Miffed by growing instances of mis-selling at banks, IRDAI has asked errant banks not to force their customers to buy insurance policies.
The insurance regulator has found that many banks sell insurance policies to their customers in lieu of FDs on the pretext of better returns.
Further, when customers approach banks for housing or other loans, banks bundle such products with insurance policies despite unwillingness of customers to buy them, found IRDAI. Typically, banks bundle a home loan insurance cover with home loans. This strategy helps them reduce risk of default and earn decent commission from sales. Many financial advisers say that customers should consider buying a term insurance policy to cover such risks as term policies are cheaper.
Also, many banks insist customers on buying an insurance policy at the time of availing a locker facility and at times make it a condition for allotting locker, found the insurance regulator.
Meanwhile, IRDAI has expressed concerns over the practice in which banks sell a regular premium policy instead of single premium policy. Typically, single premium policies are cheaper than regular premium policies as premium and commission structure of the former are very low. The single premium policies offer commission of only 2% whereas regular polices pay up to 40% and up to 7.50% in the first and second year respectively.
Last year, at a public forum, T.S Vijayan, Chairman, IRDAI had urged insurers to avoid the practice of converting insurance policies having tenure of five years or less into regular premium policies. He had said, “Insurance companies should offer single premium policies where there is a scope. This will help create happy customers and give better experience to them.”
IRDAI has asked errant banks to abide by the code of conduct of corporate agents. Also, the insurance regulator has asked banks to disclose the details of sales person is held responsible for such mis-selling.
