How to Protect Yourself from Abusive Sales


Over the years, insurance has probably been the worst-selling financial product. One of the reasons is the buyer’s lack of involvement and the other reason is the agent’s false explanations.

What is abusive selling in insurance?

Bad selling in insurance involves selling a product to customers that is inappropriate for them. The final insurance benefits are not the same as those promised at the time of sale and the policy does not meet the client’s objective. This can be done in various ways, such as falsifying benefits, exaggerating benefits, misrepresenting the policy, miscalculating benefits, bundling insurance policies or making false promises of bonuses and bonuses. ‘additional benefits.

Possible causes of abuse sales complaints

Some of the main causes of abuse sales complaints include an incorrect explanation of product features and benefits by the salesperson who operates the business. “Then incorrect premium and policy payment terms are explained to the policy owner, especially in cases where a product paying regular premiums is sold as a single premium product. The policy is sold to gullible prospects insuring a loan / bonus / medical benefits / gold coins / mobile towers / and more when purchasing an insurance policy. In addition, forgery, falsification of the proposal or other related documents are common. There is a high attrition rate among sales teams and there is pressure on the salesperson to meet the sales target. It’s also a reason, ”says Naval Goel, founder and CEO of PolicyX.com, a web insurance aggregator.

What is the impact on customers?

Abusive sales impact customers in several ways. Mainly, this results in financial loss as the premium paid is wasted and the features or benefits are of no use to the customer. Sometimes when a person finds out that the existing policy is not the best fit for their needs, they stop paying for it and the premium paid in the past is wasted.

“The second loss is even more important; when the family of the client who was supposed to receive these benefits or sum insured, find themselves without long-term support because the policy did not go as planned. This can leave them in despair as there is no financial support for them after the breadwinner disappears, ”Goel explains.

Irdai intervention

The insurance watchdog, the Insurance Regulatory and Development Authority of India (Irdai), has been instrumental in addressing these issues. More recently, he mandated insurers to provide clear policy communication to potential clients without any additions or subtractions. Communication should be based solely on the terms mentioned in the policy.

“Second, the standardized script rule has been incorporated into all aspects of the insurance policy, including all key benefits, services and information. Each insurer / agent should then be required to strictly adhere to the script so that it becomes easy for clients to understand the details and easily compare different plans based on standardized scripts, ”Goel explains.

According to Irdai’s 2020-21 annual report, the number of abuse-selling complaints increased from 41,754 in 2018-19 to 25,482 in 2020-21. The incidence of abuse claims for 10,000 policies sold has also declined over the years. The number of complaints processed in favor of the complainant increased from 25% in 2019-2020 to 24% in 2020-2021.

Things to keep in mind to avoid insurance gouging

The main cause of the mis-selling is that customers don’t read the policies themselves or research the plan information, whether it’s features, perks, or terms and conditions. Previously, clients always believed the information given by agents, which was often given for vested interests like earning bonuses etc.

Customers can easily eliminate the risk of mis-selling by getting involved in the buying process. They can consult online web aggregators where full information about the different plans is provided in a transparent manner. Buyers can make the right choice by comparing the plans, features, benefits and quotes offered by different insurers.

The client should also read the policy documents, especially the terms and conditions. These are the important details that are most often overlooked in the policy document. “Always keep your life goals in mind in order to purchase the most suitable product. Take a second opinion if you are unsure of a product. And most important of all, no one should buy a plan just because their counterpart bought it. Insurance is a highly personalized thing that varies with goals, income, and other factors. One size does not work here. Therefore, always look for a policy that most closely matches your goals, ”adds Goel.


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