7-point guide to find a good insurance agent
Insurance is an area where most mis-selling of products takes place in the country, and the root cause of this problem is the commission of insurance agents. Every year, insurance companies and insured persons lose a big chunk of their premium in paying distribution costs, including agents’ commission.
By selling single-premium products an agent earns a maximum commission of 2 per cent of the premium paid. On regular premium products, the commission is in the range of 15-30 per cent of the premium in the first year, followed by 5-7 per cent in subsequent years.
With the rates being so lucrative, it is but natural that most insurance agents are driven by commissions and sell products that bring in lots of money for them, without a thought to the customer’s needs or requirements. As a result, the poor investor always ends up a loser.
Hence, shifting the chaff from the grain to get a good insurance agent becomes all the more important. Given below are a few pointers which will help you evaluate a good insurance agent and keep away from the ones who only have their own interests at heart (instead of yours).
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1. Select with care
Do not go for the friendly neighbourhood agent, a friend’s friend or some relative, who works part-time as an agent, and is looking for potential customers. Such agents push products you may not need or want. What you need is a knowledgeable person, who uses his exposure in the industry to work out a deal that is best for you.
Acid test – If the agent identifies your needs, notes your goals and carefully presents products that will help you make the right choice to achieve your goals, then he/she is a good agent. Do keep in mind that you are the one who should take the decision and not the agent.
2. Check his expertise
This is an absolute must! The agent should know all his products. Check his knowledge by asking a lot of questions. Does he answer your queries or merely uses a lot of jargon, and does not explain the terms to you? Has he presented alternatives or is just pushing one product? Is he qualified to be an agent and what are his credentials?
Acid test – If the agent provides you a value proposition after understanding your needs and systematically presents products that suit your requirements, he is the right person.
3. Ask for references
You have every right to ask for references. Getting in touch with people who the agent has serviced will give you a good feel of his expertise, service and honesty. Take at least three references. Speak with them, reassure yourself in every way and conduct a reference check.
Acid test – If you get good references, you have nothing to worry about. If you get mixed reactions, ascertain the problem areas. Are they serious enough to impact your relationship with the agent? Is there an issue with core values? Do you need additional references? It may be a good idea to seek some more references and check on the specific problem areas. Only if you are comfortable, forge a bond with the agent.
4. Ascertain his honesty level and business ethics
To gauge a person’s honesty and business ethics may take time. It is a quality that is proven over time. But a little alertness can help you find out the agent’s level of honesty. Has the agent presented all the pros and cons of the product he is selling? Is he merely pushing a product for his personal gains?
Acid test – If the agent takes the time and effort to present the short- and long-term effects of the products and provides a comparison of the products that he has selected for you, without hiding the disadvantages, he is a good agent. Presenting facts without polishing them for personal gains is a sure sign that the agent is working towards providing the best solution for your needs.
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5. Check his customer focus
You need to ask certain questions to yourself like who will attend to your service needs once you have taken the policy. Is the agent willing to share his contact details and attend to your needs post sale? Or is he planning to assign a substitute to do the post-sale work?
Acid test – Even though it may be fine to speak with a substitute on some occasions, it is important that you have access to your agent when you need him. If the agent has shared his contact details and assured you that he is always available to serve your needs, he could be considered. But, do not just take his word for it. Check out his service record by asking for referrals and contacting some people to find out his service efficiency. This will do you good in the long run.
6. Check his financial planning skills
It is imperative that a good agent has adequate financial planning skills. Without these skills, he will not be able to identify the best possible product for you. Ascertain if the agent has asked you questions about your financial goals and needs, your family and income details, your short- and long-term needs, your risk appetite and time horizon for investment, your investment style and other questions related to your lifestyle.
Acid test – If the agent has taken care to chart out your personal profile by asking you all the relevant questions and then suggested products to suit these needs, chances are he is a good agent. By preparing an insurance plan, the agent has matched your requirements with the products and come up with the best possible solution for you. This will help you achieve your investment objective.
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7. Check your comfort level
What is your comfort level with the agent? Will you be able to deal with him for years to come? Is he trustworthy and honest? Will he help you achieve your goals? Your comfort level with the agent will help you build a long-lasting relationship. So go with the one that you are comfortable with.
Acid test – if your agent has focussed on building a relationship and made you feel comfortable by answering all your queries, chances are that he could prove to be a good agent. If you can see your agent playing an integral part in helping you meet your requirements, go for him. Your comfort level will go a long way in building a fruitful relationship.
Now that you know how to evaluate a good agent, don’t fall prey to the cookie-cutter types. Invest some time and effort in selecting a good agent. After all, you deserve a trusted advisor, who will truly help you achieve the life of your dreams.
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