IRDAI data shows that banks and insurance brokers received 9600 and 9900 complaints respectively related to unfair business practices and mis-selling in financial year 2019-20.
Insurance agents followed banks and brokers with 5730 complaints of mis-selling and unfair business practices.
Overall, life insurance companies received 43,444 complaints of mis-selling and unfair business practices in financial year 2019-20. The total number of mis-selling complaints has drastically reduced from 1.02 lakh in FY 2015-16, 62,000 in FY 2016-17, 54,000 in FY 2017-18 and 50,000 in FY 2018-19.
While LIC received close to 4000 mis-selling complaints in FY 2019-20, private companies received 39500 such complaints in the corresponding period.
Further analysis of data shows that life insurance companies receive 51 mis-selling complaints per 10,000 policies sold in FY 2019-20.
While 25% of complaints were decided in favour of policyholders, majority of complaints i.e. 67% have been rejected. Another 8% complaints were partially in favour of policyholders.
Among the most common mis-selling complaints are:
- Incorrect explanation of product features
- Regular premium policy sold as single premium product
- Policy is sold on pretext of loan, bonus and so on
- Tampering proposal form
- Inducements such as rebate
- Positioning life insurance policies as tax saving instruments
- Improper evaluation of financial needs of prospects
- Not explaining charges of ULIPs
In its yearly handbook, IRDAI said, “Sales related complaints affect the sentiment about the insurance sector. This in turn may impact the initiatives aimed at enhancing the level of insurance inclusion as measured by indicators such as insurance and insurance density. Increased incidence of mis-selling can adversely impact growth in the insurance industry which in turn would impact the availability of long term funds for economic development from the insurance sector. Hence, while there is need to assess and eradicate mis-selling from insurance industry, there is also a need to reassure general public that the regulatory framework of life insurance business is sound enough to protect policyholders’ interests and grievances, if any, are capable of being resolved by insurers.”
