Widespread Mis-selling in India’s Life Insurance Sector
A recent report has revealed that nearly 49% of life insurance policies with India’s top 10 insurers are discontinued within five years, resulting in significant financial losses for policyholders. The survey, conducted by personal finance advisory firm 1 Finance, uncovered troubling insights into the widespread mis-selling of insurance, mutual funds, and other financial products in India, often with little regard for the consumer’s best interests.
The report sheds light on the prevalent practice of mis-selling, where customers are sold insurance policies without being provided complete or accurate information. Consequently, many end up with costly or inappropriate plans that they eventually discontinue, leading to financial losses and missed benefits. The findings underscore an urgent need for improved transparency and consumer awareness in the insurance industry to better safeguard policyholders.
“Around 49% of life insurance policies are discontinued within five years, with the average 61st-month persistency ratio for the top 10 life insurers standing at just 51%. This means nearly half of policyholders stop paying premiums within five years — often walking away with significant financial losses,” the report stated.
The issue highlights the need for greater accountability and regulation in the insurance sector to prevent such practices and protect consumers. Improved transparency and consumer education are crucial in preventing the mis-selling of insurance policies and ensuring that policyholders make informed decisions about their financial products.
