Misselling is a rampant and harmful practice that affects many industries. It can be understood that most, if not every, instance of misselling can cause a lot of financial stress to customers.
While the impact of misselling is felt by customers across various industries, the worst-hit industry is the insurance industry.
In today’s blog, let’s look at some misselling episodes that have impacted companies working in the insurance industry.
But before we look at these episodes, let’s understand why customers in the insurance industry are said to be hit the worst by misselling.
How do Insurance Customers Suffer From Misselling?
Imagine yourself as the customer in this scenario.
You’ve taken a health insurance policy from a prestigious insurance company. You were informed that the policy covers the following:
- It came with an accident cover
- Most operations which require you to be admitted for over 24 hours are covered
- Certain specific operations that discharge you from the hospital in less than 24 hours are also covered
These were the major benefits told to you before you took the policy. On one fateful day, you were hit by a car whose driver lost control.
You had to be taken to the hospital and had doctors operate on your left arm, which got fractured during the accident.
Once you were discharged from the hospital, you contacted the insurance company to reimburse your hospital bills, but they denied your claims because the driver was under the influence of alcohol.
Now let’s look at the customer's grievance in this scenario.
1. Mental distress
After the terrible ordeal that the customer has gone through despite it not being their fault, they’re told that their claim won’t be approved.
This can bring a heavy mental and financial toll on customers when their hospital bills are disregarded because of irrelevant reasons. This added salt to the wound when they were promised all the support they needed when they were purchasing the insurance policy.
2. Financial burden
Every customer who purchases a life insurance policy does it to reduce the amount of cash to be spent on medical bills. This can be for people with chronic illnesses, laymen, people expecting a medical procedure soon, or others.
When people have their genuine medical claims rejected on the grounds that weren’t mentioned during the purchase of the policy, it brings them a huge financial burden. Such burdens aren’t easy to recover from.
In case an affected customer decides to pursue legal action against the company, it can add to their financial troubles even further.
Now that we’ve seen some of the problems faced by customers, let’s look at a major misselling episode from the insurance industry.
What Were Some Misselling Episodes in the Insurance Industry?
Misselling episodes are frequently seen in the insurance industry. The reason for many victims falling prey to such fraudulent practices is that these fraudsters prey on distress and panic when customers are most vulnerable.
Here are some misselling episodes that were prevalent in India.
1. Insurance policies sold in the name of fixed deposits
This was an insurance fraud that had been happening over the last decade, but there was a rise in the number of people falling for it during the coronavirus pandemic.
Most people who fell for this scam were those who lost their loved ones and encashed on the life insurance claim. These fraudsters would contact these people and tell them that they could deposit the claim amount into a fixed deposit account and then receive superseded benefits.
These people were unaware that they were paying for a health insurance policy and would know about this only when they received the documents for the same.
2. ULIPs sold by withholding information
Another product, Unit Linked Insurance Products (ULIP) was introduced to the Indian market by insurance organizations in 2001. It was a product that allowed for both investment along with a life cover.
Many insurance agents sold this as under the guise of a money-doubling plan that guaranteed them a life cover. They avoided any mention that the investments were to be annually done over 10 years.
In the 5 years from 2004-2005 to 2009-2010, around 1.56 trillion rupees were lost due to faltering in renewal of the plan.
Many agents did this practice because they were earning huge commission rates up to 40% per sale.
Now that we’ve seen a few examples of insurance misselling and its impact, let’s look at how sales agents can reduce misselling.
Ways to Reduce Agents From Misselling
When certain measures are mandated and followed by each agent, the amount of misselling will be reduced by a huge amount. Here are a few practices to reduce misselling.
1. Give customers the whole picture
When agents inform leads about a policy, nothing should be withheld. When customers aren’t informed of everything, it can lead to compliance violations being committed, which can bring about many regulatory problems.
When customers are informed about everything related to the policy, it becomes an authentic sale. Agents need to put in the effort to do this and reduce the risk of misselling.
2. Be authentic and credible
Many misselling instances happen when credibility and authenticity are masked and faked when dealing with leads.
Agents should make it a habit to send leads all related documents as part of their after call work. When leads are followed up with authentic documents, they begin to trust the customer.
When this trust is built on the basis of inauthentic credentials and forged documents, it will lead to a case of misselling at some point in time.
Providing Agents with the Right Training
Ensuring agents follow these practices can only be done with constant evaluation and planned coaching.
Constant evaluation can be done by a rigorous quality assurance framework. But when it comes to scheduling coaching for each agent, automated coaching is the ace up your sleeve.
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