Insurance Industry faces a major challenge of insurance mis selling. These mis selling are of two types :
- 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 bundled product along with other benefits of banking services. Brokers pushing the product as experts.
- Financial literacy is poor , customer do not do basic research and buy on impulse.
- Customers are not reading the terms and conditions and sign on dotted line.
Given below are few cases of insurance mis selling . These are some prevalent methods but not exhaustive :
- Selling insurance by giving false information.
- Selling regular premium policy as single premium or flexible premium .
- Selling high premium policy without realizing future money commitment .
- Forging the proposal form and giving wrong information .
- Selling Insurance Policy when customer is asking for Fixed Deposit , this is common in Banks.
- Churning the existing policy and replacing with new for new commission .
- Selling Insurance Policy by promising extra bonus , gold coin .
- Selling Insurance as pre condition for opening ATM / Telecom Tower .
- Bundling Free Health Insurance with Life Insurance
- Selling ULIPS without explaining concept .