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Insuring against Insurance

Mis-selling of insurance is rampant, admit insurance heads

If you are a policyholder of a life or non-life insurance product, chances are that your policy needs have not correctly been met. The agent, who so sweetly and subtly coerced you into opting for that policy, has, most probably, unknowingly or otherwise, sold you the wrong product. Mis-selling of policies has been going on for a while; of late, it has assumed greater proportions. At the recently held CII Insurance Summit, industry leaders admitted to the issue of mis-selling of insurance policies and gave insights into how and why this has been carrying on for years.

Said TR Ramchandran, CEO and MD of Aviva Life Insurance Company, “The rising instance of mis-selling across insurance categories is worrying. This is primarily because of financial illiteracy of the advising agents.” Nitish Asthana, senior VP, direct distribution and telcassurance, Bharti AXA Life Insurance, concurs, “Financial illiteracy in the distribution channel itself is the main cause of mis-selling. It leads to under-insurance and improper coverage for the insured. The problem lies in a lack of training on the part of the employer for need-based policy selling.” He further added that inactivity of agents is another cause for concern. He said, “There are three million agents in the market currently. But only 20% of these are productive.”

Is there a way to curb this menace? According to Sanjiv Bajaj, joint MD, Bajaj Capital, the proposed 2.25% cap on insurer’s premium charges will help arrest mis-selling. He said, “We can’t control mis-selling by doing micro-management. We have to do macro things, like having a 2.25% cap on premium charges, which will make a lot of difference.” He attributed mis-selling to a lack of long-term relationship orientation with the customer. “Mis-selling is happening more at the employee level and not the agency level, as is the perception. This can only happen when there is one thing missing in the relationship, and that is relationship. If there is emphasis on having a relationship, then mis-selling cannot happen as the advising agent wants to thrive on the life-time value of the relationship.”

While opinions on the extent of mis-selling may differ, as also what needs to be done to control it, for you, as an individual, there is little option but to be vigilant, to ask around, read the experiences of different people and safeguard your interests.

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