Just wants to quote Moneylife article on the same lines – (Source - http://www.moneylife.in/article/insu...ling/2238.html)

“Financial literacy in the distribution channel itself is the main cause of mis-selling. It leads to underinsurance and improper coverage for the insured. The problem lies in a lack of training on part of the employer for need-based policy selling.” He further added that inactivity of agents is another cause for concern. He said, “There are three million agents in the market currently. But only 20% of these are productive.”
Nitish Asthana, Senior VP, Direct Distribution and Telcassurance, Bharti AXA Life Insurance

Is there a way to curb this menace?
According to Sanjiv Bajaj, joint MD, Bajaj Capital, the proposed 2.25% cap on insurer’s premium charges will help arrest mis-selling. He said, “We can’t control mis-selling by doing micro things. We have to do macro things like having a 2.25% cap on premium charges, which will make a lot of difference.” He attributed mis-selling to a lack of long-term relationship orientation with the customer. “Mis-selling is happening more at the employee level and not the agency level, as is the misunderstanding. This can only happen when there is one thing missing in the relationship, and that is relationship. If there is emphasis on having a relationship, then mis-selling cannot happen as the advising agent wants to thrive on the life-time value of the relationship.”