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⚠️ '''Mis-selling''' occurs when an [[Definition:Insurance policy | insurance product]] is sold to a customer in a manner that is misleading, unsuitable, or inadequately disclosed — whether through active deception, omission of material information, or a failure to assess the buyer's actual needs. In the insurance industry, mis-selling scandals have driven some of the most significant regulatory overhauls of the past several decades, most notably the [[Definition:Payment protection insurance (PPI) | payment protection insurance (PPI)]] crisis in the United Kingdom, which resulted in over £38 billion in [[Definition:Claims | claims]] payouts and fundamentally reshaped conduct regulation. The concept encompasses both individual sales misconduct and systemic failures in the way products are designed, distributed, and incentivized.

🔍 Several common patterns characterize insurance mis-selling. An [[Definition:Insurance agent | agent]] might sell a [[Definition:Whole life insurance | whole life policy]] to someone who only needs [[Definition:Term life insurance | term coverage]], or add [[Definition:Add-on insurance | add-on products]] like [[Definition:Guaranteed asset protection (GAP) insurance | GAP insurance]] at the point of an auto sale without meaningfully explaining the product or confirming the customer's eligibility to claim. Pressure-based sales tactics, [[Definition:Commission | commission]] structures that reward volume over suitability, and inadequate [[Definition:Know your customer (KYC) | needs assessment]] processes all contribute. [[Definition:Insurance regulator | Regulators]] such as the [[Definition:Financial Conduct Authority (FCA) | FCA]] in the UK and state [[Definition:Department of insurance | departments of insurance]] in the US enforce conduct standards that require [[Definition:Insurance carrier | carriers]] and [[Definition:Insurance broker | intermediaries]] to document the rationale for product recommendations and to ensure that coverage sold aligns with the customer's risk profile and financial circumstances. When systemic mis-selling is identified, regulators may impose industry-wide remediation programs, including mandatory customer reviews and redress schemes.

🛡️ The reputational and financial consequences of mis-selling extend well beyond regulatory fines. Carriers implicated in widespread mis-selling face [[Definition:Litigation | litigation]] exposure, erosion of [[Definition:Policyholder | policyholder]] trust, and potential downgrades from [[Definition:Rating agency | rating agencies]] concerned about the resulting liabilities. For the broader market, high-profile mis-selling episodes fuel calls for stricter regulation that can increase compliance costs for all participants, including those with clean records. [[Definition:Insurtech | Insurtech]] firms often position transparent, algorithm-driven product recommendation engines as an antidote to traditional mis-selling risks — though regulators have signaled that automated systems are not immune from scrutiny and must themselves be tested for bias and suitability alignment.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Payment protection insurance (PPI)]]
* [[Definition:Conduct risk]]
* [[Definition:Suitability]]
* [[Definition:Financial Conduct Authority (FCA)]]
* [[Definition:Consumer protection]]
* [[Definition:Treating customers fairly (TCF)]]
{{Div col end}}

Definition:Mis-selling - Revision history

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