The pensioner, the ULIP and the quarterly target
Anil is a relationship manager at a public sector bank branch in Gurugram. His quarterly target is 40 insurance policies totalling ₹50 lakh of premium, and roughly 70% of his incentive comes from a unit-linked plan that pays the bank about four times the commission of a term plan. On a Friday afternoon Ram Prakash, a 68-year-old retired clerk, comes in with ₹5 lakh of maturity proceeds from a fixed deposit. His pension is ₹22,000 a month and he has ₹3 lakh in savings. He tells Anil he needs the money in about two years for his granddaughter's engineering admission. The branch head has already told the staff that anyone below 60% of target will be marked 'needs improvement' in the appraisal. Anil's senior suggests selling the ULIP with a five-year lock-in and telling the customer that 'it is like an FD but with better returns'. Anil has a wife and a home loan, and needs the incentive.
1. Assess the suitability of the ULIP for Ram Prakash and recommend an alternative.
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The product is unsuitable, and no amount of return talk fixes that.
Map the customer against the product feature by feature:
- Horizon: he needs the money in two years; the ULIP has a five-year lock-in. The goal and the product do not meet. If he is forced to exit early, he exits at a loss or not at all.
- Capital: the money is for a fixed, known expense. Market-linked returns can be negative at the point of withdrawal - exactly the risk he cannot carry at 68.
- Liquidity and income: pension ₹22,000; savings ₹3 lakh. This ₹5 lakh is not surplus wealth, it is a targeted corpus.
- Age and protection need: at 68 with no income dependants, a large protection-linked sale is not needs-driven either.
What actually fits: a two-year bank FD (or a split between a 1-year and 2-year FD to ladder the admission dates), with the interest rate locked at the outset and no market risk. If the horizon could genuinely stretch to five years, Senior Citizens' Savings Scheme would be the appropriate discussion - but only after confirming with the customer that the goal can move, which he has said it cannot.
The suitability conversation must be documented: goal, horizon, risk capacity, and why the recommended product matches. That note is Anil's protection if the customer later complains.
2. What regulatory and ethical problems arise from the proposed sale, and what are the consequences for Anil and the bank?
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Several distinct breaches sit in one sentence of sales patter.
- Misrepresentation. Telling a customer a market-linked product with a five-year lock-in is 'like an FD but with better returns' is a false comparison - it removes the risk disclosure that makes the sale lawful.
- Mis-selling and failure of suitability. Selling a product that does not match the stated two-year goal, to a 68-year-old pensioner, is the classic mis-selling profile.
- Free-look not explained. Every policy now carries a 30-day free-look right. Silence on it compounds the misrepresentation - the customer loses the one safety net designed for exactly this situation.
- Conflict of interest. The incentive structure (four times the commission) is the real driver, and neither Anil nor the senior has disclosed it.
- Pressure as a justification. The branch head's 60% threshold is not a defence; it is evidence of a culture problem.
Consequences: Ram Prakash can complain and claim relief; the bank as corporate agent faces conduct action and possible loss of the agency; Anil faces disciplinary action and clawback of incentive. Under the RBI's fair practices expectations, the bank's own conduct rules and IRDAI's corporate agency norms, 'the target made me do it' has never mitigated a mis-selling finding, and a recorded misrepresentation is far more damaging than a missed target.
3. Anil still has to meet his target. How should he handle the branch head's pressure this quarter?
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Separate the two problems: the customer in front of him today, and the target structure behind him.
Today: complete the needs analysis, recommend the FD, and offer a term plan only if there is a genuine protection need - which, at 68 with no dependants on his income, there probably is not. Record the suitability note and the customer's refusal of the ULIP if he refuses it. A documented, needs-based 'no sale' is a good outcome, not a failure.
This quarter:
- Build a pipeline that is not commission-led. Salary accounts in the branch, young professionals who need term cover, existing FD customers who need a second health policy - real needs, real sales, no misrepresentation.
- Ask the branch head, in writing, for a revised product mix and a revised target that reflects the branch's customer profile.
- Escalate the instruction. The senior who suggested the 'like an FD' line has created a conduct risk. Report it to the branch compliance or regional office in writing, factually and without accusation.
Why this is not career suicide: the misselling liability lands on Anil first. A complaint, a clawback and a conduct entry on his record will damage his appraisal far more than a shortfall, and the written escalation is what protects him if the branch's sales practices are later investigated.