Thomas Devasia, Former Member (Non-Life), IRDAI argues that insurers benefit from business acquired through mis-selling and should not be allowed to shift the burden of penalties entirely to distributors.

Insurance companies should not be allowed to shift the burden of mis-selling penalties entirely to intermediaries, former IRDAI member (Non-Life) Thomas Devasia has said, challenging a key element of the Insurance Regulatory and Development Authority of India’s (IRDAI) proposed distribution reforms. “The core presumption of commission clawback is that the fault ultimately lies with the intermediary. That is an unfair premise since every case of mis-selling has been to the benefit of the insurer and the intermediary,” Devasia said in an interview with ETBFSI. His comments come as IRDAI proposes stronger safeguards against mis-selling, including tagging policies to individual salespersons, documenting suitability assessments, disclosing mis-selling incidents and recovering commissions in specified cases. Advt

Devasia argued that unless insurers and other regulated entities are held accountable for acquiring business through unsuitable sales, the underlying incentives that encourage mis-selling may remain intact. “Unless regulated entities that acquire business that is an outcome of mis-selling are questioned and penalised, the problem of mis-selling will continue to be a model of business acquisition,” he said. Complaint should not automatically become a mis-selling mark On a question by ETBFSI, on what qualifies as a mis-selling report before it goes into a person’s permanent record by IRDAI through a public domain, or what adjudication process is in place for commission clawback cases, Devasia also questioned how mis-selling incidents should be recorded and adjudicated before they enter a salesperson’s permanent record.

Source link