It is a deception from which you will wake up only months or years later. That’s when you notice the returns are not as implied, exclusions turn apparent, exit options carry a price tag or premium is more than you expected. Buying an insurance policy is not a decision you can reverse easily. If you are in the claims zone, it may be too late. You are one unhappy customer, but hardly the only one. Why does this happen? Why sell on pretence? Follow the money, said a famous detective. Mis-selling is to maximise sellers’ commissions, for incentives and to reach insurer’s product-specific goals .

Hidden agenda

The seller is handling a ‘difficult-to- sell’ product under pressure to earn commission. His income and career depend on the sale even if under a pretence. There could be a hidden agenda in the way commissions are structured. Not all policies are equally profitable for the seller. Endowments, money-back and certainly unit-linked covers get more commissions than term covers. The policy pushed may be the one fetching more commission.

The hidden agenda could originate with the insurer. Targets are stiff and can often be product specific. For example, a newly-launched product everyone is under orders to sell.

Sellers don’t receive a fixed salary and what they sell determines earnings. Sales goals are unforgiving and agents can lose licence for underperforming. Hence, insurance is hard-sold and the seller is persistent.

Non-monetary benefits

Reaching targets brings non-monetary benefits such as recognition and opportunities to attend professional conventions and meetings. Success opens doors within the insurer and industry to the world of prospective clients. Networking is everything in sales and insurance, a prime example.

And then there are the priorities of the insurance company itself. New products are introduced with premium rates calculated on several assumptions, including break-even sales levels. The best opportunity to reach the number is in the launch phase since a new policy/scheme gets maximum advertising and marketing attention and the sales teams are pumped up with enthusiasm.

Hype, misinformation

Misinformation is rarely far behind when hype is involved. This combined with target pressure makes mis-selling an easy way to succeed.

Aren’t there checks and balances in the system? Definitely. The regulator speaks out against mis-selling. Suitability norms, systemic checks and documentation have been put in place to curb them.

Customers have to sign declarations about disclosure and agents are evaluated on persistence of portfolios not only sales volumes.

What can you do to avoid being a victim of mis-selling and how do the industry and regulations help you or do they fall short? We will see in the forthcoming instalment of CoverNote.

(The writer is a business journalist specialising in insurance & corporate history)

Published on April 20, 2026