Banks Must Ensure No Mis-Selling of Insurance Products to Customers, Says Financial Services Secretary

Financial Services Secretary M Nagaraju emphasised the importance of preventing mis-selling of insurance products by banks. He stated that premiums should remain affordable to enhance market penetration. At an event announcing a partnership between Central Bank of India and Italy's Generali Group, he highlighted the need for clear communication about insurance products to customers.

Mis-selling often results in higher premiums, discouraging policy renewals, according to Nagaraju. He noted that high premiums deter people from purchasing insurance. Companies must ensure premiums are reasonable and honour commitments made in policies to maintain trust. Insurance companies' survival depends on customer trust, he added.

Insurance Mis-selling Concerns

Nagaraju pointed out that mis-selling can lead to breaches of trust if companies deviate from policy commitments. Both the Finance Ministry and insurance regulator Irdai have urged banks and insurers to avoid mis-selling practices. This is part of efforts to protect investors and ensure fair treatment of customers.

The bancassurance model has significantly boosted insurance penetration in India, but it has also raised concerns about mis-selling. Finance Minister Nirmala Sitharaman highlighted these issues at an event in October. Mis-selling not only affects customers but also impacts the reputation of financial institutions involved.

Central Bank of India's Strategic Moves

Central Bank of India MD & CEO M V Rao addressed media concerns about mis-selling, stating that the bank does not offer additional incentives to staff for selling insurance products. Consequently, instances of mis-selling are rare within the bank, he said.

The bank recently acquired a 24.91% stake in Future Generali India Insurance Company and a 25.18% stake in Future Generali India Life Insurance Company Limited. Discussions with Generali Group on definitive documents, including shareholders and distribution agreements, have been completed.

Enhancing Insurance Penetration

This strategic partnership aims to boost insurance penetration across India by offering innovative products and promoting financial inclusion. The initiative aligns with the government's mission of achieving "Insurance for All" by 2047, Rao explained.

By combining Central Bank of India's extensive customer base and distribution network with Generali's global expertise in insurance solutions, customers will benefit from a diverse range of products tailored to Indian market needs.

Established in 1911, Central Bank of India is one of the country's oldest and most respected banks, with over 4,500 branches and more than 20,000 touchpoints. Generali is a leading global provider of insurance and asset management services, operating in over 50 countries and known for its customer-centric solutions.

With inputs from PTI