revise the products and reduce the payouts to intermediaries. Since bankers are our distributors they are not in the mode of canvassing typical life insurance products to a person by talking to him about his family, family needs or his long-term requirements. They do not have time to sell life insurance products. So, they get in touch with some potential customers who have money in fixed deposits, savings bank accounts, or those who have taken a loan. From these customers it is easier to get a lump sum single-premium deposit under Ulips.

But, in the past one year, commissions have come down from 22 percent to 6 percent and that is a cause for concern for banks. Therefore, they are not interested in selling our products. This is the biggest challenge we are facing at this present…

My thoughts:

When you know that your insurance products are being sold the wrong way, why persist with that distribution/marketing channel? Then why lament when something good (reduced commissions and hence reduced mis-selling) actually happens?

There are better ways to get customers to actually buy ULIPs. Don’t nickel-and-dime them with all kinds of lame charges/expenses/fees/commissions and all kinds of lame investment options (slow growth fund, fast growth fund, super-fast growth fund, zero growth fund, etc.). We now know that “that growth” doesn’t actually apply to us.

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