From Promise to Problem: How Mis-Sold Policies Hurt Indian Families

 

When most people buy insurance in India, they don’t buy a document. They buy trust.

They buy it from a familiar face — someone introduced through family, a bank relationship manager, a long-time acquaintance, or a well-spoken professional who “handles everything.”

Over time, a subtle assumption forms:

“He’s my advisor.”

“She will guide me.”

“They will take care of it.”

But here’s the uncomfortable — and important — distinction:

An insurance agent is not automatically a financial advisor. And that difference matters far more than most families realise.

1. Seller vs. Advisor: A Structural Difference

In India’s insurance ecosystem, agents are licensed distributors of insurance products. Their role is to explain available policies and facilitate the purchase process.

Keyword: PURCHASE. These agents have a sales target to achieve and commissions to earn.

An advisor, on the other hand, operates under a broader mandate — to assess a client’s financial situation holistically and recommend products aligned strictly with long-term goals and risk profile.

The two roles may overlap in practice. Many agents genuinely attempt to guide clients responsibly. But structurally, they are not the same.

The difference becomes visible only when something goes wrong.

1. The Incentive Question No One Asks

Insurance, in principle, is a promise. A promise that when life becomes uncertain, finances won’t. A promise that families won’t be left scrambling in moments of grief or medical emergency.

But sometimes, the problem isn’t the policy itself — it’s how the policy was sold.

Insurance products often carry commission structures. That is a legitimate and regulated part of the distribution system.

However, commissions vary across products. Meaning agents might prioritise what benefits them over what suits YOU sometimes.

Some plans may offer higher upfront compensation. Others may prioritise long-term renewals. The policyholder rarely sees this information during discussions. This does not automatically imply mis-selling of insurance policy. But it does create a natural incentive dynamic.

If a buyer assumes the recommendation is purely advisory — while the system operates on product-based incentives — expectations can diverge.

That divergence is where many mis-sold insurance policies originate. 

2. When “Don’t Worry, I’ll Handle It” Stops Working

During purchase, communication is frequent. Calls are returned. Forms are filled. Clarifications are immediate.

During a claim?

The process shifts.

Once a claim is filed, it enters the insurer’s structured evaluation system. Medical assessors, underwriting teams, compliance checks — the matter moves beyond the individual agent.

At this stage, many policyholders discover something unexpected:

The agent does not have decision-making authority over claims. If documentation discrepancies or mis-selling related issues arise, the agent’s influence is limited, IF they haven’t ghosted you already. This is often when claim rejection-related issues begin surfacing. 

3. Advice vs. Explanation

There is another subtle distinction. The gap was not always in the policy. Sometimes, it was in the conversation.

Explaining a product is not the same as advising on suitability. Years later, when benefits fall short of expectations, a Complaint about Insurance company may be filed — even though the written contract reflects the product accurately.

Mis-selling does not always look dramatic. It is rarely a blatant fraud.

●     Critical exclusions and waiting periods glossed over in the sales pitch.

●     Riders added without a proper explanation of cost and conditions.

●     Renewal commitments verbally assured but not contractually reflected.

This is where mis-sold insurance policies originate — not necessarily from corporate design, but from breakdowns in ethical advisory practices at the distribution level. 

4. The Emotional Cost of Role Confusion

Insurance in India is deeply relational.

Families often stay with the same agent for years. There is social familiarity. Cultural trust. Sometimes even personal friendships. This makes it harder to separate commercial roles from personal goodwill.

When a dispute arises, families feel not just disappointed, but betrayed.

 

For middle-class Indian families, especially, insurance premiums represent disciplined savings. When expectations collapse in times of need, the impact goes beyond policy terms and becomes deeply personal. 

But from a regulatory standpoint, insurers assess claims based on documented disclosures and signed proposals. They rely on paperwork rather than verbal recollections. If documentation contradicts what was verbally promised at the time of sale, the written contract prevails.

That is not hostility — it is adherence to regulatory structure. 

5. How to Protect Yourself Without Distrusting Everyone

NOTE: This is not a call for suspicion. It is a call for clarity.

Before purchasing any policy:

●     Ask how the recommendation fits into your overall financial plan.

●     Request written benefit illustrations.

●     Understand exclusions and waiting periods in plain language.

●     Clarify whether projections are guaranteed or variable.

●     Review documents during the free-look period.

Trust can coexist with verification. Professionalism does not diminish relationships — it strengthens them.

6. Where Professional Review Becomes Important

In situations where expectations and policy terms do not align, objective evaluation becomes crucial. Not every dissatisfaction qualifies as misselling of insurance policy. Not every claim rejection indicates misconduct.

Addressing mis-selling of insurance policy requires balance — not outrage. And Subject Matter Experts can provide exactly that.

 

Insurance operates within a regulated framework governed by IRDAI guidelines. Escalation channels exist, including internal grievance redressal systems and ombudsman mechanisms. The key lies in presenting facts clearly, documenting discrepancies, and pursuing remedies with precision.

 

The role of an SME is to examine documentation, communication records, and policy structure to determine whether:

●     There was a genuine misunderstanding

●     There was inadequate disclosure

●     Or there is a legally sustainable claim of misrepresentation

The objective is not confrontation. It is resolution grounded in facts. 

A Final Thought

An agent may be competent. Helpful. Even well-intentioned. But that does not automatically make them your long-term financial advisor.

Knowing that distinction does not weaken the system. It strengthens your position within it. To reduce the risk of mis-selling:

●     Read policy documents within the free-look period.

●     Record key assurances in email communication.

●     Review policies periodically, not only during claims.

And remember to seek help the moment matters seem out of hand, because in matters as significant as family protection, clarity is not cynicism — it is responsibility.