If you are mis-sold insurance policy by a bank here is what you can do

Even as customers are being mis-sold insurance policies by bank employees, a classic case of toxic work culture went viral on Monday when a top executive of HDFC Bank upbraided employees for not meeting the daily target for selling policies.

Employees could at times resort to mis-selling to achieve their targets. Mis-selling policies at banks typically means unfair or fraudulent practices bank agents adopt when selling an insurance policy. It generally includes selling policies that a customer doesn’t need or is forcefully sold with the promise of exaggerated returns or with different terms and conditions from what the buyer wanted or the agent promised. Sometimes the policies are not even suitable for customers.

Naval Goel, CEO of PolicyX.com, said, “Mostly, the mis-selling of insurance that the banks do is through bancassurance, i.e. partnerships wherein an insurance company and a bank come together to sell the insurance products of that company to the customers of the bank.”

“Earlier, the banks were only allowed to sell one life and non-life insurance product under bancassurance acting as a corporate agency. With the new Reserve Bank of India (RBI) guidelines, banks act as insurance brokers, and sell multiple insurance products according to the customer’s unique requirements,” added Goel. The RBI took this step to stop mis-selling by banks as they have limited products that they try to sell to customers forcefully.

However, one must know that the bank cannot sell an insurance policy to the customer without the latter’s consent. The agent has to provide clear information about the premiums, sum insured, premium payment terms and the policy’s limitations. Apart from this, the bank employee has to inform the customer about all the insurance products they are dealing in, enabling the customers to make an informed decision. This is the according to the data available at the Insurance Regulatory and Development Authority of India (Irdai) website under the Irdai Consumer Affairs Booklet 2019-2020 report. The regulator has not published a report after this. However, it clearly shows that unfair business practices are a significant concern.c

So, if your bank has sold you an insurance product that does not match the promises it made, then there are two things that you can do:

First, every insurance company gives a free look period of 15-30 days that varies from insurer to insurer. If you have identified the mis-selling within this period, then complain to the bank and the insurance company, and they will cancel your policy and return the premiums.

If you have identified that a bank agent has sold you a misleading policy, after the free look period, you can complain to the bank and wait for 30 days. If the bank doesn’t resolve your query on time, you can write to the banking ombudsman and the insurer with all the proofs of mis-selling. The banking ombudsman will consider all the documents you have presented, and eventually, your policy will be closed.

Can Irdai pull up these banks if the policy was mis-sold? 

The Irdai has made the following resolutions regarding the issue: Regulations under ‘Registration of Corporate Agents’ expressly forbid compelling the customers to buy insurance, Irdai has said. It adds that there is a specific code of conduct to be abided by corporate agents. “Regulation 22 (5) of Irdai (Registration of Corporate Agents) Regulations, 2015 states that the corporate agent has to disclose to the Authority the details of specified persons (SP) along with their certificate number issued by the Authority.”

“So, to put it in a nutshell, the Irdai has directed banks not to sell any insurance products to customers forcefully. If they do, the customers can lodge complaints with the bank, the banking ombudsman, and write to the insurance regulator as well,” explained Goel.

Point to note 

It would help if you considered buying an insurance policy from the insurer directly as it simplifies the process, you can get your grievances redressed from the insurer directly, or you can register your complaints with the regulator under the “Bima Bharosa system” (bimabharosa.irdai.gov.in). Further, policy improvisation is possible, which might not be available with the one you buy from the bank.