Insurance Mis Selling – Types and Reasons

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Insurance Industry faces a major challenge of insurance mis selling. These mis selling are of two types:

Types of Insurance Mis-selling

  • Insurance not matching with the needs of customer
  • Insurance being sold on exaggerated promises

There are various reasons of such large instances of mis selling, few are given below:

  • Distribution Model of Insurance Industry. Agents target their natural market. Banks push it as a bundled product along with other benefits of banking services. Brokers pushing the product as experts.
  • Financial literacy is poor, the customer does not do basic research and buy on impulse.
  • Customers are not reading the terms and conditions and sign on the dotted line.
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Common reasons for misselling of insurance policies in India:

  1. Selling insurance by giving false information.
  2. Selling a regular premium policy as a single premium or flexible premium.
  3. Selling high premium policy without realizing future money commitment.
  4. Forging the proposal form and giving wrong information.
  5. Selling Insurance Policy when the customer is asking for a Fixed Deposit, this is common in Banks.
  6. Churning the existing policy and replacing it with new for the new commission.
  7. Selling Insurance Policy by promising extra bonus, gold coin.
  8. Selling Insurance as a precondition for opening ATM/Telecom Tower.
  9. Bundling Free Health Insurance with Life Insurance.
  10. Selling ULIPS without explaining the concept.

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Also Read:  Insurance Policy Mis-Sold by Fake IRDAI Officials

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Insurance Samadhan

Shailesh Kumar

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