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IRDAI proposes public mis-selling records, commission clawback to curb insurance sales malpractice

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IRDAI proposes public mis-selling records, commission clawback to curb insurance sales malpractice

IRDAI proposes public mis-selling records, commission clawback to curb insurance sales malpractice

The regulator wants customer suitability to become an enforceable obligation and proposes linking the identity of salespersons to policies sold, with mis-selling records made public and commissions clawed back.

The Insurance Regulatory and Development Authority of India (IRDAI) has proposed a tougher framework to tackle mis-selling of insurance, including mandatory suitability assessments, public disclosure of individual mis-selling records and commission clawbacks where a policy is found to have been mis-sold. The proposals form part of IRDAI's consultation paper released today, which identifies mis-selling as a major contributor to premature surrender of life policies and erosion of customer trust. Suitability to become an enforceable obligation

IRDAI has proposed that every insurer and Insurance Distribution Entity (IDE) should have a detailed suitability framework. Advt

For life insurance sales above a defined ticket size, a documented analysis of the customer's needs and suitability would be mandatory, supported by an audit trail. Importantly, the regulator proposes that simply obtaining a customer's consent or signature should not absolve the insurer or intermediary from responsibility for selling an unsuitable product. Where a customer chooses a product different from the one recommended through the suitability analysis, the reason for that choice would also have to be documented. The consultation paper specifically flags the practice of presenting endowment or other savings insurance products as fixed deposits or equivalent deposit products, particularly in bank-led distribution.

IRDAI has listed specific practices that would attract disincentives or regulatory action.



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