As per the latest reports, the Central Government is in discussions with the Reserve Bank of India (RBI) for curbing mis-selling of insurance plans by Indian banks. The Government has decided to intervene after the receipt of many complaints from customers of banks about being forced into purchasing insurance policies while applying for banking services and loans. There are people who have also discovered that their funds have come down due to huge charges as well. The Government wishes to get into a review of the incentive structures at Indian banks for the sale of insurance products post the mis-selling problem was highlighted by the CVC (Central Vigilance Commission).
However, the Government will have to radically reform approaches taken by the key bodies towards this issues, namely IRDA and the RBI (Reserve Bank of India). There should be more accountability on part of the IRDA with regard to the approval of products which can be easily mis-sold and are harmful for a majority of buyers. There should be punishments in place for banking officials selling wrongful policies to their customers. Customer grievances should be made a priority for both the IRDA and RBI. With two regulators, customers do not even know whom to approach and the specific redressal mechanism for the same.
The Government also has to look into Misselling of insurance policies and the fact that a majority of private insurers are supported by Indian banks. ICICI Bank and HDFC Bank have ICICI Pru Life and HDFC Life while SBI has SBI Life. All banks have distribution deals for joint venture product promotions. Teller staff are instructed to woo customers into purchasing insurance plans. As per the Annual Report issued by the IRDA in 2011-12, the biggest complaint count in the life insurance space was linked to mis-selling. This majorly covered the private domain although LIC has a market share of more than 70% in this segment also. The complaints majorly talked about how trade practices were really unfair or unethical and also about how products were being mis-sold.
There were several instances where policies with single premiums were being sold as those with annual premiums, the actual product was often different from the product that was proposed originally and also the surrender value differed from what was projected initially. A major number of private insurers look to tap banks which function as their agents unfortunately. The Government has to analyse and critically review the sales and marketing blueprints of banks for promoting their insurance policies to keep such mis-selling issues at bay.
The Union Finance Ministry has reportedly directed Indian banks last year to function in the manner of brokers while offering multiple products in the insurance space and not just double up as agents for one or two insurance companies. However, banks have refused to abide by this guideline as per latest reports. The Reserve Bank of India (RBI) has not cracked the whip as of yet on these unethical practices since the IBA (Indian Bank Association) has been lobbying on this count pretty steadfastly.
It can be very disappointing and frustrating to realize that you have been made a victim of mis-selling. We at Insurance Samadhan would like to hear out your insurance complaint regarding mis-selling and would help you recover your rightful dues. Get in touch with us at https://www.insurancesamadhan.com/register