Life insurance industry needs to tackle mis-selling of policies
Mis-selling has assumed such alarming proportions that HDFC Life served a notice on LIC for its agents leveling allegations of mis-selling against it, while the LIC has come out with advertisements cautioning policyholders from unscrupulous entities offering misleading rewards.
The bancassurance channel has been added to the already crowded list of sources of mis-selling. The free-look period expires due to manipulation in delivery of policy with the result that the clients feel cheated. There is an imperative need for the life insurance industry to instil confidence in the minds of the public to fulfil the role of economic prosperity that it enshrines. It needs to be pro-active in identifying and tackling the problems of mis-selling to regain the trust of the people.
Following ways could be considered, both by the insurer and the regulator, to check rampant mis-selling.
Regulations to proclaim mis-selling as a fraud in tune with the Regulations “Prohibition of Fraudulent and Unfair Trade Practices relating to Security” issued by Sebi for sale of mutual fund schemes;
In order to check money laundering and quality of sale, the data of Cibil should be referred to verify or record financial standing of all customers. It should be mandatory after a particular limit;
People need to be involved in the sale process. Most clients sign on the