In order to curb mis-selling of insurance products, the Insurance Regulatory and Development Authority (IRDA) is considering a proposal to conduct sales audits of insurance products and take exemplary action against guilty sellers.
“As of now the trigger happens only when a customer lodges a complaint,” said an industry insider on the condition of anonymity. “A sales audit has been recommended and is under consideration. It will involve random check of several sales and identifying cases where the product sale is not in sync with the individual’s risk profile.”
The regulator can conduct the audit while inspecting companies’ accounts. “The regulator can take exemplary action in such cases,” he said.
There have been instances of a 74-year lady being sold a deferred annuity pension plan, or an individual with a low income sold a high premium product. Strong action needs to be taken to act as a deterrant, he said.
The regulator could also make transparent any action taken against people for mis-selling. “This will have a halo effect and restrain others from repeating such actions,” he said.
Interestingly, the insurance industry is looking to step up its checks and balances just in line with the mutual fund industry which has already outlined a series of proposals that look to document the complete sales process in a bid to control mis-selling.