Finally, after long debate, the Insurance Regulatory and Development Authority has decided to soften its stance on bundled insurance products. Unlike earlier, now the ban would be imposed partially and the regulator would decide which products can be bundled and which cannot.
Bundled insurance products are referred to the practices when two or more insurance products are sold together as a single product. When motor insurance or personal accident insurance covers are offered with the purchase of a vehicle; the product will be pronounced as a bundled insurance product.
Simple products with pricing transparency are likely to be allowed to be bundled as the scope for mis- selling is very narrow there. Complex products with multiple coverage may be banned as they confuse the customers,” said an insurance official.
Last year, several cases of mis-selling were reported. Hence, the regulator had decided to crack the whip on the practice. If the sources are to be believed, the regulator’s stance was so firm on these covers that they were all set to be scrapped. However, the insurers were against the complete ban and they seem to have convinced the regulator.
A senior industry official said, “A bundled-in insurance cover helps in increasing penetration and a complete ban would hamper business. So instead the regulator has decided to impose a partial ban. In this case the regulator can direct which products can be bundled and which can’t.”
The regulator had floated a discussion paper in which it said that a dealer shouldn’t be pushing products but a customer should instead be given more options.
The regulator cited that the customers too were misled through tied-up products. Cases of misleading where the bundled feature was made the selling point and advertised more than the core product were reported. In fact, there were instances where because of the bundling element the customers didn’t even know what they were buying. Also, it led to people thinking they had adequate and proper insurance when the fine print said something else.
Besides in auto, travel, personal accident and home loan segment, bundling of insurance products are also becoming common in health and life insurance segments.
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