Senior Citizen Sold a Locked-In Unit-Linked Policy
A 64-year-old retired schoolteacher invested ₹15 lakh in a single-premium unit-linked policy sold through a bank branch. The agent said the plan offered 'guaranteed 12% annual return' and that she could withdraw after one year without loss. The policy has a five-year lock-in, an 8% first-year allocation charge, and a surrender value after 14 months of about ₹11.2 lakh. The customer now needs money for surgery and complains that she was not told about the charges or the lock-in. The bank says the customer signed a benefit illustration and a risk profile showing 'moderate' risk. The insurer's grievance record shows the agent had two similar complaints last year. The free-look period of 30 days has expired.
1. Assess whether this is mis-selling. What evidence matters beyond the signed forms?
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The signed benefit illustration and risk profile are relevant but not conclusive. The central allegation is that the agent promised a 'guaranteed 12% return' and withdrawal after one year, which contradicts the product's lock-in and market-linked nature. If the customer's age, retirement status and need for liquidity were known, a five-year lock-in with an 8% upfront charge was prima facie unsuitable. The insurer should examine the agent's sales script, call recordings, the bank's referral record, the benefit illustration actually explained, and whether the customer's risk profile was completed before or after sale. A 'moderate' risk label signed by a 64-year-old retiree who says she wanted a safe deposit is not credible without evidence of explanation. The two earlier similar complaints are a pattern, not proof, but they raise the standard of inquiry. Mis-selling can be established even after the free-look period because the complaint is about the sale process, not a change of mind.
2. What redress should the insurer consider, and how should it deal with the bank and agent?
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The insurer should first quantify the loss: the ₹15 lakh premium, the 8% allocation charge, the current surrender value of ₹11.2 lakh, and any market movement. If mis-selling is established, redress should aim to put the customer back in the position she would have been in with a suitable product. Options include cancelling the policy and refunding the premium less legitimate insurance charges, waiving surrender penalties, paying the difference between the surrender value and a fair return, or allowing a need-based partial withdrawal without penalty. The insurer should not force her to remain locked in while awaiting surgery. The bank, as the distribution channel, should provide the agent's records and contribute to remediation if its staff misrepresented the product. The agent should be interviewed, and if the pattern is confirmed, face training, suspension or termination under the insurer's agent code. The insurer should also review whether commission clawback applies.
3. What controls should the insurer and bank implement to prevent similar sales?
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The insurer should impose enhanced suitability checks for customers over 60: a shorter, clearer illustration, a liquidity question, and a supervisor call before issuance. Single-premium unit-linked products with long lock-ins should trigger a mandatory cooling-off call and a plain-language disclosure of charges and surrender values. The bank should not use tellers or staff who are not trained and authorised; referral and sales roles must be separated. Call recordings should be sampled for phrases such as 'guaranteed' and 'withdraw after one year'. The insurer should monitor complaints by branch and agent, investigate repeat patterns, and report conduct issues to the regulator where required. Training should use real complaint examples, and incentives should not reward volume without quality. For the customer, the insurer should provide a clear grievance route and a decision within a defined timeline. These controls address the root cause: a product was sold to a customer whose need was safety and liquidity, not market-linked growth.