Driven by illegal incentives, bank executives compel their staff to sell insurance anyhow, with customers paying the price in the form of unwanted policies.

Image Credits: Nithin Sethi

Insurance companies lured employees of banks with expensive gifts, foreign jaunts and cash bribes to aggressively push unwanted insurance products on their customers, reveals an investigation by The Reporters’ Collective.

Call recordings, video clips and internal communication of insurance agents with bank employees expose kickbacks and unethical incentives for driving the insurance sales being freely discussed, and senior bank officials egging on employees to achieve the targets. It clearly violated banks’ code of ethics and guidelines by the insurance regulator that categorically forbid such rewards because it can lead to forced selling of insurance policies, frauds and jeopardise customers’ money.

In banking business, lenders prefer borrowers to be insured. If the borrower fails to pay back or dies, the insurance kicks in and takes care of the loan. Banks have tie-ups with insurance companies, sometimes in-house sister firms, to provide the insurance. On paper, a customer gets to choose whether or not to buy an insurance, and from whom, but practically banks give no choice.

To achieve the sales target of insurance companies and take home the commission and the fat rewards, banks in the country have been tricking their customers into buying policies of insurance firms. Sometimes, they illegally tapped into the loan accounts to add insurance premium, resulting in bounced EMIs and damaged credit score for customers. Such customers find it difficult to get a loan in the future, besides having to pay more for loans.

The investigation details the pervasive kickback scheme run by employees of certain insurance companies to influence bank staff to prey on unwitting customers. It also brings to light how these illegal financial incentives peddled by insurers lure bank employees to bend or break internal rules and code of ethics.

Twitter is littered with complaints of people accusing banks of forcing them to buy insurance as a mandatory add-on to a loan (here, here, here), locker facility (here, here), or to open an account. Banks have been accused of denying service to customers who don’t budge (here, here, here). It is akin to the widespread bane of drug companies influencing doctors with largesse in return for prescribing their drugs to patients.

From unlettered villagers to the urban middle class, everyone is at the risk of losing large chunks of money because of unwanted insurance. Often, gullible customers seeking to invest in a fixed deposit are duped into signing up for insurance. Many of these policies cost lakhs of rupees.

An official from a rural bank in Uttar Pradesh, which is backed by a major state-run bank, provided The Collective with call recordings revealing instructions from insurance company officials to pay bribes. In these recordings, the insurance company’s officers can be heard urging their agents to pool in money to pay bribes to an executive in the rural bank, with which the insurance company has a partnership.

“You won’t get business of even a rupee if you go it alone. Till the time this regional manager [of a bank] is here, consider you have won a lottery,” told an insurance officer to his agents in the conference call. “This regional manager has a demand. When he was first posted here, we had decided that we would arrange Rs 10,000–12,000 for him every month.”

In the call, the insurance company officer demanded to know from his agents whether they had any problem sparing Rs 2,000–2,500 each to grease the palm of the bank executive. The officer expressed disdain for the agents who spend on their family’s vacations and children’s birthday parties but are reluctant to pay someone who drives their business.

“We don’t want such people,” he said sternly and asked one agent to collect everyone’s “contribution”, put it in an envelope and hand it over to him before his next meeting with the regional manager.

The other clip has an agitated agent asking his senior why he should part with his hard-earned money.

The Collective could not speak with the insurance company employees who were a part of these calls. One of the employees involved in the calls refused to speak to us, hence the names of their company and the bank concerned are withheld. However, we spoke with a former employee of this insurance company whose name came up in both the call recordings. On the condition of anonymity, he acknowledged the practice of giving commission to bank executives. He said he himself has gifted iPhones to some bank staff on the company’s behalf.

Expensive gifts

Bank employees from across the country—from Ladakh in the north to Andhra Pradesh in the south, Tripura in the east to Gujarat in the west—shared evidence with us that indicates that staff in their banks have been motivated to force-sell insurance products with the lure of trips to exotic locales, gifts and kickbacks.

The evidence pertains to seven banks and includes: two whistleblower complaints alleging mass corruption; three customer complaints of force-selling of insurance; three call recordings; photos and videos of six parties thrown by insurance companies; and screenshots of conversations in 13 WhatsApp groups involving bank officials and insurance company employees. Bank employees say targets set by senior managers pressured subordinate staff to cheat or force customers into buying costly insurance policies.

Bank of Baroda officers interviewed by The Collective said insurance agents gift iPhones to their seniors. Employees from five regions of the bank shared screenshots of their respective region’s de facto banking WhatsApp groups wherein officers of IndiaFirst Life Insurance advertise rewards such as iPhones, MacBooks, tablets, and smartwatches to bank employees for meeting sales targets.

IndiaFirst is the insurance partner of Bank of Baroda, Union Bank of India, and Baroda Uttar Pradesh Gramin Bank. Bank of Baroda owns 65% of IndiaFirst’s shares.

According to Bank of Baroda Officer Employees’ (Conduct) Regulations, bank employees are prohibited from accepting gifts: The regulations state: “Save as otherwise provided in these regulations, no officer employee shall accept or permit any member of his family or any person acting on his behalf to accept any gift. It further says: “As a normal practice an officer employee shall not accept any gift from any person or institution having official dealings with the officer employee.”

A glaring dissonance arises when measuring the value of these gifts against what the bank stipulates as acceptable. The regulations clearly says, “The officer employee shall not accept any gifts without the sanction of the competent authority if the value of the gifts exceeds Rs. 75/-.” While the latest iPhone’s entry-level model commands a hefty Rs 75,000, the most economical MacBook is priced at Rs 80,000.

A Bank of Baroda employee shared footage of a video conference from September last year wherein a senior officer can be heard telling branch managers to gear up for the “important task” of an “IndiaFirst” campaign.

“If some rural branch does business of Rs 50 lakh, then it will get an iPad. Listen closely. This [offer] is for one time only. Won’t be there always. One time only. Rs 1 crore business, then iPhone is there. If Rs 1.5 crore, then MacBook is there. Keep an eye on this.”

India’s insurance market has been growing rapidly and is set to become one of the biggest in the world. Currently, 56 companies operate in India’s insurance market. Keen to ramp up their profits in this lucrative industry, insurance companies push their sales staff, which seeks shortcuts for quick results. A favourable bank manager can help the agent glide comfortably to his sales target.

A branch manager of a large government bank in Chhattisgarh, on condition of anonymity, shared with us a WhatsApp screenshot wherein an insurance company agent offered him a “commission”, which is essentially a kickback, in return for delivering him business.

The investigation found that the lure of the lucre works like a charm across banks. Employees of India’s third-largest government lender Punjab National Bank (PNB) were also offered iPhones and other rewards by the bank’s insurance partner, PNB MetLife. And in the country’s largest government bank SBI, a manager exhorted his staff to bag all the silver coins offered by SBI Life as a reward for selling insurance.

Such offers of kickbacks and rewards are made in banks’ de facto official WhatsApp groups, of which banks’ senior managers are a part. While banks’ rules say no organisational work should be conducted over WhatsApp, the messaging platform remains the preferred medium of bosses to communicate with their staff, despite employee unions’ persistent demand that official communication take place only on official channels and not on WhatsApp. Bank employees said that agents and marketing managers of insurance companies are a part of not only banks’ WhatsApp groups but even of internal review meetings of banks.

The Reporters’ Collective has confirmed the employment credentials of the insurance officials who made these offers on behalf of insurance companies but couldn’t prove that they were acting as part of a systematic corporate policy. Communication by employees or agents over informal channels such as WhatsApp allows companies to distance themselves from the actions of the implicated employee when allegations of wrongdoing arise.

Insurance companies in their responses said that they didn’t promote such schemes to drive sales and that they would take action against any employee who was found doing so.

In the past 18 months, Bank of Baroda employee unions sent six letters to the bank’s management to draw its attention to this gift culture and/or the unethical selling of IndiaFirst policies. These unions are based in Uttar Pradesh, Rajasthan, Gujarat, Maharashtra, Andhra Pradesh, and Kerala.

The letter from the union in Kerala says a regional manager put so much pressure on branch heads to meet insurance sales targets that some had to buy policies for themselves to meet the numbers and get bosses off their backs.

The Collective has seen two Bank of Baroda employees’ account statements that show debits of Rs 50,000 each for an IndiaFirst plan. Bank employees told The Collective that their seniors harass and abuse them, so much so that the staff feels compelled to resort to unethical shortcuts to meet their targets.

But sometimes they employ a hack to get the money back. The employees pay the amount from their pocket for insurance to increase the number of policies sold. But they do not provide the requisite data to generate a policy. In absence of this data, their insurance ‘application’ is rejected and the amount is refunded.

In an email, The Collective asked IndiaFirst about Bank of Baroda employee unions’ letters that accuse the company of offering expensive gifts to bank employees. IndiaFirst’s response states: “The allegations made in the same about our business practices are malicious and unverified. They are being made to defame the reputation of IndiaFirst Life and Bank of Baroda. There is no merit or basis in these allegations, and we reserve the right to act to defend our reputation and image.”

IndiaFirst said it does not offer any incentives in the form of gifts or trips. It added: “We are not privy to any such instance. If we find any of our employees indulging in such practices, we will take appropriate disciplinary action.”

A spokesperson of Bank of Baroda told The Collective that “As a responsible corporate agent, the bank adheres to the applicable regulations and follows industry best practices with respect to undertaking insurance business.”

The Collective reviewed dozens of letters sent by employees’ unions of multiple banks and interviewed employees across banks, which revealed an ecosystem of underhand stratagems. Rules and regulations remain on paper whereas senior managers run the show with utter disregard for dos and don’ts and bully employees into obeying their unlawful diktats.

In letters to management, employees’ unions allege that senior managers compel branch staff to meet unrealistic business targets by barking threats such as: “commit fraud if the target is not being achieved”, “either cut your own throat or some customer’s”, “if any staff opposes anything, open their file”, “I’ll throw you into a remote village”.

In their letters, the unions claim they have sent evidence of foul play to the management. They have demanded an inquiry and delinking of the insurance business from banks.

The Union government allowed the sale of insurance products through banks in the year 2000, aiming to increase the penetration of insurance cover by capitalising on banks’ customer base and trust factor.

Luxury trips, parties

Besides gifts and kickbacks, insurance companies bait bank employees with trips to holiday spots and stay in luxury hotels. These companies take bank employees to tourist places not only in India but also abroad — Dubai, Switzerland, Singapore, Thailand. Some insurance companies also arrange meet-and-greet with movie stars and sportspersons on these trips.

The companies call these ‘training programmes’. We got a look at the plans for one. The ‘training’ component in it was a fig-leaf. One such ‘Leadership Training Programme’ that was planned for Bank of Baroda executives in Kochi, Kerala, last February was charted by an event management firm.

The 82-page event plan says 200 employees of the bank were to be flown in and put up in a five-star hotel. The three-day, two-night schedule was packed with recreational activities such as cocktail evening, DJ night, backwater cruise, boat race, dance shows, band performance, selfie points and drone photo shoots. Only one slot in the schedule was marked for training, but that too was combined with an award function, entertainment programmes and dinner.

The event plan’s  list of participants included Bank of Baroda’s Executive Director at the time, Joydeep Dutta Roy, who was allotted a presidential suite and a luxury car. In the event plan, the head of the bank’s Wealth Management Services, Virendra Somwanshi, and other executives were also allotted luxury accommodations. The Collective could not verify whether or not this programme did take place as intended.

Likewise, The Collective has photos of a trip hosted by the insurance company SBI Life for SBI bank employees in Tamil Nadu last October. This programme was called SBI Achievers Sangamam (meaning: achievers’ meet). The employees were hosted in a four-star resort and rubbed shoulders with an Indian cricket legend . We also have photos of two award functions-cum-parties hosted for employees of Aryavart Bank, a regional rural bank in Uttar Pradesh sponsored by Bank of India, last year. One party was held in a five-star hotel in Lucknow in December 2022.

Under the Right to Information (RTI) Act, The Collective asked these banks who footed the bill for these programmes. Aryavart Bank said it did not know anything about these award functions and thus had no information. SBI and Bank of Baroda said their insurance partners—SBI Life, and Niva Bupa and Star Health respectively—funded the events.

Since these banks’ ethics policy explicitly states that bank employees must not accept any hospitality or entertainment, and that any gift received must be declared to the bank, The Collective asked the SBI under right to information for the details of gifts and hospitality its employees have received from SBI Life. The bank replied that sharing this would compromise its competitive position.

The State Bank of India’s Code of Ethics applicable to all employees states: “We shall not accept, offer or give gifts, entertainment or other benefits of value save as specified in our Code of Ethics. We shall squarely follow our Code and declare the gifts received”.

Such trips and parties, even though forbidden, are all too common. Bank employees shared with The Collective screenshots of WhatsApp groups wherein insurance companies promise these trips for meeting sales targets.

‍Chartered accountant and director of Indiaforensic, a forensic accounting firm, Mayur Joshi told The Collective that it is unethical and illegal on the part of bank employees to receive gifts or trips from their organisation’s business partners. Joshi also works as an auditor with private banks.

The Collective wrote to the SBI, and Bank of Baroda’s executives Joydeep Dutta Roy and Virendra Somwanshi who took part in the aforesaid event and questioned the ethical propriety of accepting such lavish hospitality. The Collective also sent mails to Aryavart Bank, Union Bank and their insurance partners that offer these trips and gifts. Their responses are awaited.

The flipside of lucrative inducements is that senior bank managers put pressure on subordinates to meet targets. It has laid the ground for illegal workarounds. Employees of multiple banks told The Collective that their organisations resorted to an illegal shortcut: they deduct money from customers’ loan accounts for insurance without consent to meet targets.

For example, a home loan customer agrees to a monthly payment of Rs 35,000, and switches on the auto debit from her bank account. If the bank debits an insurance amount of Rs 7,000 along with loan amount without informing the customer, there are two chances: either the customer wouldn’t notice and the fraud would slip through or the EMI could bounce due to insufficient funds.

A Chief Manager in the SBI in Tripura flagged this malpractice last year. “It has come to our notice that most of our branches are debiting loan accounts for doing insurance,” the executive said in the official WhatsApp group message. An SBI employee shared with us the screenshots of the group in which the message was sent.

This practice has resulted in loan repayment failure in many accounts. Another screenshot has this executive saying, “Despite our repeated follow-ups, branches are debiting loan accounts for insurance.” This message comes with a list of the accounts of one branch that defaulted on their loan repayments because of debit for insurance. The Collective has seen this list.

The SBI employee who shared these screenshots said that since this malpractice results in some customers defaulting on their loan repayments, their CIBIL score (creditworthiness) also takes a hit. He said many such affected customers of his branch were farmers and army personnel.

Many bank employees allege that when accounts are illegally debited with insurance premium, no policies are issued and customers remain unaware about these debits till their loan repayment defaults. Essentially, account holders end up paying insurance companies without their consent for nothing in return.

Two letters sent by a regional manager of Baroda Uttar Pradesh Gramin Bank to branch managers make evident that the practice of illegally saddling customers with insurance by surreptitiously debiting loan accounts with insurance premium is rampant.

Both the letters pertain to a sales campaign of IndiaFirst Life Insurance and end with a cautionary note: “No loan account should be debited for insurance premium.”

A day after The Collective emailed questions to Bank of Baroda, its head office issued two circulars internally. One circular, sent to all branches and bearing the subject line “Mis-selling of insurance products”, calls for strict compliance with regulations and asserts that no force-selling should take place. The other circular, sent to all zonal heads, acknowledges “issues being raised on mis-selling” and calls for putting on hold all business campaigns and rewards programmes till March 31.

Both the circulars are signed by the head of the bank’s Wealth Management Services, Virendra Somwanshi. His name appears in the list of attendees of an event hosted by the bank’s two insurance partners, mentioned earlier.

A spokesperson of Bank of Baroda told us: “During the onboarding of a customer by our life insurance partner, customer consent is taken. A physical copy of the policy is thereafter dispatched to the registered address of the customer.

“The Bank has put in place a comprehensive code of conduct and SOP and is continuously strengthening measures to ensure that our field staff understand the importance of strictly adhering to these guidelines while selling insurance products to customers.”

The problem of forced or unethical selling of insurance products is so prevalent and its impact so severe that now there are organisations that help victims navigate these issues. Nitin Balchandani, the founder of one such organisation Insurance Angels and former employee of ICICI Prudential Life Insurance, said customers of all public- and private-sector banks have reported fraudulent selling of insurance to him.

“Everyone in the [bank] hierarchy is aware of such practices and they turn a blind eye because in the end, banks earn by way of receiving commission from insurance companies and employees earn in the form of indirect benefits such as early promotions and prizes or recognition by winning insurance contests set up by insurance companies,” he said.

Shilpa Arora, a cofounder of Insurance Samadhan (meaning: insurance solutions), another company that helps victims of insurance frauds, said homemakers and the elderly are among the worst-hit by this fraud. She said people from these segments are low on financial literacy and thus the most vulnerable.

“We have seen elderly people abandoned by their family because they were mis-sold [insurance] and now the family is angry with them. They have lost all their money. Elderly people come crying to us,” she said.

Government knows

Government authorities aren’t in the dark about rewards, kickbacks, mis-selling and forced-selling in insurance sales but reform measures are very superficial.

In 2019, government-owned Punjab & Sind Bank executives were found guilty of accepting bribes from the bank’s insurance partner Aviva Insurance. According to a NewsClick article, an inquiry revealed that commissions ranging from Rs 2 lakh to Rs 22 lakh were given to bank executives, who returned the favour by forcing the bank’s customers to buy insurance.

An RBI report in 2020 conceded that “vulnerable customers were still suffering because of the sale of unintended products”.

In November 2022, the Union Finance Ministry’s Department of Financial Services (DFS) wrote to all banks, stating that it had received complaints of insurance mis-selling and that banks must take steps to avoid unethical practices.

The Insurance Regulatory and Development Authority of India (IRDAI) has imposed penalties on insurance companies on several occasions (here, here, here) for offering incentives to bank employees and organising foreign trips under the guise of training.

But the kickback culture is still prevalent so is unethical selling of insurance.

Insurance Samadhan co-founder Arora explained how unscrupulous insurance agents and/or bank employees circumvent a fraud-prevention step introduced by IRDAI. She said IRDAI has made it mandatory for insurance companies to call customers, explain the features of the policy the customers have signed up for, obtain customers’ confirmation and then only activate the policy. However, she said insurance agents and bank employees groom the customers to treat this call as a mere formality and answer every question with a yes. She said that sometimes, customers do not even get this call because the agent/employee filling their form enters their own phone number in the enrollment form.

Balchandani of Insurance Angels said he has copies of such forms bearing bogus mobile numbers. He said there have been instances when he challenged insurance companies over fraudulent sales, only for the company to claim that the policy was started after obtaining the customer’s consent over the phone. He said that upon receiving the call recordings, he learnt that the ‘customer’ who completed the telephonic verification was actually an impostor.

This article is published as a part of the Smitu Kothari Fellowship 2023 of the Centre for Financial Accountability, Delhi.

This article was originally published in The Reporters’ Collective and can be read here.

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