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Insurance mis-selling: Five factors to distinguish advisors from salespersons

Salesmen are in a hurry always. Advisors will give you time

November 30, 2021 / 10:42 AM IST
Representative image

Representative image

A lot of people complain on social media about being victims of insurance mis-selling, especially from their family members or friends. They want to continue buying from financial advisors but don’t know how to find a good one.

It is no secret that the insurance business runs on commissions. Whether you buy your policy through a financial advisor/ insurance agent or an online portal, in the end, the entity making the sale earns a hefty cut on your premium amount. That is why it is easy to assume that anyone who’s selling you a policy works with a single motive of commissions. However, this might not be the case always.

No matter where you’re buying insurance from – you need to feel confident that the person advising you has your best interest in mind – and isn’t suggesting a poor-quality product just because it brings them a good commission. You must understand whether you’re dealing with an advisor who is on your side, or simply a salesperson, who cares for nothing except his commission.

Here’s a quick guide to how you could go about knowing the difference.

A good financial advisor will focus on your goals

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Salesmen talk ‘products’. Advisors talk ‘solutions’. If the person sitting across the table is pushing a product without even knowing about your financial background, needs and goals, it is very likely that the person is a salesperson - not a financial advisor. An advisor plays the role of a partner – someone who understands your requirements – and matches products from the market to fit those needs. (And not the other way around).

Here’s a tip: If your conversation begins with “There’s a great new product that’s launched by XYZ company – you should buy it” - it is a red flag.

A good financial advisor will explain, give you time to decide

Salesmen are in a hurry. Advisors will give you time. An advisor advises. They help you with data, facts and their experience - and enable you to make a decision about purchasing a product or skipping it. As a guide, it is their job to inform and empower you - not make decisions for you. A good advisor is conscious of not being seen as  a salesman. If someone is pushing you to make a quick decision - that you’re not completely comfortable with - you might be looking at a salesperson.

Here’s a tip: If the person you’re speaking to influences you to make a decision today - ‘else the exclusive discount will not be available’ or ‘prices will increase: it is unlikely to be the right product for you.

A quality financial advisor will tell you if you don’t need a product.

Not every product is a great one. And not every product is right for you and your family. You need an advisor who will tell you when you don’t need a particular product - even if it means they don’t earn that commission.

Salesmen will jump into a ‘Sales’ mode as soon as there is an opportunity. They don’t exactly care whether you need a product or not. Unfortunately, their earnings (incentives and commissions) are directly linked to the sales they pull off - and so, they would be willing to sell you any product - whether you need it or not.

Here’s a tip: When you speak to someone selling insurance for the first time, tell them that you have no financial dependents but are exploring a term plan, because it is cheap right now. If they proceed to sell you a term plan (despite you clearly not needing it) - you’re with the wrong advisor.

 

A good financial advisor will be there with you, throughout

Before you buy the policy, a good advisor will make you and your family understand the policy terms and conditions, inclusions, and exclusions clearly. They will resolve any queries you might have and guide you through the purchase journey. Further, at the time of claim, it is the same financial advisor who will be on your side - help in filling up the claim form, documentation and other things. They will also follow up with the insurer on your behalf, and ensure that you (or your family in the case of term insurance) have a seamless experience.

In the case of a salesman, things change as soon as the sale is made. The same person who was constantly chasing you to buy the policy might even start ignoring you. And they might not be accessible to you when you need them most - at the time of claim.

Here’s a tip: Ask advisors for a few recent references of health insurance claims settlement assisted by them. Ask them about how they maintain records of their clients. Most of the time, good advisors will already have a positive word in the circle or would be recommended for his service.

Sales people are more likely to be known for their premium amount, money they have made. For instance their ONLY credentials will be they are part of the MDRT (Million Dollar Round Table - which is calculated based on the business they have done)

A good financial advisor will prioritize reputation over commissions

For an advisor, building a reputation is more important than earning a higher commission. This actually makes more business sense for them - as they are likely to build long-term relationships with families - and sell multiple products over years through your references. Hence, they will genuinely be interested in building a good relationship with you and inclined to provide a good service and earn your goodwill.

A salesman doesn’t care about building a reputation or a relationship with you. Once you purchase from them, your case will move from the ‘post-sales’ service team and you’ll likely never speak to the person who sold you your policy again. Even if the salesman calls you once in a while, it will mostly be for a new product offer or a deal that is valid for a ‘limited period’.

Here’s a tip: When someone gets in touch with you to sell a plan, ask for references of their previous clients. Or better, ask around for reviews from friends and family who would have probably used their services. A good reputation takes effort - and if the advisor is able to provide reliable references, has a strong word around service, - they’re more likely to provide you good service too.

So, how should you find a good advisor?

An insurance plan is a long-term purchase, and impacts your family’s financial security forever. It is important to have a partner who will work with you, guide you, and help you make informed decisions. Further, you need a support system to step in to be on your side, even fight on your behalf – to ensure the claim amount comes through.

In fact, when it comes to term insurance, you won’t even be around when the time of the claim comes. You need someone your family can rely on.

Here are five things you must remember while choosing a financial advisor.

-Work with an advisor who has at least five years of experience, and has taken up financial advice as a full-time job.

-The purpose of insurance is protection against financial risks. So, find someone who will discuss protection and risk management first - and not look at insurance as an investment instrument.

-Work with an advisor who begins with a need-analysis - and does not simply jump to a list of products they’re selling, or share brochures.

-Find an advisor who comes with good references and an excellent track-record. If you’re meeting them for the first time, ask for references from previous clients to get a better picture.

-Work with someone who will support you from purchase to claim, and own the service experience throughout. You want a partner for the long-term, and not just a salesperson.
Mahavir Chopra is the founder, Beshak.org, a consumer awareness platform for insurance
first published: Nov 30, 2021 10:42 am
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