Have you been mis-sold an insurance policy?

If the product features don't match your requirements, cancel it during the free-look period

Most of us have purchased at least one insurance policy we have regretted later. Either the premium was more than what we were told, or returns were not as projected. The problem of misselling is so rampant that even the regulator has addressed the issue in its latest monthly journal. There are some steps that customers can take to avoid buying a policy that does not meet their requirements.

One common complaint is with regard to the frequency of premium payment. Customers are told that the policy is a single premium but it turns out to be a multiple premium product. Another problem is when you are sold a policy bundled with a loan product, like a home loan. In such a case, make sure the policy is a term life policy and not a savings product.

Amit Roy, chief distribution officer, Aegon Religare Life Insurance, said, “Look at the premium you paid and check if it is the same mentioned in the policy bond. Similarly, while signing the loan documents, check the insurance policy document too. Since you are creating an asset while buying a loan (home in this case), don’t get into another savings product, which will only add to your liability.”

Customers must also check if the maturity date and age of the insured mentioned in the policy document match. For instance, if the policy term is 10 years and the customer’s age in the document is 45 years, then, at the time of maturity if the customer’s age does not match the maturity age, the claim could be repudiated.

 

Sometimes the customer agrees to buy one particular product, but the agent while filling up the form chooses another one because it offers higher commission or to avoid medical tests. Often customers pay two or three premiums before they realise it. One should also check the benefit illustration to know how much of the premium goes towards charges.

“Insist that the product name, your age and policy term is filled up in front of you. Or use the verification call and free-look period to cancel the policy if it does not match what the agent told you. That is why it is important to preserve copies of benefit illustration and product features,” Roy added.

Another big problem is the product-need mismatch. Most customers buy insurance to save tax, and in the process end up paying Rs 25,000 as premium for an insurance cover of only Rs 2.5 lakh, whereas the same premium could have bought the consumer a Rs 2 crore term plan. "Customers often buy products to maximise tax savings and returns rather than sum assured. To avoid this there should be better communication between the buyer and seller,” said Manish Shah, co-founder and chief executive, BigDecisions.com.

That is why today most companies have a suitability matrix profile and agents are supposed to sell only those products that match the customer’s profile, pointed out Sujoy Manna, vice-president, products, HDFC Life.

“An agent is supposed to sell a policy only after doing a need-based analysis. For this, he must ask questions related to the customers’ investment objective, time horizon, income, existing investments and risk preference. If, for instance, you require money after 10 years, then the agent should not sell you a policy that matures in five years,” he said.

If you are not sure consult someone before you buy the policy, sid Suresh Sadagopan, a certified planner.

“Insurance companies may train agents to do need-based selling. But who can verify if it is happening at the ground level? Customers must do due diligence before buying an insurance policy.” he said.