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The number of complaints by life insurance customers about mis-selling is likely to drop this financial year. Reason: products have become simpler thanks to the new traditional product norms launched in January 2014. Besides, surrender values have also been revised in favour of customers who wanted to withdraw funds by surrendering their policies.
"Complaints have at least seen a 25-30 per cent drop from February 2014 onwards. Since the largest number of complaints come from traditional life products, the January norms have been beneficial in increasing customer confidence," said an official of a private life insurance firm.
In FY13, there were a total of 341,012 registered life insurance complaints compared to 309,613 for FY12. According to the Consumer Affairs Annual Booklet released by the Insurance Regulatory and Development Authority, the number of non-life complaints saw a drop during the same period. There were 78,927 non-life complaints in FY13, compared to 93,155 complaints in FY12. According to insurance executives, earlier, unit-linked products (Ulips) were the cause of customer concern, after Irda transformed the structure of these products in September 2010, the complaints went up. Another reason, according to the actuary at a mid-size life insurance firm, is that only a few companies had a large Ulip portfolio thence.
"Ulips have become far more transparent than before. However, agents pushing products for upfront commissions had become a concern. With the January guidelines linking commissions to the tenure of the product have also made these distributors more vigilant," said the customer affairs chief with a life insurance company.
Data show that among life insurance complaints, unfair business practices related complaints accounted for 168,482 of the total registered complaints. With respect to unfair business practices, complaints were with respect to malpractices, single premium policy issued as annual premium policy and for products differing from what was disclosed.
Grievances related to alleged mis-selling by insurance companies are placed under the category of 'unfair business practices' at the point of sale.
Mis-selling broadly means unfair or fraudulent practices in soliciting or selling policies not sought by a customer. Or when a customer feels the policy sold to him is different from what was promised.
