Recently, I was an unannounced visitor to my Aunt’s place where a bunch of people were explaining a financial product. It turned out that the people were Branch Head and Advisor of a private insurance company and they were selling a ULIP.
My Aunt is a successful Doctor and seeing me, she immediately offloaded her burden of understanding the product to me.
Even though I hate ULIPs, I pretended to be another uninformed customer. I listened to their articulate description of the benefits, their customer service policies, their ethics, etc. They said that the product will no longer be available after a week and they were interested in getting a good deal for their valued/high networth clients!
Impressed, but I did have a question for them. What were the charges?
The Branch Manager continued his rhetoric. Unlike other insurance companies they charge 0% premium allocation charge, he thundered.
He gave me the pamphlet detailing other charges like policy administration charges, surrender charges, etc.
I was intrigued by the 0% premium allocation charges and which normally ranges from 15-40% for other companies. I looked deeper for the fine print and here’s what I found.
The policy administration charge which is normally Rs 60-100 for other companies was given in %age. The pamphlet said that for a premium band upto Rs 25000/-, it would be 2.50% per month of the ATP.
ATP, I came to know was Annual Target Premium.
What it meant was that 2.5*12=30% would be shaved off your investment as policy administration charge.
So the marketing savvy private insurance company has been innovative in redesigning their product so that the noise about the premium allocation charge is addressed. And at the same time, adding back the charges in a new form!!
Interesting, No? That’s why you need to be alert all the time. Do read Manish’s Top 10 tricks of mis-selling.
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