What is insurance misselling? What should you do if you fall victim to it?

Insurance Misselling: Has it ever happened to you that an insurance company misled you and sold a product by hiding important information? If it has happened, you were the victim of misselling.

Misselling happens when someone sells a product or service by misleading or hiding important information about it, often misguiding customers. Such selling methods are unethical and may lead to legal action, fines, or professional censure for the culprit.

The insurance industry is also affected by misselling, where customers often blame companies for hiding information when selling insurance policies. Such half-baked information leads to policy claim rejections or denials of insurance claims.

While there are parameters, checks, and balances to stop misselling, it is awareness about it that can make people stay away from falling victim to it.

"Safeguarding against mis-selling requires customers to maintain vigilance, stay informed, and be cautious," says Tarun Mathur, co-founder & chief business officer at Policybazaar.com.
 
Here are some tips by Mathur that can help stop malpractice and misselling in the insurance industry:

Interrogation/cross-question: When buying insurance, it is crucial to ask questions and seek clarification on policy details, inclusions, exclusions, and additional coverage options.

Decision: Avoid making impulsive decisions, as choices made in haste may lead to regret.

Read documents carefully: It is also critical to understand emergency procedures and claim documentation requirements.

Research insurance company: Make sure to research insurance offerings that promise unrealistic returns and investigate product benefits, costs, and alternatives rigorously.

Transparent online purchases: Direct online purchases from insurers or trusted aggregators can increase transparency and eliminate intermediary bias.

Use secure payment methods: Last but not least, always prioritise secure payment methods, such as cheques or reputable online platforms, and also verify the beneficiary before making payments.

What should you do if you fall victim to misselling?

If someone missells you a life insurance policy, don’t worry; as a policyholder, you have the option to cancel the policy within a specific period. Or, you can register a complaint against the company with the Insurance Regulatory and Development Authority of India (IRDAI), the insurance policy statutory body under the Ministry of Finance.

Susheel Tejuja, Founder and Managing Director of PolicyBoss.com, expresses that in most cases, the policyholder comes to know of misselling either at the time of receiving the policy document, wherein the promised set of benefits are missing, or at the time of claim, when the revelation is made.

Tejuja strongly advised to collect all evidence, including all emails and messaging-based communications as proof of misselling and register a complaint with the insurance company.

“In case of a health or life insurance policy, including ULIPs, a policyholder can register a complaint of misselling within 15 days of the policy purchase date under the free-look period offered,” he said.

According to Nilesh Parmar, COO & CTO of Future Generali India Life Insurance Company, customers have the right to invoke Free Look Cancellations (FLC) during this period, providing a legitimate reason, and the industry processes it with necessary due diligence. Additionally, they can access the dedicated Grievance Redressal Cell of the insurer to resolve customer grievances.

“If resolution is not achieved through the insurer, individuals have the option to escalate their complaint to regulatory bodies such as IRDAI or seek redressal through Ombudsman services, ensuring a comprehensive safeguard for consumer rights,” Parmar said.

“In response to these challenges, regulatory measures such as a simplified sales process, need- and goal-based advisory services, pre-issuance calling procedures, simple language policy documents, welcome calling, and pre-issuance video calling (PIVC) have been implemented,” he added.

"The IRDAI has also introduced the Benefit Illustration concept to provide policyholders with an indication of guaranteed and non-guaranteed benefits. Despite these regulations and positive efforts, individuals should remain vigilant and thoroughly understand policies to prevent falling victim to such mismatched sales practices," Nilesh said.