Anita Nair, 45, an artist, recently purchased a unit-linked plan from a private insurance company. The agent had told her it would be a five-year term.
After she paid the premium and signed the proposal form, she realised it was a 10-year policy term and, immediately, sent a mail of complaint to the company. She was not only refunded the money; the agent was also reprimanded.
Mis-selling is now being taken seriously by life insurers and they're taking innovative steps to reduce this practice.
Max Life Insurance, for example, has put into place a series of measures, including training of agents, a welcome call to the customer and having a fact-finder process with the customer to understand the latter's needs.
Ashish Vohra, senior director and chief distribution officer of Max Life, says they have a process called 'mystery shopping' in place.
In this procedure, external institutions are appointed by the company to randomly call agents and pose as a customer, to ensure they follow the correct procedure for selling a policy.
"Post introduction of these measures, customer complaints have significantly come down, implying mis-selling has been reduced," said Vohra.
Need-based selling is also becoming a focus among companies. Birla Sun Life Insurance has, among the pre-sales initiatives, a process called a 'Pre-issuance verification call'.
It is made by the customer service team as soon as the advisor logs the policy at the nearest branch. This call to the customer is to ensure he/she has understood the policy details, verify his/her credentials and confirm other formal notifications.
"Although recently launched, we expect this particular initiative will ensure there is reduction in first-year lapse of policies and persistency is managed well," said Jayant Dua, managing director and chief executive officer.
HDFC Life, another leading private life insurer, has built an algorithm to have an early warning system for policies.
Subrat Mohanty, executive vice-president, who looks after customer relations and information technology, said this would be an early indicator for policies logged in from a location prone to such fraudulent activities.
"Such policies are segregated and verified with the customer, pertaining to the terms and conditions and information provided. If there is discrepancy, the agent is called to revisit the customer and make the appropriate amendments to the policy. Further random calls are also made to the customer to ensure the correct policy has been issued."
Edelweiss Tokio Life Insurance, which has recently repositioned itself to have a customer as prime focus, is taking various steps to ensure correct selling. Deepak Mittal, chief executive, said they were thinking of psychometric testing for selecting agents.
"We want to ensure the agent is skilled in need-based selling, to reduce the complaints per policy issued," he said. A customer is refunded the money without any questions asked if he/she said the policy was mis-sold and it was not required, he said.
Apart from regular calls to customers, before and after issuance of policies, those in the sector say mis-selling can be curbed if there was sharing of information about fraudulent agents. According to sector estimates, the number of complaints per policy sold has come down by 30-40 per cent in the past two years.