Insurance, savings scams

Banks have been misleading the people into buying bancassurance products that are hybrids of insurance and savings instruments for many years. The lenders woo the people with the promise of large returns and insurance cover.

Banks have set high targets for each branch for the sale of these products, and the staff in these branches can get aggressive in trying to close the deal, sometimes even resorting to emotional blackmail or subtle 'threats'. Sales practices that are clearly misleading have been used by sales staff to get customers to sign the forms needed to apply for these products. Typically, the sales staff will target older clients who are willing to trust the brand name of the bank they are dealing with. In many cases, the trust that customers place in their financial institution is manipulated to build a market for these products.

Now the Security and Exchange Commission of Pakistan (SECP) taking a right step has started an inquiry into the aggressive selling of these products. The hybrid products come in various packages, sometimes for children's education, sometimes as a retirement plan, etc. They involve a partnership between insurance companies and banks, making it easy for both to evade responsibility once the client invariably discovers that the product is not really what it was made out to be during the sales process.

It is high time this practice was ended because the manner in which these products have been pushed onto customers amounts to a scam. Customers who have already been taken in by a sales pitch for a product need to be made aware that they are entitled to a full refund of the money that they have placed. It is important to push awareness of this basic fact because banks and insurance companies do their best to conceal it from their customers. The SECP should open a portal where customers who feel they were misled into buying one of these products can register their complaint and seek the regulator's help in getting a full refund of their money. There is nothing wrong with financial institutions partnering to offer novel products for their customers.

However, tighter regulations are needed to ensure that such offerings carry genuine benefits for the customer, that misleading sales practices are not used to push them, and that the terms are clearly laid out in the product brochures rather than contained in the fine print of the contracts.