At the recently held CII Insurance Summit, industry leaders blatantly exposed the issue of mis-selling of insurance policies and gave insights into how and why this has been carrying on for years.
If you are a policy holder 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 signing that policy, has most probably, unknowingly or otherwise, sold you the wrong product. Mis-selling of policies is going on for a while but has assumed greater proportions as of late. This was the subject of intense discussion at a recent insurance summit organised by the Confederation of Indian Industry. Said T RRamchandran, CEO and MD of Aviva Life Insurance Company, “The rising instances of mis-selling across insurance categories are worrying. This is primarily because of financial illiteracy of advising agents.”
Concurs Nitish Asthana, Senior VP, Direct Distribution and Telcassurance, Bharti AXA Life Insurance, “Financial literacy in the distribution channel itself is the main cause of mis-selling. It leads to underinsurance and improper coverage for the insured. The problem lies in a lack of training on 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 things. 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 misunderstanding. 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.”