Similar to EUINs allotted to MF distributors, IRDAI has asked corporate agents to issue a unique identity number to sales persons and branch managers of banks, brokerage houses and large distribution firms who are involved in soliciting insurance policies.
IRDAI Chairman TS Vijayan has said that the move will help reduce mis-selling in banks. He was speaking on the sidelines of the 18th CII Insurance Summit.
Vijayan told Cafemutual that there is a need to identify sales persons of corporate agents like banks .He said, “Banks don’t mis-sell. It is the employees who mis-sell insurance policies to achieve internal targets. Therefore, we need a mechanism to track such erring employees to deter mis-selling in banks.”
Typically, corporate agents like banks and large brokerage houses get their relationship managers to acquire IRDAI’s exam certificate to solicit policies. However, often it is not the RMs but the sales persons working under RMs who are actually engaged in soliciting policies. Since these sales persons don’t have such certification or the required skill set to solicit insurance policies, they end up mis-selling policies to achieve targets. Unique identification number is expected to address this issue.
A few days back, IRDAI had admitted that there is rampant mis-selling of insurance policies by banks. In fact, the insurance regulator 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, IRDAI has found that when customers approach banks for housing or other loans, banks bundle such products with insurance policies despite unwillingness of customers to buy them. This strategy helps them reduce risk of default and earn decent commission from sales.
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 lockers, found the insurance regulator.
IRDAI had also 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.
In fact, outgoing RBI Governor Raghuram Rajan, in an interview with CNBC has too expressed concern over mis-selling of insurance policies in banks. Rajan is quoted as having said, “There are areas of continuing worry. One, mis-selling of insurance. A big area of concern and it is something where we have had consumer advocates come to us with mystery shopping exercises that suggest and we have sent mystery shoppers into banks and we find that there are issues about full information, so that is an area we are going to take very seriously.”
