Regulator moves to clamp down on malpractices in bancassurance sales.

ISLAMABAD -- The Securities and Exchange Commission of Pakistan (SECP) has taken note of malpractices in selling of insurance policies through bancassurance agents, initiating action against all companies involved in their sales.

The SECP had received a large number of complaints regarding insurance products sold through bancassurance distribution channel.

Bancassurance combines savings with insurance to offer a unified product for both services. Bank branches have been aggressively marketing these products to their customers for a number of years now.

The SECP has found that bancassurance agents misled the policyholders by selling insurance policies in disguise of highly profitable investments without disclosing that the company will deduct frontend commission and other charges.

Many customers find that they have not been fully informed of all the charges that are applicable when they purchase the product, and the fine print in the agreement carries conditions that severely constrains the payouts that the customers have been led to believe they will be entitled to.

The bancassurance market works by bringing banks and insurance companies together to form a unified product. The details can change from one bank to another, but all insurance companies have now built partnerships with multiple banks to develop offerings such as these and mobilised their branch staff to aggressively market and sell these products.

Given the complexity of the product and the vague nature of the sales pitch, customers are easily misled into thinking they are buying into a secure and high yielding savings product that will also provide them with some sort of insurance cover. But in reality, customers learn that after deductions and...