Three Products, One Recommendation
Priya is a specified person at the corporate agency of a large NBFC. She is meeting Ramesh, 42, a self-employed textile trader with an annual income of ₹8 lakh, two children aged 9 and 5, and a ₹35 lakh home loan. He wants ₹1 crore of term cover and a retirement corpus in 20 years. Priya's agency is tied up with only two life insurers. Insurer A's term plan needs medical tests and will take about three weeks to issue; Insurer B's term plan is 12% cheaper per lakh of sum assured but offers a shorter list of critical illness riders. Ramesh produces a printout of a competitor insurer's term plan that is cheaper still and asks Priya what she thinks of it. Priya is ₹40,000 short of her quarterly target, which closes in four days, and her branch manager has told her that "the NBFC's own term plan should be pushed first". Ramesh also mentions that he bought a unit-linked policy from Priya three years ago, is unhappy with its 4.1% annualised return, and wants to surrender it to fund the new premiums.
1. What should Priya say about the competitor's cheaper term plan, and what must she disclose about her own tie-ups before recommending anything?
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She must first state plainly that her agency is tied up with only two life insurers and therefore cannot place business with the competitor whose printout Ramesh is holding. That single disclosure reframes everything that follows: a customer who assumes his adviser can access the whole market will misread a recommendation as a market-wide verdict.
On the comparison itself, she should not disparage the competitor, and she should not simply declare her own product "best". She should explain the features that price alone does not capture - claim settlement record, the definition of critical illness and the waiting period on those riders, the medical and financial underwriting route, and the difference between a three-week underwriting cycle and Ramesh's actual need for cover. If, after that, the competitor's product genuinely fits Ramesh better on the features he says matter, she should say so and let him decide.
She must also disclose, on request and at the point of sale, the remuneration the agency earns on the product she recommends. Recommending on the strength of a four-day target, or because the branch manager says the in-house plan "should be pushed first", is a conflict of interest and a conduct breach, not a sales tactic.
2. Ramesh wants to surrender his three-year-old unit-linked policy to fund the new premiums. What analysis must Priya complete before agreeing?
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This is a replacement decision and it needs to be worked through rather than executed. The policy is three years old, so it is still inside the five-year lock-in; surrender now will attract discontinuance treatment and return a fund value that is very likely below the premiums paid, crystallising the very 4.1% return Ramesh is complaining about. Priya should put the actual surrender value, the premiums paid, the charges already absorbed and the life cover that will be extinguished on one sheet of paper.
Then the sequence matters. If Ramesh does decide to switch, the new cover must be in force - issued, premium received by the insurer and risk commenced - before the old policy is surrendered. Discontinuance of the old policy first leaves him uninsured in between, and if he dies in that gap the family has nothing.
She must also disclose the disadvantages of replacement and record that she did so, explain that a 4.1% return over three years reflects a market-linked product being judged on a short horizon rather than necessarily a bad product, and avoid any suggestion that surrendering helps her hit a target.
3. How should Priya handle the branch manager's instruction to push the NBFC's own plan first?
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She should treat the instruction as a conflict of interest to be managed, not a directive to be obeyed. The recommendation must follow the customer's needs analysis - income, dependants, liabilities, existing cover, horizon and risk appetite - and the agency's product preference is one input among several, not the starting point.
In practice she should: (a) complete and retain a documented needs analysis and suitability rationale for whatever she recommends, so the basis of advice is evidenced rather than asserted; (b) disclose to Ramesh that the agency earns remuneration from the insurers it represents and that its product shelf is limited; (c) raise the instruction with the agency's compliance or principal officer, because an internal diktat to push a particular insurer's product regardless of suitability is a conduct risk for the corporate agency as a whole, not just a personal dilemma for her; and (d) decline to let the target influence the recommendation. If the in-house plan genuinely suits Ramesh, it should win on the merits and the file should show why. If it does not, she should recommend what does and let the target miss.