Complainant claims she was wrongly advised on the annual premium payment

ADJUDICATION BY THE OMBUDSMAN 

 

This is a referral by the complainant, Madam Deborah, in relation to the recommendation made by the Case Manager which I am required to review and adjudicate the dispute.  

 

Brief Facts 

Madam Deborah went to Bank P, Taman Melati Branch on 16/1/2020 to open a fixed deposit account for the amount of RM40,000.00. She was told by the teller at the counter to meet the sales staff, Ms Sarah, who later introduced her to another type of saving plan with better returns.  

She had deposited RM20,000.00 of her money to a Fixed Deposit account and the remaining RM20,000.00 into PLife saving plan.    

In January 2021, Madam Deborah received a letter and SMS notification for the subsequent policy premium. She contacted Bank P and was informed that she may cancel the policy with surrender value of approximately RM1,000.00.  

Madam Deborah dissatisfied with the explanation provided to her and filed a dispute with the bank. She contended that:  

• Her initial intention is to put all the funds into a Fixed Deposit account. 
• She was told that the financial product was a saving plan similar to FD, that does not require repayment nor it has any relation with investment product. She was not informed of the annual premium payment of 5 years. 
• The information in the proposal form was inaccurate and falsified as her annual wages were below RM40,000.00 as opposed to the RM132,000.00 stated in the said form. 
• With her educational background up to Form 3, she does not have knowledge in insurance product and speaks fluently in Mandarin and Cantonese only, with limited informal Bahasa Melayu.  
• She relies on the information provided by Ms. Sarah and trusted that the proposed saving plan is value added to her financial needs. She cannot read the documents which was written in English and Bahasa Melayu. 

Madam Deborah further contended that she was misled into signing up for the financial product and she would not have taken the same as she could not afford to pay the annual premium of RM20,000.00 for 5 years as she was only earning less than RM40,000.00 yearly. The funds of RM40,000.00 were the only savings that she had. Thus, in view of the misleading information, Madam Deborah requested for policy cancellation with premium refund. 

The bank rejected the claim on the grounds that there was insufficient evidence to support Madam Deborah’s allegation on misrepresentation of the product features against the sales staff, based on the following: 

• Madam Deborah confirmed that she received the policy contract, which clearly stated the terms and conditions, product features, benefits, and exclusions for the plan she had purchased, as well as the 15-day cooling-off period provision. Madam Deborah should have exercised the cooling-off period by returning the contract to the insurer within 15 days of receiving it. 
• According to the insurer's records, a welcome call was placed on 19/2/2020, and during the call, Customer Care Centre (CCC) staff summarised the purchased plan, including the premium term and premium method. During the telephone conversation, no disputes were raised. Madam Deborah also received the sales illustration provided by the sales staff which provides the plan summary including premium payment required for 5 years. 
• Madam Deborah had verified her signature on the Declaration Form for the WealthSecure Smart plan dated 15/01/2020. As a result, it is her responsibility to obtain confirmation from the sales staff before signing any document, especially one with monetary value. 

The bank further contended that: -  

• During the sales presentation on 15/01/2020, Madam Deborah had received a copy of the Sales Illustration (SI) consists of page 1 and page 3. The SI is the authorised sales material used by the sales staff and the table in page 3 had illustrated the details of the plan. There was no “saving/save” words related to the SI. 
• Madam Deborah had received the policy contract through post on 20/01/2020 and was contacted by the insurance’s customer contact centre on 19/05/2020. Based on the call recording, the CCC representative had mentioned clearly to Madam Deborah that the call was about the insurance plan which she purchased at Taman Melati branch and there was no question posed by Madam Deborah to confirm whether the plan is the saving plan as per her understanding. Madam Deborah also did not request for the conversation in Chinese instead proceeded in Bahasa. 
• Despite receiving the policy contract in February 2020, Madam Deborah had lodged her complaint upon receiving the notification letter and SMS for premium payment in January 2021. 
• The First Schedule in the policy contract showed the product details and it was clearly no “saving/save” or “interest” words related. During the welcome call, Madam Deborah had referred to the policy contract and mentioned the words such as “Announcement Receipt”, “Policy” and “Policy No.”. 
• All the sales document has been signed and generated on the same day, 15/10/2020. Madam Deborah had signed the Declaration Form dated 15/10/2020 to confirm that she has agreed to purchase the plan and it was her solely decision without seeking confirmation from her family. 

 

In view of the complaint lodged, the sales staff has provided her clarification as follows: 

• She had approached Madam Deborah while she was waiting for the bank transaction, and she introduced the plan to her. 
• She proceeded to explain the product and proceed with sales presentation Madam Deborah had showed her interest.  

 

Issue and key findings 

The issues to be deliberated are:  

• whether there was misrepresentation by the bank’s sales representative with respect to the feature of the policy which eventually led to mis-selling of the policy to Madam Deborah during the sales process of the product. 
• whether the sales process and the documents are in line with the minimum requirements under the BNM Guidelines on Product Transparency and Disclosure (BNM/RH/GL 000-3).   
• whether Madam Deborah is entitled to the full refund of the premium paid. 

 

Before we dealt with the above issue in details, it is necessary to review the relevant Bank Negara Malaysia Guidelines. The FSP is required to comply with product specific disclosure requirements under the BNM/RH/GL 000-3 Guidelines on Product Transparency and Disclosure, which include clear and concise disclosure of information at an early stage in the purchasing process to assess the suitability of financial products or services. Information about products and services must be presented in a clear and understandable manner. 

The financial product in the present case is a non-participating limited premium payment endowment plan. It is a 20 years plan with a premium payment term of five years with the Guaranteed Cash Payment (GCP), payable on the survival of the Life Assured at the end of every Policy Year and the policy provides terms and conditions, the benefits are payable upon Death, Total and Permanent Disability (TPD), surrender or maturity, whichever is earlier. 

 

In such sales process, the bank’s sales process should involve: - 

• Introducing the product to the customer through materials such as product brochures for consideration by the customer. 
• Conducting risk profiling for product suitability. 
• Examine all the forms with the customer to learn more about the product's key features. 
• Going through the Product Disclosure Sheet and the Sales Illustration to summarise and reiterate key features of the product to the customer including cooling off period. 
• Providing the customers with a copy of all key documents such as Sales Illustration and Product Disclosure Sheet. 

Madam Deborah’s initial intention is to put her money in the fixed deposit when she went to the bank on 16/01/2020. Nonetheless, there is conflicting information regarding how she was first approached by the bank's sales staff. Madam Deborah claimed that she was instructed by the counter teller staff to meet with the sales staff. The sales staff, on the other hand, claimed that she approached Madam Deborah while she was waiting at the bank.   

Madam Deborah claimed that she does not understand English, and she speaks Mandarin, Cantonese, and informal Bahasa Melayu.  

The bank has provided the following documents: 

1. Customer Fact Find Form  
2. Confirmation of Advice 
3. The duly signed Confirmation and Agreement by Life Assured/Policy Owner for Proposal  
4. Sales Illustration 
5. Product Disclose Sheet  
6. The Service Guide on what services can you expect from the Bancassurance Sales Staff 
7. Acceptance to Wealth Secure Smart Guaranteed Insurance Offer 
8. The duly signed Auto Debit Application Form 

 

We reviewed the documents above and observed that all of them were in English, with the exception of the Auto Debit Application Form and the Proposal Form, which were in English and Bahasa Melayu. The product features of the policy which includes the premium payment term of 5 years were clearly stated in the Product Disclosure Sheet (PDS) and Sales Illustration (SI).   

Nevertheless, the Auto Debit Form and the Acceptance to WealthSecure Smart Guaranteed Insurance Offer (Acceptance Form) which were signed by Madam Deborah did not indicate the frequency of the premium payment.   

We are of the view that the pertinent information on the frequency of the premium, premium amount, and total premium amount payable for the entire policy term should be clearly stated and prominently displayed in the Acceptance Form as well as the Auto Debit Form. During the signing of the forms, the sales staff must reiterate and highlight such information to Madam Deborah. 

We have reviewed the call recording of the welcome call made by AmMetLife on 19/05/2020 to Madam Deborah and note that: 

 

 

 

 

In this case, Madam Deborah had raised the issue of payment three times, and the fact that she was seeking confirmation indicated a lack of clarity on her understanding of the frequency of premium payment. This is evidenced by the fact that Madam Deborah filed the complaint as soon as she received the notification letter and SMS for premium payment in January 2021. 

The CCC could have explained to Madam Deborah that the premium payment of RM20,003.40 is to be payable every year for the duration of five years.  With such an explanation, this dispute could have likely been avoided.  We are of the view that an effective welcome call should provide timely and relevant information on the financial product to enable financial consumers to make informed decisions.  

The objective of post-sales/welcome calls to financial consumers is to validate whether staff, representatives and agents adequately assessed the financial consumers’ financial objectives, needs, risk appetite and knowledge against the risks and other features of the financial product before making any financial product advice and recommendation. 

We further note that Madam Deborah contends that she could not afford to pay a yearly premium of RM20,003.50 for another four years as her yearly income is less than RM36,000.00 as evidenced by the EA Form submitted by her. This may be the reason why she was concerned about the amount required to be paid during the welcome call. 

 

Adjudication 

In the light of the above facts and findings, we conclude that: - 

In the present case, it is important to note that Madam Deborah initially came to the bank to open a fixed deposit and not for any insurance plan.  

All the sales documents and forms including the PDS and CFF were in English. Hence, Madam Deborah’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. 

Madam Deborah should be viewed as a vulnerable consumer, in view of her language limitation. This create situations where she is significantly less able than a typical consumer to protect her interest leading to poor outcome. 

Despite her confirmation that she had received the policy document, during the welcome call on 19/05/2020 she had attempted to seek confirmation on the premium payment from the bank’s CCC. Instead of informing Madam Deborah of the premium amount and term, the CCC requested Madam Deborah to go to the nearest bank/insurance’s branch or to contact the customer care hotline, for such clarification. 

The CCC plays an important role in the interface between financial consumers and the FSP, it is crucial that she carry out her duties with due care, skill and diligence to enable the customer to make an informed decision. 

Based on the disparity in the information, in particular the affordability of Madam Deborah to pay the premium on a yearly basis with her annual income of less than RM36,000.00, we are unable to ascertain what transpired during the sales process which led to the information (Estimated Annual Income) in the Customer Fact Find Form  and the Proposal Form. 

The sales presentation was done face-to-face and was not recorded. Our challenge is to determine what was said during the sales presentation, particularly whether the salient features of the product were clearly explained to Madam Deborah.

On the other hand, when Madam Deborah had signed the proposal forms, customer fact find forms, and other documents, she is bound by the terms and conditions of the form.  

In the case of Lee Teck Seng v Lasman Das Sundra Shah [2000] 8 CLJ 317, PS Gill J (as he then was) said: 

“It is trite law that when a party signs a contract knowing it to be a contract which governs the relations between them, like the present case, then to use the words of Lord Denning J (as he then was) in Curtis v Chemical Cleaning Vbyung Co Ltd [1951] 1 All ER 631, 'His signature is irrefutable evidence of his assent to the whole contract, including the exempting classes, unless the signature is shown to be obtained by fraud or misrepresentation. Scrutton CJ in L Estrange v F Graucob Ltd [1934] 2 KB 394 had this to say: 

“When a document containing contractual terms is signed then in the absence of fraud, or, I will add misrepresentation, the party signing is bound, and it is wholly immaterial whether he had read the document or not.” 

In the circumstances and in applying the principle of fair and reasonableness, we make a decision that the disputed amount of RM20,003.40 is apportioned equally between Bank P and Madam Deborah. Bank P is to refund the sum of RM10,001.70 being 50% of the disputed amount of RM20,003.40, to the complainant.  

The above decision is final and there is no appeal. If Madam Deborah accepts this final decision, she is to inform Bank P in writing of the acceptance within 30 days from the date of this decision. Bank P is to comply with the award made within 14 business days from the date Madam Deborah informed the bank of her acceptance of this decision. 

If Madam Deborah rejects this decision, Bank P is not bound by the decision and Madam Deborah is free to pursue her rights against Bank P through other means such as legal proceedings.