Agents have to return commission if insurance is mis-sold, IRDAI brings tough proposal

In the insurance sector, policies are often given to customers with wrong information. Many times people get caught in the greed of more profit. To stop this fraud, the insurance regulator IRDAI has come up with a very strict proposal. If this proposal is implemented, the fraud on consumers in the insurance sector will be curbed to a great extent. The new rules will have a direct impact on agents who mislead customers to meet their targets.

Strict provision for withdrawal of commission

The biggest change in IRDAI’s new proposal is about agent’s commission. Until now, if an agent sold a policy by lying, his commission was guaranteed. But as per the new rule, if the policy is proved to have been mis-sold, the commission earned by that agent or distributor will be clawed back. This will make agents think twice before misleading any customer.

The record of the salesperson shall be public

IRDA is also emphasizing on increasing transparency. Under the proposal, the identity of the salesperson or agent selling it will now be mandatorily attached to every policy. The biggest catch is that if an agent has ever mis-sold insurance in the past, that information will be disclosed. In future, any customer will be able to check the past record of any agent before buying a policy. This will make it clear what is the working style of the person from whom they are taking the policy.

Control over targeting of bank employees

Often when visiting a bank or NBFC, the employees there ask customers to take an insurance policy. They get rewards or incentives based on sales. IRDA has proposed to ban this system as well. Now bank employees will not be given any incentive based on policy sales target or number. This will reduce the pressure on consumers to buy unnecessary policies.

The policy will not be sold as an investment

Most frauds occur when insurance is presented as fixed deposit (FD) or high return investment. IRDA has clarified that such cases will be treated as outright miss-selling. The main objective of insurance is to provide protection. Selling it as a profitable scheme will now be dealt with directly. This move will save money for investors who are stuck paying premium for long thinking that it is an FD. Overall, this proposal is paving the way for major reforms for insurance consumers.