New Fraud by Agents – Changing Policy tenures from “Single Premium” to “Yearly”

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A fraud, which has been going on for many years, but one that has not received enough attention. While the fraud itself is small and easy to conduct, its impact on investor wealth is significant.

What is exactly is the Fraud?

Many investors, who wish to deposit money in some financial product as a ONE-TIME payment, opt for a ‘Single Premium’ policy. Here they are required to just pay the premium fee once, and the policy carries on for many years after that.
The mistake some investors make is that they convey these instructions verbally to their agent and do not fill up the form themselves. Neither do they verify the tenure filled by the agent. Now what many unscrupulous agents do, is that instead of ‘Single Premium’, they specify ‘Regular Premium (or yearly) as the payment scheme – leading to a situation where the investor has to pay the same premium amount every year for many years thereafter.

What are the possible problems which happen?

  • The premium amount is quite substantial at times. People can’t afford that sum each year and subsequently have to discontinue the policy
  • Investors remain unaware about the tenure of the policy and stay under the assumption that they do not have to pay any more money. However, the policy lapses after a year due to non-payment (If the investor does not have an email id, they do not even get premium reminder emails)
  • Even if investors come to know about the changed tenure, they need to run around from pillar to post just to cancel the policy – suffering the consequences of a problem which should never have been theirs to begin with
  • This whole experience shatters their faith in agents/ companies and leads them to avoid other agents in the future, even good ones.
  • There is a massive emotional impact as investors see this as a breach of trust and at times they lose their hard earned money – funds which they might have set aside for some dream project!

Why is this fraud done by Agents?

Frankly, it’s just because they earn higher commissions through this ploy. Agents earn meager commissions on “single premium” policies, but on yearly premiums they stand to reap much higher rewards.

How to save yourself from this fraud?

Here are some simple common sense tips which will work
  • Never ever let the agent fill up the form; you should always fill up the form yourself.
  • If you can’t fill the form for some reason, let the agent fill it in front of you, and once he is done, review each point filled by him. Take photocopies of the filled form for your reference
  • If you still sense that the agent is being dishonest, return the policy in the free-look up period which is generally 15 days from the date when you receive the policy in your hand
  • Email the management and customer care and tell them you will be complaining to banking ombudsman and grievance cell about this and also file a police complaint on fraud.

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