Responding to concerns raised by the insurance regulator, Life Insurance Corporation(LIC) managing director Thomas Mathew has warned his managers that making false promises on its Money Plus Plan is a betrayal of 50 years of public trust in the organization.
Mathew wrote that agents were misleading the public about high returns from the plan, which is a unit-linked insurance offering. “The unethical practice of circulating such pamphlets to misguide the public and get business is betraying the trust we built up in the last 50 years.”
In the letter dated 12 February, Mathew also wrote that “the senior divisional manager and senior branch manager will be held personally responsible. We will also be constrained to withdraw credit to such business and premium procured for the purpose of all competitions and awards.”
The warning went out after the intervention of the Insurance Regulatory and Development Authority of India.
“We have asked LIC to keep a check on products claiming to offer astronomical returns and guaranteed benefits at the end of a specific period,” said C.S. Rao, chairman of IRDA.
“Following our notice, they have come out with advertisements in several newspapers, warning investors about false promises being made by these agents,” he said.
The Money Plus Plan is a unit-linked endowment policy, which offers investment-cum-insurance during the term of the policy. Like all other unit-linked insurance plans, it doesn’t promise any guaranteed returns (as it invests in the stock market), but some agents are promising high guaranteed returns.
One pamphlet claims that if you invest Rs10,000 for an initial three years of taking the policy and then roll it over for 20 years, you will get Rs16 lakh at the end of the term.
“These are unrealistic returns. For such returns, markets need to give 25% annualized returns for the period of 20 years, which is quite uncertain, considering the high volatility in the market,” said Surya Bhatia, a Delhi-based financial planner.
The plan has taken off on the back of promises made by agents, who get commissions from LIC for selling the policies.
“I bought three Money Plus Plans three months back. Though I was not convinced of the returns promised by my agent, I thought even a Rs7 lakh return is not a bad dealfor me,” said Vibhor Jain, a businessman in the small town of Moradabad.