The growing concern over mis-selling of insurance products by banks has prompted the introduction of the Bima Sugam platform, a digital initiative by the Insurance Regulatory and Development Authority of India (IRDAI). IRDAI Chairman Debasish Panda, addressing the issue at SBI’s Annual Business & Economic Conclave, emphasized that banks should prioritize their core lending activities and ensure customers are not coerced into buying unsuitable insurance products.
This comes in line with Finance Minister Nirmala Sitharaman’s call for a more responsible approach to bancassurance practices.
Key Highlights of the Discussion
Mis-Selling Concerns in Bancassurance
Finance Minister’s Remarks
- Banks have been flagged for force-selling insurance, adding an indirect cost to borrowing for customers.
- Sitharaman urged bank boards to focus on core banking activities rather than burdening customers with unnecessary insurance policies.
IRDAI Chairman’s View
- Mis-selling and force-selling have tarnished the bancassurance system.
- Banks must provide customers with options and transparency in insurance offerings.
Role of Bima Sugam Platform
Features of Bima Sugam
- A digital platform to showcase insurance products for customers.
- Integrated with Aadhaar, the account aggregator framework, and UPI for seamless transactions.
- Enables buying, selling, and claiming servicing of insurance policies in a transparent manner.
Objective
- Restore confidence in the insurance system by reducing unethical practices.
- Empower customers to make informed decisions without coercion.
- Bancassurance Channel: A Double-Edged Sword
Advantages
- Low-cost and effective distribution channel for insurance products.
Challenges
- Growing instances of unethical practices and over-reliance on insurance sales by banks.
- Need for banks to balance their role as lenders and insurance sellers.
IRDAI’s Call for Collaboration
- All stakeholders, including banks and insurers, must work together to ensure customer-centric practices.
- A focus on fair practices and transparency is essential for long-term trust in the insurance ecosystem.
| Summary/Static | Details |
| Why in the news? | Bima Sugam platform will solve insurance mis-selling |
| Concern Raised | Mis-selling and force-selling of insurance products by banks, leading to increased costs for customers. |
| Finance Minister’s Remarks | – Banks should focus on core banking activities, not insurance sales.
– Mis-selling contributes indirectly to the cost of borrowing for customers. |
| IRDAI Chairman’s Statement | – Bima Sugam platform can help address mis-selling by offering transparency in the insurance process.
– Banks must offer customers multiple product options and avoid force-selling |
| Bima Sugam Platform Features | – A digital platform showcasing insurance products.
– Integrated with Aadhaar, UPI, and the account aggregator framework. – Allows for buying, selling, and servicing of insurance policies transparently. |
| Call for Collaboration | – All stakeholders (banks, insurers, regulators) must collaborate to restore customer trust in the system. |
| Objective of the Platform | – To empower customers with better access to insurance products and ensure ethical sales practices |
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