Insurance Concepts - Insurance is a subject matter of solicitation
► The Insurer (i.e. insurance company) and Insured (i.e. an individual) enter into a legal contract with each other. On account of this contract, the insured individual pays a premium to the Insurance Company. In return the Insurance Company assures the insured individual to compensate against the unforeseen losses or hazards mentioned in the contract. Such unforeseen losses occur on account of ever-pervading risks prevalent in every nook and corner of our human lives.
► The insured individual has an insurable interest in the subject matter such as certain property matters or life of certain individual. As a result, the insured individual stands to gain if the subject matter is protected against the hazards and will stand to lose if any damage is caused to the subject.
► Though the insurance company assures the insured individual compensation against certain type of losses, it does not assure compensation for 'all' the losses. This compensation is based on the face-value of the product. In any case the insured individual stands to lose 'something' in case of loss to the subject matter accompanied with damages. (For example, one can not get a property insured at a higher amount than its actual value and then stand to gain from insurance claim in case the property is damaged. This will result in a breach of contract).
The reasons for “Insurance is a subject matter of solicitation” is enlisted below:
► The dictionary meaning of Solicitation is "To Ask For". Hence insurance is a subject that needs to be asked for by the consumers. This implies that the customers have to discuss with an Insurance Advisor regarding suggestions and professional advice suggest the right insurance products and services specially tailored or customized to meet an individual’s requirements. Hence, in short, it must be understood that Insurance Products and Services should not be SOLD but Solicited by the Consumers......
The above phrase is of much relevance to consumers as it enthrones the responsibility for identifying, choosing and selecting the appropriate insurance products and services on the consumer rather than focussing on the Insurance Company. It must be remembered that “Customer’s participation in availing the insurance products and services are purely on voluntary basis ".
As a Consumer, while availing Insurance Products and Services, the following points should be borne in mind as enlisted below:-
Understanding customization of Insurance needs and requirements
Meeting a professional insurance advisor
Identifying, Choosing and Selecting the right Insurance products and Services from a wide array of mind-boggling products
But in practice it is a well known fact that most of the consumers are not aware about either their insurance requirements or the various options available in the market before them. Thus the consumers have to obtain professional advice and help from a trained insurance advisor who “advises” the clients and then helps them to identify, choose and select the Insurance product and Services suited to such individual.
In practice, however, we observe that none of the above principles are applied. In today’s age, where cut-throat competition has become the order of the day, insurance advisers take up the role of pure selling machines trying to "close" the sale and achieve the targets as set by the Insurance Company rather than providing " professional advice" to their customers. Insurance companies put pressure on their agents to achieve their targets and often deviate from the basic dictum that drives the Insurance business.
► In spite of entering into insurance contract with the insurance company, the insured individual will take all appropriate prerequisite, and reasonable steps for the protection or safety of the subject matter. As an illustration, if a property is insured against burglary, fire, floods and theft, then the insured individual cannot deliberately or negligently expose the property to the aforesaid hazards.
► By identifying, controlling and regulating certain advertisements, acts, circulars, illustrations, practices, statements and contract forms that may be deceptive, unfair, untested accompanies with unsound methods of transacting the businesses of life and non-life insurance companies and establishing certain parameters pertaining to solicitation and sale of life and non-life insurance products and services and annuity contracts.
► All oral statements, assertions or representations, the sales techniques or procedures and the training, study or learning devices or programs made, used, followed or employed by the insurance officers, agents, brokers,employees or representatives of an insurance company.
► Issuance of any reference or reference related to the growth of the insurance industry or to the tax status of insurance companies with reference to any solicitation of an application for life/non-life insurance in a context that could reasonably be understood to generate interest in a prospective proposal of buying shares or stock in an insurance company or by becoming an investor therein rather than in the purchase of a life/non-life insurance policy.
Principles of Insurance
► Numerous homogeneous factors or causes in day-to-day life
► Definite Loss
► Accidental Loss
► Calculable Loss
► Affordable Premium
► Limited risk of catastrophically large losses
Controversies plaguing Insurance
► Religious apprhensions
► Insulation by Insurance in excess
► Complexity of insurance policy contracts
► Insurance patents