How Can Misselling Insurance Policies Impact Your Business

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How Can Misselling Insurance Policies Impact Your Business

Preface: This post was originally published in 2022 and has been updated on May 07, 2025, to provide you with the most current and accurate information.

No matter how stringent insurance regulations are, the mis-selling of insurance policies remains a prevalent issue that has compromised the credibility of numerous insurance marketing firms (IMFs). IMFs must always make sure that none of their insurance policies are mis-sold to the customers because in the long run, it will damage the reputation of their insurance intermediary firm. 

Insurance policies are inherently complex, and in most cases, much of the information contained within them is difficult for the average customer to comprehend. Customers depend on the IMF or any other insurance intermediary to interpret and communicate this information accurately. It is, therefore, IMFs’ responsibility to guide the customers in selecting the appropriate policies.

However, in some cases, an IMF may unknowingly misguide customers due to a lack of clarity, inadequate training or miscommunication, ultimately resulting in the mis-selling of policies. In this blog post, we shall explain how can misselling Insurance policies impact your business

What Does Misselling Insurance Policies Mean?

In simple terms, misselling is mistakenly selling the insurance policies to the customers that do not fit their requirement. Simply put, the final reward of that policy is different from what the customer initially thought. When it fails to meet the customer’s purpose, it is your Insurance Marketing firm that can get into trouble.

But how does that happen? Well, as an Insurance Marketing Firm, you do not directly sell policies. Instead, you reach out to an insurance agent (not a corporate agent, but an individual agent) and then, he is the one who sells those policies. 

Techniques Used For Deliberate Misselling Of Insurance Policies

When it comes to intentional mis-selling, agents often employ the following techniques:

• Creating false benefits by taking advantage of the customer’s lack of education, or understanding of the legal terminologies.

• Exaggerating the benefits customers can gain using terms that aren’t even described in the policy.

• Misrepresenting the insurance policy to give put the customer under a false sense of security

• Bundling policies where the agent ‘bundles-up’ different aspects of different policies and present them as a package

• Miscalculating the benefits of the policies

• Providing false information and false bonuses for policies

What Can Be The Causes Behind Misselling Insurance Policies?

The insurance market is filled with competitive aspects. There were days where one couldn’t sell even one policy without some miracles happening in the background. Furthermore, the introduction of insurance e-commerce has also played a major factor in increasing competition in this domain. And many aren’t too happy about it. 

Instead of focusing on creating better products and providing the right information to the users via the website, they still seek to engage with them using manipulative tactics. These tactics range from falsifying insurance information in the documents of policies to promising bonuses that can’t exist in the first place.

Furthermore, there have been many cases of tampering with the proposal and forging the documents. However, it is not only the fault of the insurance agent, the insurance marketing firm can be the one to take the blame as well.

How Can an IMF Complain Misselling of Insurance Policy?

An Insurance Marketing Firm (IMF) can report cases of insurance policy misselling to the Insurance Regulatory and Development Authority of India (IRDAI) through multiple channels. 

These include the Bima Bharosa System, email, the IRDAI Grievance Call Centre, and the Integrated Grievance Management System (IGMS). In the complaint, all the necessary details and evidence for misselling must be mentioned.

Negative Impact of Misselling Insurance Policies on Your Business

Mis-selling the insurance policies can have a severe impact on your IMF. But before we tell you about the damage that you can face, let us give you a moment to empathize with the customer.

For a customer, the issues that comes from buying the wrong policies entail the following:

• Financial losses because the premium paid goes to waste

• The features and benefits become of no use to the customer

• When the customer realizes the wrongness of an insurance policy, they can stop the insurance premiums. However, unless they can bear some deductions, all that premium is lost.

For you, the impact might be quite fruitful, but in the long term, it can destroy your insurance marketing firm.

• Lack of trust in the market: It is not the insurance company that wears the blame of policies, it is insurance intermediaries. Thus, if word gets out that your IMF is responsible for the mis-selling, the trust factor you have in the market will change for the worse.

• IRDA penalty: IRDA is the regulatory authority that monitors the conduct of all insurance intermediaries. Wherever customer complaints are concerned, it is the body that ultimately deals with them. IRDA can impose severe penalties on you if your code of conduct deviates from what is expected.

However, running a firm is a big deal. And we understand that ensuring that all the policies are sold correctively is a task that can be hard, especially in a competitive market. Therefore, there exists ways by which you can prevent such incidents from happening.

Guide For Preventing Insurance Misselling

To prevent selling the wrong policies, you have to just ask yourself one question: “How knowledgeable am I about the policies I am selling?” And then, if your intentions are clear, you can follow the steps below to sell the right policies to the right customers:

• Make your insurance portal as robust as possible, but stay within the IRDA regulations

• Provide write-ups and blogs (not marketing oriented) that can inform the customer

• Team up with insurance web aggregators. Their platforms can help dispense information to the customers in an ethical manner.

• Provide a standardized script for every insurance policy. Make sure that it contains all the benefits, services and key disclosures.

• Being vigilant about the insurance marketing firm’s business structure and the willingness to aid the customer is the only method to prevent selling the wrong policies.

Conclusion

Always conduct business with ethics in mind. As an Insurance Marketing Firm, the services you provide are vast and your potential to expand is large. Therefore, you must always ensure that you follow all the relevant rules and regulations when selling insurance policies. If you need help in ensuring compliance with IMF regulations, connect with Registrationwala for assistance. 

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