HDFC Life plans to expand distribution channel to address bancassurance mis-selling concerns

FM Nirmala Sitharaman had cautioned against mis-selling leading to financial distress for consumers and increased borrowing costs

HDFC Life, in its analyst conference call, responded to discussions surrounding bancassurance and concerns of mis-selling in the financial industry. While the management said no official information has been received from insurance regulator, but added that it is taking active steps to address mis-selling by expanding both its proprietary channels.

Mis-selling occurs when financial products such as insurance policies, mutual funds, or loans are sold without proper disclosure of terms or suitability. This could involve selling products that don’t align with a customer’s financial goals, misrepresenting the risks or benefits, or pressuring customers into purchases they don’t need.

HDFC Life pointed out that complaints related to mis-selling in its bancassurance channel are relatively lower compared to other distribution channels. However, the management said that there is always room for improvement in this area.

To overcome this, the management outlined strategy to expand both its proprietary channels, which include agency and direct sales, and its partnerships with banks.

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"In terms of numbers, bancassurance accounts for about 35 percent of our new business, with HDFC Bank contributing roughly a quarter of that. These figures include credit-life business and other segments. If the goal is to reduce concentration risk, these numbers reflect that approach," said Vibha Padalkar, CEO of HDFC Life.

This commentary from HDFC Life comes against the backdrop of Finance Minister Nirmala Sitharaman’s concerns over the growing mis-selling of financial products, particularly insurance, through the banking channel. Sitharaman highlighted the negative impact of such practices, noting that mis-selling leads to financial distress for consumers and increased borrowing costs.