Last Updated on April 5, 2026 by teamtfl
Years ago, I received a comment on one of our insurance articles from an insurance advisor based in Delhi. While I was writing my reply, another comment arrived — from a reader in Bangalore who had just been duped by an agent.
Both perspectives were completely different. But they had one thing in common: both were in deep pain.
That was in 2011. I have been thinking about this for 15 years. And in 2026, I finally have the clarity — and the conviction — to say what I believe.
⚡ Quick Answer
The life insurance industry in India has a structural problem: agents earn high upfront commissions (10-35% in year 1), which incentivizes selling expensive products over suitable ones. Honest advisors exist — but the system punishes them. IRDAI is moving toward trail-based commissions (like mutual funds), and the Insurance Fraud Monitoring Framework 2025 takes effect in April 2026. The real solution for consumers: separate insurance (term plan) from investment (mutual funds), and consider a SEBI-registered fee-only advisor who earns zero commission.
The Pain of the Insurance Advisor
Here is what Dhawal (name changed), an insurance advisor from Delhi, wrote to me. I am preserving his words — raw and unedited — because they deserve to be heard:
“Hemant, I have been in this line for 4 years now. Whenever I sit with a client, the first thing they DO NOT WANT is a term plan. To them, this concept is FOOLISH. They want plans that give returns at maturity — in 3 to 5 years. Nobody is ready to look into the distant future.”
“I meet 100 people a month. 17-18 are convinced to proceed. Finally, 4-5 convert into policies. For these 4-5 cases, I am on the phone half the day — working Saturdays, Sundays, holidays — travelling across NCR by car, bike, metro. I get 10-20% commission upfront and not more than 3% on renewals.”
“And the client treats me like a servant — ‘Bhai Saab, POLICY nahi aayi? Mere phone number galat chhapa hai!’ After a year, calling me to pick up renewal premiums, asking me to check portfolios of other companies I do not even represent.”
“The only thing I ask — please differentiate between an AGENT and a FINANCIAL ADVISOR. If your neighbourhood agent is a part-timer who brings his sales manager to every meeting, or passes on 30% of his commission to close the deal — he is an AGENT. Avoid him. But if the first thing he advises is a term plan, has been working full-time for years, has a genuine client base — he is an ADVISOR. Trust him.”
The Pain of the Indian Consumer
Around the same time, Shinoj (name changed), a reader from Bangalore, shared this experience:
“A LIC agent told me that LIC has launched a new ‘attractive’ plan called Retire and Enjoy. I searched — LIC’s website did not even mention it. But agents across India were advertising it.”
“Then I discovered the truth: it was not an official LIC product. It was a combo plan created by agents — stacking multiple LIC policies starting in consecutive years. Why? Because each new policy pays first-year commission. The whole thing was designed to maximise agent income, not customer benefit.”
“My questions: Who is behind this all-India spread? Does LIC have a role in this?”
Both Are Right. And That Is the Problem.
In 2011, I wrote: “Let readers decide what is wrong and what is right — end of the day it is their financial life.”
I was being diplomatic. I should not have been.
Here is what 25 years of practice has taught me:
Dhawal is right. Most honest insurance advisors work incredibly hard for modest income. The public does not understand term plans. Clients treat advisors like errand boys. The 4-5 conversions out of 100 meetings is real — the rejection rate is brutal.
Shinoj is right. The commission structure creates perverse incentives. When the agent earns 30-35% in year 1 for selling a traditional plan but only 10-15% for a term plan, which one will most agents push? The system does not just enable mis-selling — it rewards it.
The problem is not bad agents. It is a broken system.
What Has Changed Since 2011
| Then (2011) | Now (2026) |
|---|---|
| High upfront commissions (30-40% year 1) | IRDAI actively moving toward trail-based (levelled) commissions like mutual funds |
| No fee-only advisory option | SEBI-registered investment advisors (fee-only, zero commission) now available |
| Limited consumer awareness | Online term plans, comparison platforms, social media education |
| Minimal fraud enforcement | IRDAI Insurance Fraud Monitoring Framework 2025 (effective April 2026) |
| Agent-created combo plans rampant | Still exist — but easier to verify on insurer websites |
| IRDA | IRDAI (renamed 2014), Bima Bharosa complaint portal launched |
The trail commission model — if IRDAI implements it — would be the single biggest reform in insurance distribution. Instead of earning 35% in year 1 and almost nothing after, the advisor would earn a steady 5-8% every year the policy stays active. This aligns the advisor’s interest with the customer’s: the advisor makes more money when the customer keeps the policy, not just when they buy it.
What Should You Do as a Consumer?
Step 1: Separate insurance from investment. Buy a term plan for insurance. Buy mutual funds for investment. Never mix them. This single rule would eliminate 80% of insurance mis-selling.
Step 2: If an agent pitches a plan you have never heard of — especially a “combo” plan — verify it on the insurer’s official website. If it is not listed, it is agent-created.
Step 3: Ask the agent what commission they earn on the plan they are recommending. An honest advisor will tell you. A salesperson will get offended.
Step 4: Consider a fee-only advisor. A SEBI-registered investment advisor charges a fee — but earns zero commission from any product. Their advice is unbiased by definition.
Step 5: If you have been mis-sold a policy, file a complaint on the IRDAI’s Bima Bharosa portal. You can also approach the Insurance Ombudsman.
Tired of being sold products instead of given advice?
A fee-only advisor works for you — not the insurance company. No commissions, no product-pushing, no hidden incentives.
Dhawal was not the villain. Shinoj was not naive. They were both trapped in a system that rewards the wrong behaviour. The day India moves to trail commissions and fee-only advisory, both the advisor and the consumer will finally be on the same side.
The right advisor does not sell you a policy. They sell you peace of mind — and that should be worth paying for directly.
💬 Your Turn
Are you an insurance advisor frustrated by the system? Or a consumer who has been burned by mis-selling? Share your story — both perspectives matter. The more we talk about this, the faster the system changes.
This post was originally inspired by reader stories shared by an insurance advisor from Delhi and a consumer from Bangalore. Names have been changed. Their words — lightly edited for clarity — remain their own.
It is a decent post. I concur with your focuses. Much thanks to you.
Thanks Ravi for appreciating.
it has been a long journey with tfl. every saturday night when e-mail reaches my inbox, i become impatient to read it until the sunday morning. since i m a doctor, the world of finance is a whole new thing for me. of late, it has opened my eyes. immediately i subscribed to fundsketch goal based planning 4m tfl. now i m feeling happy that at least now i m in the right path. thanks for doing this wonderful job for the people of my motherland. what to say more that guy from the remotest place of odisha like me are subscribing to arkfp for better financial health. the scenario is definitely changing.
I have 2 policies , ICICI Pru in which I have paid 3 instalments and HDFC Life in which 2 instalments have been paid. What is your advise, to continue or to quit ?
Is it correct that Advisors or Agents who get their name in our policy documents corner a major share of the earnings ? If so how do I get their name removed from my policy ?
It is nice post.I agree withb your points.Thank you.
sir i just started my part time career with LIC as an insurance advisor. I don’t want people to take just policy but i also want to help them as much as possible ..
i am not from a financial background but recently i started to like economics and finance(just for knowledge) very much.Thanks for your articles ,i am currently pursing my b.tech(5th sem,mechanical), is there are more specific articles ,which would help me to become a better financial advisor.
Yes, I agree with you, but PPF has investment limit of Rs. 1 Lakh Annually only.
Hi nalini compare the term plan and ppf of same tenure itz the best strategy.on one hand u can cover ur life with such a small amt every year on the other hand invest the difference in ppf and see the maturity amt on excel sheet.
I think the whole life insurance plan is much better than term plan. In whole life insurance the insurance cover will increase every year and good amount is given after death to the nominee. If the person survive at the age of 80 years the he can take the maturity amount which is indeed is very high.
Hi,
I just want a suggestion from you on my problem:
I am working as Financial Advisor in a reputed co. for the last four years. But, now I want to change my Unit Manager due to my personal reasons. Is it possible as my code was generated under him.
Please reply me as earliest as possible.
dear sir, how you mange all your time with articles, business, web page reply on messege board etc ps tell how you do allthis how much time u devote for all this if u ps give chart of time u allot thanking you manoj
I am Financial Advisor. In my opinion, the whole life insurance and convertible term plan is better option for those who don’t want to take term Insurance. You can email me for details.
Dear Nalini,
Am an nri. Wife has business in India. To get deduction under 80C I need to take up some life insurance plan in her name. She wants to pay an annual premium of INR 100,00/- . We want to take up a policy for 5 years maturity say 5 to 10 years. Will you please advise which insurance plan and of which company will she take.
Best regards,
S. Chatterjee
dear all what a “vidambana” person pays 8000/- premium for his car insurance which is materilistaic but he will not spent 5000/- for term plan for his life which can not be revocable………….
Rightly said Manoj “vidambana” 🙁
thanks for giving place for my comments thanks from bottom of my heart…….
dear bani, it is misfortune of indians that qualification to become insurance advisor (so Called) is 10 th pass how one can plane for some ones life who is just 10 pass finance is very complicate subject since last few year sebi making stringent law for MF distributor but what irda doing there is lot of miss selling in insurance but due to strong lobby of agents irda is unable do any thing there is a strong mistake of insurance buyer instead of asking benifits of policy he start with what rebate or commission agent will give his intrest is in commision not in benifit, another perseption investment in insurance insurance is not investment but safety thanks bani to provide good knowledge to people
I Agree…. but I believe these days IRDA is taking important actions – let’s see if they will be able to transform this industry.
Hi Hemant,
I had a query regarding purchasing online Term Insurance Plan.
I hometown is lucknow but I am presently working in some other city and My Job is transferreble also.
I intend to buy online term plan of HDFC through some agent or HDFC Life Relation ship manager. though I have not finilised yet.
Should I purchase it from my present city where I am working or should I take it from my hometwon only.
Does it make any difference from which city Plan is purchased if I purchase directly or through any Agent/Relationship Manager.
Is it possible to transfer the policy to other city once policy is issued.
It is possible in case of LIC, But I am not sure about other companies.
I have a term insurance from Max new york , I am planning tu buy one Online Term Plan and One Amulya Jeevan though one of my friend who is employee of LIC.
Dear Hemant ji,
As above Mr Dhawal explained his story. I too would like to make a comment here. That there is a lot of difference between Agent & Advisor.
I think if one gives incentive on first premium of Policy means He is an Agent
and if not He is an Advisor. No one can expect service or good advice from an agent where it is possible to expect from an Advisor. End of the day it is the discretion of the person whom to elect for our financial advice.
Hi Anand,
Agree with you – clients should see pass backs are red flag to select an advisor.
Hi all, I want to comment on “retire and enjoy”-the so called mixed product of LIC. The thing is that it is not a core product of LIC. Based on the individual characteristics of few plans and taking risk and reward propositions duly into consideration, the same has been designed and presented. It is not a faulty nor idiotic presentation. It is a customization. That’s it. Actually you will find a mixture of 1 or 2 plans split into volumes depending upon the requirement of the client. This task is actually a laborious one both for the advisor and LIC. Inspite of this, I hope it would yield good result for the extra effort put in by the advisor. Please trust me, nobody or no master mind behind this. Any prudent advisor or even a prospect can indulge in such a jugglery but within the frame work of insurable interest.
dear hemantji
i am an agent of LIC of india. I am selling term plan from 2005 itself. after taking so much pain and lot of efforts to complete a term plan i am seeing that even though the people are well educated they loose interest in paying premium. they feel i am losing around 2 lakhs as premium. I explained each and everybody that in any policy the mortality charges will be included.
so i forced to sell bima gold in lieu of term plan.
There are a lot of educated people who are being fooled only because they don’t want to read the things but just want anyone to come and explain it to them. Now this is where the agents play their game….they simply tell what is required to sell the policy and not the odds of it.
Moreover, there is need to check the actual terms n conditions. the * sign of course is always there.
Hi Jashanpreet,
The * sign is the best invention in advertising & financial world. It’s even bigger invention than 0 by Aryabhatt.
Add * with some FREE – Indians will jump on it. 🙁
I fully agree with Mr. Dhawal Sharma. Investors or rather I should say short term traders are equally responsible for all this “bad ULIP” era. Not all ULIP’s are bad. There were many ULIP’s which were given good IRR, infact more than new plan’s IRR, but customers want good returns in short span of time. They check fund value just after months of purchasing ULIP. At the time of signing application form, they behave like long term investor, but after 3 years, they become genius in finance and just stop their premium. Then, they blame advsior for mis-selling. They are graduates, MBA, PhD, good businessman but can not understand simple english and maths.
Yes, I agree some ULIP were / are not good for investors. But who made them and approved them. It’s company and IRDA. Do we have a single person who complained in Ministry of Finance or court for making such bad plans. No. Because it’s easy for them to blame advsior.
The summary is investor should make cordial relationship with advisors and trust them.
@GOPAL – Thanks, at least someone is out there who understands the POWER OF COMPOUNDING and LONG-TERM GROWTH..
Show me one investor who has invested in ULIP for last at least 6-7 years in equity fund of his INSURANCE COMPANY, and i can say for sure that he is in profits..
As you rightly said, everybody wanted a MAGIC WAND and not ULIP, which will give them 100% profit, that too within 2 to 3 years with INSURANCE, without any CHARGES…he he he, not possible in practical/actual world 😉
Nice article
What Dhawal mentioned in the comment is called “mis-buying” , people have so much greed that they go beyond the height of stupidity . Some readers on my blog want to do CFP so that they can save Planners money , Some readers want to become an MF agent or make his wife become the agent so that commissions will be “Ghar ka paisa ghar me” .. Unless public get their eyes off the small , futile things , they will never get over the financial mess , Just like people have bad “character” in life , its bad “money Character” ! . We at jagoinvestor call it as “having a bad relationship with money” . These kind of people do not have a bad financial life , its reverse , bad financial life has this kind of people .
Btw, I could sense that it was dhawal’;s comment before I saw this name at the bottom , because we had long coversation over phone on this point many weeks back where he said exactly same story to me , The agent commissions is exaggerated in India and after this ULIP commission has come down to 5% , I am sure the situation will ease a bit
Manish
Thanks Manish for sharing insight.
I always keep saying buyer needs to be Be-Aware & Beware. But be-aware doesn’t mean you need to become MF Agent 😉
thanks manish for endorsing my views…Just found another plateform to let out my frustration on being pinpointed for every evil in INSURANCE SALES.. (Me means entire FINANCIAL ADVISOR fraternity)..
I think if investors can do a check in the internet on what they are parking their money, most of the issues will be solved. Because agents are ready to go to any extent to get business. It’s the precaution of the investor that matters.
Also if we ask more details to them, they will transfer the call to someone else. This clearly indicates that the first caller does not know anything except to repeat “Sir we have an attractive plan for you from … “.
Just one more update: Yesterday I received call from SBI’s agent regarding pension plan which guarantees 13 percent returns. There was no mention to this in the net. Just like that the agent is telling…
Regards,
Shinoj
Please dont confuse a telecaller with an AGENT..or any x,y,z person visiting you for insurance plan without checking his IRDA license..
If public at large take these few small things in consideration, they will be meeting the right person at the right time, and getting right advice..
..because telecallers are trained in such a way to call/communicate in such a way that listner listen to their SALES PITCH attentively and get into trap..
Even if you like something being offered to you by the telecallear, always insist on having PRODUCT BROUCHER and everything shown to them in WRITING..
Hi Dhawal,
Agree with you but now insurance bubble(filled with grubby water) has grown so big that it is really tough for a layman to identify who is right & who is wrong.
Dear Dhawal, telecallers are not independent entities. Big companies will use telemarketers for running their business. As a way, i feel they are agents only, working for their employers. If they know what they are telling, they are doing unethical work. But of course, these days no body matters ethics.
@Shinoj – Agreed telecallers are not independent units but then they are not the final authority unto them as well..Telecallers are just props, educated/trained in such a way to entice the listner that he gives his consent and to take his consent, the listner wants to listen only THE GOOD THINGs..
I am not at all justifying telecallers…just want to say that next step after telecalling should be meeting with a knowledgeable sales person with the product broucher in hand..
..and after the meeting, the prospect find the product good enough and everything told to him by telecaller in the product broucher, a perfect sales take place – and in this case, TELECALLER is a boon – both the client as well as the company..
Again, my humble request to everybody is to be IN ALERT MODE after telecaller step and spend few more minutes on the product and it would be WIN-WIN situation for all..
hii,,
I have IRDA licence even though people are blank and scared..m wondering even educated people unable to understand .
Hi Shinoj,
Yes internet is really helpful but internet users in India are still very low. But the problem is there are many people who have access to web but they not using it.
Who can’t read & who don’t read – both are illiterates.
@Hemant/Vikrant – add to this, i know quite a lot of people who have purchased a certain plan because the telecallar told them that this product being introduced in DIWALI season is for limited period and if you invest upward of Rs 35,000 or Rs 40,000 you will get one GOLD coin/JUICER/SHIRT etc..How ridiculuous is this reason to take up a policy?? and then they say that agents/companies are at large, doing misseling all the time??..
If only public too open up its eyes, the world will be a better place (At least financially)..
Thanks Dhawal for sharing your experience with readers.
I think this will be helpful for them to realize their mistake of not taking term plan.
You bet the advisor is correct, I am not a FA, however people in office come to me and ask me about Financial products/Insurance and so on and when i tell them about term, their reaction is “marne ka baad mujhe thodi na milega” I needs something that gives me a good return with insurance. How much you explain them, they still don’t understand.
On the other hand i have seen FA talking and fooling people left and right, i know someone who invest in ULIP every 3 years, only cause the agent returns the entire commission to the investor, how stupid. there are so many agents who just fool around and give you wrong information.
Hi Vikrant
It’s always good to hear views from readers. What you are saying is absolutely true.
Must Read: Psychology on an Indian When it comes to life insurance.
https://www.retirewise.in/2010/12/psychology-indian-life-insurance.html
hii,,
heheh.,,,,its very true story being Financial advisor i am facing same problem.
We believe that insurance companies are covertly supporting mis-selling. These are just some of the stories we have done on this
Insurance through SMS, a Sick Marketing Strategy
Legitimate agent runs MLM scheme under a murky cover
Pyramid schemes run riot under insurance regulator’s nose
Reliance insurance agent involved in chain-marketing scheme
We have given a chance to insurance companies to reply. They hem and haw. They don’t give us clear answers in writing. IRDA is fast asleep. Investors beware.
Thanks Mr Debashis for visiting our blog & sharing your views.
I really appreciate Moneylife’s contribution in personal finance world. Your articles & research are just awesome – I also like that you don’t sugarcoat them.
Hi Hemant,
You and Manish are doing a great job too . I know the cost and effort to do independent research…
Keep it up
Thanks Debashish for counting us.
You rightly said independent research is really time consuming – hope readers also appreciate our effort.
I enjoy doing research & now I have a platform to share it. 🙂