How to hire a good insurance advisor

Choosing a good insurance advisor

Although buying an insurance policy looks like a simple task, yet it does not end up well for many. It goes through an important channel known as an insurance agent. Getting reference from friends and relatives about a particular agent could be good but that again is not a reliable source to find a trustworthy agent. It is a known fact that these agents work for commission. However, it is not always necessary that they work for money and trap their clients by forcing them to buy unnecessary or irrelevant insurance policies.

Online buying of insurance comprises a very little portion of the overall business and hence finding a right agent for yourself is very important. You should choose an agent who is well informed and does the work keeping in mind what you need and explains to you all possible coverage options.

Why is there a need to find a good insurance agent for you and how to do it?

We often come across incidents where clients complain about their insurance agents. There is a difference between a professional advisor and a selling agent. A salesperson may try to sell his product by telling you whatever version of stories about his products. There are a few tips that may help you in choosing the right kind of insurance agent.

A good advisor will not leave the task of doing research about the product on you. Insurance is an essential security and you cannot jeopardise your interests by blindly relying on any random advisor/agent. Once you get a wrong policy or an agent who puts his/her personal interests first, you are likely to face many difficulties in future.

Here are a few common suggestions to find out whether the insurance agent sitting in front of you is merely a selling agent or an advisor truly interested to do the job in your favour:

The insurance agent needs to understand you: The type of insurance that you want to buy is the main reason why you look out for an agent. It is the very base of your search for a good advisor. Insurance forms part of your financial plan and the agent should be willing to spend some time with you to understand what exactly do you want-your needs, your goals and the objective behind getting the insurance. It is exclusively about you just like ordering a customised product meant for you and you only.

A salesman will talk about a particular product because his goal is to sell it to you by convincing you at any cost. But an advisor will understand your criteria and try to find a product that fits it. His approach is to find a satisfactory solution based on your objectives combined with your financial background. An agent who simply tries to sell his product will not care about your goals or your budget.

Advertising a policy by saying that ‘there is a good policy and you should only go for it’ shows that he is trying to sell you something which he wants to and the motives behind it are clear-he is not doing the job for you but for himself. Instead a professional advisor will tell you about various policies as per your needs and allows you to choose from them. Not only that, he points out the difference among them. He explains to you about all the features of the policy that you are interested in. He explains every detail including the drawbacks. 

He doesn’t hurry to sell you: When you are making an important financial decision which may have a long term impact on your finances, you need time. There should not be any rash decisions. After explaining to you about various policies that suit your demand, an agent must allow you time to think and let you come to a conclusion. There should not be any force or hurry on the part of the agent. If he tries or forces you to make hurried decisions or choose only a certain product within a short time then it surely means he is totally disrespecting your need. If he says that there is a discount on a policy and it expires today and that you should make up your mind to get it, it clearly indicates that you are surely in the wrong hands.

Allows you to make a choice and explains to you whether the product is suitable for you or not: Once you tell the agent about what you are looking for in a policy, he gives you options. He tells you when you don’t need a particular product. Commission oriented agent will not give any such advice because his sole purpose is to sell what he wants to sell. Rather he would give you ideas that will benefit him. Sales based motives always drag you to take forced decisions even if you don’t understand or like them. When you tell an agent about your needs and he convinces you to buy something which is in conflict with your request, apparently he is not good for you.

A trustworthy agent’s work will speak for him: An advisor who wants to create a substantial amount of clientbase will not run after money. He will work hard towards keeping them for a long run. And that needs a lot of hard work and patience. Trust is generated by getting a client’s satisfactory feedback. Reputation and relations built overtime always pay.

In a rush to earn commission, long lasting relations cannot be built. Because once a sales target is achieved, the commission gridy agent will run away and would not look back at what was the client’s reaction or what happened to him. The client will automatically come to the advisor again and again if he needs any other type of insurance in future. When the client is happy, recommendations are bound to follow.

The personal touch is lagging when agents work merely for commission. They just do the selling part and leave the rest to the after sales service department. That way they can get instant results but will fail to gain in the long run. They will eventually be disliked by many and lose their business.

A reputed advisor has a list of clients who took the policies from him and he would encourage you to ask about his services to those clients. Since he has created a good repo with his clients through his dedicated attempts to sell them the genuine products, he does not have anything to hide as his slate is clean. The short sighted commission based hush-rush work usually does not get an agent any good reviews, forget about reputation.

A good advisor will work for you and work with you forever: The task to find the right kind of policy is understood by a professional advisor and he makes you understand everything about the product. He will have answers for all your doubts and help you gain confidence in him by his approach. During the policy tenure he will work with you to find out any add on feature that you want. He will bring all the suitable policies before your notice. Throughout the tenure of policy coverage, he will work for you. Filling of form, payment of premium and all other matters he will take care of so that you can have a seamless experience. If at all there is a claim to be made during the continuance of a policy, all the formalities shall be his responsibility.

Thus, before you get the insurance, he gives you all the necessary information. Works with you when a claim is to be made and throughout the policy period he is there to resolve all your issues. A salesperson on the other hand would not do that. His work will be over when a product is sold. He does not care about the events that take place post purchase of a policy. He might even act like a complete stranger as if he has nothing to do with your queries when you make a claim. He will just vanish once his selling job is over.

A reliable agent works with all recognizable companies and has knowledge about all the policies: If someone genuinely sells the insurance products, he/she will naturally be in contact with all the related companies and perform the formalities to ease the client’s paperwork etc. A good agent knows about all the products and explains to his clients about the features of the products applicable to him/her.

He gets his client to choose from the various options which are alike. He would not stick to a particular product or company. That says everything about him. You should like his approach. He should sound fair and reasonable when he points out something in the product that you have chosen for yourself and explains why some other product could be a better choice.

An agent who is in a rush to sell his product might try to sell something for an xyz company which you may have never heard of. All good companies usually work with an agent who does a good job for them. When you don’t like the agent, when you are able to make out that something is not up to mark, you can always go for another one. All the companies have many agents and you are not supposed to get locked into just one option. Knowledge and trust are the keys.

The following are the quick points to help you determine his compatibility-

1. He/she is patient enough to answer all your questions and gives satisfactory explanations.
2. He/she will try to know exactly what you need and will ask you many questions in the process.
3. He/she will try to respect your budget limits.
4. He/she will suggest various options and provide you comprehensive coverage.
5. He/she will give you all the updates about the concerned product.
6. The advisor will deal with the insurance companies, clinics or hospitals that carry out the necessary tests and other parties related with your plan.
7. They usually have creative solutions to problems. You will get a sense of accomplishment from a good advisor. They are self starters and self motivated.
8. A good advisor tells the truth to clients and maintains work ethics. They work constantly to help their clients. Honesty and transparency are the requisite characteristics that they must possess.
9. They have a very good communication skill and exert more energy and enthusiasm to persuade their clients. They always update and educate themselves to understand the industry and changing trends. Learning is something that keeps them up-to-date on various policies and different regulations.

What happens when an insurance agent is not competent enough and puts his/her client in trouble-

It is not always an agent who works for his benefits that goes against your interest. There are chances that he/she is not competent enough to help you. Sometimes he/she is not exercising the fullest knowledge or fails to take as much care as a professional advisor takes due to various reasons. In that case possibilities are,

1. The agent fails to maintain appropriate coverage: When you hire someone for their service, you put all your trust in him/her.  It is an agent’s duty to provide you fullest guidance.. If the suggested coverage cannot be purchased the client should be informed immediately and a similar product should be discussed with him. All the documents and other communication to be made on the insurer’s behalf are the agent’s primary duty. But if he fails to discharge his basic duties with due diligence, the client will suffer financial damages.
2. Failure to correctly explain the terms of the policy: He should discuss the coverage particulars first. If there are other factors to be discussed, the client should be informed. The coverage limits must be made known to him. Renewal communication and the due premium along with changes in policy terms should be communicated to the client from time to time. Any failure in this regard affects clients’ interest. 
3. Administrative errors: The agent should have a set up where he can carry out all his work systematically with the help of the required software programs. The less the human interaction, the more logical and error free the outcome is. The chances of errors can be minimised only if the agent uses advanced tools. His staff needs to be updated and he should make sure that the staff is also educated from time to time. 
4. Failure to send accurate client information to the insurance company:An agent reaches out to the client. Then the client approaches him with his details if he decides to buy a policy and the last step is-to analyse the client data and submit it to the insurance company by the agent. When a claim is made, the agent is the connecting link between the client and the insurer. The agent should be capable enough to carry out this work efficiently. If he is not good at this job, the entire journey will be challenging for the client. 

SEBI Registered Investment Advisors-

Citing the above probabilities, it becomes clear that hiring a good advisor is very important. In India we have SEBI Registered Investment Advisors, considered to be the qualified professionals to provide the best kind of investment advice. We have Mutual Fund Advisors, Relationship Managers for Banks and Financial Institutions and also Independent Financial Advisors. Similarly, SEBI RIA are advisors generally charging fees directly instead of indirect fees for selling anyone’s products. The clients can continue with an advisor only if they are happy with the returns and hence the investor advisor’s intentions are in line with the clients. So it would be in your best interests to hire only genuine financial advisors ie; SEBI RIA. They are best known to provide unbiased advice.

When we go to a good doctor or a lawyer, we pay higher fees to get the best advice. But somehow this is not the trend in the case of financial products. Be it investments or any other financial instrument, perhaps we lack the knowledge about the indirect fee structure that we end up paying or the cost that we have to bear because of some unworthy professional.

Once you decide to get any form of financial advice, you need to have a broader view of the matter. On the one hand you are likely to suffer losses by hiring some regular broker/agent/ investment advisor or insurance agent, on the other hand if you get a professionally equipped financial advisor, you will have a seamless, worry free experience on top of the best kind of advice.

By choosing a SEBI RIA you will be in safer hands. Inadequate knowledge of the dynamics of any investment strategy result in serious financial mistakes. The role of SEBI RIA becomes more significant considering the risk. You can confirm that he/she is registered on the Investment Advisers list of SEBI at the time of choosing one.

Why hiring a SEBI RIA would be the best thing to do?

India was the first country in Asia to have Registered Investment Advisor Regulation in 2013 mandating that only qualified professionals who are licensed by SEBI can advertise themselves as ‘advisors’. The investor advisor regulations further got tightened in July 2020. The scope of their work includes the job of insurance related advice.

The Regulation is meant to ensure the highest kind of standards to be maintained by these advisors. Their licensing is based on a predefined procedure. SEBI has tightened the qualification norms. All advisers must have a postgraduate qualification and at least five years of relevant work experience. Licensed advisers are mandated to retake the advisory certification exam every few years.

As there were many complaints about mis-selling of products over the years, SEBI decided to make investment advisors accountable. Not everybody can be termed as an ‘advisor’ as per SEBI regulations. SEBI aims to ensure that,

• The advisors licensed by it operate under a strict code of conduct and can only offer advice that is in the investor’s best interest.
• Advisors are like fee based professionals directly accountable to their clients.
• They are capable of doing risk profiling, take a 360 degree assessment of a client’s financial health and take the best possible course of action.
• The most highlighting part is, they are subject to monitoring and audits to ensure that they follow best practises in managing and administration of investor records.
• The advisors sit on the same side of the table as you and recommend reasonable products because their income does not depend on the commissions from products they sell.
• You can be confident that without the influence of commissions paid on specific insurance policy, the best suitable product has been chosen as per your financial goals.
• As a client, you have the power to choose the level of service you want and to assess the advisor on their performance. With commission driven agent you lose all the control and continue to be victimised by the post sales outcomes.
• SEBI’s aim is to nudge investors/clients towards goal-based holistic financial planning in an environment of complete transparency and trust. SEBI also fixed the maximum fees that RIAs can charge.
• With a higher entry barrier to become an RIA, the most eligible members get to be advisors. The qualified advisors are multi-product experts.

Conclusion: As a client, you always want to buy the most suitable insurance policy at a reasonable price. Do some research on the kind of product you are interested in and then look around for a good insurance advisor. If you are able to find a SEBI RIA, he/she could be the best person to guide you for the several reasons listed above. Take some time before you finalise on both the insurance policy and the intermediary that you choose. A hurried decision will cost more in the long run. Plan well and then execute because financial decisions are crucial and the famous saying ‘well begun is half done” applies here as well!

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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