Banking and insurance can be a complex world, and misselling may occur. A bank agent engages in deceptive or unfair tactics while selling insurance policies. Policies that promise outsized returns, sell unnecessary policies, or offer policies with terms and conditions contrary to those initially discussed can fall into this category. Due to the seriousness of this issue, customers must be aware of their rights and remedies.

Unpacking Mis-selling of Insurance

Misselling often occurs through bancassurance, where insurance companies partner with banks to sell insurance products. As part of bancassurance, banks were traditionally allowed to sell only one life and non-life insurance product. In addition to selling multiple insurance products tailored to each customer’s unique needs, they act as insurance brokers according to new RBI guidelines.

Banks often tried to limit the product options they could offer customers to curb misselling. The majority of insurance misselling by banks occurs through bancassurance, according to PolicyX.com CEO Naval Goel.

The Need for Informed Consent

Customers must consent to a bank’s sale of an insurance policy. The agent must inform you clearly about the premiums, sum insured, payment terms, and policy limitations. The bank employee’s also responsible for informing the customer of all the insurance products they provide. The Insurance Regulatory and Development Authority of India (IRDAI) recommends this for customers to empower them to make informed decisions.

What To Do If Mis-Sold?

You have two options if a bank missells an insurance product:

Free-look Period:

Insurance companies typically offer a free-look period of 15-30 days, depending on the insurer. A bank or insurance company can be contacted if you discover a misselling during this period. Once the cancellation is completed, the premiums should be refunded.

After Free-look Period:

A bank agent can be held accountable if they mis-sell a policy after the expired free-look period. You need to file a complaint and wait 30 days before you can complain. If the bank fails to resolve your claim within this timeframe, you can contact the banking ombudsman and insurer. Finally, the ombudsman should close your policy after reviewing the presented documents.

The Role of IRDAI

Irdai has enforced regulations under the ‘Registration of Corporate Agents’ that prohibit encouraging customers to buy insurance. Corporate agents are expected to follow a specific code of conduct. It has been directed by IRDAI not to force banks to sell insurance products. The bank, the banking ombudsman, and the insurance regulator can be contacted if complaints are made.

Considerations

Direct purchase of an insurance policy may be advantageous. The insurer can address your grievance directly, simplifying the process and enabling policy improvisation. Furthermore, you can file a complaint with the regulator using the “Bima Bharosa system” (bimabharosa.irdai.gov.in), which might not be available if you buy from a bank.

References

Dubey, N. (2023, June 6). If you are mis-sold insurance policy by a bank here is what you can do. Business Today. https://rb.gy/jtoqn