In the previous instalment of CoverNote we saw an idea of what constitutes mis-selling. How does it happen? How do you get mis-led about the nature and suitability of an insurance policy?

Insurance spells safety. A policy’s features contribute to providing you security. It will also have some features you have to be aware of before you buy. When those are understated, not clarified, or even hidden from you or misrepresented, it makes the product sound safer than it is and lulls you into the purchase.

The mis-selling sales pitch is tuned to make an insurance policy sound benign, simple and more advantageous than it is.

Common and vintage tactics to mis-sell start with describing a life insurance policy as ‘like a fixed deposit’. It isn’t and cannot be. Many life policies are sold as offering ‘guaranteed’ returns. Some returns may be guaranteed under some policies, but many are declared year to year and are dependent on various terms and conditions.

Cousins of the guaranteed return are the minimum return and the assured addition. They may apply only to part of the proceeds of the policy while others are variable and optional.

Another ploy is to position the mandatory illustrative benefits as guaranteed. The difference between the two will be clearly printed in the policy brochure and you should ensure you ask for it apart from hearing the oral pitch which can be misleading.

Unit-linked insurance policies (ULIPs)are sold as high return policies and better than mutual funds as they come with life coverage. The high returns are a possibility indeed, as are low returns or losses! As for their comparison with mutual funds, please ask for a comparable fund option and check for yourself what the charges are on the ULIP and on the mutual fund.

Selling a regular premium policy as a single premium has become the saddest and most laughable kind of mis-selling. And then there is pressure sales of insurance as a tax-saver. Yes, that same one you were subjected to all of last month!

More serious cases involve underplaying facts that are material to the policy and its coverage. Let us say you declare a pre-existing disease (PED). The agent may persuade you to avoid this since coverage would be difficult or premium would be higher. Or you may make it easy for him, like many do,by signing a blank proposal form that he can complete ethically or unethically.

There are sinister cases where signatures have been forged on cleaned up versions of proposal forms and even fake lab test reports showing safe blood glucose levels and normal ECGs have been substituted to hide PEDs.

The proposal and its declarations are yours to live with and so are the claims denials that will haunt you later on. You can prevent this entirely by filling up your proposal form personally and retaining a photocopy. And there is a second chance to correct any error or mischief. When the insurance policy is issued to you, the company has to give you a copy of your proposal form. It is in your interest to check it at least then. The 15-day free-look period when you can return any policy and get a refund of premium is an opportunity to exit a bad deal. I would urge you strongly to be aware of it and be ready to use it if needed. Like many things in this world, for each unethical seller there are many more honest foot-soldiers in the insurance sales army. The sad news is that academic studies in marketing reveal that mis-sellers make more money, for themselves and their companies.

That was a sample of how mis-selling can happen. Let’s go on to see why and what you can do to protect yourself as indeed the regulator’s position.

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

Published on April 13, 2026