Why mis-selling is rarely just a sales problem
By Aman Pal Singh
Most people have bought something they later realized they did not fully understand. Sometimes the consequences are trivial: an unnecessary software subscription, an appliance with features nobody needed, or a mobile plan that looked cheaper than it really was.
Insurance is different.
A poorly understood insurance product may not reveal itself for months or even years. The customer may discover the problem only when a claim is rejected, when a policy is surrendered early, or when the protection they thought they had turns out to be very different from the protection they actually bought.
That is why mis-selling deserves more attention than it usually receives. It is often treated as a frontline sales or compliance issue, when in reality the causes can begin much earlier, with product design, incentives, distribution strategy and management decisions.
The uncomfortable truth is that the person making the sale may simply be the final link in a much longer chain.
The sale is often only where the problem becomes visible
Businesses naturally measure what is easy to see. In insurance, that usually means premium, policy volumes, conversion rates, market share and distributor productivity.
There is nothing wrong with these metrics. The problem arises when they become the dominant definition of success.
A policy can look excellent on a sales dashboard and still be poor business. It may lapse after twelve months. The customer may have misunderstood an exclusion. The product may have been technically suitable but economically inappropriate. A claim several years later may reveal that the buyer and the insurer had completely different ideas about what was covered.
By then, however, the sale has long since been counted.
This is why the better question for management is not simply, “How much did we sell?” It is, “What happened after we sold it?”
For a CEO, that distinction matters because poor-quality business eventually shows up somewhere else: in cancellations, complaints, claims disputes, customer attrition, remediation costs or regulatory intervention.
Revenue that looks attractive today can become expensive tomorrow.
Incentives usually explain more than policies do
Every organisation says that customers matter. The more revealing question is what the organisation actually rewards.
If employees, agents, banks or brokers are primarily rewarded for completing transactions, they will naturally become very good at completing transactions. That does not automatically mean misconduct. It simply means that economic incentives influence behaviour.
Insurance relies heavily on intermediaries, and commission itself is not the problem. Agents, brokers, banks and advisers play an essential role in helping customers understand products and in giving insurers access to markets they could not efficiently reach on their own.
The issue is how those incentives are structured.
If most of the financial reward arrives the moment a policy is issued, while little attention is paid to whether the customer remains, understands the product or receives an appropriate outcome, the economics are sending a stronger signal than the compliance manual.
This is a wider business lesson, not merely an insurance lesson: culture is often visible in compensation before it is visible in values statements.
Different sales channels create different risks
Modern insurance is sold in many ways: through agents, brokers, banks, websites, comparison platforms and increasingly as part of another purchase.
The risks are not identical.
A broker or agent may face pressure around sales targets or commissions. A bank brings a different dynamic because customers may place greater trust in a recommendation coming from an institution that already manages their money. A digital platform removes some human inconsistency, but it introduces questions around design: what is pre-selected, what is recommended, what information is emphasized and what is buried.
Embedded insurance creates another challenge altogether. Think about travel cover added during an airline booking, insurance offered while financing a vehicle, or protection included alongside an electronic purchase. The customer is often focused on the main transaction, not the insurance.
Convenience can be valuable, but convenience can also reduce attention.
The implication for leadership is straightforward. One generic “distribution policy” is rarely enough. The governance needs to reflect on how customers actually buy.
Technology can reduce mis-selling — and scale it
Digital distribution is often presented as the solution to poor sales practices.
It can certainly help. Technology can standardize disclosures, create audit trails, reduce inconsistency and prevent salespeople from bypassing mandatory steps.
But technology also introduces a different risk: it can scale a flawed design with extraordinary efficiency.
A human adviser might make a poor recommendation to one customer. A badly designed algorithm can make the same poor recommendation to thousands.
The important question therefore is not only whether the technology worked as designed. It is whether the design itself was sound.
A digital journey can legally display every required disclosure and still leave customers confused. A recommendation engine can be technically accurate and still be based on incomplete assumptions. An AI system can automate suitability checks while missing nuances a human adviser might have spotted.
The lesson is broader than insurance. Automation does not remove accountability; it moves accountability upstream.
Claims often tell us more than sales reports do
Insurance has a peculiar characteristic: the quality of the purchase is frequently tested long after the sale.
A customer may hold a policy for years before needing it. Only then does the difference between expectation and contract become visible.
This is why claims, cancellations and complaints should not sit in organisational silos.
Repeated disputes around the same exclusion may indicate a claims problem, but they may also indicate a disclosure problem. Unusual early cancellations may indicate pricing concerns, but they may also reveal that customers did not understand what they had purchased. Poor retention through one channel may signal a completely different sales experience from another.
Most insurers already possess this information. Sales has one part of it. Finance has another. Claims, customer service, actuarial teams, compliance and risk all see different parts of the same customer journey.
The opportunity is not always to create more data. It is to connect the data that already exists.
Boards do not need more dashboards
Most boards are not short of information. If anything, they receive too much of it.
The challenge is identifying the few indicators that reveal whether growth is sustainable.
Alongside premium and production, boards should understand early cancellations, persistency, complaint trends, claims disputes and the quality of business by distribution channel. They should also understand where incentives are heavily concentrated around short-term production.
This does not require directors to run the sales organisation. It requires them to distinguish between revenue and durable value.
That is a fundamental governance responsibility.
The real test comes when good conduct costs money
Every organisation supports customer outcomes when doing so is commercially convenient.
The difficult decisions come when the two appear to conflict.
What happens when the highest-producing distributor also generates some of the weakest-quality business? What happens when redesigning an incentive scheme may reduce sales? What happens when adding stronger suitability checks lowers conversion rates? What happens when a profitable product is simply too difficult for customers to understand consistently?
Those choices reveal far more about an organisation than any conduct policy.
Good governance is sometimes visible in what a company is willing to stop doing.
Insurance, at its core, is built on trust. A customer pays money today because they believe a promise will be honored tomorrow.
Mis-selling damages that promise before the relationship has really begun.
That is why it should not be left to compliance teams alone. It belongs in the broader leadership conversation around incentives, product design, technology, customer value and sustainable growth.
The question for any insurer is no longer simply whether a policy was sold correctly.
It is whether the entire system surrounding that sale was designed to make the right outcome more likely.
That is a harder standard.
It is also a far better one.
Aman Pal Singh
MD & CEO | Independent Director | Board Member
Insurance, Insurtech & Financial Services
https://www.b4einsurtech.com/
