Lakhs of brokers and agents sell insurance in India, and even though some are well-intentioned, most are seen making fake promises to get their way. Customers with limited knowledge look up to agents who will help them choose policies that are suitable for their need and lifestyle. But at times some rogue agents take advantage of the situation and sell insurance by misrepresenting facts or even a distorted picture of the features of an insurance policy. Experts suggest while buying a policy, buyers should be aware of the ways in which insurance can be mis-sold to them.
All agents might not want to mislead you, but there are ways through which many policyholders have been misled and mis-sold. As a policyholder, you should always ask questions, be aware of the promises made, and read the proposal and final document carefully before signing off.
If you are also planning to buy an insurance policy, you need to know about the common ways insurance policies are mis-sold:
- Policy benefits are not explained clearly
If the agent has not explained you the policy benefits and features accurately, or you are still unclear about them, and he/she refuses to explain further, know that there is something wrong. Industry experts say customers should understand that they are paying a premium for getting and keeping an insurance policy, hence, the benefits as in the protection and savings of the policy should be explained in advanced.
There are many agents who exaggerate, distorts, and also state false returns to make their policy show attractive rates of returns. Note that if something appears too good to be true, then it probably is.
- The insurance policy gives better returns than Fixed Deposits
If you’re promised that insurance policies give better than Fixed Deposits, know it is not true. This is one of the most common ways of selling insurance. For instance, if you are made fake promises like an insurance policy is a safer option and gives better returns than an FD, do not fall for that.
A life Insurance policies in general offers protection to the policyholder in case of untimely death and the surviving family members get a sum assured from the insurer. The sum assured/protection benefit is provided after the customer has paid a premium. Some policies also provide other benefits be it in the form of money back, maturity benefit or amount payable in between the term of the policy. These policies generally do not offer higher returns than FDs.
- Premium payment
Agents tend to give misleading information on premiums and exaggerate the benefits of the policy. Till the policyholder pay his/her premiums correctly, on time and for the full term of the policy, the insurers are liable to honor its side of promises made in the product. However, if the full term is not completed by the policyholder, the claim process changes also there may be charges or deductions that the insurer charges. Hence, commit to that premium amount which will be easily payable by you.
- Claim procedure
Mostly to do with the health and accident insurance policies. The agent while selling a policy should clearly state exactly under what all circumstances can the policyholder make a claim. Also, what type of claim is payable and what is not. Fraud agents also give policyholders the impression that anything and everything is covered under an insurance policy if the policyholder goes to a hospital or meets with an accident, which is not true. To not be mis-sold it is better to ask the agent under what circumstances/conditions are claims not payable.
For instance, if you are a smoker and you declare yourself as a non-smoker while buying the policy, in case of a life insurance policy, upon your death, the insurance company can refuse to pay the death claim to your family. Whereas in the case of health insurance policy, many ‘exclusions’ might get added to your policy for instance, for instance, certain hospital claims might not be payable, OPD treatments not included, longer waiting period, or worst-case scenario, you claim could also get rejected. Before signing a policy read the policy document carefully and understand the clauses.