More than half of complaints against private life insurers are related to Unfair Business Practices (UFBP), according to the Insurance Regulatory and Development Authority of India (IRDAI).
Out of a total of 1,27,378 grievances registered in the last financial year, 26,107 pertained to UFBP. Out of this, 45,884 were in the private sector and 54 percent of complaints are on UFBP, as per the latest data. In the case of public sector insurers, the complaints on UFBP are very low (2978 out of 81,494) accounting for only 3.65 percent. The overall grievances in the life insurance industry, however, have come down to 1,27,378 in FY23 as against 1,54,826 in the previous year. Spurious calls as reported in the name of officials of IRDAI/IGMS, various government agencies, and other financial institutions is a matter of concern for the insurance industry, the regulator said.
IRDAI has issued several public notices, press releases, advertisements on leading TV Channels, newspapers, and directions to insurance companies to caution the public against spurious calls etc at various touchpoints and in the media as well. IRDAI has also cautioned the public not to transact with spurious callers in any manner.
Insurers have been advised to take up the issue of mis-selling seriously by doing a root cause analysis to identify the major causes. Some of them are: ascertain suitability of product, place controls on various channels based on the vulnerability of the channel and have a strategy on dealing with complaints of mis-selling, IRDAI said in its latest annual report. The definitive way of reducing mis-selling is to make the members of the public aware of the concept of insurance, kinds of insurance policies, risks covered, benefits offered, exclusions, and conditions etc. This is sought to be achieved through various efforts of financial education to improve financial literacy.
The prominence of complaints related to Unfair Business Practices in the private life insurance sector has raised concerns about the conduct of these companies. According to the data released by the Insurance Regulatory and Development Authority of India (IRDAI), out of the total 1,27,378 grievances registered in the last financial year, a staggering 26,107 were related to Unfair Business Practices.
The data further revealed that 54 percent of the complaints against private life insurers were specifically related to Unfair Business Practices, while in the case of public sector insurers, such complaints were significantly lower, accounting for only 3.65 percent. This stark contrast highlights the need for stricter regulations and oversight in the private sector to ensure fair and transparent practices.
One particular concern highlighted by IRDAI is the prevalence of spurious calls made in the name of IRDAI officials, IGMS, and other financial institutions. These calls often deceive policyholders and manipulate them into engaging in fraudulent transactions. To address this issue, IRDAI has issued public notices, press releases, and advertisements cautioning the public against such spurious calls. In addition, the regulator has urged insurance companies to undertake a thorough analysis of the causes behind mis-selling and implement appropriate strategies to tackle complaints in this regard.
Mis-selling is a significant issue within the insurance industry, and IRDAI emphasizes the importance of making the public aware of insurance concepts, policy types, coverage, benefits, exclusions, and conditions. Enhancing financial literacy through various educational initiatives is seen as a crucial step in reducing mis-selling and empowering individuals to make informed decisions about insurance products.
Despite the overall reduction in grievances in the life insurance industry from the previous year, the prevalence of complaints related to Unfair Business Practices in the private sector demands immediate attention. It is essential for regulators, insurers, and other stakeholders to work collaboratively to enforce stricter guidelines and ensure ethical practices that protect the interests of policyholders. By fostering transparency and accountability, the insurance industry can regain the trust of the public and provide the necessary protection and financial security they deserve.
