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Live Insurance Scam: How To Steal A Trillion

A fool and his money are soon parted. Better that fools handover money to a Sahara or an LIC – rather than these firangi types.

Even though there are no (significant?) depositor-complaints, Sahara is being forced to refund Rs.24,000 crores to various ‘depositors’. As though, Rs.24,000 crores amount was lying around. In some account somewhere.

Rs.24,000 crores – waiting for refund command from regulatory or judicial authorities.

Unspilling Milk

I am not sure where Sahara Parivaar gets its thousands of crores from – but surely we know where most of this money goes. I can quibble about the end-use of these funds – but can’t complain.

Wonder what is bothering RBI-SEBI-SC?

Phoren Maal

On the other hand, no one seems to be bothered about a similar scam being executed in the insurance industry. The Sahara scam is being executed by a back-of-beyond Bengali-huckster who appeals to the UP-bhaiyya – and that is not acceptable.

The insurance swindle is run by foreign-returned, slick-MBA types, with MNC connections. And that is is an ‘important’ part of our economy?

A fool and his money are soon parted. Better that fools handover money to a Sahara or an LIC – rather than these firangi types.

With Sahara-LIC we know where the money is going.

When one lives in a country of over a billion people, big numbers seldom come as a surprise. But when I looked at the number of Rs.1.5 trillion, I was astounded. That’s about 1.5% of the Indian gross domestic product, was the first thought. . Knowing that the industry will come after this number, as my colleague in this work so graphically put it, with their bazookas, we did the numbers again. And again. And several times again. Checked and re-checked the methodology with insurance industry experts, actuaries and academics. We used another, totally different method to see if we were way off the mark. But the final number refused to back down. Retail investors lost a minimum of Rs.1.5 trillion to the insurance industry and its agents over a period of seven years that ended in the financial year 2011-12. Mint on 6 February 2013 here: http://bit.ly/X3YJDY.

Not only did companies manufacture toxic products, sold them through very large incentives (remember, the Insurance Act specifies the maximum limit for commissions, not the minimum), but once the policyholder let the policy lapse on finding out that it was unsuitable, kept the money with themselves, again imposing the maximum possible cost on the policyholder, and then moved that money over to their profit account. Question them about it and they say that the rules allowed it. They were just following the Insurance Act that allows them to do so after a waiting period of two years.

What next? One view is that now that the insurance regulator has changed the rules of the game, we should all get on with life. But is that the correct approach? Let’s look at how the industry behaved once the Ulip rules were changed in 2010. It moved to producing and selling traditional plans which still had all the features that made Ulips toxic.

The regulator will now change these rules as well to take most of the toxicity out before the end of the current fiscal year. But what does this market behaviour say about the industry? It says that the industry will continue to find loopholes in the rules and will use them to the detriment of the investor. What will make them move from checking regulatory boxes to really looking after the policyholder? It could be the fear of big ticket penalties.

We’ve proved that policyholders have lost huge sums of money. We now need the finance minister to put in place a mechanism to get this money disgorged and returned to the policyholder. And a stiff penalty for doing what they did.

via How to steal a trillion – Livemint.

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