Inadequate or wrong information regarding insurance policies and consequent failure of consumers to get the benefits are major issues facing the Insurance Regulatory & Development Authority (IRDA), headquartered at Hyderabad.

The genesis of the problem arises out of the various Unit Linked Insurance Plans (ULIPs) sold by public and private insurance companies. With the insurance industry opening up to private players since 2000, there has been fierce competition for getting in as many people as possible to invest with the insurance industry with various incentives and promises, most of which are either false or misleading.

For example, a large number of policies, which were linked to units and the share market, promised consumers returns of at least 15 to 20% 'in consonance with movements in the stock market'. However, when the stock market crashed, many consumers literally saw their Net Asset Values (NAVs) and money melting away in front of their eyes.

A large number of complaints are pouring into IRDA on how the consumer was never told that the policy was linked to the stock market, on how cash incentives derived from the premium were given upfront at the time of taking the policy (an activity barred by law) and 'guaranteed returns' which never materialised.

A the heart of this problem lies in the inadequate training given to agents and their greed to make a fast buck. A study found that many agents were not conversant with the policies they were selling. Gullible consumers got into these policies, not aware of the task of paying monthly or yearly premiums without even a single paisa in return.

The issue of 'mis-selling' of policies is a crisis, which points to shortcomings in the system of insurance selling. IRDA is promising to come up with a solution for this problem by asking for feedback from consumers.

MS Kamath/ DNA-Daily News & Analysis Source: 3D Syndication