What is fraud in bank insurance and how can consumers recover their lost money?
Bank insurance :My brother had collected the money to go on Umrah with his mother. To keep them safe brother opened a bank account & was asked to sign eight or ten forms. Little did they know that it contained a bank insurance form.
According to Tahir Mahmood a resident of Muzaffargarh Punjab a private bank committed fraud with his brother. He tells the British news that a few days after the policy came into force he found out that the bank had deducted some of the amount deposited in the name of insurance policy.
When we found out it was said that your brother has a bank insurance policy. We said we do not want this policy so the bank staff replied that if you want the money back you have to pay three installments.
They were forced to accept these conditions but when it came to the 3rd installment in 2017, the bank staff said that the insurance company was not taking the installment. However the insurance company said that nothing was done by them. When I contacted the bankers again they started working reluctantly & the matter was put on hold.
Tahir has not received the money back till today. During the previous government he lodged a complaint on the Prime Minister Citizen Portal & was asked to contact the ombudsman. There has-been no relief from there & the family money has sunk to this day. The brother and mother collected money again & performed Umrah but the money sunk in the bank has not been found yet.
But Tahir family is not the only one to fall victim to bank insurance fraud. You can find people on social media & in real life who claim that the bank cheated them that is they were trapped in the mire of bank insurance without telling or informing them, which caused them financial loss.
In this article we have done something to find out what is bank insurance and which institution can provide relief to the victims of bank insurance.
What is bank insurance?
There are many insurance companies operating in Pakistan & their products are advertised in newspapers TV channels & social media. However bank insurance is a new thing compared to insurance in Pakistan.
Regarding thi financial expert Arsalan Baig said that bank insurance is actually insurance but it includes the bank. It involves a service level agreement between insurance companies & banks ie the bank receives its commission and profit on the sale of insurance products.
NA Usmani Secretary General Insurance Companies Association of Pakistan said that the bank is an approved product of State Insurance and Securities & Exchange Commission of Pakistan.
In bank insurance the insurance company uses the bank counter & the banks are acting as a corporate agent. Just as an insurance company has agents for a product who charge their own commission for making a policy so does the relevant bank in bank insurance receive a commission as a corporate agent.
How do people get cheated in bank insurance?
The list of consumers who have-been deceived in the name of bank insurance is long & people claim that the money they have invested as an investment has-been incorporated into the policy through bank insurance & deducted. Done or some other users say that they did not make a profit from it on the contrary they lost their money due to strict conditions & regulations.
In response Arsalan Baig admits that the biggest problem is with the banks. When an insurance company gives an insurance target to a bank the bank management tells the staff that you have to meet that target in any case.
He said that the staff of the banks are under a lot of pressure from the top management and they use various tactics to bring people in bank insurance in any case. The staff has to sell insurance products & they miss guide their clients and bring their investment into bank insurance under various guises.
For example if the staff has a bank insurance policy of one million five to 6 million get it in commission. Arsalan said that just as ordinary insurance agents get commissions on policy making, so do banks get commissions as corporate agents. In any case the bank management wants to get maximum commission by meeting the target so the staff sells product through misselling in the wrong way and provides wrong information to the people.
NA Osmani said that it is a matter of routine when the banks are given a target by the insurance companies & if the insurance policy is given to the people incorrectly by the bank staff then it Its not the insurance company fault.
However he agreed that it would be a matter of concern if the wrong way of bank insurance is a disgrace to traditional insurance. People in insurance sector are worried because they are being targeted because of bank insurance.
bank has the opportunity to make good money in name of insurance
Consumers have also shared the financial statements of local banks on social media which show a significant increase in earnings in terms of bank insurance. Similarly the earnings of insurance companies can be seen to increase significantly in this regard. In the first quarter of 2022 a local bank earned about Rs. 48 crore in terms of bank insurance.
One user wrote that a banker working in a local bank was told that if he brought in a business worth Rs 200 crore he would be promoted & now the banker is constantly raising money through bank insurance.
Similarly statements of banks in the last financial year can be seen in name of bank assurance.
One of the local banks United Bank Limited has also been mentioned on Twitter as one of the few banks earning in the name of bank insurance. In this regard the management of UBL United Bank Limited was contacted and an attempt was made to know their position.
UBL United Bank Limited said in a written reply that the bank ensures that its customers understand bank assurance properly including its benefits & risks. This products is offered under a regulatory system for which bank has partnered with reputed insurance companies.
The bank said Proceedings are carried out only on cases in which the customers have given their consent. An amount of Rs 1.375 billion has-been paid to various families in the last five years through bank assurance.
Which institution can provide relief to the victims of bank insurance?
In PakistanSBP is the regulator of the banking sector & insurance sector is under the SECP. The performance of both regulators has-been questioned by users on Twitter.
In this regard, the SECP said in its written reply that it has amended the Bank Assurance Rules & Regulations in 2020 to combine the interests of insurers policyholders & banks.
SECP said that a complete mechanism has been devised for bank assurance in which the entire process is scrutinized for a certain period of time before and after the sale of the policy. The SECP said that there is a provision in their law that if the policyholders find out within 25 months of the policy that it has-been sold incorrectly, they will get 100% premium. ۔
SECP has said that the interest of insurers banks & policyholders will be consolidated by gradually reducing the commission of corporate agents.
On the other hand after the SBP took a stand a spokesperson of the central bank sent a circular stating the guidelines for the sale of 3rd party products in banks which contained only policy guidelines.
In the event of a complaint in insurance sector in Pakistan there is an institution called the Insurance Ombudsman which deals with insurance including bank insurance cases. It is headquartered in Karachi & has regional offices in other areas.
In case of fraud in the name of bank insurance people can lodge a complaint in the office of the Insurance Ombudsman who calls the concerned bank or insurance company for a regular hearing & the decision is binding on the bank & insurance companies.
Mubashir Naeem Siddiqui director general of the Insurance Ombudsman Office told the British news that bank managers often take advantage of the fact that they know client account to whom the product could be sold.
Siddiqui said that when the bank staff sells a bank insurance product to someone they are selling it not as an insurance policy but as a bank product so often people are deceived & trapped.
Siddiqui said that 80 per cent of the complaints they receive are related to banks insurance in which the victims tell how bank staff misrepresented and sold them the bank insurance product.
He said that there is an element of greed in it as the bank gets 25 to 50 percent commission on bank insurance. If a bank sells bank insurance of Rs 5 million, it gets a commission at a premium of Rs 2.5 million.
He says that he has recommended to the Insurance Ombudsman to the SBP that portion of its good performance on bank insurance should be taken out of the performance of bank staff as it has led to people in the name of bank insurance With that comes fraud.
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Mubashir Naeem Siddiqui said that the Insurance Ombudsman has-done a lot in this regard in connection with the sinking of people money & has also run an awareness campaign in this regard.
According to him if only the data of 2021 ie last year is obtained then the Insurance Ombudsman has returned the lost Rs 2 billion to the victims all over Pakistan.
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