Decoding the Mis-Selling of Financial Products | Articles

The mis-selling of insurance non ULIP plans are on the rise, the benefit illustrations of insurance products are misleading and customers are getting more aware of the cost of free advice.

Dhirendra Kumar, CEO, ValueResearchOnline, delves deeper into the mis-selling. He laments that many customers have slowly come to a state of inherent distrust of financial products. Two decades after liberalisation of the sector began, this is a sad place to have reached.

Excerpts:

The style and scale of the resources dedicated to the sales effort, as well as the hostility they generate among the targets is now part of the game?it won?t change. Which is rather tough on the resources, who happen to be human beings who are just trying to make a living. They sound like hard-working young men and women who make a sincere effort to do their job the way they have been taught to.

Sooner or later, they would learn that there?s something underhand in what they are doing and that would start colouring their behaviour.

I?m told that some banks have a policy of rotating their relationship managers quickly because as time goes by, a greater and greater proportion of the customers start getting hostile towards their relationship manager. A new face helps temper down that hostility because some of it gets deflected on to the previous individual rather than the organisation.

As I said earlier, this sort of a thing is not inherent to insurance, but merely a by-product of the economics of financial product under some circumstances. In the days of incessant NFOs and high commissions, mutual funds were also sold like this. When, in the middle of the last decade, there was a liquidity glut in the economy, loans (even unsecured personal loans) were sold like this. Even today, real estate is sold like this in some markets.

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