LIC's MoneyPlus Scam

The image you see here is the brochure used by LIC agents across the country for fooling middle-class people into investing their hard earned money into an investment product through fraudulent means. I am talking about LIC’s Money Plus. It is a highly successful ULIP instrument.

Not for a moment am I questioning the legality or quality of the product itself. What I am appalled with is the ethical standards of LIC’s agents. Typically what happens is that the agent shows this brochure to a prospective customer and talks to him about the ‘indicative’ returns. The brochure seems to suggest that his expected returns will vary from 20% to 30% on an annuated basis. This would mean that an investment of Rs. 30,000 will give you returns in the range of 7 lacs to 34 lacs.

In most cases the prospective customer will not think beyond the boundaries of what is being shown in the brochure. Of course, the agent can back his claim by showing LIC’s record in the past 3 years when the stock market grew exponentially. The possibility of a loss is not suggested anywhere except in the statutory warning about Market Risk which is present in a corner in the finest of prints.

A 20% yearly growth in assets over a 20-year time frame is the kind of growth that hasn’t been attained by the likes of Warren Buffet and Peter Lynch who are among the greatest investors in the world. If ever these guys come to know about the claims made by LIC’s agents…

Only last week, one of my friends fell in the trap of a LIC agent and subscribed to the Money Plus policy. This guy works in a top IT company and is a very intelligent person. If such people can be fooled, then think about people from the lower economic strata like auto rickshaw drivers and the likes. Rs. 10,000 is a significant amount for these guys. But the lure of getting Rs. 30 lacs from an investment of just Rs. 30,000 will be very difficult for them to resist.

The most worrying aspect is that this kind of sales tactics is not an isolated event. I now know atleast three agents who have used this trick. I must say that this has been a very successful method albeit unethical. It seems that whoever knows about the MoneyPlus scheme seems to have a favourable opinion on it, thanks to the lucrative figures mentioned in the brochure.

Needless to say, something needs to be done to stop this unethical practice. The regulators can do their bit by imposing strict restrictions on the commissions paid to insurance agents. More importantly, the LIC should rein in its agents.

The MoneyPlus scheme is now closed for investors and hence no one will now fall for false promises of the LIC agents- but I hope that this article gives investors more wisdom in future when one can expect more such schemes in the market.