NHB bans mis-selling of insurance with housing loans

The National Housing Bank (NHB) is taking action against home financiers for mis-selling insurance policies with housing loans. The NHB has ordered these companies to stop this practice unless they fully inform borrowers about the policies' terms and conditions. Home finance companies (HFCs) must now obtain explicit consent from customers and provide at least two insurance options. This move aims to increase transparency and competition among insurers. The NHB's directive follows complaints from borrowers who were unaware of what they were signing up for. In previous communications, NHB expressed worries about the significant income HFCs generated from selling insurance. Investigations revealed that many borrowers did not know the terms of their bundled policies. In some cases, the insurance coverage was shorter than the loan term, suggesting that sales were driven more by profit than by providing valuable protection. The NHB also found that many companies did not have proper policies for distributing insurance. In a recent review, they discovered that multiple insurance products were sometimes sold to the same customer. These products included life insurance, building insurance, and critical illness coverage. The NHB noted that borrower consent was often lacking or unclear. Findings from various inspections were shared in meetings with other regulators, indicating a widespread issue with mis-selling in the housing finance sector. The NHB is committed to ensuring that customers are better informed and treated fairly in the insurance market.