Beware of mis-selling: Must read before buying any policy

Below is the verbatim transcript of Mashruwala's interview with CNBC-TV18. 

Q: There have been several instances of mis-sellign of products, for instance unit linked insurance policies (ULIP) plan is sold as a single premium policy till the policyholder is asked to pay a premium again next year or being sold insurance under the garb of investment. How can retail investors protect themselves against this kind of mis-selling?

A: First principle is buyer beware. While there are lot of regulations and guidelines whether it is Securities and Exchange Board of India (SEBI) or Insurance Regulatory and Development Authority (IRDA) or Reserve Bank of India (RBI) or Pensions Fund Regulatory and Development Authority (PFRDA), they keep on modifying regulations. At the end of the day it is the buyer who has to be careful by himself/herself.

There are couples of things that one should do: (1) whenever one is buying a product, try and ask the person who is selling, to explain the product fully. If one does not understand then do not buy the product. The more complicated the product more are chances that one is going to be manipulative or going to lose out on.

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(2) While one is applying for the product, ensure that all  details are given in writing. Ensure that the product brochure is on the letterhead of the product manufacturers, for example, if it is an insurance plan by LIC then ensure that it is a LIC brochure and not on a stationary of an agent or somebody who has put an LIC logo.

(3) While filling up the form, as far as possible the buyer should fill the form and all the critical information. Even if the buyer has not filled up but an agent or if it is a bank or somebody else who has filled it up then go through the form thoroughly. Many times these people are not trying to mis-sell, but the entire information is not given correctly and later on it may turnout to be detrimental.

(4) Whenever the buyer hears that that specific day is the last day or the scheme is closing and hence the agent or someone ask the buyer to do something in haste then do not do it because there is never a situation whereby the best possible product will have a last day. One will have similar products coming up or similar options available later on.

Therefore, if a buyer is aware of certain basic things then chances of something being mis-sold to him or her, are little less and after this if one has done the thorough documentation then one have various options of going to regulator etc. However, the first principle is, buyer beware.