Insurers to be liable for agents' misdeeds

The move will come as a relief to millions of policyholders, who often complain that the policy sold to them was not what was promised to them and companies pass on the blame to the agents.
NEW DELHI: While the attention is focused on higher foreign investment limit in the insurance sector — from 26% to 49% — the government has quietly inserted new provisions that will make it tough for insurers to escape responsibility for mis-selling by agents. The notice for amendments circulated to Rajya Sabha members on Thursday has proposed that insurers will be "responsible for all the acts and omissions of its agents, including violation of code of conduct". It has also proposed a penalty of up to Rs 1 crore on insurers for such violations.

The move will come as a relief to millions of policyholders, who often complain that the policy sold to them was not what was promised to them and companies pass on the blame to the agents. Although there are safeguards such as a free look-in period, and a cancellation of the policy within 15 days, if the buyer is not satisfied, most consumers only realize the flaws much later.

Several individuals are now running shy of buying insurance after they invested in unit-linked insurance plans or Ulips in the hope of earning big returns, only to be disappointed by the hefty commission. At that time, insurers had blamed agents for the confusion.
There are certain other changes introduced compared to the 2008 Insurance Bill. The BJP government has suggested that no life insurance policy will be called into question on any ground, including fraud, after the expiry of three years from the date of issuance of the policy or from the date the risk coverage started. The Bill moved in 2008 had proposed the cut-off at five years.

The Times of India