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5 steps to select an insurance advisor
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May 16, 2007 10:22 IST

For most individuals, the insurance advisor is the first and sole contact with an insurance company. The advisor helps them select an insurance policy and also aids in the ensuing paperwork and documentation.

Few would dispute that insurance has a vital role to play in each individual's portfolio from the perspective of indemnifying against risks in case of an eventuality. Hence it is important to take due care while selecting an insurance advisor.

In this article, we present a 5-step strategy that will help individuals in selecting the right insurance advisor.

Certification from IRDA
The first parameter on which the advisor must be tested is the requisite qualification. Any individual who wishes to be an insurance advisor needs to be certified by the Insurance Regulatory and Development Authority. According to the IRDA guidelines, an insurance advisor must undergo the prescribed training and pass the qualifying exam. Before seeking advice from an insurance advisor, ensure that he is certified by IRDA.

Ability to offer advice
An incorrect and widely-held notion is that the insurance agent's core responsibility is to aid in the paper work i.e. filling the form and depositing insurance premiums. Nothing could be farther from the truth. While the aforementioned are important, the advisor's main duty is to offer accurate and unbiased advice (this should not be easy as one insurance advisor can be empanelled only with one insurance company, so his advice is likely to be biased in favour of that insurance company).

He should be able to help the client build an insurance portfolio that is in line with the latter's needs. Insurance decisions based on inaccurate advice can have adverse implications.

Quality of service
One of the most common complaints from policyholders is that their insurance agent no longer services their needs. Remember insurance is not a one-time activity; on the contrary it is a long-term commitment and one that could need to be serviced routinely. It makes imminent sense to be associated with an advisor for whom insurance is a core activity.

Often individuals are known to "turn" into insurance advisors on a part-time basis with the intention of making some income on the side. Typically, such advisors are known to lose interest, discontinue their insurance business and in the process leave their clients in the lurch.

Inquire for how long the advisor has been operating in the insurance business. Similarly, ask for referrals and conduct an assessment of his service standards by interacting with his existing clients. Prompt and competent service should be treated as pre-requisites while selecting an insurance advisor.

Range of products
In the insurance sphere, one size doesn't fit all. Every individual has different needs and the same undergo a change over a period of time. The advisor should be capable enough to understand these needs and offer suitable products to fulfill them. Associate with an advisor who can advice and provide the entire range of products.

Nowadays, it is not uncommon to find advisors who offer a standard solution (often in the shape of unit-linked insurance plans - ULIPs) to every individual, irrespective of his needs. On a similar note, term plans, despite being the most affordable form of life insurance, usually never feature on the insurance advisor's recommendation.

Insurance companies are known to offer a wide rage of products. The advisor needs to have thorough knowledge of all the products offered by the company. Moreover, he should be informed about the competitors' products so as to provide unbiased and meaningful recommendations, regardless of how much he stands to gain by way of agency commissions.

Competence is the key
Do not hire someone as an insurance advisor simply because he is a friend or a relative. The decision to engage the services of an advisor should be based on his competence and skill sets. As mentioned earlier, the advisor has a vital role to play and hiring one for the wrong reasons can prove to be costly over the long-term. Emotions should play no role while hiring an insurance advisor.

By Personalfn.com, a financial planning initiative. It can be reached at info@personalfn.com. Personalfn.com also publishes a free-to-download financial planning guide, Money Simplified. To get a copy of the latest issue -- Real Estate & You - please click here.



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