Credit card issuers to recover outstandings from card holders' employers.

Recently,I have been reading newspaper articles regarding ICICI Bank incorporating a clause for recovery of credit card dues from card holders' employers in the Terms and Conditions for usage of credit card. This article also indicates that other banks will follow suit.

The ability of the ICICI Bank to write to your employer to recover your loan outstandings from amounts payable by your employer to you is nothing new that it should make its way to news articles only now. The basic problem is that any small news about ICICI Bank begins to get blown out of proportions. There is no doubt about it that ICICI is not amongst the best of banks as far as customer service is concerned simply because it has grown beyond proportions. Some of the smaller nationalized banks will really score much higher than ICICI Bank as far as personalised and courteous service to the small depositor is concerned. However, as long as there is no service required from a human being at one of the bigger branches of ICICI Bank, this bank will score the highest for automated and computer (read online) related services that are used by the customer without human intervention from the bank. I also bank with ICICI Bank and I do find their services below par at large brances and very good at small branches that hope for a customer to walk in. This may be normal at all banks worldwide.

Now coming back to the point of recovering dues from a defaulting customer through their employers, those of you who may have availed of personal loans from ICICI bank should be aware of the following document:-

• ICICI BANK LIMITED'S (ALL-INDIA) STANDARD TERMS AND CONDITIONS GOVERNING PERSONAL LOANS (REGULAR AND PRE-QUALIFIED LOANS) [Registered on June 14,2005 with the Sub-Registrar of Assurances, Andheri- No. 1, Mumbai as document BDR - 1/ 06244 in Book No.IV (as modified from April 15, 2006)].

Do bear in mind that this document is duly stamped and registered. Every time you avail of loans from the bank, you are asked to sign on a stamped agreement. That agreement you sign is basically indicating your agreement to be bound by this registered document.

Now this document already has the following clause no. 27 under the heading RIGHTS AND REMEDIES OF THE BANK:-

• If any one (or more) Events of default shall have occurred, then ICICI Bank shall, in addition to the various rights and remedies of ICICI Bank referred to in the clauses above, be irrevocably entitled and authorised to contact and require the Borrower/s' employers to make deduction/s from the salary / wages payable by the employer to the Borrower/s and to remit the same to ICICI Bank until all of the Borrower/s Dues outstanding from the Borrower/s to ICICI Bank is / are completely discharged. The deductions shall be of such amounts, and to such extent, as ICICI Bank may communicate to (and instruct) the Borrower/s employer. The Borrower/s shall not have, or raise / create, any objection to such deductions. No law or contract governing the Borrower/s and / or the Borrower/s' employer prevents or restricts in any manner the afforesaid right of ICICI Bank to require such deduction and payment by the Borrower/s' employer to the ICICI Bank. Provided however that in the event the said amounts so deducted are insufficient to repay the outstanding Borrower/s' Dues to ICICI bank in full, the unpaid amount remaining due to ICICI Bank shall be paid by the Borrower/s in such manner as ICICI Bank may in its sole discretion decide and the payment shall be made by the Borrower/s accordingly.

I have availed of a personal loan from ICICI Bank in 2007 and this is what came along with the loan. There are also many other clauses that suggest you must intimate to ICICI Bank regarding any material changes in your financial affairs that they may need to know about you. This can be changes like change in your job, business, profession etc. and anything in the conduct of your financial affairs that may have a severe impact on your ability to repay. That would also mean if you take another loan,you are duty bound to inform the Bank. You have signed on the dotted line that you agree to the terms and conditions written in a registered document. Legally, you cannot retract from this contract. Therefore I have said that this clause is not new. Maybe they will supplement it in their already registered document for credit cards. It is written in the document that it is adequate for them to send you email or publish in their website regarding any supplements or changes to the agreement. Maybe they will send an email to card holders if they have the address on record and definitely publish the changes on their website.

ICICI Bank does find its ways into the news for many bad reasons and one of them is regarding their recovery of loans. In case ICICI Bank is indeed a Dishonest Lender or a Loan Shark, then you would definitely have reasons to worry. For my personal loan I allowed them to use ECS to recover installments and they took PDCs each for 6 month value of installments till the end of the tenure. I had to change the ECS mandate as I closed the account and opened a new account. They took from me PDCs for the remaining tenure from the new account. To my surprise, after 15 days I got back my old PDCs issued from the previous bank account. Reading so many adverse News reports and articles on the internet written by consumer guidance advocates regarding ICICI Bank in particular, I was worried that ICICI Bank may not return these cheques.

So far everything seems OK with ICICI Bank as far as I am concerned. However, I have to wait until my loan is fully repaid to see how honest or dishonest ICICI Bank is. after receiving their total dues. Credit card holders may be worried about excessive charges especially on non credit of card repayments or delayed credits. Normally, ICICI Bank is known to sort out such disputes within the first level of complaint itself in case you are in the right. In this respect, by my own bad experience with some foreign banks, they levy these fancy charges even after they receive and clear the instruments well before due date. They even acknowledge receipt of cheques in clearing and clear the funds from your account. Still they will tell you that they have not received the cheque at all. I had dragged one of these foreign banks right upto The banking Ombudsman. At that stage they simply credited the amount of payments I made and reversed the charges and informed The Banking Ombudsman accordingly that the error occured due to mistakes of their outsourced service providers and they have taken the remedial action. All that was done before I could make a claim for compensation. Remember that credit cards is the only banking service where it is possible to claim compensation for mental agony. On the good side of customer relations, I have had instances of Citibank reversing such charges even when I was in the wrong (dropping unsigned cheque, wrong dated or undated cheques in the drop box, alterations unauthenticated etc.). With ICICI Bank I never had such problems to contact their grievances cell for financial issues. My grievances with them have been generally for service related issues.

Now in case all banks are equipped with this clause against card holders, it will be of great concern and discomfort if they misuse this clause to shore up their revenues by double recoveries etc. or recovering when not eligible. There is nothing you can do in such instances to stop your employer from paying the bank as you have already subscribed to these Terms and Conditions. Therefore the only course of action for you is to give the bank notice not to recover amounts this way due to reasons of dispute and pray to the Consumer Court or Banking Ombudsman or The Court to which you have made a complaint regarding wrongful charges and non credit of payment, to issue an "interim order" to the card issuer not to recover any dues in this manner and in case it is determined that they have already recovered any dues wrongfully they would be liable to compensate interest from the date of such wrongful recoveries.

It is advisable to log in to your card account and check that your payments are duly credited and no wrong charges are debited. It is better to nip this issues in the bud rather than wait for it to be blown out of proportions. After all, you would like to get on with your life and work rather than waste time on such issues. Please do use the first and second level of escallation at the bank itself before approaching any forum. Chances are you may at least have the dispute solved but receive no compensation. Some banks do display they will as a matter of self discipline compensate the customer in case of their mistakes. However, I have not heard of any bank voluntary compensating customers.

The evils of banking services!

Life has been hectic for quite sometime. A lot has been happening that kept me so busy that although I have been online for most of the day (really no difference between working days and holidays) trying to save money rather than make money.

Believe it, I too have had my share of grievances with banks and life insurance companies and worse still, such disputes keep on occurring. I am on my toes all the time and I have to take a lot of time off to examine my bank account statements, frequently check my transactions online and worse still, read the junk mails or emails from my banks thoroughly to ensure that they have not slipped in any changes in fine print.

Fortunately, I have not yet had any occurrences of fraudulent transactions that have not been initiated or authorized by me. However I have had numerous instances of excessive charges, duplication of charges, non credit of realized payments to credit card issuers and levies of excessive charges due to non credit. I have spent a good deal of time in fighting and disputing transactions and they really take a lot of time to get sorted out because the authorities for starters unjustifiably give banks 30 days to sort the dispute before the consumer can escalate his / her grievances to exercise options of using the next higher legal forum available i.e. banking ombudsman or consumer courts.

One question keeps coming to my mind. Why so many occurrences and that too of seemingly small amounts. It seems that banks have targeted the small consumers with little or no means to excess charge or not credit payments and then levy more charges and interest. The reason why this seems probable is that if they levy a small amount on a widespread database of customers, chances are that very few will point out the errors. They will receive the complaints and I could guess that the complaints may be a small fraction of the errors they seem to be deliberately making. Even after receiving complaints, they are very confident that the amounts are not too large and the consumer may not waste time in going through the process of resolution of complaints. At worst, very few consumers would go to the higher forums and banks have enough resources to fight. The consumer is unfortunately weak and helpless in such matters as normally regulators like Reserve Bank of India always believe that the Banker is right. The banks have the ability to fight it out right through the Supreme Court. In the past I have been advised by banks that I should not go through disputes because even if they lose round one they will go in appeal right through till the Supreme Court as they have the financial ability to do so.

I suggest that you frequently access your bank account and check for the following:-

• Charges levied to your account. You will not get any details in the statements but you can always ask them what it is for.
• Duplication of charges. The most common instance is in the CBS Branches of most of our nationalized banks in India. If you use a service at a non home branch, chances are you may be automatically debited by the CBS system. The branch where you carried out the transaction may also duplicate the debit. This happens due to lack of training imparted by the bank to its staff and even if the staff is inefficient or make too many errors, the pressure of the unions is so high that staff relations is of paramount importance compared to customer satisfaction. This is to the detriment of customers as banks habitually protect their staff, especially the nationalized banks. Therefore please be vigilant on this issue.
• Please read the fine print in all statements as well as junk mails or emails received from your bank.
• If you find anything out of the way or wrong, please raise a dispute and keep a copy of the email or letter (do not trash it). Remember to date the correspondence as you can approach the next forum usually only after 30 days of the initial complaint if it remains unresolved.
• It is important that there are follow ups. I suggest you keep a copy for all correspondence exchanged and also maintain details of your visits to the bank and costs (conveyance, postage, courier, telephone calls, email bandwidth etc.) . You can claim these costs in addition to costs for approaching the next higher forum and also compensation for mental agony wherever allowed (normally for credit cards). If you maintain records it will prove that you have been proactively following up. However, do not go overboard by calling once every two minutes, blasting emails and faxes, sending too many letters etc. Avoid aggression like creating a scene at branches of the bank. After all, your initial interest is to get the rectification done and this can happen if approach is made in a cool and non agitated matter.
• If the bank sorts your matters even after slight delays, remember to write a thank you letter or email if you intend to continue maintaining relationship with them.

Privacy Policy Revision 1

Enactment of new laws in various jurisdictions compels us to post revisions to our privacy policy rather than amending the existing privacy policy.

Our privacy policy initially posted on August 24, 2008 in its revised form from time to time continues to be applicable with following additions and / or revisions effective April 1, 2009:-

1. Any changes with respect to our method of collection and handling of the visitors' Personally Identifiable Information or Sensitive Information will be effective from the date of the post only on data collected on or after that date. For Personally Identifiable Information and Sensitive Information already collected under the previous Privacy Policy, revisions will apply only with the consent of the person submitting the information.
   
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Changes to our Privacy Policy will henceforth be notified as a separate post.

Automatic monthly or annual transactions with your credit cards. Very Dangerous.

Believe it because it has happened to me inspite of being a seasoned credit card user for over 25 years.

Yahoo India as you know is the subsidiary of the international Web Search Marketing Giant Yahoo Inc.

Last year, to be precise, on February 23, 2008 I availed their services to host a website. They gave me a package deal of Rs.1,123 for one year including web hosting and domain name registration. They were accepting only credit card payments and I paid using my VISA card issued by Andhra Bank.

They told me that every year my card will be charged Rs.1,123 for renewal so that I will not have any disruption of service.

Basically there are two services that I subscribed to with Yahoo India Small Business
1) Domain name registration
2) Web Hosting.

Last month when I observed on the business panel that Yahoo will automatically charge me Rs.2,246 for the hosting I decided to go elsewhere. On their help resources they gave the procedure of how I could change my registrar for the domain name. This is mandatory as ICANN does not allow any registrar to bind me to use their services and I am free to change my registrar. I only had to provide a domain transfer coe to the new registrar with whom I wished to avail this service. Yahoo also recommended in thier website that for uninterrupted registration I should make arrangements with new registrar first before cancelling the service with them. They did not provide me the unlocking code on my management panel and when seeking the information it was indicated that I should send them an email. It took 3 reminders before they furnished me with the necessary information so I could approach a new registrar. After that it took 9 days for the domain to be transferred to the new registrar. Later I subscribed to hosting with the new registrar and proceeded to cancel my services with the Yahoo India Small Business. When I went to the business panel of my Yahoo Service, I could view the information and also the payment information. My card information was also captured on their website to make a next transaction on February 23, 2009. There is also a Cancel Services Link. Below is the actions I have taken in chronological sequence.

1) I clicked the Cancel Services Link. On the screen I got the message that to cancel services I should phone +919900199001 or send an email to in-cs-ysb@cc.yahoo-inc.com

2) I called +919900199001 and got an IVRS response to send email.

3) I sent email. No response for 2 days.

4) I went to the website management panel online and from the payment section I attempted to delete the card information using the delete link. I got a response that I should first enter another card number and details before this one can be deleted. If you observe, they are not accepting the cancellation of services and they are refusing to cancel my card information. If I do not want their services they are not entitled to my card information. How can they keep it so unsecurely on the internet? Now I got a response from them that they wish to call me but I was not available on the phone. They also said they have forwarded my email to the concerned department for renewal. My instruction to them was clear. PLEASE CANCEL and I warned them not to charge my card and delete the information they have on record.

5) I found some land line numbers of theirs in Mumbai on their website. I called. They asked me to call Bangalore. I called. They gave me another number in MG Road Bangalore. I called. They told me that I will have to send an email to in-cs-ysb@cc.yahoo-inc.com. After so much costs they have taken me round a full circle. I called Andhra Bank, they told me there is no way I can stop an electronic transaction and I would have to get the existing card blocked and reissued which would cost me Rs. 400/-. Eventually I would have to do this and hope to somehow recover the amount from Yahoo. I escalated my complaint to a higher up in Andhra Bank. He told me that to make my grounds stronger in case of dispute with Yahoo, I should send them an email instructing them to cancel the services and cancel the captured card information. I had already done this but the officer at Andhra Bank told me to add the following
'You are hereby required to confirm the cancellation of services and deletion of card information within 24 hours of this email. In case I do not receive any response within 48 hours from this email I shall assume that you have cancelled the services and accordingly my card will not be debited by you for any renewal.'

However, I chose to pay Rs.400 and get my card blocked and reissued. I am using this card since 25 years and have had very good services from Andhra Bank. I really wished for a good nights sleep rather than being cheated by a Juggernaut like Yahoo. Eventually my savings were reduced in changing providers. However, in future I would be saving something at least.

Another disastrous instance of automatic debit was for a product by Tata AIG General Insurance. I literally got conned by one of their tele marketing salesperson to sign up for a policy that sounded reasonably good. the cost was Rs.10/- per month for 2 months and thereafter Rs.701/- month. I had to part with my credit card information to facilitate debit of Rs.10/- month for the first 2 months. Thereafter if I did not cancel the policy within the free look in period of 60 days, my card account would be charged Rs.701 per month. Do bear in mind that all this was over telephone. On receipt of the policy I found to my detriment that it was one of the most disastrous insurance contracts I ever read (I too was a life insurance agent for 2 years). Immediately within 20 days (against 60 days) I sent back the policy with instructions to cancel the same and also sent a letter to Axis Bank, the card issuer, not to allow any debit to my card other than the Rs.10/- per month for 2 months. I sent them copy of my communication to Tata AIG General Insurance Company Ltd.

After 2 months I was surprised to observe that I was charged Rs.701/-. On telephoning Axis Bank, I was told that credit card transactions cannot be stopped and I would have to block the card and reissue it at a cost. I chose to cancel the card as it was a new account barely 5 months old. Eventually, after complaing to IRDA with the proof of communications to Tata AIG, the insurer cancelled the policy and refunded the amount charged to me within 2 days of receiving a letter from the IRDA. They sent the refund to my cancelled credit card and Axis Bank took another one month to refund the money to me.

What I found strange is that banks are happy to honor a telephonic instruction and charge your credit card account. Written instructions seem to have no value as far as credit cards are concerned, at least in India. Direct Savings Bank debits are a better option as you can put a stop to the debit more easily. Strange. Where good funds are available, payment can be stopped but where a credit limit is given a payment cannot be stopped and a bank seems only too happy to debit your credit card account and recover money from you. The reason they seem to be doing this is that there is more profit in the credit card transactions. As the merchant, whether honest or dishonest is bearing their charges, the banks tend to get more pro merchant than pro customer and look after the interest of the merchant. The card holder who pays the charge and in some cases also fees and interest (if revolving credit is used) seems to be at the receiving end in all these transactions.

It is a necessity to make card transactions. I strongly suggest the following:-

1. Avoid transactions where you have to give card details on phone.
   
2. DO NOT use credit cards online or at any merchant physically or through mail for a future transaction or automatic charges at regular frequency. There is absolutely NO WAY the card holder can stop these transactions. It can be cancelled only by the Merchant. If you deal with a dishonest merchant you will lose your money as you are bound to pay to the bank whatever is charged.
3. It is important you use credit card only for goods or services you are sure of receiving immediately and not in the distant future.

If you stick to these rules, you may be entitled to a good night's sleep.

ICICI Bank's Rs. 375 Cr. exposure to Lehman Brothers. Any problems for ICICI Bank or its account holders?

The news is out that ICICI bank has an exposure of EUR 57 Million (Rs. 375 Crores) in Lehman Brothers that has filed for Chapter 11 Bankruptcy with a US Court in New York. Fortunately due to somewhat rigid controls our regulators have on Indian Banks, most of our banks are not so adversely affected by the debacle of Lehman Brothers. The exposure of ICICI Bank is through its England subsidiary.

Is this a major disaster for the account holders of the country's second largest commercial bank?

Maybe not yet as the problem has so far been felt only in the share markets where the shares of ICICI bank has opened almost 6% lower. Remember the year 2003 when rumours of ICICI Bank going bankrupt rocked the country's second largest and fastest growing bank to such an extent that the regulator Reserve Bank of India had to step in and issue a statement that there is no problem with the Bank. Many people in Gujarat state where the rumours started had thronged at the branches of ICICI bank during midnight of the weekend to know about the status of their moneys lying with ICICI bank.

Many people (possibly the rumour mongers) had made huge profits in buying overnight the shares and bonds of ICICI bank at highly discounted prices. These situations are normally prominent in Gujarat State only.

The rumour mongers are at it again. People know that I do majority of my banking with ICICI Bank and they have been phoning me since afternoon telling me that I should withdraw all my moneys from ICICI Bank by tomorrow evening as it is going to fail. Relying a bit too heavily on ICICI Bank and being addicted to its services, of course I panicked. I decided to go and draw out some money from the ATM. No crowds at all that would remind me of the situation in 2003. In fact I was the only customer withdrawing cash from the ATM and all the 3 machines were operational. I could withdraw the cash. Next I walked into the branch. Not too much of a crowd at 4.30pm and it seemed to be business as usual. After my visit to the ATM I was able to use the card for shopping also. To my mind, these are not the idiosyncrasies of a failing bank. In this volatile stock market, rather than account holders, it is possible that the share holders who have a position with ICICI Bank will really have to be worried about it. Maybe the rumour mongers want to buy financial products of ICICI Bank and its Group Entities at a substantial discount to make immediate gains. These things happen only in Gujarat and we can rightly call this state the rumour house of India.

In the meantime, it is better to intensify our watch on ICICI Bank. I really do hope that our regulator the Reserve Bank of India puts in place a proper system wherein Banks do not feel the heat by such rumours. It is very badly needed here for sake of account holders and depositors.

High interest rates on credit card defaults in India. Matter with Supreme Court now.

Most of the hapless credit card users in India may have heaved a sigh of relief that the Supreme Court of India refused to stay a judgement of the National Consumers Forum of India stating that credit card issuers should charge an interest of less than 30% per annum on default of credit card dues. Appeal on this judgement by the National Consumers Forum was filed before the Supreme Court by card issuing banks, mainly the foreign banks and the large private sector Indian banks who have been charging interest rates of between 36%-49% per annum on default in payment of credit card dues. In addition to this they are also charging a late payment fee based on the minimum amount due.

The justification that banks have given to the Supreme Court of India for charging such a high rate of interest to credit card customers are having to make telephone calls and paying call centres to get new customers, telephone and Internet costs, high rate of defaults and frauds etc. It seems that the banks are trying to pass on the losses and costs in due course of their banking business to the hapless credit card customers.

While this judgement provides some temporary relief, please do not increase your credit card spends on revolving basis if you think the banks will charge you only 2.5% per month + service tax. This judgement is applicable only for defaulters who do not pay to the bank. Chances are that you are not a defaulter if you pay the minimum amount due by the due date and are charged interest on what you do not pay. If you are not a defaulter you will continue to be charged at the high rate of interest the card issuing companies have been hitherto charging to you. Defaulting is not an option to avail the lower rate temporarily allowed till the appeal reaches its logical conclusion. If you default, your name will be placed by your card issuer in the industry defaulters database maintained by the CIBIL for all bankers and you may not be able to avail bank loans or credit card facility from other banks till your name is removed from the defaulters' list. Therefore, please go easy and avoid going overboard with charging unnecessary purchases to your credit card.

Consider a situation that you make a purchase of Rs.5000/- and bank allows you to pay 10% by the due date and defer the rest. Today is the 10th September,2008 and bank issues your bill on 20th September. You will receive the bill that will have to be paid into the account (physical realisation of cheque into the account) by say 4th October. This means you should deposit your cheque on 30th September for it to be credited by 4th October. You must pay a minimum amount of Rs.500 by 4th October to avoid being charged late payment fee. If you pay the entire bill of Rs.5000 by this date, you are charged no fees or interest. If you pay only Rs. 500/- or less than the total amount due, you are first charged interest at 36% - 49% per annum + 12.36% service tax from the day you made the purchase on 10th September till the date you make the part payment. From the date your payment is received, you are charged on the balance amount at 36% - 49%. This way you are not reported as a defaulter to CIBIL. Consider the scenario that you do not make the payment or your payment is credited to your account after the due date. What happens then? You are a defaulter and you are charged 36%-49% per annum from the date of purchase till the date your payment is received beyond the due date or till next statement date if not received at all. If payment is received after due date, even if full amount is paid, you will be charged interest from date of purchase till date of payment as well as interest on the balance amount due till your next billing date. In addition to this you are also charged a late payment fee that varies from bank to bank. Most bank's charge 30% of the minimum amount due subject to a minimum of Rs.300 and maximum of Rs.600/-. In case of the illustration given above, 30% of Rs.500 works out to Rs.150. Therefore in this case they would charge you Rs.300/- being their minimum amount instead of Rs.150/- what it should work out to. Therefore the default would cost much more than 36% - 49% per annum depending on the amount. The higher the amount of default the late payment charges are less as there is a ceiling of Rs.600. Eventually you are encouraged to default for a large amount and not a small amount. What the honest credit card user is paying for is the charges a bank incurs in its marketing efforts to get dishonest wilfull defaulters + the amount the banks loses in principal amounts charged by these defaulters. Why do you have to pay? Because you are honest and wish to avoid getting into any default lists circulated by the bank to the CIBIL database. Banks earn interest and charges from you if you delay payment as well as earn charges from the merchant establishment that sells you the goods and merchandise / services. This is usually 2% + service tax. The merchant bears the communication costs for the swiping machine while completing the transaction. The card issuer settles the merchant 3 days after you charge the transaction and they earn their charges for committing funds for a very short term of 15-45 days depending on which day of your billing cycle you charged the amount. In case of debit cards, banks earn the same amount without any money at stake as customer account is immediately debited. It will take a lot to justify the high rate of interest between 36 - 49% per annum and I do hope that the fact that Banks are earning on credit / debit card transactions from the merchant establishments should be disclosed to the Supreme Court of India. Even 30% per annum is too high considering the service tax component added to it. We just have to hope that the Supreme Court will administer justice after fully analysing the facts and getting from the card issuers full statement of whatever they earn from the merchant establishments and not go by distorted figures given by banks. We should remember that for what customers charge their accounts for transactions with Petrol Pumps (Bunkers), Railways and Airlines a separate charge is recovered by the card issuers from the customers for these specific transactions. Card issuers also recover a charge for crediting refunds in case of cancelled railways or airline tickets. In these circumstances, we can only say that credit card business is a loan sharking business given a legal sanctity by the Government that chooses to remain silent because of the Service Tax they generate @ 12.36% of whatever the bank charges to the customer.

Insurance is a subject matter of solicitation! Really?

Life Insurance Policies and General Insurance Policies are being sold in India since more than a century under the British Raj. After independence, in the mid 1950s, the insurance business was nationalised in India and the Life Insurance Corporation of India took over the Life Insurance Business in India exclusively. The General Insurance Business was taken over by the General Insurance Corporation of India through its subsidiaries, the major ones being New India Assurance Co. Ltd., Oriental Fire and General Insurance Co. Ltd., National Insurance Corporation of India ltd. and United India Insurance Company Limited. These four nationalised insurance company issued mediclaim, accident, property, motor vehicle, marine and other general insurance businesses in India. Insurance for loss due to medical illnesses, accidents etc. was sold as additional riders in the Life Insurance Business. From 1956 to 1999, these nationalised insurance companies have had a free ride selling insurance policies without any competition. Post 1999, with private investments (including a 26% cap on foreign investments) being allowed to enter the insurance business, the face of the Indian Insurance business has changed tremendously. Before privatisation of the insurance business, we rarely read the fine print in the advertisements of insurance companies stating "Insurance is a subject matter of solicitation". The owners of the insurance companies (Government of India) never really needed to advertise insurance at all. You need insurance, you would walk into one of the divisional offices or branches of the insurance companies. Insurance agents were active but the selection criteria was based more on influence rather than qualifications. The only need for advertisements was if there was a drive to issue more of certain class of insurance products. The only purpose of advertisements was to sell massive number of policies. After all the moneys raised from premiums are invested into social infrastructure developments projects. That was the only need for advertisements. Post 1999, all this has changed. The Insurance Regulatory & Development Authority of India was constituted to regulate the general and life insurance business transacted in India, including the public sector insurance companies on a level playing field. With the public sector insurance companies having exclusivity in the trade for over four decades, the playing field could really not be called a level playing field especially for those in the Life Insurance business. In the General Insurance Business the private sector companies could prove themselves by settling claims promptly. The problems that private sector life insurance companies had was that if at all any claims were filed, they were all early claims that required thorough investigations before settlement because they themselves were newly in the insurance business and all their policies were new. Therefore, there were delays in settlement of claims. However, the general perception was that the private sector life insurance companies were unreliable for this reason alone. However, they were helpless as there is a statute in place that early death claims have to be thoroughly investigated before settlement. This was and is applicable even to the Life Insurance Corporation of India (LIC). However, the public totally ignored delays by the LIC for this same reason or rather were conveniently made to ignore this by the agents of LIC by showing solid proof of quick settlement of claims in the last 40 years when they had exclusivity of the business. With the number of private sector players increasing in the insurance sector, regulations were framed for appointing agents with proper qualifications and passing an exam held by the regulator. Regulations were also framed for advertisements that the companies could issue and the illustrations of policies issued by the companies. These have to be approved by the regulator IRDA. Taking cue from insurance business in other developed countries, our Indian insurance companies also had to write this line "Insurance is a subject matter of solicitation" on all forms of advertisements, including letter heads and visiting cards of employees or agents. This has become more of a statutory warning like what you find in advertisements or packages of alcoholic beverages or tobacco products (including Gutka). What exactly does this phrase or sentence mean. To decipher the meaning, first let us examine what solicitation means. To solicit in this context is to offer services against payment. This means that the insurance companies are selling to you their services (read policies) against payment of premium. The quote is clearly written as 'Insurance is the subject matter of solicitation'. This means that insurance policies can only be sold and not bought. In your right state of mind, you will not wake up one day and remember that you have to go and purchase an insurance policy, the reason being it is a contract that leaves you poorer in your pocket. It is something that you force yourself to procure because of your worries that you have in your mind. The most convenient way of getting rid of worries is to forget about it. That is what you may do and totally forget about taking insurance altogether and that can be damaging. Therefore insurance companies have to reach out to you through agents, employees or through advertisements. What should you understand by this phrase? I suggest you entertain the insurance agent with respect and hear him out for what he has to offer to you from his company. After all he is restricted to offer only his sponsoring companies product and he is in the best position to offer to you what you need as Insurance policies can only be sold, never bought. His card will also display this phrase 'Insurance is a subject matter of solicitation. Now let us come to the subject matter of this post. Why do I pose the question 'Really?' after this quote. That is because the insurance policies are never being sold. They are being 'wrongly sold', especially the life insurance policies. In Life Insurance, you definitely need the term insurance policies that are low cost with higher death benefit. That is what insurance really is and what you really need. For over four decades insurance was sold in India only as a tax saving tool giving you RETURNS. That is wrong. Insurance as it should be is risk protection. Any insurance that gives you returns is bound to be expensive as it is your money only that will be returned to you after being used, invested and eventually after insurance companies retain their pound of flesh to pay for the agents and their expenses. The returns you get is not comparable to other financial investments in the same situation although you will get a limited protection that is too costly. Eventually it is a contract that makes you poor while you are living so that you can die rich. Technically, such a contract is for those who can afford it and are rich. However agents will never sell to you the products that you need for what you can afford. First of all they themselves are more pressurised into selling to you what the company wants them to sell to you and not what you need. There is more profit in getting you to buy what you really do not need. You may pay your first and second premiums without much difficulty but as the policy continues, you are stuck and it is your lookout how to arrange the premiums to keep the policy in force and not loose everything. This is definitely not the lookout of the insurance company or the agent. The agent also has the attraction of selling you policies that give him higher first year commissions so he has the chance of attending a Million Dollar Round Table Conference in some fancy exotic locale, fully sponsored by his principal. For the principal to pay his commission as well as costs, they have to earn a really high amount from you and therefore the policy can never be a win-win situation for you. The insurance has been aggressively solicited to you. Therefore I have put forward the question 'Really?'. It has not been solicited with the intention of your necessity. Therefore please do take care to first take an economical policy that offers 100% protection and no returns. Avail of money back policies only when you can really afford it. In this respect I find LIC has products to suit all budgets. Our finance minister has rightly referred to them as 'The Jewel in the crown' in his last budget. It is now only left to the agent to solicit the right products you need. As far as the private sector insurance companies are concerned, they do have a floor limit on the annual premiums they receive to consider issuing you a policy. Their agents will not be interested if you are of the class of sub 10K annual premiums and they will try to aggressively sell to you what you do not need and cannot afford and over and above make you feel bad if you are not availing the policy they want to sell you. I have been an insurance agent for 3 years with a private sector company. While I found that for namesake they had products that could suit people, they constantly coaxed agents to sell products that they wanted sold. I am not against any of these companies. Insurance is something that you need and worldwide the insurance agency business is difficult as it is very difficult to sell a piece of paper against money. What I am totally against is the misrepresentation done by fellow agents who succeeded using doubtful means of inducement and I failed because I wanted to proceed by the book in a manner beneficial for the client. Therefore I left this business. However, I have no regret having done this business. I had to pass an exam to qualify and I learnt a lot from it. In case you feel you need my guidance anytime, my IM ID is in my profile. Anytime. You can leave your comments.

I have had to liberally use the words 'no' and 'not' in this post even though I am against the use of these highly negative words. The insurance business is such that it breeds on negative impulses. Therefore usage of these words are really unavoidable.