Beware if bank staff says insurance purchase mandatory for loan approval

Your guard should also go up if undue pressure is applied to purchase a policy immediately

The Finance Ministry’s Department of Financial Services (DFS) has directed lenders to stop offering incentives on insurance sales to curb mis-selling, according to media reports. It has instructed financial institutions to sell insurance policies only based on customer needs and not link them to sales targets.

Mis-aligned incentives

Mis-selling occurs when incentives overshadow customer needs. “Bank employees are set targets for selling financial products, including insurance. Their incentives or commissions depend upon it. This creates unwarranted pressure, pushing bank employees to sell products that do not meet the customer’s needs,” says Shilpa Arora, co-founder and chief operating officer, Insurance Samadhan.

 

Insurance is