Watch Out For These Red Flags When Buying Insurance
It is important to read the fine print and know what is covered and what is not.
The content husband gently holding his wife, who is smiling peacefully. Sitting on the lawn together, they watch their children play in the park. Perfect pictures are often placed as promises of protection on brochures.
But serene smiles and gleeful grins don't usually convince customers.
Thanks to denied claims or wrong product purchases, cynicism and caution can creep in when buying insurance.
The Trust Deficit
A ‘trust deficit’ toward the industry is the issue, according to Mahavir Chopra, founder of Beshark.org.
The focus of the industry is shifting toward the sales and distribution of product, which is increasing trust deficit, he said. Product inaccessibility and incredibly delayed processing of claims add to customers' apprehensions about buying insurance products.
Devil Is In The Details (And Fine Print)
People do not always anticipate the possibilities of being sold the wrong product, claims being denied and not having access to information about products.
The Insurance Regulatory and Development Authority of India had made a few changes earlier this month, to ease access to information for customers.
But insurers have worked their way around the mandates and full disclosure is still hidden in fine print.
Information that specifies the price, withdrawal, claims, coverage and any charges or conditions that apply to the product needs to be clear and easily available to the policyholder.
It is important to read the fine print and know what is covered and what is not. This knowledge can keep unpleasant surprises at bay when it's time to make a claim, Chopra said.
Elements of the purchase, like the surrender value, have also undergone changes—the most important one being the premium payment in traditional insurance products.
There is also a minimum limit of payment in place at the event of surrender, to ensure that there is some reasonability that the customers are getting.
Health Insurance
There are lots of clauses that are attached to making a claim, especially in health insurance. Delays in the processing is often because insurers must directly contact the hospital for the required documents, which further delay the process.
A good financial agent who has a track record of making claims is a necessity, according to Chopra. “There are regulations that agents need to protect you from and their knowledge of the system fetches higher possibility of getting the claim approved."
Red Flags To Avoid
A significant factor contributing to misselling is the lack of awareness among consumers. Insurance agents often work on commission, which can incentivise them to sell higher premium policies, or those that offer higher commissions, regardless of whether they are suitable for the customer.
The root cause of misselling lies in these high commissions, said Chopra. There have been no changes in rules regarding commission, so he does not anticipate any immediate improvement on the issue.
Understanding the requirement is the first step and that clarity can help identify the product that one needs. Taking emotional decisions while purchasing insurance is something to steer clear of, he said.
