Mis-selling is a very common practice in the insurance industry. It basically refers to selling insurance products by means of withholding truths, giving false information and misinterpreting details to potential insurance clients. Sometimes, insurance agents are successful in cajoling clients in a way that they end up purchasing a product that does not really suit their requirements. This is probably one of the most copious reasons why the insurance sector in India is shambling, even after so many years. According to statistics, mis-selling of insurance policies has resulted in a major setback in the growth of the insurance industry in India.
There are numerous insurance agents selling different kinds of insurance policies to potential clients all across India. Most of these agents have good and honest intentions, thus they are keen on helping their clients select policies that are most suited as per their requirement and way of living.
However, unfortunately there are many insurance agents who are true to their work and try to sell insurance policies honestly and not by giving false information or misinterpreting details to the client. But the industry has been shamed because of such malicious practices and hence, present a garbled image of the insurance policy.
Take-away: As an ethical insurance agent, it is your duty as well as responsibility to provide well-informed true information to the client and take steps, keeping the clients welfare in mind.
Top 4 Most Common Mis-selling technique that you must avoid:
Below are some common mis-selling techniques of insurance agents:
Promising high returns:
This stands as the number one mis-selling technique commonly used by insurance agents. The insurance agent promises high returns to the client in order to sell the policy.
Fact: A life insurance policy is a protection tool and needs to be placed likewise. It cannot be positioned as a returns tool as it will never be fair to do so.
A life insurance policy provides monetary protection to the beneficiary in case of unforeseen or unfortunate death of the insurer. Thus, the family members or beneficiaries receive a sum assured, also known as a protection benefit, from the insurance company. To avail the service of this protection benefit, the insurance company charges the insured with a premium.
Thus, selling life insurance on the basis of high returns is not the right way to position insurance as a product. There is no doubt that life insurance is an extremely important part of one’s financial portfolio; however it should not be compared to any pure investment product.
Additionally, there are various other advantages that come along with a life insurance policy. These advantages function as savings in case the insured survives and nothing unfortunate happens to him or her. One such advantage is in the form of money back where money is paid either in between the policy term or at the end of the insurance policy. This is known as maturity benefit.
Each policy has a protection aspect and a saving aspect, and this is what you need to make precise to the client. You cannot compare an insurance policy with a savings product, as both the products come with different objectives.
Half-baked information of insurance policy and its benefits:
Even though the client is most likely aware of it, as a life insurance agent, it is important that you provide the detailed and accurate information about the insurance policy, its benefits, savings, tax benefits, etc. Some clients had been informed that ULIPs have guaranteed returns. Others were told that that their life insurance needs to be paid only for 3 years, while their policy was a 20-year one!
These are some examples of sheer lies and miscommunication that was purposely or subconsciously passed on to the client!
Fact: What a lot of insurance agents do is that they give half-baked information to the client with the objective of luring the clients to attractive return rates of a policy. However, the accurate positioning of the insurance policy with its pros and cons needs to be positioned to the client so that he can take an informed decision about the same. This is extremely important for life insurance policies as it is a long-term plan and needs to be well positioned in the mindset of the client for him to continue it till the end.
Unclear information about claim:
At the time of selling accident and health insurance policies, you must make it very clear that under what situations or circumstances a claim is not payable.
For instance, if a client is a smoker but has declared himself as a non-smoker in the insurance application form, the insurance company holds the right to refuse from paying the claim to his or her family in case he or she dies. Health insurance policies have certain exclusions, for example specific hospital claims not payable like OPD or sickness prevailing before commencement of the policy, etc.
Fact: The client needs to be aware of the possible claim situations and the fact that he needs to tell the truth at all points of time to be able to get an insurance claim. This is a VERY important expectation that needs to be set in the client’s mind which would not result in unnecessary hassle, commotion and misunderstanding.
As a good insurance agent, you must make clear the conditions under which the claims are payable and not payable too. You can do so by reading the policy document with the client.
Incorrect premium information:
Many insurance agents aggravate the advantages of the insurance policy and avoid discussing about the premium, costs and duty of the policyholder. The insurance company stays put on the promises it makes in the product; however you must inform the client that regular payment of premium for the full term of the policy needs to be made in a timely manner. This is where the client has to comply and fulfil his or her duties.
Fact: You need to rightly inform the client that if the premium payments for the entire policy term is not made on time, then charges will be applicable and the policy holder will have to suffer deductions. Hence, the policy holder should only adhere to a premium amount which is payable and thus affordable by him or her.
For health insurance, he should be informed that the premium can change every year due to multiple reasons. Also, the client or policy holder should also be made aware of the repercussions of discontinuing until the full premium paying term.
Although not every insurance agent may have the intention of duping the client, it is important for you as a responsible insurance agent to give only correct information to your clients. Sometimes, you may be in a rush or you may just omit important characteristics of an insurance policy to save your time. However, please understand that to be able to serve the client effectively, you need to assist him or her patiently with 100% accurate information.
You need be aware and vigilant with your client and make sure he or she receives all the important information regarding the insurance policy he or she is interested in. This way, you will only get serious clients who will surely continue their policies for the long run.
Mis-selling of insurance policies have seen a decline in the insurance industry and this is not healthy for the entire industry as a whole. Persistency in premium is very important for the insurer, client as well as agent, so that you keep receiving your renewal premiums on time. This is a legacy you need to build very diligently.