Bancassurance mis-selling and Insurance for All by 2047
Why in the news
Regulators are tightening the rules on how banks sell insurance, since mis-selling threatens the national aim of Insurance for All by 2047.
Key facts
- Bancassurance: banks sell insurers’ products to their own customers through branches. Benefits: wider reach, easy access, extra bank revenue.
- Mis-selling means pushing unsuitable policies, for example converting senior citizens’ fixed deposits into policies, or selling high-premium plans to those who cannot afford them.
- The Finance Minister called mis-selling an offence and said grievance redressal should not need visits to two regulators.
Who regulates what
| Item | Regulator |
|---|---|
| Insurance products | IRDAI |
| Banks | RBI |
This overlap produced a regulatory grey area with limited monitoring.
Recent measures
- RBI draft norms on conduct and sales practices for third-party products sold by banks.
- Risk-Based Internal Audit (RBIA) to check suitability, premium affordability and compliance.
- Suitability checks against the customer’s financial capacity, goals and risk tolerance.
Significance
- Well-regulated bancassurance can expand cover and improve financial security.
- Customer trust and strong governance are essential.
Exam angle
- Goal: Insurance for All by 2047.
- Regulators involved: Finance Ministry, RBI, IRDAI.
- Key term: Risk-Based Internal Audit (RBIA).
- Complaint data: over 26,000 in FY25.