Mis-Selling and Regulations of Insurance Distribution - Selected Solutions

Abstract

Mis-selling is a term used to describe (un)intentional practices that result in selling a customer a product that does not meet their needs. It can be assumed that the phenomenon is omnipresent, however in certain periods it increases. The first symptom of mis-selling may be the above average profitability of certain business lines. Also the rapid increase in the number of salesmen and increased migration between agency networks may indicate a worsening of mis-selling. The next step, which is not always present, is the increasing number of consumer complaints, especially on aggressive acquisition or unfavourable provisions in the general terms of insurance. Then, mostly due to an external factor (eg. financial crisis, rising un- employment), consumer interest in financial products held either grows or there is a need to use them. Then the effects of previous practices are noticed. Mechanisms which counteract mis-selling include: certification of insurance intermediaries; professional training; information to the customer, appropriate to the content, scope and form; control of sales activities; the remuneration policy of insurance intermediaries.