Life insurance travails even for non-poor!

But I sensed a good opportunity when Rajesh (my driver and Man Friday) approached me for a hike in salary. I agreed since a hike was due anyway,but on the condition that a part of the hike is used to buy adequate life and health cover. I suspect he readily agreed because the hike I was proposing was beyond what he thought a dyed in the wool marwari like me would offer. So,I gave him the hike and helped him getting his health policy as well. That was a real cakewalk since I assisted him in buying a health policy online. The problem occurred when he tried to buy life insurance. All the online options declined to issue the policy as it got rejected on underwriting guidelines probably since he was a non matriculate (7th pass) and earned around Rs. 1.50 lakhs a year. This,when he was otherwise young (32) and perfectly healthy with no medical disclosures.

Perversely Rajesh was happy that the term life policy was declined since he was now enjoying a salary hike without having to fork out the life insurance premium. So much for my skills at imparting financial literacy.

There the matter rested till his wife suffered from a bout of malaria and had to be hospitalised. For the first time in his life Rajesh realised the magic of insurance as almost the entire hospitalisation expenses (the word almost used here will be the subject matter of another article on another day) were reimbursed to him within a month of his wifes discharge from the hospital and he was able to repay the advance that he had taken from me as well as the loan taken from his brother. This rather unfortunate illness had at least one silver lining. Rajesh was a passionate convert to the benefits of insurance.

He now started pestering me to get his life insurance as well. Then began the saga. I tried getting him the cover from every single company offering online term policies but without an exception all of them declined to do so. Some of them mentioned that underwriting would be done manually and they would be contacting Rajesh soon but nothing more was ever heard from any of them. I then tried getting him a manual term policy from one of the leading private insurance companies but after taking his premium deposit and making him fill the application form and submit documents like his passbook (of the account into which his salary was credited) they declined the policy with a reason that seemed to be in Latin. It is reads like: Due to RCU reject. I checked with a senior marketing official of the same company but he had no clue what this rejection reason meant. If somebody can decode that,please let me know.

I suddenly remembered a good friend who was an LIC agent. So far I had shunned the PSU insurer believing that they preferred to be your partner in investing your money rather than providing you a pure risk policy and also because their term policy was quite expensive. But I decided to give it a good old college try.

Surprise!! Surprise!! My agent (and friend) was not only supportive of the application although it netted him a negligible commission but also took personal interest to make sure that the policy was issued. There was a half-hearted attempt to try and sell an endowment policy instead of the term policy but on realising that it was the term policy (Jeevan Anmol) or nothing he went ahead. Rajesh is now insured for Rs 10 lakhs. Just a small side script is that he has asked me for a bigger hike to compensate him for the higher than expected premium on the life insurance policy.

The good thing is that I am reasonably sure he will continue with the policy whether or not he continues to work for me in the future.

All this set me thinking. If this was the experience of somebody who had me as a guide then what would be the fate of his counterpart who did not have somebody to guide him. There was no use to Rajeshs financial literacy on the need and benefit of life insurance if he was not able to actually buy the product. None of the friends I spoke to in the life insurance industry could give me an answer whether mortality data suggests that non-matriculates with lower middle class incomes but who are otherwise healthy are at higher risk of death. And if there is indeed data to suggest that they are somehow more at risk of death surely they will also be more at risk for hospitalisation expenses as well but the health insurance industry thankfully does not discriminate against them. On the investment side thankfully most of the options including mutual funds,NPS as well as the traditional PPF,bank FD,etc,continue to be available to people like Rajesh.

So why does the Life Insurance industry discriminate against them. If there is an answer to this riddle would be glad to hear about it?

Disclosure: Neither the company I work for (Apnapaisa) nor I am an insurance agent or insurance broker. However LIC as well as most of the other private sector life insurance companies that are referred to in this article are advertisers with Apnapaisa.

Harsh Roongta is CEO,Apna Paisa

Note: The views expressed are those of the author and not necessarily those of Expressindia.