Life insurance firms are caught in a strange menace, battling a guerrilla backlash from people they fired.
Several insurers have alerted the regulator that sacked employees, who walked away with data on thousands of policies, are now misusing the customer information given at the time of buying the policy to ‘blackmail’ the companies.
In the past one month, many insurance firms have been inundated with letters from customers raking up old policy issues, alleging misselling and threatening to move court.
The letters, surprisingly welldrafted and mostly from highvalue clients, have raised suspicion that the customers in question have been provoked by men who have access to key information.
Besides aggrieved ex-employees, some in the insurance industry said a north-based broker dealing with multiple insurance companies could be involved in the racket.
The modus operandi is simple: former employees reach out to customers and tell them that they were given a raw deal; the intention is to threaten and force an insurance company to come to the negotiating table; the deal is that the customer pays some commission to the former insurance man for his ‘services’.
“Some data has been leaked from a third-party vendor,” said Indiafirst Managing Director and Chief Executive Officer P Nandagopal. Insurers Seek Police Help
“Details of thousands of policies have been stolen by some executives and they are making spurious calls to policyholders to stop paying renewal (premium), discontinue their existing policy and move on to new policies,” said Indiafirst’s Nandagopal. The recent incidents are taking place soon after many policy renewals and almost a year after several companies received calls from fraudsters posing as officials of the Insurance Regulatory & Development Authority, the industry watchdog.
Last week, some of the firms took up the matter with the regulator. “It could lead to reputational and financial loss and can impact our persistency (or policies in force) ratio. The regulator has advised companies to investigate the cases and file police complaints if necessary,” said an industry consultant. PNB Metlife Insurance is planning to report the incidents to Delhi Police’s Economic Offences Wing. “When we threatened to take the matter to the EOW, they stopped misleading our policyholders,” said Rajesh Relan, MD and CEO of PNB Metlife. Since insurance companies face a challenge in terms of high attrition, the incidents have also raised concerns over data theft in the life industry. “Sales executives often take data of policyholders and make them change policies to the new company they join,” said the CEO of another large private sector life company.
The industry has lost over 6 lakh individual agents and 5,000 direct employees since 2010 after the rules were changed for Unit-Linked Insurance Products (Ulips), which for some years sold like hot cakes. After allegations of rampant misselling, the regulator changed the rules of the game by on one hand increasing the lock-in period and policy tenure, and on the other hand lowering charges and commissions received for selling Ulips. The life insurance industry shrank with Ulips becoming less attractive for intermediaries. The share of Ulips in total income of the sector has crashed to 20-25% (from a peak of 80%) while traditional products such as money-back contribute the rest. The life insurance industry earned a total income of . 2.8 lakh crore in 2012-13, recording a drop of 6% in total income. “The complaints have come for Ulips as well as traditional policies. In some cases there may have been instances of misselling since intermediaries, fishing for high commission, promised the moon to customers. But many customers had unrealistically high expectations from such insurance products,” said a source.
Source :The Economic Times.
Date : 28/06/2013
Writer: SUGATA GHOSH & SHILPY SINHA MUMBAI