An MDRT tag of an insurance agent means nothing – beware!

The world of insurance sales is murky and it gets proven every day. Here’s one more.

A reader recently emailed to me that his son had taken up amongst other insurance policies:

New Endowment plan with profit : Sum Assured 14.95 lakhs, started 2016, yearly premium is Rs. 40,836

New Endowment plan with profit : Sum Assured 8.55 lakhs, Table &Term is 814 & 30, started 2016, yearly premium is Rs. 27,067

It has been told by the well known agent that, this is a “Magic plan for retire & enjoy” which is a combination of LIC plans specially researched to meet the objective of securing a financially independent life assured and his/her spouse on retirement. and the net annuity will increase every yr. to take care of inflation approx. @ 9.00%.

It is relevant to point out a few words from the message:

1. Well known agent
2. Magic plan for retire and enjoy
3. Securing a financially independent life assured

First things first. I was not sure about the well known agent thing. As I replied with my observations, he mentioned to me again that the agent was MDRT, USA.

He did so multiple times suggesting that he considered it as some sort of an certified authority, in this case, in insurance.

It’s time to break the myth.

What does MDRT mean?

For beginners, MDRT stands for Million Dollar Round Table. In the world of insurance, it is prestigious world wide club of some of the top performing insurance sales agents. The people who break into the club are required to fulfil  criteria of minimum sales, commissions and/or premium collection.

The sole focus of a would be or an existing MDRT member is to keep doing a minimum required sales / commission amount and keep the membership.

As you would notice, the word “customer’ does not appear there. It is a self serving membership and has no linkage to the good of the customer.

Unfortunately, it has been drummed up to be taken as some sort of an authority. However, nothing can be further from the truth.

For understanding, let’s take an example of “Royal Society of Surgeons”. As per Wikipedia,

…Royal College of Surgeons (RCS), is an independent professional body and registered charity committed to promoting and advancing the highest standards of surgical care for patients, regulating surgery, including dentistry, in England and Wales.

Now look up the word MDRT in Google or visit www.mdrt.org, its official website. The difference is obvious.

What my reader suffered from is authority bias, in fact, false authority bias.

As per Wikipedia again,

Authority bias is the tendency to attribute greater accuracy to the opinion of an authority figure (unrelated to its content) and be more influenced by that opinion.

He took the agent’s word assuming it came from an authority on the subject. False!

Being a member of MDRT doesn’t necessarily make one an authority. MDRT is just a high sales and commission churning insurance agent.

An insurance agent can be customer focused by his/her own choice but it is not necessary to earn this membership.

By the way, I tried to search and find something that linked MDRT with customer service. Surprise! I did not find a single link on Google.

By calling themselves an MDRT member, the agents tend to create a false authority bias. The unsuspecting customer assumes it to be similar to Dr Suraj Prakash, MD.

Next is the way the term is being used to sell, in this case the ‘magic plan’.

Now, if the MDRT is indeed a reference to the quality of work and relies on a rigorous methodology to understand and serve the customer needs than the current behaviour leaves a lot to ask for.

In my view, more things need to be disclosed to the buyer. That is definitely not the case.

In fact, in the illustration of the magic plan shared by the reader that he received from the MDRT agent, had so many loopholes in information and presentation.

The numbers were inconsistent. The first year premium was different from the other years.

The first page of the illustration mentioned that there is 9% increment in annuity once in 5 years, but on the illustration notes it said 9% every year.

I know of no such plan from LIC which has a 9% increment every year in annuity payouts. Even Jeevan Akshay annuity plan has a increment option at a simple (and not compounding) rate of 3% per year.

Do let me know if you know of one.

Next, there was no actual plan or policy name mentioned. Of course, only when the reader signed up under the influence did he come to know about the 2 endowment plans.

Now, the less said about endowment plans, the better. Their working (or the absence of it) is quite well know in the insurance world.

Finally, the focus on “financially independent life assured”.

The agent’s selling focus was clear – tax savings, risk cover via sum assured, policy loan and the income post retirement.

While he pitched financially independent life assure, there was no attempt to explain if the so called future income was enough. After all in 30 years, post-inflation, post-tax the now big-looking amount is reduced to not even enough to pay your groceries.

Will it bring financial independence for sure?

That’s probably too much to expect from the prestigious MDRT agent.

Now 2 years later, my reader has buyer’s remorse.

Well, not too late but the reparations come at a cost.

In summary, there’s nothing magical about the MDRT tagged agent.

One word – Beware!

And, get some education.