Office bearers of LIAFI hand over a letter to Mr Pranab Mukherjee, Union Finance Minister

In protest against the implementation of the Swarup Committee recommendation to abolish agents’ commissions, a letter was handed over in person to Mr Pranab Mukherjee, Union Finance Minister, by Mr S B Sreenivasa Chary, President, and Mr Shyamal Chakraborty, Secretary General, Life Insurance Agents’ Federation of India (LIAFI),  The letter added that the proposed amendment to pay hereditary commission did not speak about payment of balance of commission earned by the agent during his life-time and also gratuity after the death of an agent. The powers to decide on the rate of commissions should vest with the Government and not IRDA, it said.

In the opinion of LIAFI, fee payment for services rendered would bring corruption as people have their own reservations about making payments for services received and want a share in the commission which an agent gets for selling a Life insurance policy. How then do we expect people to pay a fee for buying an insurance policy? asks the petition.

Here are other significant points made in the representation:

Postal Life Insurance is an example. What Swarup committee proposes to do is already in existence for the past 124 years in Postal Life Insurance – totally load free. They have only 0.27 per cent of the total policies LIC has, the representation points out  And in case of the New Pension Scheme (NPS) also – no load – no sale!

The consultation paper of the committee consciously equates mutual fund (MF) products to insurance products for the purpose of distribution costs. The basic difference between the products ignored by the consultation paper is significant. Insurance products are sold after paying due diligence on the health, income status, other risk factors on life and related contingencies of the consumer.

The agent has to do all the checking on behalf of the insurance company before a sale is effected. This may involve many visits to the policyholder’s residence, office, hospital, bank and other places.

Agents also need to service the policies over the entire policy term, while mutual  funds (MFs) do not have such a necessity. Further, the penetration of insurance in rural areas is much better than the capital market/mutual fund industry mainly due to the huge network of agents built by  Life Insurance Corporation of India (LIC.)

If the committee’s suggestions are implemented, lakhs of Life insurance agents will be out of the books of insurance companies. The inflow of insurance business will be reduced drastically, as nobody would like to pay fees to agents as is being paid to doctors or advocates, because till today Life insurance does not come under the essential requirements  of human beings.  There are more than 30 crore Life insurance policyholders, who will be affected by this decision.  Many of these policies will lapse in the absence of services by the agents.

Life insurance is never bought for profit.  But it is a cushion against dry days either due to death or old age.

In the new regime, many insurance sales will not take place at all for want of agents. The casualty is neither the insurance company nor the agent. But the poor widow, who is left to pay the debts of her husband and fend for herself and her children. Sans the insurance money, the picture is pathetic. Only a Life insurance agent, who visits the widow to be told that her husband had no life insurance, realises her real plight.

This side of the story hardly comes out before society. It is easily asked: Why did he not buy a policy?  How can the widow and her small children answer this, when they carry the fire of hunger in their stomachs?

The committee may believe that Life insurance agents are garnering big incomes by way of commissions on policies. It is a matter of pity that the average income of the Life insurance agents today is around Rs 60,000 per annum. The commission expenses of insurance companies has come down from 9.15 per cent to 6.38 per cent during the last seven years.

Agents also sell single premium and ULIPs and get only two per cent commission on it. In the year 2008-09 the total premium collection was more than 2.20 lakh crore. Besides this, the industry has created employment by appointing agents without any burden on the exchequer. As a matter of fact, the Life insurance industry should help Life insurance agents become creative social workers and not merely insurance vendors. Commission is needed for survival and today agents earn the bare minimum.

We have strong reasons to believe that Life insurance premiums will increase instead of reduce after removal of the agents as administrative expenses will increase manifold as many more regular employees will be required to handle the job of 30 lakh servicing agents.

Conclusion:

The story of the Life insurance movement in India is spotlessly clean, corruption free, totally service oriented and therefore exemplary. LIC has been awarded the ‘Most Trusted Brand of India Award’ for the last five years in succession. It should be treated as an example for others to follow and not as a matter of envy.

The Rs 15,000 crore commission expenses of the industry should not be viewed as merely a hefty Rs 15,000 crore. It should be viewed from the angle of a tool of having collected Rs 2, 20,000 crore from 30 crore policy holders for infrastructure development, which our country most urgently needs. 15,000 crore has fed 30 lakh families of life insurance agents.

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Urging Mr D Swarup, Chairman, Committee on Investor Awareness and Protection to “continue the agency commissions for soliciting insurance business,” a delegation of the National Federation of Insurance Field Workers of India (NFIFWI) headed by Mr R Jayprakash, its Secretary General, met him at New Delhi on September 12, 2009.

They offered their support in the efforts to increase financial literacy in the country. On September 7, 2009, they also gave their feedback on the consultation paper submitted by the committee.

Retracing the background to the changes, the NFIFWI said: The insurance industry in India was opened up based on the recommendations of the Malhotra committee submitted in 1994.

The views of the committee were that the penetration of insurance was poor and that competition would ensure better products, better services, more agency force and better penetration. Better products was in the form of unit linked insurance policies (ULIPs) which transferred the entire investment risk on the customers. ULIPs is what has now become the bane of the Industry, says the NFIFWI representation.

The report of the committee on distribution channels(Govardhan Committee) has stated in its opening remarks, “It is an acknowledged fact that insurance, especially in India, is more sold than bought.”

“Since Life insurance is meant to cover potential losses in future and not to cater to immediate consumption needs, there is always a tendency to postpone or avoid the purchase of Life insurance,” says the report.

The low awareness levels in the society further add to the difficulty in selling Life insurance. Selling therefore, becomes the key link in the chain of activities. In a country like India, selling, which essentially means carrying the message of insurance through the last but toughest mile, acquires even greater pre-eminence,” the report adds.

After the opening up, the distortion in the Life insurance industry has been the over emphasis on ULIPs and single premium policies. ULIPs are nothing but mutual funds a product earlier sold by Unit Trust of India (UTI) in India, says the representation.

The priority of the committee should be to consider ULIPs as a mutual fund product and then reconsider the recommendations of scrapping commissions to agents, purely on the basis of the needs, realities of marketing the risk oriented insurance policies, says the NFIFWI representation.

Insurance Regulatory and Development Authority (IRDA) has taken various measures to curb misselling of ULIPs and over emphasis on ULIPs.

The role of agents and their difficulties are to be analysed based on the following facts, says the representation:

Insurance in India continues to be sold and not purchased.

The agent works on commission basis earned only on completed policy business.

The agent is the link and the primary underwriter for the insurance companies.

The agent introduces the customer to the insurance companies giving all relevant information on health, work, social aspects, family history, and financial standing. The insurance company relies on these confidential reports to undertake the risk on a proposal given. These information are cross checked and reconfirmed by the Development Officer (DO) who writes the moral hazard report to help the underwriting of a policy.

The insurance companies have to have this information and no person is going to collect it without being paid. The responsibility is on the agent, as a primary underwriter to provide authentic information.

The agent acts in a fair and judicious manner because of long-term interests with the insurance company, and the customer. The commission structure ensures this. It makes the agent responsible and also keeps corruption at bay because everybody is aware that the companies pay commissions to the agent.

The proposed charging of fees instead of commissions will destroy the entire system and standards. Bad selection of lives, manipulations in claims, and misappropriation of money will happen thereby causing harm to policyholders and insurance companies. The agent will be interested only in his fees and at the sale or service point.

The agent has to spend heavily to establish himself, create infrastructure for working. Training, office expenses, travelling and marketing expenses are all in the form of compulsory investments before agents can start doing substantial business and earn commissions.

Commissions do not necessarily compensate expenses and guarantee income. This is the only major reason why there is heavy exodus, dropouts and termination of agents on non-performance.

The profession requires social skills, heavy tolerance levels, persuasive skills, an obliging personality and readiness to work against adverse conditions apart from high professionalism and standards, the representation adds.

The profession does not command respect, and recognition comes only after the agent is successful.

The agent has to market a policy and even after the preparedness of the customer to purchase a policy, the agent has to render services to get all the formalities like medical examination, payments and proposal forms completed as insurance is a legal contract unlike other financial investments.

These are the reasons why insurance agency is not a sought after profession the world over and justifies the present system of commissions paid to agents.

Risk coverage and Protection

Insurance and Life insurance are not at all  investments. Insurance is for risk coverage, for protection and social security. In Life insurance there are pure risk term insurance policies, savings linked insurance policies and ULIPs.

Only in ULIPs is there an element of investment and some sort of misselling is happening by exaggeration of stock market returns which is actually unpredictable.

IRDA has brought in caps on expenses and, in single premium policies, the commissions are low at, around 2 per cent, the representation adds.

The commissions embedded in insurance policies ensure that the agent who gives regular service to customers is barred from taking any charges. The services range from product information, industry updations, payments, claims servicing, assignments or change in nominations and revival of policies. Insurance being a concept has to be always pushed and the ratio of a successful sale to the number of meeting calls is one is to ten or more.

The only motivation for an agent is the possibility of earning a commission. The insurance company is also benefited in the sense that they do not have to pay for unproductive calls and meetings. This model has helped the growth of the insurance companies world over and development of the insurance agency profession.

Life Insurance Corporation of India (LIC) has systematically grown and developed over the years in India in spite of the fact that the social systems in India did not encourage Life insurance. This is because of the large network of agents who penetrated the nook and corner of the country spreading the concept of Life insurance. The DOs and the tied agency has been  the most successful marketing channel in the Life insurance industry, the representation adds.

All the other channels like bancassurance, corporate agents and brokers have not been successful as they are faceless marketing channels.

Insurance vs MFs vs ULIPs

The committee has been comparing insurance with mutual funds and equities. It is also felt that there is a isunderstanding created that Life insurance means ULIPs.

This has happened because commissions have been scrapped in the mutual fund industry and the mutual fund industry has been complaining against ULIPs and the insurance industry.

In MFs there is no need for underwriting a policy or assessment of risk of an individual.

The income tax benefit was given for Life insurance policies as an encouragement and to promote social security. Life insurance being a long term saving, the savings was handy for the government in infrastructure development. The same income tax benefit was extended to ULIPs which was being sold as a Life insurance product. This started affecting the MF industry. The committee can suggest income tax rebate only for the insurance component in ULIPs

Even today 55 per cent to 60 per cent of LIC’s business is from conventional risk covering policies.

There is an observation that Life insurance policies have low yields. This is a misplaced opinion. When comparing yields, the weightage for the risk component along with tax benefit should be loaded in the Life insurance policy yield. Life insurance funds are invested in long term infrastructure development where the yield has to be lower. The interesting fact is that during recession, the Life insurance policies had better yield than the stock markets. It is also a known fact that high yield comes with a high risk factor.

In India we do not have a social security system like the Western countries. In India the only social security is in the form of Life insurance policies.

As stated in the report there is no badly constructed product as all products are approved by IRDA. About the product fitting the risk return profile of the consumer, Life insurance products have various benefits and the customer can choose and decide which product will suit his needs. For example, a marriage endowment policy caters to the

savings need for a wedding. This is also ensured by risk coverage, the representation adds.

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In the following pages, we bring you reactions from Premium’s readers who have poured out their responses to the recommendations. This was done through our web site, http://magazine.premiumonline.in where we gave a facility to respond to the Swarup committee recommendations. On September 10, all the responses received were sent to the committee’s email id as required.

Disastrous Idea!
The recommendations will have a disastrous effect on insurance agents, many of whom have given up their full-time jobs to advise clients. In India today, there are many families which survive because of commissions. If this right of theirs is taken away, how will they survive and, in the case of people who are above 40 and are agents, who will give them jobs? If the very livelihood of insurance agents is affected, how will they be motivated to sell their product? Is it right to snatch their well deserved commission?

In what way will this contribute to the economy? Will it not be disastrous if you have a bunch of people who have no money and are unemployed because of no motivation to sell?
Abhay P

More Committees
There is a cost involved in selling any product, leave alone a financial product. The Government should appoint a committee for all the products sold in India. There should be no dealers for cars; no real estate agents, no franchisees for milk products, nothing. Everything should be purchased from the manufacturer directly.

If you look into the commission structures of even developed countries, say the US, the commission rates payable is around 80-90 per cent in the first year. This is apart from the advisory charges.

Instead of removing the commissions, the best way to check mis-selling is to ensure that all the agents have certain minimum qualifications to sell financial products. Without getting the basics right, mere removal of commissions alone will not do any good to the industry, to the clients as or to the insurance agents. And as such, if you average out the commission paid by insurance companies over a period of 20 years, it works out to five to seven per cent per annum on an average, which is not an exorbitant pay-out considering any industry standard.

The other way to curb mis-selling and to ensure persistency is to make sure the client has the final call to change the agent, and hence the commission payable to him, if the agent is not providing proper service to him.
Myinsuranceid

Chain effect
I am a Development Officer of LIC working in a small town of West Bengal. I think the committee forgot that “Insurance is sold, not bought”. If upfront commission of agents is removed, many agents no doubt will be affected, then so will the insurance companies.
bijtic@gmail.com

Against retail marketing
The committee’s recommendations will kill insurance retail marketing. In General insurance, already the agency force is suffering because of low incomes. Now, this move will kill Life insurance business also. This is not based on ground realities. I hope better sense prevails.
vsmanian100@hotmail.com

Not the best way

We need to keep the audience in mind when we recommend a charge structure. Insurance is mainly bought by the mass market with an average ticket size of Rs 6,000 to Rs 7,000 premium. If he has to be paid for advice, no good advisor will charge less than Rs 5,000 for advice if he is qualified and spends sufficient time. This would mean the customer in future will end up paying up to 80 per cent of his premium for advice or will be left to fend himself for a product which is supposed to come into play when he is not there. Who will fight for his claim if the distributor is not there?

We definitely need to have more educated advisors and what I feel needs to be done is have different series of exams and let the complex ULIPs be sold only to people with adequate knowledge and the paying for advice in this case is not a bad idea.

Also what about lakhs of bancassurance agents who, at the moment, do not even have to clear the basic 100 hour exam and have no control or restriction on them. The most misselling is happening there. This waiver of training needs to be removed and they have to be made responsible for their advice and acts.

Also we talk about long term service and regular advice which is definitely a must in a complex product like ULIP where timely switches can make all the difference. Can this truly happen in a regime where there is no trail? If the insurance companies are being allowed to charge the customers based on funds under management then why not let the advisors and distributors also be linked to the performance on funds. This would result in a lower load on the customer as he will not have pay additional 2 to 5 per cent of renewal premium as expense but will get about 0.4 per cent of the funds under management.

This would ensure that he will work actively at ensuring the funds remain invested with the company thus drastically improving the persistency as well his fortunes. If the investor’s fund grows then his income will also grow.

Sanjiv Bajaj, Joint Managing Director, Bajaj Capital Limited.
bajajsanjiv@gmail.com

Fundamentally Wrong
Roti, kapda aur makan. You want to snatch all these with your report! Doesn’t your report defy the Government’s policy of employment for all? The realities of Indian social structure should have been considered before recommending these Utopian suggestions. Please don’t be a culprit of ruining the households of over 30 lakh agents.
V J Anuja

Industry will suffer
Insurance penetration in India is very low and we should first try to increase awareness. There is no insurance sales without follow-up from agents. People are not ready to give priority to investment in insurance. That being the case, who will support a family left in the lurch? There is no industry or sales without remuneration.
V. Meenakshi Sundaram

An Agent’s Right!
Procuring a policy means procuring confidence. Policyholders buy policies not only because of the product but also for the agents who approach them. So a policy is not only an agreement between the policyholder and the company but also between the policyholder and the agent. This relationship goes on as long as the policy is alive. So, it is the right of an agent to receive renewal commission.
R Ezhilarasu, Agent,LIC

Biased and one-sided
The intention of the committee to introduce professionalism into the agency system is a welcome step, but the way it is proposed is not only disastrous, but would kill the industry. It is a biased report with no study on the impact it would have on the tens of lakhs of agents, who have not only protected the dreams of so many citizens of India, but also realised their dreams slogging for the insurance companies. Not to forget that the insurance companies are surviving on their efforts. Just a few agents who do mis-selling do not represent the whole agency force that has changed the insurance market.

In any industry the 80-20 ratio works. So also in the insurance industry, there must be about 20 per cent agents who bring in 80 per cent of the business and who do professional work.

Charging Fees is a big laugh at this stage. Firstly, because, the committee should have come up with the idea of setting up the required educational structure and generating the required number of professionals for the market. Now we have at least 22 lakh active agents. Let the committee guess how many qualified professionals are required to cover the market. With over 30 lakh agents the market is not fully captured. With few hundreds, the committee expects to charge fees from the customers. Firstly, the market is not evolved for the sudden change.

Wiping out commission is a decision which will ruin the lives of those over 22 lakh of agents and their families. It is a committee report dictated without realising the consequences.
D V Suresh, Hyderabad

Lose-Lose Situation
Almost a decade ago, the Government privatised the insurance industry saying the penetration of insurance was very low in India and allowed the private players in. That brought aggressive marketing strategies and, to a certain extent, growing awareness. But customers are still misguided. While earning a very nominal commmision, an agent is still working hard to spread the message door to door. And if there is no commission, the ambitions of increasing insurance penetration will go for a toss. Instead of phasing out commissions, let training be professional, let’s spread the system of commission based on the quality of service to the customers.

With this move almost 30 lakhs agents will be on the streets and add to the chaos of unemployment. The committee should not take any hasty decision which will spoil the lives of many who are making an honest living.
S K Soni

Uncalled for!
The Consultation Paper of the Committee on Investor Protection and Financial Literacy recommending scrapping the Agents’ Commission by 2011 on Life Insurance is uncalled for as it appears to have been proposed without having representations from the insurance industry who are well informed about the absolute need for an insurance advisor being a primary underwriter.

When LIC was started in 1956, the Life Fund of the corporation was Rs 380.61 crore today the same has reached Rs 8,07,317.43 crore.  From 17.9 lakh policies by the end of 1957, today LIC has in its books over 25.78 crore in-force policies. Agents, who are responsible for 95 per cent of the corporation’s business, have played a vital role in bringing these policies into the corporation’s books.

The services of an insurance agent/ advisor are important in eliminating financial and medical moral hazards. His long term relationship with the investor means he renders his services at the most needed time like revival and death claim settlements which otherwise an independent advisor, with no remuneration, cannot do. Or there is a very fair chance of an independent advisor misusing such opportunities.

The report speaks about three million advisors serving 188 million investors out of which eight million investors form the chunk of debt and equity markets, which amounts to a mere two per cent of the total investors (data you have collected from Indian Retail Finance Markets, 2007, IIMS Data works.) The balance 180 million investors are holding conventional financial assets which are long term in nature according to your report. Then where is the need to drive home the order overlooking the 98 per cent conventional insurance investors?

Is the committee trying to protect eight million investors of debt/ equity markets sacrificing the interests of the huge 180 million long term conventional investors, served by 2.7 million insurance agents as per the data you have collected from the Life Insurance Council?

It is said in your report that at the time of inception the public had very few options of investment. This clearly shows that the committee had not gone in depth into the subject nor collected vital information and statistics of the industry activities between 1938 to 1956, that is prior to nationalisation, wherein more than 246 companies were in full force.

Mutual funds and Life insurance are two separate types of investments guided by different parameters which can never be compared. Life insurance, even today, is sold and seldom purchased in most parts of the world, particularly in India. The services of Life insurance agents are sought by the companies on commission basis in most of the countries. And the commissions paid by most of the countries are much higher than in India.

India as a whole has over 30 per cent uninsured population and over 45 per cent in rural areas. And the literacy level, including insurance literacy, is far behind any of these countries and comparisons with them makes no sense.

It is a matter of pity that the average income of the Life insurance agents today is around Rs 60,000 per annum which is much below the salary of a Class 4 employee. The agents are also selling single premium and ULIP Policies and getting only two per cent commission on them.

The Committee felt that the agents need not learn their job apart from passing a simple examination held by IRDA at the time they joined the profession. If the job of Life insurance agents were to be easy and to earn huge commissions was an unqualified job, why would over eight lakh agents get terminated in the last five years on account of malperformance?  Contrary to the Committee’s opinion, only those who are on the job of continuous learning about their profession remain in the profession.  The 80/20 principle works for Life insurance marketing also. It is those highly competent and qualified 20 per cent of agents who approach people, extend them professional guidance and bring in 80 per cent of the business.

A few years ago the then IRDA Chairman, Mr C S Rao, in his report, had ruled out the need to bring about a change in the commission structure for agents.

The Life insurance Agents’ Federation of India (LIAFI,) in view of all the reasons stated above, strongly condemns the recommendations and appeals to scrap all proposals against the constructive role being presently played by the Life insurance agents and save the Life insurance industry and the lives of agents who are committed to their profession.
S B Sreenivasa Chary, President, Life Insurance Agents’ Federation of India (LIAFI)

Anti-agents move!
It is not a welcome move. There are many agents who depend on this profession for their survival. This move will not only destroy the community of agents, but also create confusion among the insurance companies on how to compensate agents for the policies they have canvassed. Mis-selling or bias can be controlled by ways other than targeting agents. Agents strive to sell insurance products and give after sales service too. Certainly this move will demotivate genuine agents.
Murali Harangtri

Wrong Approach
I welcome the committee’s recommendations on educating advisors and the public about insurance. But phasing out insurance commissions alone is not fair.

In fact all products require media coverage to be pushed into the market. Can we say that advertisements can go so that the entire cost reduction can be beneficial to the common man? Then how will the public know about products/services essential to them?

Even in developed countries insurance products are sold at a cost. In India today only two to three per cent of the people are covered under insurance. Is it possible to let people get the product at source so that it’s available to them at actual cost?
R Ramesh

Professionalism is welcome
The move is good for professionals like us. Now we can create respect for our profession and a distinction between the normal agents, who just sell policies for their  earnings, and those who sell for the clients’ benefit. The time has come to start giving products to the clients as per their needs and not by giving him commission. It should be implemented as soon as possible.
Rajtalati

Industry Destruction
Phasing out agent commissions will be disastrous for the insurance industry. Agents are the backbone of this service industry all over the world.
V J Paulose, Agent, LIC

Violation of Justice
When LIC was established, the Government lent Rs 5 crore as assistance to it but it is now amazing to note that LIC has made as much as 17 lakh crore (including Life Fund and assets.) The role of the agents in the motivation of investors should not go unrecognised.

The move to scrap agents’ commissions by 2011 lacks seriousness. In India, most of the public works are done through contracts and agencies. For example, road building and construction and welfare schemes. All these are initiated on commission or percentage basis. This could also have been included in this report and proposed to be done through ministerial staff.

People are so busy that without somebody’s help or without a facilitator, they never think of saving their money or investing on their own. Nearly 30 to 40 lakh people are directly or indirectly involved in this industry. Scrapping of the commissions would amount to destabilising the families. This would amount to violation of natural justice on the grounds of deprivation of livelihood.
N. Krishna

Adverse Effects
About 65 per cent of people live in rural areas and are uneducated about insurance.

Life Insurance Corporation of India (LIC) supports the development initiatives of the Government of India, and its agents are LIC’s backbone. How can agents survive without commissions?
Birendra P D Rai

Impractical Move
People cannot take Life insurance by walking into an insurance company. So I personally oppose this decision.
Ganesh Deshmukh, Pune

Regressive Recommendation
This is a recommendation which would take the insurance industry backward. The very purpose of the Government having thrown open the industry to private companies is to have more insurance penetration in the country, which our government owned companies could not do all these years.

Now if the committee recommends that no commission is to be paid on sale of insurance products, it would affect the livelihood of agents across the country. Instead of recommending ways and means to check mis-selling, to safeguard only the interest of the investor, the committee has come out with this sort of a recommendation.

Why should there be abolition of commission on financial products only, Even to buy a non-judicial stamp paper you have to pay a commission to the vendor (which is printed by the Government for the people.) Please do not forget that the insurance companies are dependent on their agency force to sell their products and they have opened shop in this country with huge investments. Let us not forget that in India “Insurance is not bought, only SOLD”.
R Vasagan Arasu, Chennai

Premature Decision
This decision is too premature. Do you think that somebody in a village or even a small town will get up in the morning and say ‘‘Dal chawal baad mein laoonga, pehle mujhe insurance khareedna padega bhai!”

Nobody in a metropolitan city is likely to think like that too. You know the answer sir, and so do our families.

My wife tells me, ‘‘How many times  you have to call a person and make him understand, and then he buys a policy…woh log kabhi apne aap insurance kharidenge?”

You have got the power to read and ignore these mails, or not read them at all. But the fact remains that insurance is always sold and never bought.
B Jitu,bjitu@balajiwealthcare.com

Breaking the backbone
I strongly feel that the move is a blow to the agents as they are the ones who built the reputation of LIC. This will discourage and demotivate the agents who are the “backbone” of LIC. The insurance business takes place on the face value of the agents. I understand that very few proposals will come on their own accord as people these days want everything at their doorstep. If we are not capable of providing them services at their doorstep they look for other avenues.
S Anbazhagan, Poonamalle, Chennai

Unfair Recommendations
The commission rates have not been revised since 1956. But the salaries of Government employees/Members of Parliament are revised as per the current price index. The committee is not being fair by recommending phasing out of commission.
Licrmpl1962in

Educate. Don’t Eradicate.
Insurance is not a product that people can go and buy. Insurance is a concept that has to be explained to the customers. Analysing the customer’s future need, taking into consideration his family, service/business and inflation, he must suggest from the more than 200 policies available in the market. By removing commissions, agents, the industry and the economy will be pushed down. The committee should recommend educating the agent in the right way.
guruprasadsrao@yahoo.co.in

Full of holes
From the perspective of the Life insurance industry, the report tends to overlook several critical aspects: If the proposals of the committee were implemented, an individual tied agent would be severely impacted, since:

(a) Large organised distributors, who are in a position to cartelise the trade, would control the market and hugely undercut the fee;

(b) Large organised distributors are perceived to offer better advice than individual agents;

(c) The reward for services of an individual agent are uncertain;

(d) Customers’ expectation will be that a fixed transaction based fee will be charged irrespective of the amount invested since quality of advice cannot be linked to amount invested.

The 29 lakh individual Life insurance agents will find it very hard to survive in their current profession.

The paper recommends that the customer, who is not even sure how best to handle his own financials, must determine compensation for his advisor and pay the advisor directly. It may not be a valid assumption that the customer would be equipped to work out fair compensation for the right advice.

It is a well-accepted fact that insurance is ‘sold’, not ‘bought.’ Each attempt by an agent to make a sale may not result in a conversion. Hence the compensation must be clear and adequate for the agent to make any sincere efforts towards solicitation.

The report fails to consider that when the advisor is confronted with an uncertain reward for his effort, he may not even feel motivated to invest time in a minimum knowledge-linked training programme, higher level of testing and continuing education, as suggested in the report.

Therefore the entire hypotheses that agents could be motivated to go for training and continuing education and that would lead to honest sale would fail, since no one would come forward for the training.

The report has not considered the implication of the change on advisor’s trail commission – customer would simply not pay a subsequent fee or may pay a marginal fee as everything would get settled at the time of sale – therefore further reducing attractiveness for agents.

Recommendations suggest punitive action including fines related to financial loss the consumer has had to suffer. Is it sensible to hold the advisor liable for financial loss to the customer, even though it is caused by advisor’s wrong advice? This way, the customer would not think twice before assuming any risk in respect of his investment and perhaps demand that advisor fee is linked to the success of the product.

Insurance is a contract of “utmost good faith”, which is different from mutual funds and a distinction needs to be drawn.

The suggested proposition of ‘no load’ questions the basic principle of business or a profit making organisation, which is no different than any other product that is sold in the market. There has to be ‘margin’ for the intermediary for him being able to provide advice and education, which has to be supported by compensation.

Life insurance companies have invested heavily in the development of the distribution network. By moving to a noload scenario, the cost structure does not disappear. A number of employees will have to be engaged by the Life insurance companies, wherein a variable outsourced cost will actually become the direct cost of the companies, further delaying the break even.

We need to take a cue from the other industries such as the newly opened NPS and MFs, where a no or small load has resulted in a drop in the volumes. If we take a cue from the General insurance and Health industry, third party or vehicle insurance has not taken off because there is no or little commission on these products.

The customer issues and mis-selling may not actually go away as there will be no control over the intermediary. Today ethics and compliance programmes of insurance companies actually supervise these agents and train them appropriately to ensure that proper advice is given.
Pktrip

Experience Lacking
With due respect to all the persons involved in presenting the report, first they should be given agency and asked to serve in the industry for at least five years and only then allowed to give any report.
Balaji R

Industry will collapse
The Swarup committee wants to remove the pillars of the Life insurance industry i.e. we the Life insurance agents. What will happen to a building if the pillars are removed? The building will collapse. Similarly, the Life insurance industry itself shall collapse.
D N Rao, dnrao13@gmail.com, LIC Agent, Hyderabad

Illogical
The insurance industry has many misgivings and sadly nobody has addressed it as yet. From the agent’s point of view – has anybody thought of all the kickbacks that the customers ask for? Solve that issue – this is a message from all agents to the insurance companies as well as Development Officers. Everybody wants the agents’ share – does anybody care?

What is the qualification of the Swarup committee and what is their reference point of data? If a customer is asking for a kickback. Why does he deserve a proper consultant? Let the agents charge all people a consultancy charge to be paid for service irrespective of them buying a policy or not. Will the Swarup committee figure this out!

Sadly nobody has bothered to set this straight as it does not affect anyone’s income except the agents’. All agents and Development Officers who encourage the kickback practice are responsible for this situation and the insurance companies have also not done their job intentionally-that is the story for all to figure out.

Does the Swarup committee have the mind to figure out all the misleading sales that the private insurance companies have done? The agents get the blame here too – it’s bizarre. How will insurance be sold and what happens to the social nature of insurance. I would like to appeal to all the insurance companies and the Development Officers and related people-get your act right and do something about it as you never know mate, you could all run out of business.

There is nothing that the Swarup committee or any other committee can do-it’s only you guys-get professional and do your job well. A customer who wants good advice will never ask for a kickback-please don’t mislead them.
Chaitanya Tewari

Agents needed
The basic objective of LIC is to spread the message of insurance to every nook and corner of our country. In our country if each and every citizen in rural areas has to be covered by insurance, this requires prolonged service by agents who should be adequately rewarded. If the committee’s recommendations are accepted it will destroy the livelihood of agents and the result is denying the benefits of insurance to the layman in rural areas. This report is biased in favour of a few rich in the metros. In our country, most of the population lives in rural areas and they require services of agents. If the agent commissions are phased out as per recommendations, it will affect lakhs of agents.
William Jeyaraj

Consultation Charges
Kindly understand that the awareness regarding investments can be created only by intermediaries. Not all the people in India are well educated and connected to latest technologies. The intermediaries are the people who can create awareness among the investors. Normally intermediaries meet about 30 persons out of whom only one may take an insurance policy. But he has to spend money, time and energy to meet all the 30 because he does not know who is going to give him the proposal. His commission is only like the consultation charge advocates, auditors and engineers get.
P.S. Giridharan

Create infrastructure
Phasing out the insurance commissions by 2011 is a detrimental step. It is too early to adopt the fee based servicing model in insurance, because the knowledge levels of the Indian customer is not so great and, in India, insurance is sold not bought.

An agent persuades the customer and it takes serious follow up and a lot of time before the customer says ‘yes’ to taking insurance. It takes 10 prospects for an agent to make a sale and get compensated. For the effort he puts in, nine prospects get free education and the agent is not compensated for it directly. An agent not only takes care of insurance needs, he virtually becomes a family member of the customer and generally he takes care of the various needs of the customer like getting them their PAN cards, filing their Income Tax returns, settling the maturity claims of orphan policies of the prospect and a host of services relating to insurance. An agent has to go that extra mile in helping the customer personally in various aspects though there is no necessity to do so.

These kinds of recommendations are good for the customers and the industry in the long run but before thinking of implementing them or even coming up with such recommendations, the Government has to put the infrastructure in place to impart financial education.

An agent has a simple understanding about the requirements of the customer and he uses his experience and knowledge to explain the concept of insurance/investments to the masses. He talks their language and that’s how insurance penetration is happening.

First the agents/advisors should be given some additional incentive to come forward to upgrade their financial knowledge. But by default, the agent keeps upgrading himself continuously.

There should be a win-win situation for the advisors and the customers. Part fee and part commission structure would help to a great extent to the customer and agent/advisor and industry as a whole, because the advisors will voluntarily upgrade their knowledge since part of their income is directly dependant on the fee and the customer has the liberty to compensate the advisor according to the advice/service levels of the advisor.
Balraj T, (Certified Financial Planner,), Director,Net Worth Financial Planning,Hyderabad

Majority Suffers
Not a favourable move on the commission structure. Because out of 13 lakh agents in LIC only 20 per cent are successful. Others struggle to continue in this profession. Any change in the commission structure will cause the end of 10 lakh agents and their dependents. I request the committee to reconsider the same.
LICsunil@hotmail.com

Training is the key
Insurance is sold, not bought. If you remove commission, the purpose for which nationalisation was effected in this country in 1956 would be lost. Only a select few in the society will enjoy insurance protection in this country. We have not yet attained professionalism in education – in the medical, legal or the accountancy branches. As such we cannot single out a profession where ethical behavior is practiced 100 per cent. Rules and laws are flouted not only by ordinary citizens but by the law makers.

Persons like Mr T N Seshan and Dr Abdul Kalam have written about how they obeyed their agents when asked to sign on the dotted line. Such is the trust maintained by a good number of agents. There are exceptions too. There are any number of cases against  officials and public service personnel.

Let the Swarup Committee recommend continuous training in a professional way for insurance and financial sector personnel first. And after a few years of compliance, you can see a sea change in the attitude of people selling insurance which I experienced in my own team.
arasuav@gmail.com

Wrong comparison
‘‘It must be remembered that the logic of such an incentive structure worked in 1938, when a single-player industry was envisaged and consumers had few other options for long-term investments. The year 2009 is a different time and place in terms of number of players, products, consumers and their needs. Arguably, the Insurance Act needs to keep pace and take notice of a changed world.’’

These lines I copied from the Swarup committee report page 8, and I would like to state that in the year 1938 when the Insurance Act 1938 was introduced, there were more than 200 players in the Life insurance industry and people had around more than 5,000 schemes to make long term investment whereas in 2009, there are only 22 players.
Narsaria

Real Problem
Education of advisors and the public is needed. Similarly regulating the sales channels of financial products is also necessary. But not abolition of the commission structure model and imposing a fee model.

As per the recommendations, we must first make them well informed about financial products, create financial literacy and then think about the advisory model.

Mis-selling makes for more lapsations, I agree. Before privatisation only LIC agents were the sellers. At that time the lapsation ratio was not high like now. When the new distribution channels like corporate agents (banks,) brokers and referrals emerged, the lapsation ratio also rose. Even now LIC’s lapsation ratio is below the industy’s average. It shows how individual agents care for their customers. So treat the disease, don’t kill the patient.
V S Murugesan

Advisor is necessary
The business that we are in requires a human touch and unlike mutual funds, cannot be sold without a distributor. My personal opinion is that I would be more confused looking for a Life insurance cover on the Internet since there are so many options to choose from and, ultimately, I would end up buying the wrong product for the wrong reasons because I have not realised some of the needs that I have.

If an agent was there to help me out, things would have been simplified and I would have been guided better. Besides, I do not even have the time to remember that my policy is due for maturity and my family would have to run from pillar to post for the claim in case something happens to me if there is no one to help them out. As it is they have suffered a loss, then why add to the misery?
Chirag Nanavati

Counter Productive
I welcome the recommendations regarding educating investors and upgrading the knowledge of advisors. The agents will be advisors if the system of recruitment is made more stringent at the entry level itself which the IRDA should have done in the past itself. The committee talks about investors’ protection but what about advisors’ protection. Is this the way to create more employment opportunities? How are the advisors going to be compensated? How many investors are going to pay consulting fees to the advisors? Does the committee expect the advisors to do honorary social service?

These recommendations if implemented will introduce competition among advisors offering consultation fees. Only the financially fittest who can offer unworkable fees will survive in the industry and not the professional advisors. The trend will be that the advisors who charge lesser fee will not care to provide suitable insurance solutions. Instead of making the industry prosper and protecting the investors’ interest, the recommendation will worsen the situation.
R. Srinivasan

Self-destructive
The move to abolish insurance commissions to intermediaries will spell doom for the intermediaries as well as the industry as a whole. In one stroke, the Government wants to render 30 lakh agents jobless and increase unemployment.

Even today, in India, insurance is not bought, but sold. Awareness about “insurance” is still low among the masses. In this scenario, the Government expects the insuring public to approach the insurance company to buy a product? They are mistaken. The committee’s proposal that intermediaries must charge clients for the services rendered instead of getting commission will not work as the insuring public here, more used to taking “cuts” and “kick-backs”, will not be comfortable to pay a fee to the intermediary.

The recommendation that a new benchmark qualification be made for financial advisors is welcome. But, the move to totally eliminate commission to agents is suicidal.
Anand A Jathan,  Chief Life Insurance  Advisor, LIC of India, MDO III / 893

Killing the Industry
India is currently illiterate about insurance without any of the social security coverage available in Western nations. The absence of any incentives for agents will lead to a significant drop in insurance coverage of the population. I have convinced many reluctant people to buy insurance. Many of them realised the benefits when some ill-fortune happened. The majority of the population does not foresee the problems in not having insurance and needs to be convinced.

Also, there is a definite service aspect related to insurance which is not similar to any other financial product. When a person buys insurance he is making a commitment for the next 10-15 years and needs proper guidance so that he doesn’t surrender the policy whenever faced with tough times.

Hence, in my opinion, phasing out insurance commissions is a very hard step which will debilitate the flourishing insurance industry and enhance the problem of unemployment. And the result…….Kisano ke bad, insurance agents will commit suicide.
Sarla Somani, Nagpur

Agents on Payroll?
As an Agent of LIC, I feel the outsourcing concept has been adopted by LIC from its inception and we as agents, perform services of selling/maintaining services of LIC products. In case they dispense with the concept of commission, LIC will have to recruit people to perform the above services for which they may have to foot a heavy bill. The efficiency levels of such employees and their dedication to selling and maintaining the LIC products are issues that will have to be addressed.
S Anandi, Chennai

Lop-Sided view
Nearly 30 to 40 lakh people are directly or indirectly involved in this industry. Scrapping of the commissions would amount to destabilising the families.

The formation of the committee appears to be lop-sided on the grounds that it has not involved LIC as the prime financial corporation and not shown magnanimity of making it a co-member to hear its views.

If the report is implemented the insurance industry would lose its base and become a sinking boat.
P Subramani, LIC24x365@gmail.com

Agent is Important
We discussed the issue at the Life Insurance Round Table (LIRT) Annual Convention and have come to the conclusion that the job of agents needs to be explained to you as the Chairman of the Committee comprising representatives of Reserve Bank of India, Securities Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority (IRDA.)

An insurance sale does not happen; it is preceded by ten meetings (calls) on a new prospect who emerge from among 100 contacts. That means one sale out of 100 contacts.

Life insurance is not purchased instantly but happens after approach by an agent uncovering the needs, providing the solutions from the basket of products. A doctor is needed to diagnose and prescribe so that a chemist can sell the manufacturers’ products for the benefit of patients.

You can depend on the doctor (agent) who finds out the money value of human life and undertakes Capital Need Analysis. He fills the gaps with insurance solutions for providing following the five benefits:

1. Lifestyle continuity expenses

2. Education fund

3. Health care fund

4. Retirement fund

5. Fund for cancellation of loans

An agent is necessary for finding prospects, meeting them to find out their needs, making them recognise their needs and solving those needs with insurance solutions not today but yesterday, because timing of death is unknown.

Insurance is a long time contract for meeting needs during all life cycle changes. The policy will pay the desired benefits only if it is kept in force by timely payment of renewal premiums. This job is done by the agent alone.

Life has lot of opportunities and difficulties; the agent comes in handy to upgrade the insurance cover commensurate with the increasing incomes with consequent better standard of living. Likewise, in adverse situations his help is needed for taking a loan from the insurance company or for assigning the policy to the financial institutions as a collateral.

Claim settlement on maturity is not much of a problem because the agent keeps in touch and updates the change in address so that maturity vouchers sent by the insurance company does not go astray.

Agents apply the healing touch when someone dies by handing over the claim cheque.

The remuneration (first year and renewal commission) represents rewards for all the activities. When translated into reward for each of the calls it is not 35 per cent but may be even 1 per cent of the premium. (The average income for each call he has made leading to the sale.)

Many times there is no sale for ‘n’ number of calls made, bringing down the average income per call made. Employees are paid on time basis and agents are paid on sale basis even though he may have worked for 24/7, 365 days in a year. He will be paid only when a sale is made.

The proposed measure based on the fee structure payable by the policyholders will lead to generation of unaccounted income and denial of rightful share of Income Tax and Service Tax which is being remitted today by insurance company out of the commission payable by them to the agent.
Nirupama Kamdar, P S Kochhar and other signatories, LIC Round Table

Against Welfare
I protest the Swarup committee report’s proposal to phase out commissions to insurance agents from April 2011. This committee report is against the national interest, interest of the masses and people’s welfare.
Nayan Bhowmick, Development Officer, LIC, Shillong

Totally unfair
If your recommendations are accepted, it will throw 30 lakh self employed insurance advisors, out of their jobs. They are not just individuals, but support at least three to four dependants. Also, at a very conservative estimate, about two lakh advisors are having their own offices where at least four to five persons are employed. Hence more than one crore people will be affected by your decision. If you can gag and deprive employment and food to more than one crore people by just one single stroke of the pen, then by the same single stroke of the pen, can you provide employment to these one crore people? No! It is just not possible because these advisors are not depending on the Government to give them employment.

You want to bring in the concept of empowerment of investors, so that we, as advisors, get fees and disclose our present and future incentives that we may get. Okay! Agreed. But we advisors are also consumers in various walks of life. Do other intermediaries disclose their margin of profits and incentives to us, as consumers? Therefore, empower all consumers like us and then implement your recommendations.

The majority of advisors, say more than 98 per cent are honest, genuine, doing good customer service. Only a handful might indulge in mis-selling. That too big corporates like banks. At the click of a button, they get know customers having good balances in their accounts and just call them up and ask them to invest in mutual funds or in insurance schemes in just one sitting.

The customers are obliged and they just sign on the dotted lines whereas the persons doing the counselling do not sufficiently explain the features of the schemes. When they themselves do not know them, how can they explain it to their customers?

In case of borrowers they are almost blackmailed into taking a policy since the loan may not be sanctioned and, in all cases, the premium also is included in the loan amount. The borrowers have no other go but to toe the bank’s line.

Then the customers subsequently call us to explain the schemes in which they were forced to invest by their bankers! The bankers don’t offer any after sales service but pocket the commission in the comfort of their air conditioned offices. But as advisors, we have to prospect the customers, get their appointments, go to their places at their convenient time by spending our time, energy and money, explain the schemes but even then the deal is not assured. There is many a slip between the cup and the lip.

Only in few occasions, the deal clicks and that too since there is a tremendous amount of kickbacks in this industry, our income is not a real income. We pay income tax, service tax, transport costs and then only we have something for us and our family, if at all there is any.

Hence almost in all cases, the entire first year’s commission, which you have put as Rs 15,000 crore for last year, in case of individual advisors is only on paper. What we get, if at all, is only from the second or even from the third year. That too, only if the policyholder continues to pay the premium, neither he nor the advisor dies. When there is so much of outflow of the so called “income” and highly risky and uncertain future incomes, it is highly unfair to take into account the “apparent income” of the individual advisors.
Anantha

Don’t put hurdles
I have been in the insurance agency business for the last six years. Most of my clients are salaried employees and they pay their premiums on a monthly basis and the premiums are as low as Rs 1,000 or 1,500 per month. It will be highly difficult to take my commission from them on monthly basis say Rs 10 or 20 being one per cent of my commission. Further, there is a heavy blow to mutual fund agents as my customers pay through SIP and I find it is impossible to collect commission on a monthly basis. I feel the authorities should direct their efforts at increasing business rather than putting hurdles in its development at this stage. I strongly feel the policy makers should have selling experience.
Udaykumar

Target ULIPs
An insurance agent sacrifices his life for business. His family also depends upon him. Insurance is social security for the people. It is the duty of the Government to provide insurance to every individual. An agent does this job for the Government. For this great job the compensation to the agents is only commission. So it is not a good decision to phase out the commission of the agents. But in Unit Linked Insurance Plans (ULIPs) if because of the commissions of agents, the customer suffers a loss then you may consider reducing commissions in such policies only.
K Breshnev, Business Development Manager, Shriram Group Companies, Tirunelveli

Consider the poor
Now most insurance companies are concentrating on the rural sector for insurance business through ‘agents’ only. At this juncture, if the agents’ commission is dropped there will be no mediators between the people and insurance companies and so the ultimate aim of the Indian insurance industry will be lost. Most of the poor people will continue their lives without any insurance awareness because no one will be interested in educating them. The insurance industry will also face deep trouble in procuring business. So please reconsider the decision.
D M Shriram

Service charge
I have been working in LIC for 21 years. In my experience, to market insurance high academic qualifications are not required, but of course an agent must have a minimum qualification of plus two. Emerging insurance markets are leading to a lot of unethical business and it must be controlled.

However, commissions that agents earn at present are poor. An agent has to meet at least ten persons in a day to close one or two sales. In case of a single premium policy, the agent has to service the policy through the term period without any commission. So kindly recommend a service charge for the period of the policy like in mutual funds.
George E Itticheria

Grow the Industry
If the committee’s recommendations are implemented, the survival of about 90 per cent of advisors would become difficult as most of them do great service to the society while ensuring their personal development. They are fully dependent on their well deserved commission. The insurance industry contributes to infrastructure development and the economy.

Insurance advisors will get demotivated and their long association with their insurance companies would get terminated which will result in less penetration in rural and urban areas.

It is pertinent to note that if the Direct Tax Code proposed by the Finance Minister gets implemented, it will have implications on the insurance industry as well. Rs 3 lakh limit which provides for investments by an individual to save tax insurance premium should also form part of this, or else the insurance industry will have very little chance of growing. Investments by individuals in Insurance policies should be encouraged so that in this process both Insurance industry as well as insurance advisors will get benefits.
K S Rajagopalan

Misselling is the cause
It’s self explanatory. Better and stricter exams for agents are required so misselling does not happen and some standards are maintained. Now due to the absolute poor ways of selling financial products of the whole fraternity will suffer.

I am very well equipped to move to the advisory fee based model as we are already practicing it today. But, sad to say, more than 90 per cent of agents will be wiped out and will have to look for a new job. Also I believe lot of consolidation will happen and agents will group together and bring costs down and sell more products in different areas.
Ravi Jethani, Agent, LIC, Mumbai

Disincentive to Agents
The Mumbai-based Association of LIC Agents (ALICA) held a meeting to consider the recommendations of the Swarup commitee. The meeting was conducted by Mr Shyamsundar Bairagra, President and Mr Rajesh Inamdar, Vice-President of the association, and attended by some of the top performing agents of Mumbai and Thane including Mr Rohit Danani, Mr B B Chandoke, Mr R K Shetty, Mr Anand Jathan, Mr Sunil Sohoni, Mr Suhas Ranade, Mr J S Patil, Mr Uday Tendulkar, Mr Jitendra Anandpara, Mr Davawalla, Mr Bharat Popat and Mr Narendra Shah.

The members were not in agreement with the Swarup committee suggestions to phase out insurance commissions by 2011 on the grounds that the move will not create equitable justice to the policyholders due to the fact that today they are in the habit of receiving free advice and being persuaded and motivated to take action for their own financial well being all through their lives.

Taking any move recommended by the consultation paper will disincentivise the agent to promote the product of the insurance company and will have the long term impact of bringing down the business of the insurance industry at large. Even today with the current commission structures, the penetration is barely four per cent of the GDP. Such a move will obviously stop the penetration in the market. Especially in a country like India where the masses are not insured, such a move will jeopardise the insurability in the country itself.

We want to add also that the world over insurance is never purchased, it is always sold. Unless there is perseverance by the agent, it is very difficult for a customer to come on his own and buy it. Nowhere in the world have agents not been provided commission.

In the UK and the US insurance penetration is 90 to 95 per cent. This is the basic difference, the literacy levels here are very low.

In fact we want to relate a compliment that we often get from our clients. They say, “It is only because you are following up for renewal that our policy is in force.”

If agents are not working, lapsation would increase, where would it stand to benefit the insurance public and insurance companies?
Association of LIC Agents, Mumbai & Thane. alicapresident@gmail.com

Salary proposed?
Without commissions how can we sell insurance? No one will be able to sell insurance. Is the committee recommending salary for the insurance agents depending on their service?
kalathera@rediffmail.com

Changing times
The sad part is the assumption of the words of the US regulator: ‘The agent will go where the money is’, as the basis of the recommendations.

No doubt it is good tidings for those who are practising ethics and professionalism as it’s a recognition long overdue. Many a time business has been weaned away via rebating and other unfair practices and the least importance was given to professionals. Perhaps the age old norm of insurance is sold and not bought might be going in for a reform too.

If the norms are going to be laid out and sufficient time given to upgrade and professionalise the financial services field, then, definitely it is a good move and will attract quality and bring in professionalism to the financial services sector. Unfortunately for persons not equipped with knowledge and modern tools of CRM, record keeping and updation, they may have to upgrade or join hands with those who have the skills and synergies.

In the NPS system choosing the ‘ethically mature path’, it’s true that commission system makes the advisor an agent of the company whereas the payment is done by the customer. The new paradigm of  ‘‘financial literacy’’ and complex financial products make a regulatory environment a necessity. It’s a fact which we need to learn to accept than to react upon.

In India it’s the issue of efficient conversion of savings into investments. Indian middle class is experimenting with credit and different financial products.

It’s true that slowly but surely, the responsibility of product selling is going to be with the advisor. With this new

responsibility, definitely the advisor of tomorrow has to be a reformed and better equipped person. Only then will he survive. Rather, not only survive, but thrive. He should view this as an opportunity rather than a nail in his coffin.

However rather than having one more regulatory organisation (we already have the RBI, IRDA, SEBI, PFRDA, NSDL, AMFI and TRAI and now FINWEB!) it’s time to consolidate them into one super regulator!
Rajesh Chheda, Financial Listener, (MDRT Area Chair-Goa), Finance Factory,Panjim, Goa

Fee for service
An agent anticipates the future needs of the client and invests his time and effort to give continuous and prompt service. Even after the customer’s demise, the agent helps the family financially. By phasing out commission, he will not be in a position to give such services. Insurance is not a product that people can go and buy. Insurance is a concept that has to be explained to the customers from the more than 200 different options available in the market. Instead of phasing out commissions, the committee should recommend steps to educate agents in the right way.
Arvinder Singh Hora, ashora123@rediffmail.com, Life Insurance Corporation (LIC) of India, Indore

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