Banks, brokers receive highest no. of mis-selling complaints: IRDAI

IRDAI data shows that banks and insurance brokers received 9600 and 9900 complaints respectively related to unfair business practices and mis-selling in financial year 2019-20.

Insurance agents followed banks and brokers with 5730 complaints of mis-selling and unfair business practices.

Overall, life insurance companies received 43,444 complaints of mis-selling and unfair business practices in financial year 2019-20. The total number of mis-selling complaints has drastically reduced from 1.02 lakh in FY 2015-16, 62,000 in FY 2016-17, 54,000 in FY 2017-18 and 50,000 in FY 2018-19.

While LIC received close to 4000 mis-selling complaints in FY 2019-20, private companies received 39500 such complaints in the corresponding period. Further analysis of data shows that life insurance companies receive 51 mis-selling complaints per 10,000 policies sold in FY 2019-20.

While 25% of complaints were decided in favour of policyholders, majority of complaints i.e. 67% have been rejected. Another 8% complaints were partially in favour of policyholders.

Among the most common mis-selling complaints are:

• Incorrect explanation of product features
• Regular premium policy sold as single premium product
• Policy is sold on pretext of loan, bonus and so on
• Tampering proposal form
• Inducements such as rebate
• Positioning life insurance policies as tax saving instruments
• Improper evaluation of financial needs of prospects
• Not explaining charges of ULIPs

In its yearly handbook, IRDAI said, “Sales related complaints affect the sentiment about the insurance sector. This in turn may impact the initiatives  aimed  at  enhancing  the  level  of  insurance  inclusion  as  measured  by  indicators  such  as  insurance and  insurance  density. Increased  incidence  of  mis-selling  can  adversely  impact  growth  in  the  insurance  industry  which  in  turn  would  impact  the  availability  of  long  term  funds  for  economic development from the insurance sector. Hence, while there is need to assess and eradicate mis-selling from insurance industry, there is also a need to reassure general public that the regulatory framework  of  life  insurance business  is  sound  enough  to  protect  policyholders’  interests  and  grievances,  if  any,  are  capable  of  being  resolved  by  insurers.”

Source: Cafe Mutual

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