The number of cases of insurances being sold through unfair and fraudulent means by financial organizations, especially banks have soared lately.
To address this issue, the ministry of finance has directed banks to put into action a strong mechanism to avoid such mishappenings as the ministry has been receiving many complaints that banks and life insurance corporations are adopting unethical means to sell insurance policies to customers.
In a letter directed to the chairpersons and managing directors of state-owned lenders or public sector banks, the Department of Financial Services has asked them to roll-out strict mechanisms to oversee prevention of such means for selling insurance policies of subsidiary insurers to customers of the bank.
According to the latest annual report curated by the regulatory body – Insurance Regulatory and Development Authority of India or IRDAI, a total of 23,110 cases were reported in the year 2021-2022 for mis-selling of insurances to bank customers, while the count of such complaints stood at 31 for every 10,000 policies sold during the said year.
The percentage of complaints disposed in favour of complainant has climbed from 24% in the year 2020-21 to 27% in the year 2021-22, mentioned IRDAI’s annual report.
“On the advice of IRDAI, insurers have also been taking the issue of mis-selling seriously by doing a root cause analysis to identify the major causes and have taken suitable steps to prevent or reduce mis-selling,” the report noted.
Further, in the letter sent by the Finance ministry to PSU banks, it is suggested that 100% KYC compliance is insured during the sourcing of insurance business by the banks.
“In keeping with these guidelines, you are requested to issue suitable instructions to the concerned vertical of your bank for putting in place a robust mechanism for avoiding any unfair and unethical practices adopted by bank and the franchise Life Insurance Company for procuring life insurance policies from bank customers,” the letter read.
