The fact that some life insurers or their intermediaries indulge in unfair practices and resort to mis-selling of products is known. But what is not known is that consumer complaints pertaining to such practices constitute the largest number and far outnumber grievances on delays in claim settlement and unjust repudiation of claims!
An analysis of the total number of consumer complaints received against life insurers (by the industry as well as the regulator) during 2011-2012, shows that the largest percentage (32 per cent) of complaints pertain to 'unfair business practices at the point of sale'. Issues regarding claim settlement, on the other hand, constitute 10 per cent of the total complaints.
The Insurance Regulatory and Development Authority (IRDA), which has dissected the complaints, have further classified 'unfair business practices' into different sub-groups, so as to scrutinise them further.
Accordingly, 34,799 complaints, constituting the largest subgroup, pertain to 'malpractices' perpetrated by the insurers. Another 18,675 complaints come under the heading of 'products differing from what were requested or disclosed'. As many as 9,848 complaints refer to 'tampering, corrections, forgery of proposal or related papers'.
The categorisation gives a clear picture of the unethical practices that insurers are resorting to, in order to sell their products.
There are complaints about single premium policy issued as annual premium policy (8,810 complaints), 'free-look' refund not paid (6,243), misappropriation of premiums (5,369), proposed insurance not in the interest of the consumer or the proposer, term of the policy altered without consent, illegitimate inducements offered, intermediary not providing material information about the cover, surrender value projected being different from the actual, misleading information on premium paying period.
Well, the list goes on, adding up to 10,0770 complaints of unfair practices, out of a total of 30,9613 consumer complaints received during 2011-2012
There is also a huge consumer discontent about the way insurers process the proposals because 27 per cent of the total number of complaints are about that. Another 20 per cent of complaints pertain to policy servicing, while 4 percent relate to Unitlinked Insurance Policy.
So what happens to these complaints? As per the statistics compiled by the IRDA, 30,8331 complaints have been 'attended to'. Out of this, 73 per cent of the complaints have been decided in favour of the consumers or the insured, while the rest went against them.
Consumer complaints registered during 2011-12 constitute 0.64 per cent of the total number of life policies. I must also mention that the largest number of complaints was received from Delhi, followed by West Bengal, Haryana and Jharkhand.
The data not only helps IRDA tackle recalcitrant insurers, but also come up with new guidelines and regulations where necessary to protect the interests of consumers. Its recent exposure draft on 'standard proposal form for life insurance', for example, is meant to prevent the sale of unsuitable products to consumers.
P.K.Naik: The bank from which I took a business loan forced me to buy an insurance policy which is not suited to my needs at all. Since I needed the loan, I had no other option but to take it. What can I do now ?
Complain immediately to the nodal officer of the bank drawing his attention to the forced sale. Also complain to the Reserve Bank of India. You also need to write to the insurance company whose policy you have been sold, besides IRDA, seeking cancellation of the policy and a full refund.
I must mention here that IRDA is now looking into this issue of tying and bundling of insurance with other products and also forced sale of such products, adversely affecting consumer interest and has sought the response of all stakeholders on the required regulatory action.