Warren Buffet is a very wise man. And a very rich wise man. Wherever he goes, he leaves a trail of awe stuck people wanting to hear him, ape him and be rich like him.
His musings are famous and his acumen flawless. The third richest man in the world needs neither advice nor money. In fact he has given away most of his wealth back to society.
So when my morning newspaper began screaming “Buy a policy, meet Warren Buffet”, I was caught off guard.
The modus operandi of Berkshire Insurance
Berkshire Insurance has opened it’s office in India. That is big news and it has made its way to every part of the globe. Read this from the Berkshire Insurance website :
Berkshireinsurance.com is a majority owned non-direct subsidiary of Berkshire Hathaway Inc incorporated in India. The company started operations in India in 2011 and is headquartered in Gurgaon. The company is as a licensed corporate agent of Bajaj Allianz General Insurance Company and sells Bajaj Allianz policies directly to retail consumers through the Internet on Berkshireinsurance.com and also through call centers. BerkshireInsurance.com currently distributes insurance for private cars that fall within the underwriting guidelines of Bajaj Allianz. However, we shall be expanding soon across different verticals, including travel, health and life insurance.
What probably got unnoticed is the fact that Berkshire Insurance is desperate to cut through the motor insurance segment rather quickly than anticipated.
In its mad scramble to get clients, it has hit upon an idea to have all its policyholders meet up with Warren Buffet. So you have to obviously buy a motor insurance policy from the company before you can get to meet the legend.
This fact has been advertised very heavily in leading dailies. The cult following of the old chap is such that invariably thousands of policies got sold as a result of this. The modus operandi had succeesed.
Photo from Berkshire Insurance website
Will you get to meet your legend after all ?
The website of Berkshire Insurance has this caveat in italics:
Due to space limitations, the invitation is restricted to one person per policy. Invitations are strictly on a first-come, first served basis.
What that means is that not all of you policy holders would have got into Taj Palace. The Berkshire Insurance company website also does not say how many such seats were available and how many had been booked at any point of time. So you would have to buy a policy and leave the rest to luck.
Berkshire Insurance really wanted investors to buy motor policies with a promise to get a few of them in the four walls with Warren Buffet. Is that correct ? Hmmmm.
What was also not clear was whether a higher amount of premium paid related to a higher probability of meeting up with the legend.
So why am I shouting hoarse ?
Simply because the selling methodology is cheap and is against the basic principles of insurance, if not against the law.
The law in insurance does prevent any thing of value to be given as an inducement or enticement to the consumer when selling insurance. The inducement or enticement could include anything not in the contract – any part of the commission received by the insurance agent or any gifts. These result in inducing the consumer via kick backs to buy a specific product. This is a strict NO NO.
It is a very common knowledge that in the 80’s and 90’s, kick back was a very common practice in India. Our Uncles-next-door-cum-LIC-agents used to pay us a small remuneration when we purchased endowment or money back policies from them. We had no option. We were ignorant, the Uncles were our parents friends and they used to brag about returns in percentage terms and insurance was used as an emotional investment vehicle.
Things changed over a period of time with the IRDA taking the mantle of Customer is King more seriously. Such practices have now been made redundant (hopefully !). IRDA has cracked the whip on ULIPs which became one of the most infamous and missold product of modern day India. We moved to a mature insurance industry but things like this leave a bad taste.
Warren Buffet has been associated with no wrong – his image is very clean and his transactions honest. So how this happened is beyond my comprehension. He is to the investing world what Sachin Tendulkar is to cricket. Sachin declined to do an advertisement for a liquor firm some 3 months back. My personal opinion is that the Sage of Omaha should have stayed away from it, but then that’s my personal opinion.
To me, this is simply an unethical method of selling a product based on a cult figure by Berkshire Insurance. It is tantamount to enticement and inducement. I am not sure what you readers think but IRDA does not agree with me, otherwise it would have blinked by now. Would IRDA allow a life advisor to sell a policy by paying a kick back to the client? How about bringing back our LIC Uncles who call sell LIC policies like pop corns.
Learnings from Berkshire Insurance
Any firm or company will go to any extent to sell its product. You, the investor have to be aware of what you buy.
In my view, products should be sold on their features.
Investors should buy products if the product suits their overall financial planning. You cannot buy a product because Shah Rukh Khan and Warren Buffet endorse it. There have been companies endorsed by your favorite films stars, gurus and sportsperson that have gone down the drain in no time.
Sure, Warren isn’t going down ever but you, the investor should know what is best for you. Buy products based on your need and the products overall fitment in your portfolio.
The products of Berkshire Insurance might be good and if they are, they did not need Warren Buffet to market it. I am myself such a big fan of Warren Buffet that I could not accept this happening. But looks like there is nothing wrong with such a practice as no one is complaining against Berkshire Insurance.
Meanwhile, Warren Buffet will remain a wise man. And a very rich wise man. Thanks to all policy holders of Berkshire Insurance who made it to Taj Palace or stood outside it.
@Radhey,
This was news everywhere, i must say an excellent work from the marketing/sales team. They managed to sell a lot of policies. Usually people spend thousands of dollars to meet Mr. Buffet but here in India you could have met him at the price of peanuts.
This is completely unethical. I wouldn’t associate myself to such companies even if it means a missed chance to meet Warren Buffet.
@Vivek,
Yes its unethical but who would not want to meet Mr. Buffet. My neighbor, a CA himself and a fan of Mr. Buffet and had bought this policy just to see the great one but was disappointed when he learnt that only a few selected people were able to attend his session.
@Rakesh, Like I said I wouldn’t and I am sure many other people who stick to their principles.
Remember we critised Birla’s stunt with Yuvraj Singhs illness on the same forum? There is a difference in selling a pen and insurance.