Did you know that 6 out of 10 customers complain about misselling in insurance? Recently, the IRDAI chief has cautioned the banks against mis-selling insurance products. They primarily stated that a lot of ill practices are being conducted in the bancassurance system that is eroding customer trust. Well, this announcement from the IRDAI chief has caused jitters in the bancassurance insurance line of business. What’s more? Read on to explore!
What Does the IRDAI Chief Have to Say About Insurance Mis-selling?
Emphasizing the trust factor that banks have with the customers over the years, the IRDAI chief said that the trust factor of banks is instrumental for them to sell the right products at the right price. Further, he emphasized that the banks need to focus on selling insurance products as an option rather than concentrating their operations solely on it. He said that the banks need not run after the customers to sell products rather, restore the customer trust in the bank-assured insurance products. He also mentioned that the banks need to stick to their primary function and not just keep selling policies.
Does this Come in Close Connection with the Finance Minister’s Misselling in Insurance Caution?
If you have kept a close eye on the recent news, Finance Minister Nirmala Sitaraman has also issued a warning against mis-selling in insurance. This caution echoes her stance on emphasizing the banks to stick to their primary task. In the past, there have been instances of banks asking senior citizens to invest their savings in the policies of insurance companies. This deviation of the banks has caused policy mis-selling to escalate and has also made banks deviate from their primary function.
What’s More?
This caution has come down heavily on the insurers especially the bancassurance sector who are used to force policies on customers. This not only questions the customer’s willingness to purchase these bank-assured policy products but also gives a nudge to sell the wrong policies to the customers. Last year IRDAI amended the product regulations that placed responsibility on the insurance companies to ensure that the companies take reasonable care to ensure the suitability of the prospects as well as the policyholders. This also ensured that the customer had the wherewithal to pay the renewal premium.
The IRDAI chief further said that the boards now have greater autonomy for making business and operational decisions independently. This has been possible as many of the redundant prior approvals have been discarded.
There have been processes that have been streamlined across various areas, this includes entering the insurance sector, managing expenses, launching products, raising capital as well as investing in assets. This will provide more opportunities as well as flexibility for the new entrants, he further said.
Ending his caution with a positive note the IRDAI chief said that currently the insurance sector is the 10th largest globally and is said to become 6th within the next 7-8 years.
Conclusion
As the IRDAI chief gives much-needed clarity on the mis-selling in insurance, the banks have got a much-needed reality check on the way polices are widely being sold under the pretext of bancassurance. This reality check will caution the banks who forcefully try to sell policies and contribute to mis-selling escalation.
