ADJUDICATION BY THE OMBUDSMAN
This is a referral by Bank F in relation to the recommendation made by the Case Manager where I am required to review and adjudicate the dispute.
1. On 26/08/2014, Puan K went to Bank F to open a fixed deposit account. Mr. M, a bank officer, referred the complainant to the bank’s assistant sales manager, Ms G.
2. The assistant sales manager made representations to Puan K to invest in BP Income Plus 2 Plan. Puan K was asked to pay one-time payment of RM20,000.00 and was told that she will receive interest of RM500.00 every six (6) months for five (5) years and the plan is not based on market value.
3. The assistant sales manager also represented to Puan K that the plan was for a five-year term with insurance coverage. She was also told that upon completion of the five (5) years, either Insurer A or the bank will return the principal amount of RM20,000.00. The sales process was conducted in Tamil and with the presence of Mr. M.
4. Puan K agreed to take up the investment scheme as proposed by the assistant sales manager and invested RM20,000.00 and the policy came into force on 17/09/2014.
5. After receiving the policy document, Puan K contacted the assistant sales manager to seek explanation on the policy maturity date printed on the policy as 17/09/2022, which is for an eight-year term instead of five-year term as presented during the sales process.
6. According to Puan K, she was told by the sales agent that it was nothing to worry about and she could get her full money back at the end of the five-year term i.e., in September 2019.
7. However, according to the assistant sales manager, she explained to Puan K that the monies can be withdrawn after five (5) years subject to the surrender value which is subject to the market rate.
8. On 23/10/2019, upon completion of the five-year term, Puan K contacted the assistant sales manager to withdraw her investment of RM20,000.00. However, the assistant sales manager informed her that the principal returns will be lesser as the investment plan is for five (5) years plus an additional two (2) years.
9. Thus, Puan K had requested for withdrawal of her investment amount of RM20,000.00 based on the representation by the assistant sales manager.
10. The bank rejected her claim on the grounds that: -
a) The insurance coverage has been provided since the policy commencement date i.e., on 26/09/2014; and
b) Semi-annual coupon pay-out totalling RM5,000.00 has been duly paid to the complainant from year 2015 to 2019.
Issues and key findings
The issues in this case are: -
i) whether there was misrepresentation by the assistant sales manager with respect to the features of the policy which eventually led to mis-selling of the policy to Puan K.
ii) whether Puan K is entitled to withdraw the investment amount of RM20,000.00 after completion of five-year policy term.
1. On the issue whether there was misrepresentation of the product features during the sales process, the burden is on Puan K to prove the misrepresentation and that the said misrepresentation influenced her in making the decision to purchase the policy.
2. In dealing with such cases, it is important to know what transpired during the sale process and the early stage of the policy commencement, which lead to Puan K’s complaint.
3. On 25/10/2019, pursuant to the Puan K’s complaint, the insurer (Insurer A) had a meeting with Puan K, the bank officer (Mr M) and the assistant sales manager (Ms. G).
4. The minutes of the meeting confirms that: -
i) the bank officer was present during the presentation of the product to Puan K; and
ii) the bank officer confirmed that the assistant sales manager informed Puan K that the plan need only be kept for five years.
5. The assistant sales manager disagreed with the statement made by the bank officer and contended that she had presented the plan as an eight-year plan with five-year fixed pay out.
6. Later at the mediation session on 11 March 2020 the bank’s sales staff, Mr. M further confirmed that: -
i) on 26/08/2014 Puan K’s intention when she went to the bank was to put her monies in fixed deposit.
ii) she had informed the assistant sales manager she was not interested to buy any unit trusts or plans that are based on market rate.
7. It was also noted that after receiving the policy document, Puan K contacted the assistant sales manager to seek explanation on the policy maturity date printed on the policy as 17/09/2022, an eight-year term instead of five-year term.
8. This is confirmed by a telephone conversation between Puan K and the assistant sales manager on 23/10/2019. In the said telephone conversation, the assistant sales manager stated that after receiving the policy, Puan K had intended to cancel the policy but did not proceed after her explanation.
9. At this point in time, it is an irresistible inference that the assistant sales manager has the knowledge of the fact that Puan K took up the policy because she believed that the policy is a five-year term and she wanted to withdraw the investment amount of RM20,000.00 upon completion of the said five years.
10. We wish to highlight that it is the assistant sales manager’s duty to disclose to Puan K of her statutory rights under Section 128 of the Financial Services Act 2013 which allows her to return the policy within 15 days after such delivery. Puan K could have received full refund of her money (RM20,000.00) at that point in time.
11. This is as specified in the BNM Guidelines on Product Transparency and Disclosure (Paragraph 9.3.1 c) on the duty of disclosure on the part of the FSP which continues during the term of the contract. Thus, upon a specific request from the assured/policyholder, the FSP should provide relevant and reasonable information as and when requested by the customer during the term of the contract.
12. As regards to the issue as to what was presented to Puan K during the sales process, the confirmation from the sales staff who was present during the presentation of the plan to Puan K and the conduct of the assistant sales manager further corroborated the fact that the plan was presented as a five-year plan and Puan K may withdraw the investment amount of RM20,000.00 at the end of the five-year term.
13. It is important to emphasize that the assistant sales manager would be under a duty to disclose to Puan K all facts known to her that are material, in particularly the product features. Failure to do so, constitutes a breach of its duty of utmost good faith.
14. We wish to highlight that in the case of Tan Jing Jeong v Allianz Life Insurance Malaysia Berhad & Anor  4 CLJ 710, it was held that the insurer had a positive duty to inform the insured that 55% of the insured’s investment would be used to pay administrative charges. The court further held that the features of the policy was the most important factor that persuaded the plaintiff into agreeing to purchase the policy from both the agents and that the plaintiff was convinced by the agent in that case who advised him as such. The insurer had failed to disclose a material fact thereby breaching its duty to act in utmost good faith.
15. The final issue to be determined is the consequences of the representation made by the assistance sale manager to Puan K. Reference is made to section 150 and 151 of the Insurance Act 1996 which provides that the statement made or act done by an agent for the purpose of the formation or variation of the contract of insurance, shall be deemed to be made by the insurer itself, notwithstanding the fact that the statement was misleading, false or deceptive. If the agent is authorised to solicits or negotiate a contract of insurance on behalf of the insurance company, it is sufficient to bind the insurance company. The similar sections are available under Paragraph 12, Schedule 9 of section 129 of the Financial Services Act 2013.
16. By virtue of Paragraph 12, Schedule 9 of section 129 of the FSA 2013, the FSP is bound by the statement made and act done by the assistant sales manager.
In light of the above findings, we found that misrepresentation by the assistant sales manager of the bank was undoubtedly proven. It is clear that there was no meeting of the mind when the contract was entered.
From the action taken by Puan K in verifying the plan features after receiving the policy document and intended to withdraw her money upon completion of the five-year term, proved that she would not have taken the policy if she knew that the policy benefits were not as what was presented to her.
The assistant sales manager plays an important role in the interface between Puan K (as a consumer) and Bank F; thus, it is crucial that she carry out her duties with due care, skill, and diligence.
We found that the assistant sales manager did not abide by the duty of full disclosure and did not demonstrate utmost good faith in inducing Puan K to enter into the contract. Thus, misrepresentation by the assistant sales manager of the bank was undoubtedly proven and the bank is liable for the acts of the sales officer.
Bank F bound by the statement made and act done by the assistant sales manager. Thus, on the principle of fair and reasonable, this decision is in favour of Puan K and Bank F should honour the representation made by their assistant sales manager as the features presented to Puan K, i.e., withdrawal of RM20,000.00 after completion of five-year term.
In addition to the above, Puan K is to keep the semi-annual coupon pay-out totalling RM5,000.00 which has been duly paid to her from year 2015 to 2019. Taking into account the surrender value of the policy as at 20/07/2020 is RM17,191.20, Bank F is to pay RM2,808.80 (RM20,000.00 - RM17,191.20) to Puan K.
The above decision is final and there is no appeal. If Puan K rejects this decision, she is free to pursue her rights against the Bank F through other means such as legal proceedings.