Branch conduct review: 64% persistency, replacement churning and a top producer who cannot be challenged

Persistency cost. 13th-month persistency of 64% means 36% of the ₹26 crore of annualised premium - about ₹9.36 crore - does not survive into the second year. At a 35% first-year commission, roughly ₹3.28 crore of commission was paid on premium that will not renew. Add the acquisition cost already spent (medical, underwriting, policy issue, typically 10–12% of first-year premium, so ₹2.6–3.1 crore) and the unamortised expense overrun that must now be written off against shareholder capital. The gap to the 85% target is 21 points, or about ₹5.5 crore of annualised premium.

Free-look cost. 9.8% of ₹26 crore is about ₹2.55 crore refunded at the 30-day point. Nearly all the acquisition cost on those cases is lost, and each cancelled case also carries a handling and complaint cost and a reputational hit.

Ranking by severity (highest first):

1. Blank signed proposal forms and a third-party signature on a proposal - this is potential fraud and forgery, exposes the insurer to void contracts and to criminal complaint, and is the one item that must be escalated immediately rather than managed locally.
2. Payments to two 'sub-agents' - if they are unlicensed, paying commission to them breaches licensing rules; if they are licensed, the arrangement still needs to be disclosed and proper. Either way, it is a mis-selling and money-laundering risk.
3. Twenty-two replacement cases in six months - churning without a documented replacement analysis is the classic indicator of commission-driven selling, and it is a regulatory reporting issue as well as a conduct one.
4. 'Fixed deposit giving 12%' - 22 complaints from one branch is a pattern, not a coincidence, and misrepresentation of returns is the highest-frequency mis-selling finding in life insurance.
5. 64% persistency - the outcome of the above, and the metric that would have detected all of it if anyone had looked.

Hands-on first (0–30 days)

• Suspend the top producer's authority to submit new business pending investigation. Suspend is not dismissal: it protects the book and gives you a defensible process.
• Take possession of all blank and part-completed forms in the branch, log them and destroy them under dual control. Introduce a rule that no proposal leaves the branch incomplete.
• File a conduct report to the Principal Officer/Compliance the same day, with the facts as known and not as you would like them to be. Notify legal on the third-party signature.
• Pull the 22 replacement cases and the 22 misrepresentation complaints; contact each customer, record what they were told and by whom.
• Freeze recruitment credited to the top producer.

90 days

• Complete the investigation with written statements from the agent, the sub-agents and the complainants; decide on termination, and if forgery is established, refer to the police and to the licensing authority.
• Remediate customers: free-look-style reinstatement or refunds where misrepresentation is proven, and a written apology.
• Retrain the whole branch on replacement disclosure, product features and documentation.
• Move the scorecard away from first-year premium: weight 13th-month persistency, complaint ratio and free-look rate at no less than 50% of the agent's rating.

180 days

• Re-audit the branch with a second-line review; check whether other branches show the same pattern.
• Exit interviews with the lapsed customers to test whether the lapse cause was mis-selling or affordability.
• Report outcomes to the Audit Committee and, where required, to the regulator.

The top producer. Treat him as a conduct risk, not a revenue asset. His 58% share of branch premium is precisely why the branch failed to supervise him. His 14 years of service entitle him to a fair process, not to leniency.

Internal reporting

• Immediate written report to the Principal Officer/Compliance, with facts, dates and evidence, on the blank forms, the third-party signature, the payments to sub-agents and the misrepresentation complaints.
• Notification to the Risk Management Committee and the Audit Committee at the next meeting, and earlier if the sums are material.
• A written record of every decision and who made it, because this file will be reviewed by the regulator and possibly by a court.

External reporting

• Any reportable fraud or mis-selling event to the regulator within the prescribed timeline.
• Responses to ombudsman or consumer-forum complaints based on the investigation file, not on the agent's account.
• A police complaint if the signature forgery is established.
• Fit-and-proper disclosure if the branch manager or the agent is a licensed person whose conduct is found wanting.

The branch manager's conflict. He is two months from his appraisal, close to the agent, and dependent on him for recruitment and premium. Three things follow:

1. He must recuse himself from the investigation and from any decision on the agent's continuation, and hand it to the regional head or an independent reviewer.
2. He must not attempt to resolve the matter informally, by 'having a word' with the agent or by persuading complainants to withdraw.
3. He must recognise that his failure to supervise is itself under review. A branch with 64% persistency, 22 identical misrepresentation complaints and a 22-case replacement cluster did not develop these symptoms in a quarter. The honest position to put to the reviewer is what he knew, when he knew it and what he did - not what he would now like to have done.