 "A lot of 'ills' have crept into the system: Panda on product mis-selling")
A day after Finance Minister Nirmala Sitharaman flagged mis-selling of products, especially insurance, the chief of insurance regulator Irdai, Debasish Panda, on Tuesday cautioned lenders against the ‘ills’ that have crept into the bank-led insurance distribution and said that there was a need to restore customer confidence in the system.
The chairman of Insurance Regulatory and Development Authority of India (Irdai) also said that banks must not forget their core activity. Panda echoed Sitharaman, who too had told lenders on Monday to stay focused on their core activity of mobilising deposits and lending money.
Speaking at the State Bank of India’s (SBI’s) Annual Business & Economic Conclave, Panda said, “…the bank channel is a very useful channel, but of late, a lot of ills have crept into the system”.
“I think we all need to sit together… restore that confidence, and it should become a distribution model which is low cost. You don’t need to chase customers. You have to give the option to the customer. No mis-selling, no force-selling, the Bima Sugam will also facilitate that,” Panda said.
Banks and insurance companies have tied up to sell insurance products through bank branches and this partnership is known as bancassurance.
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In October 2023, Irdai had formed a task force to review the existing bancassurance framework and improve the efficiency amid complaints of mis-selling or forced selling of policies.
Previously, in March 2024, the finance secretary had met heads of the public sector banks and asked them to keep mis-selling of insurance products under check.
“I believe that there is merit in the system, but we have to do it with care and caution so that you don't forget your activity and only start selling insurance. So, that is one thing. It should be incidental. As a customer, I know you have a bouquet of products,” Panda said.
On Monday, Sitharaman had said, “I wish to say this for the due consideration of the bank boards, sale of insurance by banks has raised concerns of instances of mis-selling and I would say this has contributed indirectly to cost of borrowing for the customers. So banks will have to look at this, look at their core banking activities and not burden customers with insurances they don’t require.”
Following the finance minister’s commentary, shares of most insurance companies closed in the red on Tuesday, with bank-led insurers facing the steepest declines.
Life Insurance Corporation, the country’s largest insurer, saw its shares drop 0.6 per cent, while SBI Life Insurance’s shares fell 2.5 per cent. HDFC Life Insurance shares declined 1.4 per cent, ICICI Prudential Life Insurance dropped 1.1 per cent, and Max Life Insurance shares tumbled by 4 per cent.
Separately, Irdai Member (Distribution) Satyajit Tripathy has also highlighted in the past that complaints about product mis-selling in life insurance has increased to an alarming level and it has grabbed the attention of the policy makers.