Unlike other sectors, insurance is considered to be a field where there has to be strong regulations to protect policyholders. Despite this, policyholders are often at the receiving end.
Insurance is an intangible product where its efficacy is known only at a later date when a claim arises. A number of techniques are used to influence customers to purchase insurance products from specific companies.
Misleading customers
The Insurance Act recognises the issue of influence and addresses through a specific provision which acknowledges the ways by which buyers can be influenced through offer of incentives of any nature. This is however observed more in its breach.
The insurance regulator permits the use of certain specified channels of marketing in addition to direct marketing by the companies. Agents, corporate agents, bancassurance, insurance marketing firms, web aggregators, point of sales, common service centres, motor insurance service providers are the recognised channels of marketing. While all of them make use of influence for effecting sales, two of them come with inbuilt capacity for undue influence.
Banks have undue influence
Bancassurance is one of the marketing channels where banks act as corporate agents of insurance companies to sell insurance. For banks, it’s an attractive proposition and an additional source of income. For customers, it appears to be a one stop shop for their financial requirements. There is however a twist to the story. Those who avail loan from banks are quite vulnerable to influence. A loanee can be directed to avail an insurance policy from a specific company. There is a good chance that any suggestion from the bank would be accepted by the borrowers, as they want the loan process to end smoothly and swiftly.
Banks deal with a limited number of companies and therefore do not provide a wide choice to the customers in terms of benefits. In a way it restricts customer choice and diversity and influences them is a certain direction.
Vehicle deliveries get delayed
Motor insurance service providers (or MISP’s), are another channel where undue influence is being exercised. When a customer goes to a dealer, they would be directed to a pre-existing tie-up with certain insurance companies. At times, insurance is offered as part of the sale price of the vehicle. Again, every manufacturer has got a insurance programme whereby the dealers claim that they would give cashless claim settlement for anybody going through their programme. Such cashless facility would not be available to others who avail insurance from a company which is not part of the programme. Out of the many companies offering insurance, only about three or four may be part of the programme of the manufacturer. There have been reports of dealers warning delay in delivery of vehicles or use of other methods to force customers to avail insurance through them.
A common portal with all available choices
The regulator has to find a solution to this issue. Complaints of mis-selling have been very high for bancassurance as per reports. One way could be to insist that banks and MISP’s should necessarily create a portal where all the insurance companies could participate. Customers should be told to make a choice online from this portal.
One more method could be for the regulator to call up policyholders coming through these channels, on a sample basis and verify if they were aware of details and that there was no influence on them.
