In our everyday transactions, most of us tend to trust agents and service providers to correctly fill out the details in application forms without worrying about being cheated. Sometimes, that trust could turn into an expensive mistake and against the rules too, as this case shows. Mr Narayana, 74 years old, was approached by Hari Babu, an insurance agent for ICICI Prudential Life Insurance, who persuaded him to purchase a 10-year LifeStage Pension policy, a tax-saving investment for himself and his wife, four years younger.
Hari Babu gave him a lengthy form, asked him to sign at the marked places and assured him that all the details would be filled by company officials based on the photo ID, birth proof and PAN card copies. Since private sector banks and companies routinely offer such assistance to customers, Mr Narayana signed the form and handed it over along with a crossed cheque for the premium and back-up documents required by the insurer.
Several days later, he received the policy document and noticed that his date of birth was incorrect. His wife and he were shown to have an identical date of birth with a term running from 70 to 80 years. Believing that it was a genuine slip in filling up the form, he immediately called up the agent, Hari Babu, and asked for the document to be corrected. He brought along the company representative, who assured him that it was a minor error and it does not affect any return or other benefits. He also said that the policy was meant only for younger people and that such ‘adjustments’ are routinely done and further that the managers know about such adjustments.
Mr Narayana is a stickler and refused to accept this explanation. He wrote to ICICI Prudential for a correction and received further confirmation that he was not eligible to apply for the policy. At this stage, he believed that the company was hand-in-glove with this mischief. Mr Narayana’s son-in-law, Venkatesh, forwarded the complaint to me. He says, “In my opinion, this is an outright fraud, a case of cheating, misrepresentation and a blatant breach of trust, among other possible violations.”
I sent the complaint to ICICI Prudential’s CEO, Shikha Sharma, and was heartened at the speed with which she acted to set things right. Since Mr Narayana did not qualify for the pension policy, the company refunded his first premium deposit and closed the policy. It also set up an enquiry to find out what had happened. While forwarding the complaint, I was confident that ICICI Prudential would, indeed, return Mr Narayana’s premium. The bigger issue was what action is initiated against officials and agents who deliberately cheat, especially senior citizens, but bring in business. Would the agent be reported to the Insurance Regulatory and Development Authority (IRDA) to ensure that those who cheat customers must be permanently debarred from the business?
Cheating customers in the pension and insurance sectors is particularly repulsive. Unlike the stock market, where an investor is prepared for a variety of risks in pursuit of high returns, insurance and pension are safety nets. People often pay premiums for decades, only because they want financial protection from unforeseen calamities. Imagine discovering that the insurance agent, focused on his own fees and commission, had deliberately lured you into a policy that you are ineligible for and have no hope of making a valid claim!
I spoke to Fali Pocha, chairman of IRICS (International Reinsurance and Insurance Consultancy Services Pvt Ltd), a well-respected insurance brokerage firm, to check how people should avoid becoming victims of such fraud. His advice is crucial to anyone buying insurance. Mr Pocha says that, under insurance regulations, no intermediary is allowed to fill up any part of the proposal form, unless the person buying insurance is illiterate. Even in such cases, there is a declaration at the bottom of the form that the terms of the policy have been clearly read and explained to the person, with a provision for a thumb impression. He says, “In my office, even if our most valued client says that this form is too long or complicated, we offer to send a person to guide and help the customer, but we will not fill it up for him.” Most of us are completely unaware that this is a legal requirement which ensures that customers cannot blame intermediaries for inaccuracies in the proposal form. This rule was apparently introduced because, often enough, customers also collude with agents or intermediaries to make a claim on the basis of such inaccuracy. Unfortunately, the ICICI Pru case did not proceed smoothly. The company claimed that the services of the ‘salespersons’ were terminated and the entire sales channel had been sensitised to the case. But learnt from the Narayanas that the agent was still in business and continued to make calls with the company official in tow. After more calls and emails from us, the customer was told that the agent was removed and the matter reported to IRDA.
IRDA’s stated objective is “to protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto.” We are told that it does take up customer complaints. But the process is extremely slow and erratic. IRDA licenses insurance agents and requires them to undergo training before they can clear their certification examination. However, nobody is clear if the agency, which grants a licence, also has a well-defined procedure to terminate it in order to prevent agents from cheating. That IRDA’s complaint resolution mechanism needs tightening is clear from the number of complaints regarding insurance companies posted on review forums such as www.mouthshut.com or are filed with the consumer courts at all levels. Clearly, we need strong consumer bodies to push for substantive change. Until that happens, there is one clear lesson from the Narayana case. Consumers must never allow agents and intermediaries to fill up the proposal form; it is against the rules.