Irdai has directed banking and financial institutions, who act as bancassurance agents for insurance companies, not to forcibly sell policies to their customers or even without their consent.
The Insurance Regulatory and Development Authority (Irdai) said it was receiving plaints from policyholders on being mis-sold insurance policies by banks and NBFCs.
Most of the plaints where cases of misselling and unfair business practices took place included: Compulsory bundling of insurance products with bank’s products despite expressing unwillingness when customers approach for housing loans; insist to buy insurance or make it a condition, at times, to get locker and issuance of policies without consent.
In other cases, customers were also forcibly sold single premium insurance policies in lieu of fixed deposit receipts stating that “this will give better benefits than fixed deposits,” Irdai said in its list of types of complaints.
Customers were also issued regular premium policies in place of single premium policies and renewal premiums were debited from their bank account without any intimation, assuring they will get double payment after a select period.
Regulations under ‘Registration of Corporate Agents’ expressly forbids compelling the customers to buy insurance, Irdai said, adding there is a specific code of conduct to be aboded by corporate agents.
“Regulation 22 (5) of Irdai (Registration of Corporate Agents) Regulations, 2015 states that the corporate agent has to disclose to the Authority the details of specified persons (SP) along with their certificate number issued by the Authority.”
“This will help to ascertain the name of the SP who was responsible for such misselling,” the regulator said.
When such cases were referred to the insurers, they said banks had taken necessary action against the erring employee.
In good number of cases it was informed that the employee has already left service and in many cases premium amount collected by insurer was refunded to the customer or he is allowed to change the mode of payment/type of plan, it added.
“It is emphasised that refunding the money or allowing the customer to change the mode of payment or plan is not the solution for this vexatious issue. Instead the banks/NBFCs should have a system which should proactively detect and discourage such kinds of misselling/forced selling/wrong selling,” it said.
Irdai directed: “You (Banks/NBFCs) are hereby advised to follow the regulations cited herein scrupulously and bring it to the notice of Specified Persons/concerned officials that such complaints are being viewed seriously by Irdai.”