Wednesday, May 5, 2010

Purpose of Insurance Policy - Scope of reviving the industry

The purpose of Insurance is covering the economical risk of  life etc. of an individual or group of people.
The principle of Insurance is based on sharing the collective fund and settle claims with people, thereby help them to overcome economical risk. This the insured gets against premium agreed.

The purpose of  investing in stocks for an individual is to participate in profit or loss of big enterprises run by professional corporate and  the advantage to public companies is that they get public money to finance their big projects.

The purpose of mutual Fund is to cater to the needs of  investors who are not competent to directly invest in shares but need expert managers of Mutual Funds ti invest for them.

Is it advisable and meaningful to Mix all these products? Insurance companies have launched and mis sold many ULIP Schemes which are based on funds  of shares.

There are many simpler schemes of insurances which already exist with the insurance companies. Plus IRDA and Ministry of finance can easily force /guide/instruct these companies to have these simple products. The main problem is marketing by agents. Neither Sales Managers, Seniors, agents of Insurance companies are interested to sell them. These Simple and pure insurance schemes providing real purpose of the insurance can be directly sold by insurance companies by keeping staff ( no need of agents).
Common men will buy these schemes as they do deposit their Term deposits in banks.


Simplifying and standardizing marketing  by insurance companies and  dismantling the Agent Marketing is the key to stop the menace of mis selling and mystery selling.


Bankim Shah
 

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