3rd Prize Winner – Shri Raghav Jain, Birla Institute of Management Technology

Mis-selling in Insurance and how to prevent it

1. Mis-selling at a glance By definition, mis-selling means selling a product by giving a wrong picture of a product, it may include, giving wrong information, giving unrealistic information, not giving full information about the product. You must have heard an insured, saying – but this was not I asked for. And, your agent accusing, but then I did mentioned all the details upfront, didn’t I? Insurance is a business of selling commitments and here is a case where this was broken. Unfortunately the product was mis-sold. Mis-selling is not unique to insurance and happens in various lines of businesses (loans, credit cards, investment products, pharmacy, hospitality etc.), but Insurance being an intangible service – the principle of Caveat emptor prevails in insurance. Often, the intermediary does not fully explain the policy details to the customer. Or the buyer (insured) is in a hurry and doesn't care to check the fine print. There have been cases reported where the agent deliberately misguided the buyer. Discussing an example of mis-selling: A person aged 54, having a handsome amount of savings with him and having no dependents (no kids and wife has passed away a few years ago), has no need of a term insurance (death benefit) but the agent may sell him this policy. A common practice that is seen in this regard is where the agent sells the policy promising a single premium mode or a limited term policy but it actually turns out to be a regular premium mode. And the customer has no option but to surrender the policy or stop paying the premium. According to a survey conducted by Ernst & Young, compared to different types of frauds, insurance companies are most affected by “mis-selling” due to premeditated fabrication or fraudulent