Operational Issues - Misselling
Adjudication by Ombudsman
This is a referral by the Financial Service Provider in relation to the recommendation made by the Case Manager which I am required to review and adjudicate the dispute.
- The complainant, a 64-year-old lady, went to Bank A in November 2015 to open a fixed deposit account. She was attended by the bank’s sales staff.
- The Complainant contended that during the sales: -
- she had informed the sales staff and subsequently his superior that she was not interested in any insurance plan in view of her age.
- she prefers to place her money in a fixed deposit.
- she was persuaded and given assurance that the product will give her better returns compared to fixed deposits.
- her investment in the product is safe; and
- the explanation on the risks inherent in the product was not given.
- The Complainant further contended that she was misled to sign up for an insurance plan. This is a single premium investment-linked insurance plan that provides insurance coverage upon death or Total Permanent Disability (TPD) with investment returns. The plan covers up to age 100 however, the TPD coverage under the plan is only up to age 65. The product is underwritten by Insurer X.
- In 2016, the Complainant went to the bank and met the sales staff and was informed that the returns on her investment was around RM9,000.
- On 14 December 2018, the Complainant was informed that her investment amount of RM200,000. had reduced to RM184,000. She decided to cancel the plan and came back on 17 December 2018 to submit her documents to the sales staff. At this point of time, she was informed that the value of her investment funds had reduced to RM182,600. However, upon cancellation (surrender) of the policy, she received RM179,167.99 only. Based on her initial investment of RM200,000, she had suffered a loss of RM20,832.01
- The complainant had made a complaint on the lack of transparency and disclosure as regards to the product features in particularly on the risk of the product by the sales staff during the sales and requested the bank to compensate her with RM42,515.99, which she has computed as follows:
Initial investment amount RM200,000.00
Less: Amount received upon surrender RM179,167.99
Loss incurred RM 20,832. 01
Add: Interest earned had she placed her money on FD RM 25,200.00
Amount claimed RM 46,032.01
Less: Amount received from the bank’s staff RM1,284.01
: Amount received from AIA RM 2,232.01
- The bank rejected the claim on the grounds that there was no mis-selling or misrepresentation of the product and the sale was conducted in accordance with its sales process.
- The bank contended that: -
- the sale was done in accordance with the bank’s sales guidelines and procedures.
- the product features were explained to the Complainant and the sales presentation was conducted in Mandarin.
- the Complainant was given a copy of the Product Disclosure Sheet (PDS) which sets out the product features which includes the sum assured, policy coverage, free look period, exclusions, and cancellation of the plan.
- the Complainant had agreed to the product recommendation and satisfied with the plan’s features, benefits, and past performance.
- the Complainant had signed the PDS and nominated her daughter as the nominee.
- upon receiving the contract, the bank’s manager of regional sales and support had explained the product features to the Complainant based on her request for another explanation on the product features by an independent party.
- the Complainant is fully aware of the product risk and has been monitoring and obtaining the fund performance through the bank’s staff.
- In 2017, the Complainant had made her own decision to hold on to the investment when the plan had generated some investment return.
- In 2018, when the market faced a downturn, the Complainant had decided to surrender the policy despite being informed that she will make a loss if the surrender the policy.
Investigation and Findings
- The Complainant‘s initial intention is to put her money in the fixed deposit and she had made it clear to the bank staff that she is not interested to buy any insurance plan due to her age factor.
- The Complainant does not understand English language and during the sales process (pre-contractual stage and at the point of entering the contract), the explanation given by the sales staff was in Mandarin language.
- The Complainant had signed all documents in Chinese characters and all subsequent correspondences between the Complainant and the sales agent were in Mandarin.
- The policy provides death benefit up to age 100 years and Total and Permanent Disability Benefit (TPD). However, the TPD benefit coverage has ended a year after the Complainant bought the insurance plan when she reached the age of 65 years old.
- The Product Document Sheet (PDS) and Customer Fact Find provided to the Complainant was in English language and there was no independent post-sale call back review to assess the Complainant’s understanding on the product features and the product risk(s), as the policy is a term insurance.
- The Complainant, upon receiving the policy contract had informed the bank officer that she did not want the plan and would like to cancel it. The bank officer had his manager to re-explain the product and convince the Complainant to keep the plan.
- This is another importance observation which reflects the unsuitability of the product to the Complainant’s needs.
Adjudication and Reasons
In the light of the above facts and findings, we conclude that: -
- On the issue of whether there was a misrepresentation, the burden is on the complainant. The complainant must prove that the said misrepresentation influenced her into making the decision to purchase the policy.
- In the present case, it is important to note that the complainant initially came to the bank to open a fixed deposit and not for any insurance plan. The Complainant was persuaded and given assurance that the product will give her better returns compared to fixed deposits.
- While the explanation of the product by the sales agent during the sales process was in Mandarin, all documents and forms including the PDS and CFF were in English. Hence, the Complainant’s decision was heavily dependent on the information given by the sales agent.
- Under the BNM/RH/GL 000-3 Guidelines on Product Transparency and Disclosure (page 16/20), it provides that the FSP should ensure that all forms and pamphlets are available in Bahasa Malaysia or other languages.
- The Complainant should be viewed as a vulnerable consumer, in view of her age and the language limitation. This create situations where she is significantly less able than a typical consumer to protect her interest leading to poor outcome.
- The complainant had later attempted to cancel the policy during the 15 days free look period upon receiving her policy document. However, she did not proceed with the cancellation after a re-explanation by the bank’s manager. The Complainant could have managed to get the refund of her investment should the bank officer acted on her request during this period.
- Based on all of the above, on a balance of probabilities, it is our view that there was an element of inducement by the sales agent to influence the complainant into making the decision to purchase the policy.
- It is important to note that it is the FSP’s duty to provide clear and adequate explanation of all material risks of investing in investment link product, especially potential loss of the principal sum invested so that the consumer could make an informed investment decision. It is to ensure that financial products and services sold are appropriate to the needs and resources of the consumer.
In the circumstances and in applying the principle of fair and reasonableness, the sum of RM17,315.99 is awarded in favour of the Complainant The sum comprises the loss incurred at RM20,832.01 and deduction of amount received from the bank staff and Insurer X totalling RM3,516.02
The above decision is final and there is no appeal. If the Complainant rejects this decision, she is free to pursue her rights against the bank through other means such as legal proceedings.