Mis-selling in life insurance: Dos and Don'ts

| 21 Feb 2022

Purchasing financial products can be difficult. An array of choices, multiple benefits and pricing can greatly influence our buying decision. Sometimes we end up purchasing with much gusto only to realise that we were misled - some features are missing, the offerings are very different from what was mentioned in the label and soon enough, you know this was a classic case of mis-selling. This is especially true for life insurance products. The complexity involved in understanding financial products like life insurance is one of the reasons behind low insurance penetration in India. It can be a significant setback for customers, considering the financial commitment being made by our customers, only to realise the policy is unsuitable and does not meet the needs of the policyholder.

To increase awareness and reduce instances of mis-selling, IRDAI has mandated insurers to be transparent in their policy-related communication to prospective customers. For instance, one of the mandatory directives issued by the regulator requires life insurers to issue benefit illustrations based on two different assumed rates of return in a prescribed format to help customers understand the nuances of various policies.

While the regulator plays an active role in safeguarding the interest of policyholders, here are few guidelines that you can follow to make an informed decision:

  • Often, an over-enthusiastic seller will make grand assurances of lucrative returns on a policy, in a bid to sell it to the customer. If we think the promises are too good to be true, it is always better to take a second opinion. In any situation, researching about the policy will enable us to make better decisions when planning investments
  • A rule of thumb is not to compare life insurance policies with any other financial instruments such as fixed deposits, mutual funds etc. The fundamental purpose of a life insurance policy is different from others, and every financial tool has different needs to fulfil. If the seller says otherwise, be cautious and consult a financial adviser
  • There are numerous life insurance products in the market with varied offerings. We must be clear on our future goals and expectations before buying life insurance. It is better to research and gather information before you meet a seller to have an informed discussion, and choose the right life insurance that is mapped to your future needs
  • Reading, understanding the life insurance product and asking questions to get a clear view of what we are purchasing is advisable when buying life insurance. Some important aspects like sum assured, premiums, and pay-out terms should be thoroughly checked before signing and making a purchase

In case a policy is mis-sold, we should avoid panic and instead:

  • Reach out to the insurer who can help with a quick query resolution
  • In case of any grievance, we can connect with the insurer via customer service portals including website, email or WhatsApp
  • Access policy through various DIY modules to easily modify details and file for quick claims


Being mis-sold life insurance can be stressful for anyone. Although, with robust measures implemented by the insurers and the IRDAI, mis-selling-related grievances can be reduced. Upon realising that you have been mis-sold a product, gather your documents and immediately inform your insurer to receive the correct resolution to your concern.

These simple steps can help our customers avoid the experience of mis-selling and take quick corrective actions in case they experience mis-selling of life insurance products.

Image: Manu Lavanya

Manu Lavanya is the Director & Chief Operations Officer of Max Life Insurance. Manu has over two decades of valuable experience in successfully creating, transforming and scaling IT business across multiple industry domains and geographies including the US, Latin America, Eastern Europe, UK and India. Manu leads the “Fulfillment group” that comprises Operations, Information Technology, Underwriting & Claims, Digital Transformation and Quality, Innovation & Service Excellence. As COO, Manu plays an instrumental role in enhancing the Operations value chain, leading our Digital Transformation agenda and strengthening the Quality culture thereby helping us craft superior customer experiences.

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