Allegations Surface Over IndiaFirst Life Insurance Mis-selling

In a significant development, Bank of Baroda Officers Union has raised allegations of mis-selling against IndiaFirst Life Insurance (IFLI), urging a review of the Third Party Product (TPP) and calling for its delinking from employees.

The union, in a letter to the Managing Director and CEO of Bank of Baroda, asserted, “No one is voluntarily taking this policy (of IndiaFirst Life) as it is totally unattractive and non-profitable, having more negative features when compared to many insurance policies available in the market.” According to their analysis, over 75% of policies are at risk of default within the first year.

Incentive Driven Imperative
The Baroda Bima Diwas login drive, meant to boost IFLI sales, is criticised for causing a significant loss of man-days, amounting to a staggering Rs 539.74 crore. The incentive-driven approach, the union claims, has inadvertently harmed business operations.

“The incentive-hungry executives, including top bosses, are not aware of the impact on the business in the form of loss of man days, which comes to around 74964 staff x 5 days x 12 months = 44.97 lakh man days in a year. If average daily pay and allowances per employee is taken as Rs 1200, it comes to a whopping amount of Rs 539.74 crore,” the Union said.

Concerns Over IndiaFirst Life Insurance’s Profit Model
The union calls for a forensic audit of IndiaFirst Life Insurance, challenging the authenticity of the insurer’s profits. They argue that profits are not generated from sound investment practices but rather from funds lost due to non-rollover or unattractive policies. The alleged unethical profits are said to be misleading customers and, in the past, were distributed as cash incentives to executives.

“This profit is unethical and immoral, which is pocketed by misleading the customers. Previously, the subsidiary used to give huge cash incentives to executives. Though stopped now, it has taken a different shape in the form of incentives ranging from expensive electronic gadgets to foreign trips. Where is this money coming from? Again, it is from the lapsed policies due to non-rollover.” the letter said.

The letter from the union raises questions about the source of funds for lucrative incentives offered by IFLI. While cash incentives to executives have ceased, the union asserts that these funds are now redirected to provide incentives ranging from expensive electronic gadgets to foreign trips. The union calls for transparency in financial transactions and an investigation into the funding of these incentives.

Staffing Shortages Across Branches
Apart from mis-selling allegations, the union sheds light on the critical issue of staff shortages across Bank of Baroda branches. More than 2,500 branches, constituting one-fourth of the total, operate with either a loan officer or a single clerk. The union asserts that allocating five man-days for insurance business is an undue burden on already strained bank employees.

The union drew attention to the adverse impact on work-life balance, asserting that young officers have faced such imbalances, leading to resignations and, tragically, even suicides. The union emphasises the toll that pressure for insurance sales has taken on the well-being of bank employees.

In response to these challenges, the Bank of Baroda Officers Union demands the establishment of an independent committee to investigate the mis-selling allegations and recommend corrective measures. The primary goal is to delink the insurance business from the responsibilities of bank employees, ensuring a fair and ethical working environment.

Wider Banking Sector Concerns
A Bank of Baroda Officer based in the Eastern region of India said, “Bank management is hell bent on selling the IndiaFirst Life Insurance and target based approach is a strong indicator of it. Moreover, the monthly Baroda Bima Divas is a clear deviation from core banking services.”

Beyond the specific concerns with IndiaFirst Life Insurance, the union’s letter highlights broader apprehensions within the banking sector about the mis-selling of Third Party Products. The apprehensions of the union finds similar resonance with that of the All India Bank of Officers Confederation (AIBOC) in 2017, wrote to the Indian Insurance Regulatory and Development Authority (IRDAI) in  2017, emphasising the need for regulatory action to curb the menace of cross-selling.

As the allegations against IndiaFirst Life Insurance unfold, the broader debate over the mis-selling of insurance products within the banking sector gains momentum. The union's call for regulatory intervention underscores the need for a comprehensive review of practices that impact both the financial health of banks and the well-being of their employees.