How to avoid falling prey to mis-selling of insurance policies

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August 19, 2020 3:05 PM

Even without being misled by agents, there are ways through which policyholders have been misled and mis-sold insurance policies. Hence, policyholders should always ask questions, carefully read the proposal and final documents of the policy, and beware of fake promises made before signing off.

health insurance, life insurance, insurance agent, ulip policy is it good, mis selling of insurance policy, fraud agent, COVID-19, Corona Kavach, Corona Rakshak, working millenialsFind out the common ways of mis-selling policies to customers:

With the spread of the pandemic, more and more people have started opting for insurance, mostly health and life insurance. In India, quite a large number of insurance products are sold through brokers and agents. Even though some brokers and insurance agents may be well-intentioned, most are seen making fake promises to policyholders to get their way.

Mostly, buyers with limited knowledge about insurance products, look up to these agents hoping to get help while choosing policies that are suitable for their needs and lifestyle. However, it’s often seen that some rogue agents take advantage of such buyers and misrepresent facts or even give a distorted picture of the features of the policy while selling an insurance policy. Hence, experts suggest buyers should be aware of such agents and the ways in which insurance can be mis-sold to them while buying a policy.

Even without being misled by agents, there are ways through which policyholders have been misled and mis-sold insurance policies. Hence, policyholders should always ask questions, carefully read the proposal and final documents of the policy, and beware of fake promises made before signing off.

Here are some of the common ways of mis-selling policies to customers:

  • It’s a red sigh if the policy benefits are not explained clearly to you. Agents have to explain the policy benefits and features accurately to the buyer. Hence, if you are still unclear about them, and the agent has not explained to you the policy features and benefits properly, and refuses to explain further, know that there is something wrong. Keep in mind that you will be paying the premium for getting benefits, which should be explained in advance.
  • There are agents who exaggerate, distort, and also state false promises to make their policy show attractive rates of returns to the buyer. Hence, experts say customers be aware of such fake promises.
  • Some brokers and insurance agents promise that insurance plans give better returns than bank fixed deposits and some other investment avenues. If you’re told similar things, then know that it may not be true. Industry experts say promising insurance plans giving better returns than bank FDs is one of the most common ways of selling insurance. Hence, do not fall for statements like – an insurance policy is a safer option and gives better returns than an FD. Also, keep in mind that insurance policies and savings/investments are entirely different instruments. They should not be mixed or compared.
  • Another point where many buyers are mis-sold policies is premium payment. Agents not only exaggerate the benefits of the policy but also give misleading information on premiums. While buying a policy, commit to a premium amount that will be easily payable by you. Till the time a policyholder pays their premiums on time and for the full term of the policy, any insurer is liable to honor its side of promises made in the product. But if the policyholder has not paid the premium for the full term, the claim process changes. The insurers could also charge additional charges.
  • The claim procedure has mostly to do with the health and accident insurance policies. Policyholders need to know from their agents while buying a policy, exactly under what all circumstances can the policyholder make a claim, what type of claim is payable, and what is not. While mis-selling agents give the impression to the policyholders that anything and everything is covered under an insurance policy, which is not true. All insurance policies have exceptions. Hence, it is better to find out under what circumstances or conditions will the claim not be payable.

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