The agent may be mis-selling but why has IRDA allowed such an incentive structure?

There seems to be only one direction the insurance industry is headed: Down. Every other day we hear stories about how, in the pursuit of higher commissions, insurance agents are selling one investment product (ULIP) after another and not life cover (term policy). Households pay exorbitant upfront commissions that go as high as 40 per cent for a 20-year product, but the agent either disappears after three years or returns to churn the money into a new 20-year policy. Much has been written about this but most of the industry, regulator Insurance Regulatory and Development Authority (IRDA) and the Government have nothing to say or do.
What’s new is a two-day old email from an alert doctor. Here’s what he wrote: “I would like to draw your attention to a leading insurance company’s strategy. Recently, its agent offered to pay in cash if I disclose my diabetic patients’ names to the insurance company. Also, if anyone takes this insurance policy (offered to diabetics only), additional cash will be paid. And if more patients take the policy, other offers such as a Malaysia trip [are offered], according to slab.” He concludes saying, “Doctors are not expected to reveal diagnosis of a patient unless asked by court of law.”

Opinion in The Indian Express, August 01, 2007