Here is a note of caution to all consumers: Never buy an insurance product on verbal assurances and promises, whether made by an agent or a telemarketer; a bank or an insurer.
In this age of cut throat competition and unscrupulous practices, one always needs to be extremely wary of unfair practices in the marketing of insurance products.
In the UK, for example, between 2003 and 2008, an estimated two million consumers were misguided by banks and even stores into buying potentially worthless Payment Protection Insurance (PPI).
The financial services regulator, who has imposed steep penalties on those found guilty of such malpractice and asked them to refund the premium collected from the consumers, has now said it will henceforth take pro-active steps to prevent such mis-sale.
The PPI was sold alongside loans and credit cards to cover situations such as illnesses or accidents or unemployment, which the consumers couldn’t pay back.
The terms and conditions of the policy were such that it offered no benefit whatsoever to a large percentage of consumers, but they were never informed of this.
In this age of globalisation malpractices, too, go global and India is part of that global village. So mis-selling here may not be of the scale seen in the UK, but it is still happening.
Credit card companies issue payment protection and health insurance policies without the consumer’s consent; unit-linked insurance policies are sold through false representations.
Consumers are also sold a variety of insurance products by misleading them about the periodicity and the quantum of premium to be paid, or the duration of the policy.
While regulators need to tighten control over financial institutions, these kinds of practices that are inimical to consumer interest and consumers also need to become more discerning buyers.
They need to remember that they have a right to cancel or return a policy within 15 days from the date of receipt of the document and get a refund of the premium paid, if they disagree with anything.
However, in order to exercise that right, consumers should develop the habit of reading carefully the policy document, while insurers need to put terms and conditions in not just English but also in local languages and in a manner that is easy to comprehend.
Gaurav Sachar: My mother (61) was sold a life insurance policy saying after three years, she would get the full benefit. She later found that she would get the benefit only at age 85. I have so far paid Rs 80,000 at the rate of Rs 20,000 per year. I do not want to pay any more on this policy and I want my money back. What do I do?
Answer: I do not know the nature of your policy or the terms governing it. Usually, on cancellation of a policy, one is only entitled to the surrender value. However, here the policy was sold through misrepresentation. There was also a clear violation of the IRDA Regulation. The agent took the signature of your mother on a blank proposal form. So the insurer has to return your money in full. Please send a complaint with all relevant details to the IRDA grievance cell (www.irdaindia.org) and if necessary, to the Insurance Ombudsman.
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