December 20, 2019: The Securities and Exchange Commission of Pakistan (SECP), to address the issue of mis-selling of insurance policies through bancassurance agents, has initiated actions against all such companies.
The SECP has observed a large number of complaints against insurance companies regarding insurance products sold through the bancassurance distribution channel. The bancassurance agents misled the policyholders by selling insurance policies in disguise of highly profitable investments without disclosing that the company will deduct front-end commission and other charges.
In this respect, the Insurance Division of the SECP has penalized an insurance company for violating the respective regulatory framework. The SECP, while concluding its proceedings directed the insurance company to refund the full amount of premium to 19 policyholders. Moreover, the insurance company was also directed to claw back the commission paid to bank(s) in these cases.
To eliminate any element of mis-selling, SECP also instructed the company to bring transparency in the sales process and provide maximum disclosure and information about the insurance products to the policyholders. The company was also asked to warrant compliance of bancassurance staff with a prescribed code of conduct.
SECP, besides having the mandate for the development of the insurance sector, is also responsible for protecting the interests of the policyholders. Therefore, strict action would be taken against the insurance companies indulged in mis-selling. Moreover, the tightening of Bancassurance Regulations is also being considered to curtail the issue of mis-selling.
