If a bank sold the policy, complain to its grievance cell and, if necessary, escalate the complaint to the Reserve Bank of India Ombudsman.
The Insurance Regulatory and Development Authority of India (Irdai) has imposed a Rs 1 crore penalty on Canara HSBC Life Insurance Company for mis-selling a deferred annuity policy to an 88 year old, although its entry age was 30 to 80.
Irdai found deficiencies in the verification call, proposal form, disclosure of features and solicitation process.
- You can post your insurance related questions HERE
Key Points
- Irdai fined Canara HSBC Life for mis-selling a deferred annuity to an 88 year old.
- Large fixed deposits and trust in bankers make elderly customers easy targets.
- Insurance may be falsely pitched as a fixed deposit or guaranteed-return product.
- Check the customer information sheet, benefit illustration and policy schedule carefully.
- Cancel unsuitable policies within 30 days and obtain written acknowledgement.
- Approach the insurer, Insurance Ombudsman, Bima Bharosa or RBI Ombudsman when needed.
Why seniors are easy targets
Many seniors do not realise that incentives drive recommendations.
"They sign where instructed without seeking further documents because they trust the banker," says M Pattabiraman, associate professor, Indian Institute of Technology Madras and founder, Freefincal.
Many also hold much of their retirement corpus in deposits.
"Large fixed-deposit holdings make them easy targets for high-margin products presented as secure income streams," says Pattabiraman.
Recognise mis-selling
Sellers may portray insurance as a high-interest fixed deposit or a guaranteed-return product (even when that is not the case).
They may sell it as a short-term plan without revealing the long tenure, lock-in, low liquidity and early-exit penalties.
Sometimes these plans are sold as single-premium plans when, in reality, they require regular premium payments.
Check suitability
Barring immediate annuities, most life policies may not suit seniors.
A deferred annuity makes little sense at age 75 if income starts five or six years later.
"Returns during the deferment period may be only around 4 to 5.5 per cent," says Renu Maheshwari, Sebi-registered investment adviser, cofounder and principal adviser, Finscholarz Wealth Managers.
Ulips carry market risk.
Endowment and money-back plans may not generate adequate returns to beat medical inflation.
Seniors without income generally do not require term insurance.
Understand the product
Seniors must distinguish between the premium-payment term and the policy term.
In a deferred annuity, establish when the payouts begin.
If an investment of Rs 5 lakh produces Rs 1 lakh annually from the sixth year, the return is not 20 per cent.
"The waiting period lowers the effective return," says Maheshwari.
Check the internal rate of return.
Annuity products tend to have zero or low liquidity.
"A promise of liquidity from a locked annuity corpus indicates mis-selling," says Shilpa Arora, cofounder and chief operating officer (COO), Insurance Samadhan.
Read before signing
Read the customer information sheet (CIS), which states benefits, exclusions, lock-in and charges.
Treat the verification call seriously.
"Do not hand the phone to another person to answer on your behalf," says Kapil Mehta, cofounder, SecureNow Insurance Broker.
Once the policy document arrives, review the benefit illustration and policy schedule page.
"The benefit illustration tells you how much the policy will pay and when.
"It also distinguishes guaranteed benefits from non-guaranteed ones," says Mehta.
Use the free-look period
The free-look period lasts 30 days from receipt of the policy document.
Return an unsuitable policy at the insurer's branch or online.
"Obtain an acknowledgement of the cancellation request," says Arora.
Escalate complaints
If the free-look period has ended, complain in writing to the insurer's grievance redressal officer.
"Obtain a complaint reference number," says Siddartha Karnani, partner, King Stubb & Kasiva, Advocates and Attorneys.
If the response is unsatisfactory, approach the Insurance Ombudsman.
"An unresolved or inadequately answered complaint may also be escalated to Irdai through Bima Bharosa," says Karnani.
If a bank sold the policy, complain to its grievance cell and, if necessary, escalate the complaint to the Reserve Bank of India Ombudsman.
Consumer court and civil court remedies remain available.
Avoid rushed purchases
Ignore salespersons if they say that the premium will go up if you do not hurry up and buy.
Demand documents and study them.
"Seek an opinion from an independent fee-only adviser.
"Consult a knowledgeable and trusted family member if a fee-only adviser is not available," says Maheshwari.
- You can post your insurance related questions HERE
Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.
Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.
Feature Presentation: Ashish Narsale/Rediff
