New Delhi: The consumers are facing the problem of mis-selling for a long time now. With the low financial literacy in the country, consumers are vulnerable to misguidance and they rely heavily on the advices of the agents for their investments. There are instances when the innocent consumers are misled and sold schemes not suiting their demands. Rather for personal benefit, it is seen that insurance agents tend to sell the products which earns them good commission.

In order to protect the interest of consumers, the government on Wednesday asked insurance regulator IRDA to take punitive action against companies which resort to mis-selling of policies.
    
"IRDA should be expressively punitive to companies who resort to mis-selling or violate the initially agreed terms and conditions," Finance Minister Pranab Mukherjee told the board of the Insurance Regulatory and Development Authority (IRDA).
   
He also asked the regulator to take steps to contain the tendency of "suicidal competition" among insurance companies, which are undercutting one another by offering policies at low premium to grab a bigger market share.
   
"To ensure prudent underwriting and curbing unhealthy and suicidal competition among the companies through undercutting premiums is something that the regulator will need to address suitably," he said, adding IRDA has made progress in ensuring policyholder's protection.
   
There is a need to widen the reach of insurance especially in semi-urban and rural areas, he said, adding, the low penetration in general insurance is mainly because of lesser availability of retail products.
   
The Minister further said, "While de-tariffing (freedom to fix premium) has resulted in significant lowering of premiums for the consumers, the adverse impact is being felt on the insurance company's balance sheet."
   
On low penetration of insurance covers in the country, Mukherjee said "There are few concerns that need to be addressed. Notwithstanding India's rapid growth...it has largely remained an under-insured market with financial vulnerability across most of the income segments".

(JPN/Agencies)