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The Reserve Bank of India (RBI) said complaints of mis-selling insurance products could impact the continuation of policies, affecting the cash flows of companies. In its Financial Stability Report, RBI said such complaints have been rising in recent years.
In 2012-13, there were 341,012 registered life insurance complaints as compared to 309,613 for 2011-12. According to the Consumer Affairs Annual Booklet of the Insurance Regulatory and Development Authority, the number of non-life insurance complaints dropped in the period. There were 78,927 registered non-life complaints for 2012-13, compared to 93,155 in 2011-12.
Mis-selling broadly means unfair or fraudulent practices in soliciting or selling policies not sought by a customer. Or, where customers feel the policy sold is different from what they wanted or were promised.
RBI said the increasing number of complaints could affect the public’s confidence in insurance products, intermediaries and insurance companies. "More important, it seriously affects the demand for insurance, which could have serious implications on insurance as an avenue of tapping savings for long-term investments for the economy," it said.
The central bank said Irda had taken regulatory measures to check this. The Irda (Protection of Policyholders Interests’) Regulation, 2002, provides a framework for protection, through requirements to be met at the point of sale, proposal, sale and servicing of products, emphasising on complete disclosures. There is an option of ‘free look cancellation’ within 15 days of receiving a policy document. Further, misleading publications for soliciting or selling of policies are prohibited under the Irda (Insurance Advertisements and Disclosure Regulations), 2000. Regulations for licensing of insurance intermediaries such as agents and brokers, and a prescribed code of conduct for their operations, are aimed at ensuring that intermediaries do not resort to unfair practices. "Irda has the power to take action against insurers and intermediaries which include imposition of fine, issuance of warning, suspension and cancellation of licence. Irda has been increasingly using these powers to check mis-selling," said RBI.
According to Irda data, among life insurance complaints, complaints on unfair business practices accounted for 168,482 of the total number mentioned earlier.
In the non-life segment, policy-related complaints topped the list, accounting for 29,101. The motor insurance segment, followed by health, accounted for the largedt number of complaints in the non-life sector.
