Mis-selling accounts for a majority of life insurance complaints

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The Ombudsman of the Life Insurance sector has been receiving a number of complaints with regards to the mis selling of life insurance policies by the intermediaries. In the case of the non-life insurance sector, the complaints have been mostly pertaining to the claims being rejected with regards to the existence of a pre-existing ailment. The mis- selling is often being done by forging the proposer’s signature on documents of a long term plan even though the proposer clearly did not have the capacity to carry on the policy for a long duration, as reported by the Council of the Insurers or the ECOI. The IRDAI has also made it compulsory for all insurers to follow up with the verification calls and yet reports have emerged that the agents and the brokers have been persuading the customers to accept all terms and conditions unquestioningly when they receive the calls.

There are equal numbers of complaints from both life insurance and non- life insurance policy holders across India, according to MML Verma, the Secretary General. Out of them, the complaints pertaining health insurance in the non- life insurance segment was exceedingly high.

According to Milind Kharat, the insurance ombudsman in Mumbai and Goa, the amendments that were made in 2018 gives the ombudsman the power to pass orders against insurance companies as well as intermediaries, which means that such orders can be passed against banks as well. However, the insurance company will be held responsible predominantly because that is whom the agents represent. Moreover, the office of the ombudsman is a very effective platform for bringing such issues to light as there are no fees or legal assistance required. Customers can make their complaints with just an email. Nevertheless, the ombudsman still did not have the power to impose penalties and so the maximum they could do in case a complaint was found valid was to order the refund of the premium amount.

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There is another limitation that the ombudsman faces which is that the maximum award that he can issue is for Rs 30 lakhs. Considering the fact that some policy holders are taking health insurance cover up to Rs 1 crore or higher, it has been recommended that such limits should not be imposed in case of individual complaints.

Apart from citing pre- existing illness, complaints have been made on the basis that the claims were rejected as the insurance company felt that the expenditure was not made reasonably and was completely optional. According to Mr. Kharat, the term “reasonable” itself was a very relative term and what could be considered reasonable for one might not be so for another, depending on the part of the country one resides in or the immediate circumstances one had to face. In many cases, insurers also reject claims during cataract operation on grounds that the lens used was too expensive. In case of the exclusion of the same, the inadmissibility of the cost of the multi- focal lens should be clearly stated in the policy during such a surgery. Efforts are being made to safeguard the proposers and the policy holders against such loopholes and they should decrease the woes of the common man to an extent.

Shailesh Kumar

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