Compare before you buy insurance cover
Anyone selling an insurance product has to fully brief the prospective purchaser about the policy, so as to facilitate an informed decision. Regulations governing the sale of insurance also impose a duty on the insurer and his intermediary to sell a policy that strictly meets the needs of the person.
Yet, you see blatant violations of these regulations, particularly when insurance is sold along with other products and services.
Take for example, the compulsory home fire insurance often thrust on a bank customer availing a home loan and the peddling of a home loan protection plan by banks providing home finance. In most cases, the bank does not even discuss the insurance policy with the customer, just buys the insurance of its choice and collects the premium amount from the policyholder. The bank may not even hand over the policy document to the customer, nor tell him/her about the policy terms and conditions.
Similarly, most people travelling abroad buy their overseas health and travel insurance from travel agents who books their air tickets and make the hotel reservations, because that is convenient. However, the agent neither discusses their requirements nor their choice of insurer. And he/ she does not give them any information about the policy — what it covers, what it does not. All that he wants to know from them is the total amount of insurance cover that they wish to buy and the policy document is handed over to the customer along with the tickets.
There are many such insurance covers that are linked to the sale of a product or a service — extended warranty or insurance against damage, sold along with electronic goods including mobile phones, marriage postponement/cancelation insurance marketed by wedding planners, insurance against cancellation of holiday sold by travel agents along with travel packages, accident and life insurance plans hawked by banks along with home and personal loans, payment protection insurance by credit cards companies, etc.
In all such cases, the required disclosure about the insurance product is either totally inadequate or completely absent and the product may not meet the needs of the consumer. In certain cases, there would be forced selling of the product and one also cannot rule out misrepresentation of facts. In short, such sale not only violates the various insurance regulations meant for the protection of consumers, but also takes away the consumer’s right to information and informed choice .
Besides the Insurance Regula- tory and Development Authority’s (IRDA) Regulation on the protection of policyholders’ interest, which lays down that the prospect be given full information about the product, the code of conduct for corporate agents too stipulates that the intermediary cannot force a prospect to buy an insurance product and cannot misrepresent facts. It also mandates that the agent fully disseminate information about the product and take into account the needs of the prospect while recommending a specific insurance plan. But obviously these regulations are not being followed in their its letter and spirit and this needs to change.
Way back in 2012, the IRDA had expressed concern over the possible exploitation of consumers in such sale of insurance products and had issued a discussion paper on ‘Tying and bundling of insurance policies with other services and goods.”. But unfortunately, the paper still figures in the website meant for policy holders as a project ‘in the pipeline’.
It’s time the IRDA took steps to strictly regulate the sale of insurance products through corporate agents and ensured that consumer interests are not compromised. Consumer education about their rights as insurance customers is also very essential.
Consumers in turn should make it a habit to compare policies of different insurers and buy what is in their best interest, instead of blindly buying what is thrust on them.