The Mis-sold Policy and the Free-Look Window
A retired schoolteacher, Mrs. Bano, 63, was sold a unit-linked life policy through her bank with an annual premium of PKR 400,000, funded by redeeming her only savings certificate. The relationship officer told her the plan was 'like a fixed deposit with life cover' and that she could 'take her money out any time.' She signed the proposal and a separate 'suitability' form that the officer filled in on her behalf, ticking 'high risk tolerance' and 'long-term horizon of 15+ years.' The policy documents, including the free-look period notice, were mailed to an address she says she never received. Three months later, realising the surrender value is far below what she paid, she complains to the bank. She is now outside the free-look period.
1. Assess the bank's and officer's conduct against suitability and disclosure expectations, and explain why the 'suitability form' does not protect the bank here.
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Conduct assessment:
- Misdescription. Calling a unit-linked policy 'like a fixed deposit with life cover' is a material misrepresentation. Unit-linked products carry investment risk; capital is not guaranteed and surrender values can be below premiums in early years.
- False liquidity claim. 'Take your money out any time' conceals surrender charges and market risk. For a 63-year-old funding it from her only savings, this is severe.
- Unsuitable profile. Retired, single source of funds, likely low risk tolerance and short-to-medium liquidity needs - the opposite of a 15+ year high-risk unit-linked plan.
- Form completed by the officer. A suitability form ticked by the seller rather than the customer is not evidence of suitability; it is evidence of a control failure. It records the officer's assertions, not the customer's instructions.
- Disclosure failure. If the policy documents and free-look notice never reached her, the customer was denied the very mechanism designed to catch mis-selling.
Why the form doesn't protect the bank: Suitability is judged on the substance of the advice and the customer's actual circumstances, not on a signed box. A form the adviser completed, containing answers inconsistent with the customer's known profile (retired, sole savings), is unreliable on its face. Regulators and courts treat such forms as evidence to be tested, not a shield; the bank remains liable for the advice given and for the adequacy of its controls.
2. Mrs. Bano is outside the free-look period. What remedies and redress routes should the bank consider, and what internal actions follow?
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Remedies/redress:
- Treat the complaint on its merits, not on the technicality. The free-look period is a minimum protection; it does not extinguish liability for misrepresentation. If the sale was mis-described and the disclosure never reached her, the bank should consider cancellation and refund of premiums (net of any genuine risk cover consumed) as a goodwill/redress remedy.
- Escalate to the bank's complaints/redress function and inform her of her right to take the matter to the relevant regulator/ombudsman (e.g., the banking/insurance ombudsman or SECP/SBP complaint channels as applicable) if unresolved.
- Document the outcome and any compensation.
Internal actions:
- Root-cause review of how a sole-savings retiree was placed in a high-risk unit-linked plan and how the suitability form was completed by staff.
- Control fix: suitability forms must be completed and signed by the customer, with independent verification/call-back for vulnerable or elderly customers and for large single premiums.
- Disclosure fix: confirm delivery of policy documents and free-look notice (recorded delivery or verified contact), with evidence retained.
- Conduct action against the officer where the misdescription is established; review incentive and training arrangements.
- Trend monitoring for similar complaints and remediation of other affected customers if a pattern emerges.