Misselling: Why You Need To Beware Of It

Misselling is defined as deliberate, reckless, or negligent sale of products or services in circumstances where the contract is either misrepresented, or the product or service is unsuitable for the customer's needs.

In simple terms Misselling means that you were given unsuitable advice, the risks were not explained to you or you were not given the information you needed, and ended up with a product that isn’t right for you.

Examples of Misselling in Finance
· Selling life insurance to someone who has no dependents.
· Selling retired or elderly person a long-term or child plan.
· Selling the policy promising a single premium mode or a limited term policy but it actually turns out to be a regular premium mode.
· Selling endowment plans without disclosing the expenses and commissions earned,
· Selling ULIPs by promising huge returns,
· Asking investors to surrender the existing policy (giving false reasons of non performance) and to buy a new high commission-yielding policy. Churning the policy every five or six years while the policyholder pays the price
· Selling investor five funds with SIPs of Rs 1,000 each instead of one fund with SIP of Rs 5,000.
· A bank relationship manager suggesting his client to exit from the existing funds as their NAV is at Rs 140, Rs 80 each, and instead start fresh SIP investments in two cheap NFOs with their NAV of Rs 10 each, recommended by the bank’s research team. Relationship manager used the ignorance of his client that low NAV doesn’t mean the fund is cheap and it has nothing to do with the future performance of the fund.
· Recently it’s also observed that some unscrupulous elements call randomly(send emails) and introduce themselves as belonging from IRDA or Ministry of Finance or RBI and lure customers with fake offers like bonus or incentives. But they are pushing high commission-yielding products.

Misselling for financial products is not unique to insurance and happens in various lines of businesses such as loans, credit cards, investment products, pharmacy, hospitality etc. The customers mostly buy financial products either in obligation or because of ignorance. Lot of mis-selling of insurance policy happens during last month of a financial year as people are in a hurry to save taxes.

But Misselling is quite rampant in our daily life also in products other than the financial products. Example of a misselling of non financial products:

● Say you were looking to use 4G on a mobile phone. You told the shop assistant that you planned use 4G and they recommended a model. Then you took it home, and found that it doesn’t work. There’s nothing wrong with the phone itself – it’s not faulty – but it’s not what you needed. The mobile phone was mis-sold to you.
● Fairness creams are a multi-billion rupee industry in India as in India a large population equates fairness with beauty and superiority. Now they have for men too!
● A superior course, global exposure, international faculty, good placement. Many universities claim.
● Speak Asia, duped around 23 lakh investors to the tune of Rs 2,000 crore. It promised a weekly income, merely on filling online survey forms. Members paid money to join the firm’s network and earn reward points for referring its offerings to friends and peers.
● Diet soda With no calories or sugar, comes with its own set of side effects that may harm your health-from kick starting kidney problems to adding inches to your waistline.
● Brown bread much of the ‘brown’ bread you’ll find in the supermarket is simply the same white bread with brown coloring added. Hardly the healthier choice it’s made out to be!
● As Indians are becoming more health conscious market is full of high nutritional products heart-healthy cooking oil, crunchy granola bars, fruit-flavoured yoghurt, to dry fruit-sprinkled muesli, we are taking everything that screams low calorie.

If something looks too good to be true, it probably is. And this applies in case of buying anything, any product financial products as well. Don’t get tricked into the trap of marketing, intermediaries and buy the product just because the advertisement or agent is eulogizing it.

Ignorance is no bliss. If you have limited wisdom about a product, an insurance plan or a mutual fund scheme, it becomes easy for commission-seeking agents to trick you into the wrong insurance or mutual fund scheme. Understand that a salesperson or an agent’s job is not to advice on the product's suitability for the specific needs of customers. He/she is just an intermediary between the company he is representing and you, as a customer and so his strategy revolves around just three words: sell, sell, sell. It is unrewarding for him to think about the investor’s financial goals when he has his own to fulfill.

Stop the blame game. Do your own homework before buying any product, including financial product. Playing victim is no use and then till how long can you hide behind it. Misselling happens because mis-buying happens. There is no easy way out, no short cuts. As they say “It is easier to protect your feet with slippers than to cover the earth with carpet.”
This article is written by Kritika.
Image: Thinkstock