Max New York Life Insurance has come up with ad campaign titled ‘Aapke Sachche Advisor’ to change consumers’ perception of an industry badly tarnished by rampant mis-selling. The ad only proves admission of guilt and desperate efforts to overcome years of misdeeds

Max New York Life Insurance has just released a television commercial (TVC). For the first time, an insurance company is not talking about how your family can be safe and secure; how your child’s dream of becoming a pilot, or how you can retire with your head held high. The TVC is about mis-selling.

The advertisement features an agent, or the ‘sachche advisor’, trying to sell a Max New York Life product to a potential customer. In the process of selling, we encounter another character, supposedly the devil, who, in the background, is forcing the ‘sachche advisor’ to mis-sell the product by giving bad advice. However, the agent disregards the devil, and instead sticks to his ethics. The customer, ever-trusting, asks where is he supposed to sign. In trying to portray that Max New York Life is a great customer-oriented company employing ethical agents, what the ad really does is to openly admit the menace of mis-selling.



It is nice to see that an insurance company has taken the high moral ground but what can it live up to it?

Today, a reader in www.jagoinvestor.com complained that while he took a home loan of Rs45 lakh from Axis Bank, when the first disbursement was made “he came to know that the total sanctioned amount was Rs49.25 lakh. The balance Rs4.25 lakh was the insurance policy that the bank has paid. “This was never told to me clearly and I cannot bear such a loss,” complains the reader. The purpose of bank was to earn unlawful commission from the insurance agency at our cost. Also, the cost of insurance is much higher than the prevailing market rates. I and my family feel cheated by this unscrupulous activity and seek you help to save our hard earned money. As nobody in the bank replies properly and only assures that the insurance will be returned if loan is prepaid, this is only a way of fooling customers. The bank has not only disbursed Rs4.25 lakh wrongly but also charging interest on the same.” The insurance company? Max York Life! We are not surprised. Mis-selling is generic the way insurance companies work. It is embedded in the structure of prices and commissions.

In our recent cover story dated 19 April 2012 (This can happen to you!) we had highlighted gross cases of hard-selling and mis-selling, where customers were sold toxic policies like Highest NAV Plan and Classic ULIP, causing anguish and financial losses. There was even an advisor contest by Reliance Life Insurance to give incentives to its agents to jam down these very unsafe products down customers’ throats so that agents could win big prizes such as a Honda City car. Earlier this year (Reliance SIP Insure investor caught in a trap), an investor had fallen for Reliance’s Tax Saver Fund, a mutual fund-insurance combo plan, where merely switching bank accounts would kill all the benefits accrued. The environment has become toxic and conducive to mis-selling, but the regulators are apathetic.

If mis-selling was not common and Max New York Life was not deeply concerned about it coming in the way of increasing sales, there would not have been any reason to do an ad around it. Since the majority of insurance policies are wrong products sold to wrong people, this rare confession of Max New York Life is welcome. But there are several things wrong with this TVC.

1. The key factor in large scale mis-selling insurance is steep sales targets and juicy commissions. While the Max New York Life highlights how a simpleton agent is able to remain ethical, it does not say whether he is doing is doing this out of the goodness of his heart or what is impelling him to do it. After all, there is no mention that Max New York Life has reduced commissions and also steep sales targets which are the prime reasons for mis-selling.

 2. The maximum selling and (therefore mis-selling) is not done by innocent-looking agents but devils in pinstripes—the relationship managers of banks who are highly paid and are incentivised to sell in order to meet sales targets. They are constantly under pressure to meet those targets, regardless of the customers they meet, and thus resort to mis-selling. Despite this, the regulators do not particularly care about coming down on hard-selling by big banks. Indeed, the Indian Banks’ Association has actually stated that it cannot and will not prevent mis-selling by banks.

A press release of Max New York Life on this ad quotes Anisha Motwani, director and chief marketing officer as saying, "The life insurance industry is maligned by a perception of large-scale mis-selling, primarily on account of the agents who take advantage of the consumer's lack of financial understanding and ignoring the actual need of the customer. This however is not true for all agents and hence it would not be appropriate to tar the image of an entire industry based on such perceptions.” Thus, according to her, there are ‘good’ agents and ‘bad’ agents. How will the customer identify which ones are ‘good’ and ‘bad’?

The answer, according to Ms Motwani, is by merely gauging the behaviour of insurance agents rather than products.  She further adds, “This campaign has been designed to extend itself beyond promoting life insurance policies and products and begin establishing trust with the consumers by educating them on how to identify a customer-centric company and evaluate the correct selling behaviour of the agent keeping in mind the needs of the consumer."

The campaign is essentially pleading television viewers to ‘trust’ agents and that Max New York Life is saintly. The underlying message also tells the public that mis-selling will not happen from them in future. However, in a commission-based model, mis-selling is bound to happen, and when it does happen, it will open the doors for investors and policy holders to sue Max New York Life on the grounds of the being misled by the TVC? That mess of course would be handled by the legal department and not the marketing hotshots in the company or the agency Ogilvy & Mather who have thought up this gimmick.

The implicit admission of the industry’s misdeeds, while brave, is false because it does not address the core problem of unethical selling in pursuits of stiff sales targets and fat commissions.