With quite a few reported cases now, mis-selling of insurance related products are becoming very popular now. Many of these sales are even taking place through the branches of various banks and that has got people really worried. Some bank employers are employing aggressive marketing techniques and people are falling for this because of the trust they have build on the bank, which they are familiar with for many years. It is hard to give an exact number of such cases but with the rise in the number of complains at the banking and insurance ombudsman offices, specially in the bigger cities such as Mumbai, Chennai, Delhi, Kolkata there is a lot of certainty in the claims and a reason to worry about.
Here one can interpret the word mis-selling as:
- Loading on products
- Wrong sale of product with deceptive description
- False promise of higher returns.
The open architecture model:
Under the open architecture model the mis-selling of insurance is expected to go even higher according to industry experts. Due to the open architecture a bank can have ties with up to three insurers each in health, life and non-life segment. According to the founder and CEO of Insurance Inbox “Mis-selling is prevalent in almost all kinds of channels, but the open architecture model will throw up more challenges”. The aggressive strategies of the insurance companies and banks also act as a catalyst to this. The high competition in the market also makes the situation even worse and pushing many of the employees to adopt these unfair means to meet their target.
The open architecture model also demands very specific and specialized skill sets from the bank employees as the number of tie-ups are higher. They need to have a clear understanding of the different products and the nuances related to them so that they can give clear instructions to the customers and explain the small details. The lack of knowledge about the various policies is another driving factor, which is promoting such mis-selling of the insurances. Banks would consider the insurance selling as a side business and so they do not pay much attention to this sector. For this the employees are not trained well and pass wrong information to the customers.
- The products must be made simpler so that they are easily understandable. The terms of the policies must be laid out clearly without any hidden clause so that it would not create any confusion later on.
- The infrastructure must be developed as we saw the problem lies in the root of the system. The employees must be trained well so that they have a better understanding of what they are selling.
- The banks and insurance companies should device a way for selling their products in a less aggressive way especially under the open architecture model. Just blindly targeting to scale their business would make it even worse because people would start loosing trust if such mis-selling increases in number.
- Banks can implement various data analytic tools in their system so that the best policy figured out for a particular customer by the system and not some employee. This would help the customers to meet their demand in a much better way.