| WHAT THEY DON’T TEACH
YOU IN SEMINARS AND MEETINGS
M.M.L. Verma, SDM, Mumbai DO-I
When agents succeed in making a good (?) sale they often come
across two (undesired) phenomena -
- They underestimate the financial capacity of the prospect
and end up getting less business.
- They do not collect adequate evidence of the income and
financial profile of the proposer and at times,
i. the proposal is accepted for less than the proposed sum. or
ii. the proposal comes back with some query or request for
some further requirements.
The result is:
- After (2) above, agents devote considerable time in meeting
the BM / Manager (Sales) / MM / SDM to represent the case.
- At times the desired amount of risk is accepted and at
times it’s not.
Therefore, learning what to present and how to present proposals
in view of financial underwriting is of utmost importance
to our agents/marketing officials.
We all know that -
- Income proof is required beyond the Total Rated Sum Assured
(TRSA) of Rs. 25 lacs (TRSA up to Rs. 25 lacs can be accepted
on the basis of income declared in the Personal Finance Questionnaire.)
- Income exempted from income tax (like dividend, interest
from tax free RBI bonds etc.) is counted as income for the purpose
of financial underwriting. In this case proper proof must be
submitted.
- 20% increase in the amount of insurance is permissible,
if the Marketing Manager/Sr. Divisional Manager recommends so
in his/her
MHR.
We should also know that -
1. Credit for parents’ income can be taken to the following
extent -
(a) age of life assured up to 25 years - Max. S.A. Rs. 1 crore
(b) age of life assured 26 to 35 years - 50% of life assured’s
own eligibility.
(c) age of life assured 36 to 45 years - 30% of life assured’s
own eligibility.
This is of course subject to the premium paying capacity of
the parent/s.
2. Credit for wife’s income can be taken, provided she is insured.
For this her eligibility has to be calculated first; beyond
insurance on her own life, she can propose on her husband’s
life WITHIN HER OWN ELIGIBILITY.
For example,
| Rated up S.A. on her life |
= Rs. 25 lacs |
| Her eligibility as per her income |
= Rs. 70 lacs |
| Balance of her eligibility |
= Rs. 45 Iacs
(Rs. 70 lacs -
Rs. 25 Iacs) |
| Eligibility for husband |
= Rs. 25 lacs
because even though her further eligibility is for Rs. 45
lacs her husband cannot get credit for more than her own
insurance. |
3. Category I and II ladies can take credit for their husband’s
income provided the total rated up sum assured on their lives
does not go beyond Rs. 40 lacs. It may be noted that a man can
finance an amount of insurance on the life of his wife equal
to his own insurance, provided he is eligible to finance both.
4. On the basis of husband’s insurance and eligibility, insurance
cover of more than Rs. 10 lacs and upto Rs. 30 Iacs can be granted
to married ladies under Category Ill provided the lady is (i)
a graduate and (ii) she has a passport or a “Mediclaim” policy
or a driving licence or a credit card.
5. Usually, ITR in ‘Saral’ form shows income as reduced by
“standard deduction” whereas total salary income is counted
for financial underwriting.
6. Accrual of interest in R.B.I. bonds is counted for financial
underwriting.
7. Share of profit in partnership firms, though tax free in
the hands of the partner, is counted for financial underwriting.
8. Exempted export income is also counted.
“Computation of Income Tax” in case of businessman / professionals
and Form No. 16 in case of employees must be obtained with ITRs
to have a detailed view of his income.
The enclosed proforma may be used to take care of the point
mentioned above.
However, acceptance of risk is not a mechanical process of
mere calculation on the basis of income/ accrued income/exempted
income as above. Insurance can be offered beyond what is calculated
on the basis of the income as above DEPENDING ON THE LIFE STYLE,
FINANCIAL PROFILE, FUTURE PROSPECTS OF THE LIFE PROPOSED as
brought out by the authority (MM/SDM in most of the cases) submitting
the “Moral Hazard Report”.
How to present the case?
The Actuarial Department, Central Office through their Circular
No. Ref: ActI/1890/4 dated 31.7.2003 have given some indication
in this regard:-“It is observed that under some of the high
sum proposed cases, the income shown in the prescribed income
proofs is not adequate for granting the full sum proposed. However,
information gathered by the agent/Development Officer indicates
that the proposer is very well off with lots of assets and undisclosed
income.
All the Branch/Divisional Offices before forwarding such high
sum assured cases to Central Office should first calculate the
eligibility of the proposer on the basis of the income proof
submitted. If the income is not adequate and if there are indications
that the proposer is a very well-off person, the Divisional/
Branch Offices should call for additional income and other proofs
including the Personal Financial Questionnaire, duly filled
in and signed by the proposer and countersigned by the official
filling in the Special MHR. The special MHR should indicate
along with other things the life style of the proposer and it
should be given by the Marketing Manager/Sr. Divisional Manager”.
First of all, the agent should try to obtain the following
information, if he/she feels that the income proof of the prospect
does not truly/properly reflect the financial profile of the
prospect (i.e. the prospect deserves higher S.A.) -
1. The Personal Finance Questionnaire (PFQ) must be obtained
from the proposer; it should be counter-signed by the authority
submitting the MHR.
2. Details of the exact nature of the proposer’s business/
profession.
3. His exact job.
4. His life style
- Is he a member of some reputable club?
- Does he own car/s?
- Are his children studying in some prestigious school/college?
- What property (flat/bungalow/farm house/ land) does he own?
- What bank deposits / RBI bonds / shares does he possess?
- What is the job/profile of the spouse?
- Does he have passport/Does he visit foreign countries?
- Has he availed himself of some loan from any bank?
- Does he have any income which is not reflected in ITRs? What
is the estimate of such income of the prospect?
- What is the business trend of the prospect in the current
year?
- Any other relevant matter reflecting the financial profile.
The agent must try to elicit the information and also try to
obtain some document in support, wherever possible, It is quite
possible that the proposer may not like to provide copies of
some of the documents; therefore, without causing irritation
to him, the agent should collect as many documents as possible.
It is of utmost importance to give a fair estimate of his ACTUAL
INCOME; if the agent finds that the proposer has suppressed
income, he (the agent) should write so in his ACR’ to enable
the underwriter to have a correct assessment of the proposer’s
financial profile. Taking care these points will benefit the
agent in two ways
- The agent can have the overall view of the prospect for canvassing
proper amount of insurance under suitably attractive plan/s
not only for the prospect but also for other members of the
family.
- He will save a lot of his/her own times as well as the time
of the underwriter and will be able to get acceptance for higher S.A.
- The recommendation of the Marketing Manager / Sr. Divisional Manager
is prescribed as per rules in many situations. I would not say
that the writing the MHR is an art or a science; however, I
must say that the following points are important:-
1. A clear, point-wise and logical MHR supported by as many relevant
documents as possible definitely a help to the underwriter and
a support for the proposal.
2. Apart from the MHR, a nicely printed letter I the MM/SDM
elucidating the life style ar financial profile of the prospect,
with an estimate of his income is a necessary adjunct to the proposal.
Why the recommended S.A. may be accepted must be brought out
by the MHR.
3. A visit by the authority writing the MHR to t work place
of the prospect is the key to writing good MHR.
4. The ACR/MHR/letter must give the estimate the actual yearly
income (even beyond what is mentioned in I.T.R.s.) of the proposer.
At the cost of repetition, I must remind agents a marketing
officials that the amount of insurance that can be offered depends
not only on the income shown in I.T.R.s but also on the life style
and financial profile of the proposer.
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