What Is Mis-selling of Insurance Policy? – Complete Guide
Mis-selling of an insurance policy occurs when an insurance product is sold to a customer by providing incorrect, incomplete, or misleading information, or when the policy sold does not match the customer’s financial needs, risk profile, or consent.
Mis-selling can happen intentionally or unintentionally and is one of the most common issues faced by insurance buyers in India.
Common Examples of Insurance Mis-selling
Mis-selling may occur in the following ways:
- Selling an investment plan as a “fixed deposit” or “guaranteed return”
- Hiding important exclusions or waiting periods
- Forcing customers to buy insurance with loans or credit cards
- Selling long-term policies without explaining lock-in periods
- Promising unrealistic or assured returns
- Taking signatures without proper explanation of terms
Why Mis-selling of Insurance Happens
- Pressure to meet sales targets
- Lack of product knowledge among agents
- Customer’s low awareness of insurance products
- Complex policy documents
- Miscommunication between agent and buyer
How to Identify Mis-selling of an Insurance Policy
You may be a victim of mis-selling if:
- Policy benefits differ from what was promised
- Premium amount or policy term was not explained clearly
- You were not informed about surrender charges
- You did not receive policy documents on time
- Policy was issued without your informed consent
What to Do If You Are a Victim of Mis-selling
1. Contact the Insurance Company
Raise a written complaint with the insurer’s grievance cell.
2. Approach the Insurance Ombudsman
If unresolved, you can approach the Insurance Ombudsman free of cost.
3. Use IRDAI Grievance Portal
File a complaint through the IRDAI Integrated Grievance Management System (IGMS).
4. Free-Look Period
You can cancel the policy within 15–30 days of receiving it (free-look period).
How to Avoid Insurance Mis-selling
- Always read the policy document carefully
- Do not rely only on verbal promises
- Ask for written illustrations and benefit details
- Match policy with your financial goals
- Buy insurance from trusted advisors or platforms
- Never sign blank proposal forms
Role of IRDAI in Preventing Mis-selling
The Insurance Regulatory and Development Authority of India (IRDAI) has issued strict guidelines to prevent mis-selling, including:
- Mandatory benefit illustrations
- Audio/video verification in certain cases
- Free-look period protection
- Penalties on insurers and agents
Conclusion
Mis-selling of insurance policies can lead to financial loss, stress, and loss of trust. Being informed, asking the right questions, and understanding policy terms are the best ways to protect yourself. Awareness is the strongest defense against insurance mis-selling.
At Saving Mantra, we believe in transparent guidance and ethical insurance advice, helping you choose the right policy that truly matches your needs.
Disclaimer
This blog is for informational purposes only and does not constitute legal, financial, or insurance advice. Policy terms, regulations, and grievance mechanisms are subject to change as per IRDAI guidelines. Readers are advised to consult qualified insurance professionals before making any insurance decisions.