Insurance misselling happens when an agent has been lured into buying an insurance policy by giving false promises or half-baked information about the policy
You have been mis-sold an insurance policy if you were manipulated into buying an insurance policy with financial products such as a loan or a bank locker, according to a recent media report. And there are high chances that some features of the insurance policy that would not have convinced you to buy it were hidden from you.
As there are increasing cases of insurance mis-selling, people might think they are trapped with such policies, and have no other option but to continue to pay premiums, with no way to get any refund. However, such is not the case.
In a recent ruling in November 2024, the National Consumer Disputes Redressal Commission (NCDRC) stressed the fact that any insurance policy that has been mis-sold to the policyholder by the agent would be qualified for a complete refund of the premium amount.
For example, take the case of Gyan Prakash Singh versus Tata AIA Life Insurance. Here, the NCDRC called out the life insurer for misrepresenting the premium payment tenure to the policyholder, according to a recent media report. In this case, the premium payment had to be paid annually for 10 years, whereas the insurance agent told Singh that it would just be a one-time obligation.
As suggested by the NCDRC, Tata AIA also needs to refund the total premium amount, i.e., Rs 2,47,700, with nine per cent interest. Also, Rs 10,000 needs to be provided as compensation towards mental harassment and Rs 5,000 as litigation costs.
What Actually Happened
Here is an outline of the case, as it transpired. In the year 2009, a Tata AIA agent reached out to Gyan Prakash Singh, from a low-income family. He mis-sold several insurance policies under the pretence that just by giving a one-time premium, the policy’s value would go up by 1.5 times, after 1.5 years.
Inspired by such claims, Singh purchased five policies. While the judgment mentioned that one policy was in Singh’s name, which was purchased on June 19, 2009, for Rs 49,900, the other two policies were on Amita Singh, his wife’s name, that was purchased June 26, 2009, for Rs 49,900, and on 28th June 2009, for Rs 49,900. He bought two other policies in his daughter, Nishi Singh’s name, on June 11, 2009, for Rs 49,900 each.
However, just within a fortnight of receiving these policies, Singh’s family figured out that the premium needed to be paid annually for 10 years, and that it was not a one-time activity, as it was originally suggested by the insurer’s agent.