What is Mis-selling?
Mis-selling is defined as the intentional, reckless, or careless sale of items or services via contract deception or product or service unsuitability for the customer’s requirements. ULIPs or unit-linked insurance plans offer you the benefits of investing in market with the protection of a life cover. Since its inception, one of the priorities of the Insurance Regulatory and Development Authority of India (IRDAI) has been to prevent the mis-selling of unit-linked insurance plans (ULIP).
What are the factors that are responsible for Mis-selling of ULIP Plans?
Here’s what you can expect a fraudulent sales pitch to sound like if you plan on buying ULIPs
Your ULIP offers guaranteed market returns:
This might sound like ‘double your money in five years,’ or ‘get an annual return of x per cent.’ No sales pitch that ensures guaranteed returns -such as ‘get x% returns from the market- from a market-linked investment should be viewed without some degree of suspicion. Apart from being too good to be true, doubling your money from a market-linked investment in less than a half-decade requires pure luck, selection of the right asset classes to invest in at the right time, consideration of the current economic situation at the time you invest, consideration of the existing market conditions and much more that is beyond your insurer's control. When it comes to market-linked instruments, there is no guarantee (only probability) that your fund will generate certain number of returns. Any party that promises 100% guaranteed market-linked returns is not being honest.
Your ULIP is better than x instrument:
When insurers or financial parties claim their product is better than other types of instruments, this sets the stage for deception. While some instruments are more suited to one individual over another, there is no universally ideal financial instrument. You should decide whether investing in a certain financial instrument makes sense based on your income, age, financial goals, investment horizon, and risk appetite and not by simply assuming it is better than another instrument.
The terms and conditions of your ULIP are not important:
If any policy-seller skips mentioning the terms and conditions of your ULIP plan to you, you can consider this an example of mis-selling that policy. ULIPs have a slew of features like their added charges, and terms and conditions that are essential to know before purchasing the policy. The terms and conditions can detail crucial information like when a policy is valid and when it isn’t, claim filing information, contacts you might need in the future, and more.
Tips to avoid insurance mis-selling
- Assess your financial situation carefully, and account for your risk appetite, investment horizon, and personal needs. Then consider whether a certain ULIP plan adds more value to your life than it takes away.
- Always read the terms and conditions detailed in your policy document carefully. If you have any doubts or clarifications, take it up with your insurer before buying your policy.
- Getting a second or third opinion from a financial adviser or a financially literate friend or relative if you are being pitched a ULIP plan from an insurer.
- Gather any evidence that seems contradictory to what you were told regarding your policy and seek clarity from your insurer before you buy it.
Conclusion
Although rampant, insurance mis-selling can be put to a stop when buyers become more conscious and insurers more transparent. Vist our life insurance website to access a slew of insurance policies and what they offer and can be tailored to your preferences.
Source:
https://www.businessworld.in/article/Beware-Of-These-Insurance-Mis-selling-Traps/18-12-2019-180699/
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