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5 easy steps to select an unbiased insurance advisor - Outside View by PersonalFN
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5 easy steps to select an unbiased insurance advisor
Nov 29, 2012

While investing an investor takes into account various checks and balances to make sure that the hard earned money is channelized in the right investment avenue and that too in the right proportion. Though this exercise involves a lot of time, effort and energy, it is imperative that investors undertake this exercise in order to build wealth in the long term. But apart from generating wealth, investors should also give equal attention to their protection needs. And since life is uncertain, having sufficient insurance protection for the breadwinner of the family stands imperative.

However, with galore of innovative insurance products to choose from, an investor needs to carefully assess his or her protection needs as well as be aware of the various pros and cons of different insurance policies. And to know them better, it is imperative to seek advice from an unbiased insurance advisor. But one may wonder, how to select unbiased insurance advisor from a plethora of insurance advisors. Here are some easy steps to select an unbiased insurance advisor;

  1. Certification from IRDA

    The first parameter on which the advisor must be tested is the requisite qualification. Any individual who wishes to be an insurance advisor needs to be certified by the Insurance Regulatory and Development Authority (IRDA). According to the IRDA guidelines, an insurance advisor must undergo the prescribed training and pass the qualifying exam. Before seeking advice from an insurance advisor, ensure that he is certified by the IRDA.

  2. Ability to offer advice

    An incorrect and widely-held notion is that the insurance agent's core responsibility is to aid in the paper work i.e. filling the form and depositing insurance premiums. Nothing could be farther from the truth. While the aforementioned activities are important, the advisor's main duty is to offer accurate and unbiased advice (this should not be easy as one insurance advisor can be empanelled only with one insurance company, so his advice is likely to be biased in favour of that insurance company). Insurance decisions based on inaccurate advice can have adverse implications on one's entire investment portfolio.

  3. Quality of service

    One of the most common complaints from policyholders is that their insurance agent no longer services their needs. Remember insurance is not a one-time activity; on the contrary it is a long-term commitment and one that needs to be serviced routinely. It makes sense to be associated with an advisor for whom insurance is a core activity. Often individuals are known to "turn" into insurance advisors on a part-time basis with the intention of making some income on the side. Typically, such advisors are known to lose interest, discontinue their insurance business and in the process leave their clients in the lurch.

    As such an investor needs to enquire for how long the advisor has been operating in the insurance business. Similarly, ask for referrals and conduct an assessment of his service standards by interacting with his existing clients. Prompt and competent service should be treated as pre-requisites while selecting an insurance advisor.

  4. Range of products

    In the insurance sphere, one size doesn't fit all. Every individual has different needs and the same undergo a change over a period of time. The advisor should be capable enough to understand these needs and offer suitable products to fulfil them. Associate with an advisor who can advise and provide the entire range of products.

    Nowadays, it is not uncommon to find advisors who offer a standard solution (often in the shape of Unit-Linked Insurance Plans - ULIPs) to every individual, irrespective of his or her needs. On a similar note, term plans, despite being the most affordable form of life insurance, usually never feature on the insurance advisor's recommendation (due to lower commissions on such products).

    Insurance companies are known to offer a wide range of products. The advisor needs to have thorough knowledge of all the products offered by the company. Moreover, the advisor should be informed about the competitors' products so as to provide unbiased and meaningful recommendations, regardless of how much he stands to gain by way of agency commissions.

  5. Competence is the key

    Do not hire someone as an insurance advisor simply because he or she is a friend or a relative. The decision to engage the services of an advisor should be based on his competence and skill sets. As mentioned earlier, the advisor has a vital role to play and hiring one for the wrong reasons can prove to be costly over the long-term. Emotions should play no role while hiring an insurance advisor.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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