Insurance Scam By Banker

Senior citizens continue to be duped into buying high-premium insurance policies, sold to them as annuity plans, with no attempt to stop or punish this widespread fraud. 

So how does this work? - It starts with bank Relation Manager (RM) calling customers with the offer of 'single premium' policies offering a fixed annuity. The RM is aware of the customer's financial strength, savings account balance, fixed deposits, credit card history and other details. 

 

A personal meeting is fixed where the customer is told that a single, lump sum investment will provide lifelong fixed returns. The minimum lump sum premium is usually large amount. The customer were assured of a regular annuity payment after a while. 

 

If the sales pitch succeeds, the RM notes down customer details on the prescribed application form and asks for signatures. Most people, who sign after such a sales pitch, do not make the effort to read the form, fill it up themselves in their own handwriting (as required by insurance policies) or even scrutinise it after it is done. 

 

These days, an RM will pull out a tab from his bag and start punching data into it for smoother and faster onboarding.  

 

The most important column in this form is 'Premium payment frequency.' The options are monthly, quarterly, half-yearly, yearly and lump sum. The RM puts a tick against the 'yearly' option without explaining the implications to the customer. It ensures that the customer only realises he or she has been duped after 11 months on receiving a notice for the next premium payment. 

 

When an average, middle-class customer signs up for such a hefty annual premium, it ought to raise a red flag but insurers have another check. Insurer should track and double-check such policies and punish mis-selling. But banks and insurers simply don't care. On the contrary, the RM, banker or agent who commits this fraud, is seen as a star salesperson and rewarded with incentives and bonuses.

 

Digging Deeper - It doesn't stop here. With another 11 months before the fraud is revealed, the agent uses the time to dig up information about a customer's family and sweet-talks them into purchasing additional policies in the names of children and grandchildren, portraying it as smart succession planning with benefits. A slow legal system, which gives primacy to the words of the contract and signatures affixed by the customer, works against them when they finally wake up and want to lodge a complaint. 

 

The scam is not limited to senior citizens. The younger generation, or Gen Z, is also casual and careless about reading and understanding insurance proposals and tends to sign forms blindly. This will ensure that the fraud remains active in the future.