Insurance Mis-selling: Union Govt Suggests Checks on Agents, including Recording Sales Pitch, Says Report
MAS Team | 04 January 2024
Insurance agents may soon be required to maintain audio-visual records of their sales pitch, where they must read out a summary of the policy features to prospective buyers, says a news report.
According to the report from Times of India (ToI), with multiple cases in consumer forums and thousands of complaints of mis-selling, the consumer affairs department has written to the Union ministry of finance seeking a change in rules that the terms and conditions, or at least the summary, should be clearly explained as it is not properly communicated, resulting in disputes.
"In a letter to financial services secretary Vivek Joshi, consumer affairs secretary Rohit Kumar Singh has noted that the genesis of the dispute often lies in lack of proper communication, although consumers often complain that only positive aspects of the policy are told to them when insurance is sold. A final decision on the issue will, however, have to be taken by the Insurance Regulatory and Development Authority of India (IRDAI), which sets the rules," the report says.
As repeatedly pointed out by Moneylife, people, primarily senior citizens, continue to be duped into buying high-premium insurance policies, sold to them as annuity plans, with no attempt to stop or punish this widespread fraud. Most of the time, this is done by bank relationship managers (RMs). (Read: Senior Citizens Continue To Be Duped by Insurance Agents Mis-selling Life Insurance as Annuity Plans)
Coming back to the ToI report, it says terms and conditions in insurance policies are often in ambiguous language, which consumers do not understand. Mr Singh, the secretary for consumer affairs, has suggested that insurance policies be framed "in the regional languages concerning the rural population of that particular area".
The consumer affairs department has also suggested that the policies must make the inclusions and exclusions extremely clear in their terms and conditions. In several cases, when policyholders apply for claims, the insurance company representatives inform them about the exclusions. Such clarity in policy documents will also bring down litigation in the sector, officials told the newspaper.
Another suggestion by the National Consumer Disputes Redressal Commission (NCRDC) president justice Amreshwar Prata Sahi is regarding the rejection of medical claims by hospitals if a policyholder is not hospitalised for at least 24 hours for surgery or treatment. "As advancements allow for treatments and surgeries to be completed within a few hours, it is imperative that such a clause be re-examined and suitably amended," Mr Singh says in the letter reviewed by ToI.