In a recently published article that appeared in a respected financial newspaper the topic of customers facing problems in their insurance policies was covered. The article quoted excerpts from an analysis done by a social media marketing company. The analysis covered complaints posted by consumers on various social media channels regarding three insurance topics:
- Settlement of policies
- Renewal of policies
- Payment of first premiums
Of the three points analysed, maximum complaints were registered in the ‘settlement of policy’ subject. A deeper analysis revealed that mis-selling was the biggest trouble spot, followed by policy termination, online renewals and missing documents.
What is mis-selling?
In a definition quoted in Wikipedia, “mis-selling refers to the deliberate, reckless, or negligent sale of products or services in circumstances where the contract is either misrepresented, or the product or service is unsuitable for the customer’s needs. For example, selling life insurance to someone who has no dependents is regarded as mis-selling.”
What steps are being taken to prevent mis-selling?
According to the article, ‘the Insurance Regulatory and Development Authority made it a mandate to make ‘insurance processes’ more transparent and customer centric. Various steps have been taken in this direction in the recent past to improve product design and bring changes in sales practices.’ There are also various regulatory measures that the IRDA has put in place to provide a framework for protection. Measures like:
- Option of Free Look Cancellation within 15 days of receiving a policy document
- Prohibiting misleading publications for soliciting or selling of policies
- Licensing of insurance intermediaries such as agents and brokers
- Prescribed code of conduct for operations
But the numbers of complaints that the study received paint a different picture. So, what can you as a consumer do to stay away from such unethical practices? The answer is simple: stay alert! stay empowered!
How can you do so?
As said earlier, our objective at Power to Consumer is to not just resolve your complaints, but empower you. And we believe the best way to empower consumers is to make them aware of case studies covering the subject of mis-selling. This way you can be aware of the pitfalls and avoid getting trapped into one.
- Case Study 1: Yashu Vashishath vs. Birla Sun Life Insurance Company
Yashu Vashishath, a student from Chandigarh, had approached Birla Sun Life Insurance Company to get a policy that catered to the requirements of his admission to a university in Wisconsin, USA for further studies. He paid a premium amount of Rs. 1 Lakh and left for US. On reaching US, he realised that the policy that he is holding in his hands is worthless, as it was not recognized by the University. [su_highlight background=”#99fbff”]Birla Sun Life Insurance Company in the spirit of selling an insurance policy withheld back the crucial information that their policy is not valid overseas. [/su_highlight]. This was a clear case of mis-selling on the part of the insurance company.
Yashu took the case with Insurance Ombudsman who directed the Company to refund the paid amount, but they paid no heed. He then approached the UT District Consumer Disputes Redressal Forum at Chandigarh who withheld the decision, and direction of said Ombudsman; and accordingly awarded only the refund of surrender value to Yashu Vashishath.
- Case Study 2: Uni Ply Industries Limited vs. New India Assurance Company Limited
In a second case, the designated National Commission granted a verdict in favour of Uni Ply Industries, and rejected the appeal of New India Assurance Company Limited on the grounds that it is the duty of the policy issuing company to highlight important terms and conditions in their policy document. The Company had issued a one-page policy document to Uni Ply Industries without a mention of the terms and conditions.
The Honourable National Commission in its verdict said that ‘Merely issuing a cover note on the policy doesn’t absolve the Insurance Company of its responsibilities. [su_highlight background=”#99fbff”] They need to ensure that the policy terms and conditions are clearly communicated to the insured, and any special conditions or warranties are clear and free of ambiguous words.[/su_highlight] Ambiguity in the terms of the policy will be against the insurer since it drafts to the policy wording.’ The Commission also set aside the role that a Surveyor plays in processing claims. It quoted that if the surveyor’s assessment is not in line with the terms of contract or all material facts are not considered, it is likely to be set aside.