Here's a simple question. When you approach a bank for opening a savings bank account, what do you expect to get? The most obvious answer is a savings bank account, i.e. a pass book, a cheque book, a pay-in slip and an ATM card (high service standards might be stretching it a bit too far). Right?
Wrong! The first thing you will land up with is an insurance policy, and then the rest will follow. Confused?
What does an insurance policy have to do with a savings bank account you might ask; the two are completely unrelated. The author of this article was of similar view until he visited a bank.
The bank in question ranks among the premier public sector banks in the country. When a local branch in suburban Mumbai was approached for opening a savings bank account, the bank employee claimed that buying an insurance policy would be 'necessary,' since a scheme to that effect was in operation.
The insurance policy is from an insurance company, which is a joint venture between the bank and a foreign entity. On enquiring as to why it was necessary to buy a life insurance policy, the bank employee simply retorted that it was because of the scheme. This was followed by a veiled threat that failing to buy the life insurance policy would mean that the account opening process could stretch over a 3-month period.
Of course, the bank was not in a position to produce any guideline or notification from the Reserve Bank of India or any other competent authority to validate its claim that buying a life insurance policy was mandatory.
When the branch manager was approached, he grudgingly agreed that there was no obligation to buy a life insurance policy. Of course, that did not deter him from putting up a strong case for forcibly selling insurance policies.
First, he chose to run down private sector banks and pointed out how maintaining a rather high minimum balance at all times was necessary therein; in his view, the insurance policy was a better trade-off! Secondly, he also chose to eulogise the importance of insurance and how the same would actually be in the author's best interests.
Finally, while the author managed to avoid the life insurance policy, others who failed to put up a resistance weren't as lucky. A number of individuals meekly followed the bank's unfair diktat and signed up for insurance policies that they perhaps didn't need in the first place.
We would like to clarify that this instance was specific to the branch in question and not an across the board policy with the bank i.e. when we visited other branches of the same bank, we did not encounter the requirement for a buying a life insurance policy.
However, that doesn't take away the gravity of the situation or the bank's onus to ensure that fair practices are followed in all its branches. There are a couple of points that make this case pertinent.
First, arm-twisting individuals into buying life insurance policies for the sake of a savings bank account is unfair and completely unacceptable. The bank's prospective customers certainly deserve a better deal. It's a different matter if the bank chooses to offer insurance (among other) services to them. In such a situation the customer can use his discretion to make a choice.
But to make buying insurance policies a mandatory requirement and threatening customers with an inordinate delay in opening the account is just not banking!
Second, most individuals who are forced into buying a life insurance policy end up buying a policy with the least premium payment (and thereby with a lower insurance cover).
This is only to be expected; let's not forget that the compulsory life insurance policy is seen as an unwanted obligation. Incidentally, instead of explaining what the insurance policy has to offer, the bank chose to highlight the affordable annual premiums.
Buying insurance is all about assessing one's needs and then determining the appropriate insurance cover and product. By selling insurance based on premium payments, the bank was indulging in mis-selling and contributing to the most common evil plaguing the insurance sector.
So what should you do, if you find yourself in a similar situation?
For starters, don't accept such unfair treatment; stand up to it. Don't hesitate to contact a senior official from the bank/branch and present your case. If that doesn't help, approach the RBI.
The RBI has instituted The Banking Ombudsman Scheme, to provide individuals with a forum for filing complaints against banks.
For far too long, individuals have been at the receiving end of unfair practices from various entities in the financial services industry. Now it's time to stand up and be counted!
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