Insurance Sales Are Now 100% Online - But This Is Why You Should Be Cautious

Kolkata’s 66-year-old Satish Pal was duped a few weeks ago when he realised that an insurance policy was bought in his name. Turns out, Pal had interacted with an agent on a virtual platform and later dropped out since he felt that the product did not suit his needs.

During this process, the agent had virtually filled up a form and sought an OTP which Pal thought was needed to view the premium rates applicable for the product. However, in fact this OTP was in fact used to authenticate the product sale and Pal was misled. After three days when Pal received a message stating that an insurance policy has been sold and he is to immediately make the online payment, he was alarmed. He contacted the insurer and got the policy cancelled.

To ensure that insurance customers are not inconvenienced amidst the Coronavirus outbreak, the insurance regulator allowed physical signatures to be dispensed with. This has now been replaced with a one-time-password which will be sent to the customer. This OTP is used to validate the sales process. For customers who are not technologically-savvy, this could turn out to be another way to become a fraud victim. An ‘friendly’ neighbourhood agent could end up getting access to an OTP by simply calling the customers. Senior citizens are especially at high risk.

One would wonder why would an agent sell such fake policies. After all, the policy will come into force only after the full premium is received. But, considering the COVID-19 pandemic, sales targets have been revised upwards with strict monitoring of the numbers. To cut corners, agents simply 'buy' such policies for 1-2 customers, a part of which comes back to them as commission.

During the renewal after one year, the policy lapses on non-payment of premium. However, the agents target for the previous year was met so he/she doesn't bother. These pseudo sales usually happen at the end of a month or quarter when agents are scrambling around to complete their sales targets of selling a certain number of policies.

The complete virtual sales process has been a bane for older customers since they tend to miss crucial emails, text messages related to any new policy purchase. Mumbai's Sarita Patil who helps her father manage his finances immediately noticed an SMS on his mobile phone stating that a high-value policy from a private sector insurer had been sold to him.

When she quizzed her father, Patil realised that he had in fact transferred money to their agent to be deposited as renewal premium. This amount was used by the agent to purchase another policy by the agent and he also was able to secure the OTP by contacting the customer on the pretext of renewing an existing product. His KYC was also submitted on video mode.

Since Patil was able to spot the fraud within the free-look period of 15 days, she was able to get the policy cancelled and get the money refunded. However, the agent denied any wrongdoing and stated that he had mentioned that it was a new policy and an SMS was also sent to the customer. However, not all customers who have been misled would be able to spot these errors quickly. Hence it is essential that customers do not click on any link sent by agents, bank intermediaries unless they are sure about buying an insurance product.

During online interactions for possible virtual sales, be sure to not share any OTP with the agent since this could be used to fraudulently purchase policies. Any suspicious activities by agents should also be immediately reported to insurance companies through their grievance cell. IRDAI wants to make insurance sales process simpler for customers and insurers. Considering that virtual sales will be the new-normal for the next few quarters, it is imperative that customers are well aware of the potential risks of buying online. Shying away from e-purchase is not the solution; staying alert and informed is the key to avoid frauds.