Focus on your needs while buying an insurance plan

Tax break must not be sole purpose of buying a policy since it can lead to a bad choice

Reading up on insurance gives us many answers. It also gives rise to many new questions in the mind. We realise that there is much we don’t know and need to understand. These questions lead us to the right product and the right insurance company.

Once you have researched your needs and the products available at the site of Insurance Web Aggregators (IWAs), which we saw in detail in the earlier instalment of Cover Note, you can make inquiries on their websites.

Answering queries

Following this, the insurance company/companies concerned will reach out to you and take you through the process of answering your questions and finalising the sale.

You can also contact any agent or the representative of a corporate agency or an insurance broker to take the process forward.

At this stage, you will face a lot of hard sell and pressure to make up your mind. Do take your time and be convinced you have all the information you need before finalising your insurance purchase.

In the midst of all the confusing inputs and mixing up of issues in an attempt to convince you to buy quickly, don’t lose sight of the purpose for which you are buying insurance. It may be health or life risk coverage, or may be it is an investment tailored to your needs and time frame.

It can also be statutory as in the case of Motor Third Party Liability insurance.

Except for the last category of policies, a carrot that the intermediary will dangle is the tax break. While it exists and has its value, it cannot and should not be the reason for you to buy insurance, or a specific policy. Many have regretted bad choices being misled by such incidental advantages.

We saw many insurance intermediaries in the last few instalments, here is one more.

Apart from the agent or broker, you can also buy insurance from an intermediary called an Insurance Marketing Firm (IMF).

Unlike other institutional intermediaries (the corporate agent, including bancassurance partner and the insurance broker), an IMF sells insurance but can also be in the business of selling other financial products such as National Pension Scheme (NPS) accounts, post office small savings schemes and mutual funds.

Increasing coverage

The objective of creating this additional channel to sell insurance is to locate intermediaries and their field personnel in economically-backward districts in order to facilitate increasing insurance coverage there. Their registration conditions also reflect it.

About 375 IMFs are registered with the Insurance Regulatory and Development Authority of India (IRDAI). IMFs can appoint insurance sales persons and financial services executives. The former is licensed to sell only insurance and the latter, with suitable licences from other financial regulators, can sell other financial products.

In such geographical locations, it will be more convenient for the customers to buy insurance from the same entity that they approach for other savings and investment products.

For the intermediaries too, this will lead to better efficiency since they create infrastructure that can be used to sell a wider range of products and can cross-sell to the same customer base.

(The writer is a business journalist specialising in insurance and corporate history)

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