Online insurance nightmare: 61% trapped in policies they can't cancel

61% users of online insurance sales/ service platforms surveyed who purchased an insurance policy experienced a subscription trap where the platform made it difficult for them to cancel it.

A recent survey by LocalCircles, a consumer advocacy group in India, has revealed widespread use of deceptive practices known as "dark patterns" by online insurance platforms. These practices are designed to manipulate consumers into making decisions that are not in their best interest.

Key Findings:

• 61% of respondents who purchased online insurance experienced a "subscription trap," where canceling the policy was made difficult.
• 86% reported platforms frequently using a "nagging" approach, bombarding them with messages when trying to get a quote or cancel a policy.
• 57% of respondents said platforms frequently used a forced action by seeking unnecessary personal details to provide a quote and sending unsolicited information or misusing the personal details

These tactics compromise a consumer's ability to make informed choices, potentially leading them to purchase inadequate coverage or get stuck in unwanted subscriptions.

 

The survey received over 36,000 responses from insurance consumers located in 309 districts of India. 66% respondents were men while 34% respondents were women. 49% respondents were from tier 1, 24% from tier 2 and 27% respondents were from tier 3, 4 and rural districts. 

Mis-selling of insurance policies, whether life, health, motor, property or any other insurance, is not an uncommon practice. The insurance agents or officials often don’t tell what all the policy doesn’t cover or the drawbacks of a particular policy vis-à-vis another or hard sell a policy in an attempt to meet their targets. While there is provision for the insured to return or cancel a policy when an insurance company misleads you and sells a product by hiding important information, it is equally true that many people trust the agent and often don’t read the full document during the consideration period when the policy can still be returned without any financial loss. 

As an increasing number of consumers take to the internet to buy or renew insurance policies, complaints of mis-selling or manipulative selling also called as dark patterns in the online world have risen in the last 9 months, noted LocalCircles.

 The timing of these complaints coincides with the Government via the Central Consumer Protection Authority (CCPA) notifying prohibition on 13 types of dark patterns in November 2023. These include false urgency, basket sneaking, confirm shaming, forced action, subscription trap, interface interference, bait and switch, drip pricing, disguised advertisement, nagging, trick questions, SaaS (software as a service) billing and rogue malwares.  As per the CCPA notification, dark patterns amount to misleading advertisement or unfair trade practice or violation of consumer rights. 

The survey highlights a significant concern for online insurance buyers in India. Dark patterns can lead to:

• Reduced Choice: Consumers may be steered towards specific plans or pressured to buy before fully understanding their options.
• Hidden Costs: Subscription traps may result in unknowingly paying for unwanted coverage.
• Data Privacy Concerns: Forced action tactics raise questions about how personal information is collected and used.

LocalCircles is urging government bodies like the Consumer Protection Authority (CCPA) and the Insurance Regulatory and Development Authority (IRDAI) to take action. 

Stressing on some of the dark patterns in the insurance sector, European Insurance and Occupational Pensions Authority (eiopa) in a report, states that dark patterns in insurance are those that seek to exploit consumer biases. Some of these include social proof, forced action, false sense of urgency, hidden charges, etc. In the case of forced action dark pattern, consumers are made to believe that they cannot get a quote or make a comparison without following the directions of an online platform. This may lead consumers to disclose personal information that they wouldn’t have shared otherwise. 

Similarly, a false sense of urgency is created by falsely informing the consumers that a product is only available for a limited period of time. This practice leverages on the fear of missing out and discourages users from reading all the information available. Websites, including insurance websites, sometimes use pre-selected or default options which are not necessarily in the interest of consumers. False hierarchies are used to promote a certain option or, on the contrary, to hide certain options. This could include using brighter colours or a bigger font size, to guide consumers into taking certain decisions, states the eiopa’s report.

The scenarios described by eiopa are relevant in India too, going by consumer experiences when the insurance policy in their hands fails to deliver on the promise assured to them.