Govt to tighten noose around mis-sellers of insurance

The government is preparing to deal sternly with companies selling insurance, pension or mutual fund products on the basis of incorrect information to consumers, inflated rate of return and hidden costs.

A government committee set up to suggest ways to bring out transparency in selling of financial product, has suggested that households abstained from saving in these products not because ‘low access’ to finance but ‘low trust’ in financial markets.

“The saving rate in India is high. These savings, however, do not translate to financial assets. The gross domestic savings of the household sector were 22 per cent of GDP in 2012-13, of which savings in physical assets such as gold and real estate were 15 per cent of GDP, while savings in financial assets were only 7 per cent of GDP,” the committee headed by former finance secretary Sumit Bose said. “One factor that can potentially explain the reluctance of households to engage in financial markets is low trust,” it said.

It said the limited investments in retail finance have been accompanied by several allegations of mis-selling. “Typical complaints include customers not been given correct information about products, not shown the full array of products, not told the exact amount of their contributions that will be diverted towards commissions and costs, and made to churn their portfolios without any apparent benefit to them,” the panel said.