Typical Dispute Features of Bancassurance Products
Bancassurance products including the investment-linked assurance products have been one of the major product types of disputes in the FDRC over the past years. Disputes are mostly the result of the differences between consumers’ perceptions of the products and the actual product features.
The typical disputes are:
- Guaranteed and non-guaranteed returns: The projected total return of most insurance products comprise of guaranteed and non-guaranteed parts. Quite often, the FDRC will receive complaints about the shortfall-return of bancassurance products. Consumers would allege that they were not informed of the non-guaranteed nature of the return during the selling process.
- The withdrawals of interest or dividend: Many financial products such as fixed-term deposits allow holders to withdraw the interest freely. However, withdrawal of interest or dividend from an insurance plan before maturity would affect the final return because projection of the final return of an insurance policy is generally based on a compound interest formula which assumes no withdrawals of interest/dividend would be made during the tenure. Disputes often arise out of the variance between the actual final return and projected return due to the withdrawal of interest/dividend before maturity.
- Product features: The FDRC occasionally receives complaints where allegedly the complainants had not been told of the nature of the insurance/financial products during the selling process. The typical allegation of the consumers is about being misled to subscribe to some "investment products" or “saving plans with higher interest” which were actually insurance products by nature. Disputes may arise out of the grievance for being misled and/or the financial loss due to the features of insurance products.
- Tenure or term to maturity: Normally, insurance products would have a fixed term to maturity. It is a standard term that the financial institution will charge the customer a significant surrender fee for early redemption. Disputes between consumers and financial institutions arise as a result of the loss due to early redemption.
Below are two common case studies.
Investment-Linked Assurance Plan
Mr. Tong was a loyal customer of Bank A. Years ago, he subscribed to two insurance plans with different features from the bank. However, he did not realize the different features of the 2 plans until one year after when he found out that one of the insurance plans had an 8-year tenure instead of an expected 3-year term. He felt that he had been cheated and lodged a complaint with the bank for giving misleading advice during the selling process.
In addition, he also alleged that the bank staff was negligent and caused intentional delays which prevented him from acquiring enough information to revoke the contract in the cooling off period. The bank replied to him after its internal investigation that the working procedures of its relevant staff were properly performed in accordance with its internal guidelines and rules.
During the case management process at the FDRC, it was discovered that both parties spent much time dealing with complaints against people and procedures instead of negotiating on the remedial arrangement during the whole complaint handling process. The mediation service at the FDRC provided an excellent chance for both parties to have a dialogue from different perspectives.
During the mediation session, the mediator assisted both parties to "separate people from the problems" and focused the discussions on problem solving. The bank eventually identified and addressed the needs of Mr. Tong by offering him a flexible financial arrangement. Mr. Tong was pleased to accept the solution.
Retirement Insurance Plan
Ms. Wong, a housewife in mainland China, frequently travels to Hong Kong for shopping. One day, she opened a personal account with Bank B by depositing HK$500,000 and she also subscribed to a "financial product" for her unborn child with a view that she could withdraw money from that "financial product" freely.
One year later, Ms. Wong found that the "financial product" was in essence a retirement insurance plan with fixed investment tenure when she failed to withdraw money from it. She was surprised and thus lodged a complaint to Bank B to request for a refund. However, Bank B denied any liability because Ms. Wong did not cancel her insurance policy during the cooling off period and no refund could be arranged.
Ms. Wong responded that the policy of that "financial product" was not delivered to her address in mainland China so she could not discover the discrepancies in a timely manner.
During the mediation process, the mediator encouraged both parties to treasure their relationships, whilst assisting them to identify the critical issues in the dispute, their underlying interests, and explore all available options. Eventually, a settlement was reached. Both parties appreciated the efforts of the FDRC and the mediator.
(The case studies above are constructed based on real FDRC cases. Various information including names of claimant, financial institution and its staff, actual claim and settlement amount and the stories behind have been altered or disguised for confidentiality reasons.)