Mis-selling of life, health insurance top consumer complaints list

According to the report a bulk of the complaints has been registered in respect of mis-selling of insurance policies by intermediaries. Read this to know more...

Mis-selling of life, health insurance top consumer complaints list

An annual report released by the Executive Council of Insurers (ECOI) finds mis-selling of life insurance policies by intermediaries topping the list of consumer grievances. This is followed by mis-selling of health insurance policies by brokers and agents on behalf of non-life insurers.

ECOI Secretary General MML Verma noted that pan-India, consumer complaints regarding rejection of health insurance claims topped the list in the non-life insurance segment even as the number of life and non-life insurance complaints were split 50-50.

The mis-selling method

According to the insurance ombudsman set up and facilitated by ECOI, and established under the Insurance Ombudsman Rules, 2017, intermediaries indulge in fraud and forgery of signatures of the proposers on insurance forms or sell long-term, unaffordable policies that the proposer cannot service through the tenure of the policy.

Such mis-selling could be checked at the underwriting stage but “the underwriter clears long premium-paying term plans even though the proposer does not have the paying capacity to maintain the policy beyond the initial payment,” the report states.

To cover up this mis-selling, the insurance ombudsman observed that intermediaries even tutor customers to accept all terms and conditions when they receive follow-up verification calls from insurance companies, which are mandatory according to the rules set up by the Insurance Regulatory and Development Authority of India (IRDAI), the industry regulator.

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The ombudsman’s limitations

While the insurance ombudsman can take the insurance company to task for mis-selling of insurance policies by their agents, it cannot impose penalties on the erring company. Also, the maximum award it can issue for disputes between the customers and insurance companies cannot exceed Rs 30 lakh.

“We have recommended that since the office looks at only individual complaints, there should not be any limit, considering that many individuals are taking Rs 1 crore cover for term or health insurance,” said Milind Kharat, Insurance Ombudsman for Mumbai and Goa, as reported by The Times of India.

Yet, Kharat claims his office effectively eases redressal of consumer complaints – there is no requirement for a lawyer, and consumers can register their complaints via email.

Ground for rejections

The main reason for rejection of health insurance claims of customers by insurance companies relates to pre-existing illnesses. The other ground for claim rejection is expenditure overshooting ‘reasonable and customary charges.’

“Reasonable is a very subjective term and what is reasonable in one part of the country may not be reasonable in another,” said Kharat, according to The Times of India report. 

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Claim settlement

The claim settlement ratio (CSR) measures the claims settled by the insurance companies against the claims received by it in a year. The higher the claim settlement ratio CSR, better is the insurance company from a consumer’s perspective.

According to IRDAI’s figures, the top five life insurance companies with their respective claim settlement ratios for 2016-17 are: 

Insurance Company

Total Claims Paid (FY 2016-17)

Claim Settlement Ratio (FY 2016-17)




Max Life






Aegon Life



SBI Life



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In this context, the Annual Report for the year 2017-18 also suggests measures that could help smoothen claim settlement by complainants. One such recommendation reads:

Third Party Agents (TPAs)’ decision on settlement of claims should not be final and the matter should be reviewed by the insurer to arrive at a judicious decision. Most insurers do not have any established systems for review of the claims rejected by their TPAs. Even when the complainant approaches the Grievance Cell, after repudiation of the claim by the TPA, the insurer seldom examines the claim dispassionately. In some cases, the insurer depends upon the TPA to present cases before the ombudsman.

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