Central Bank turns attention to complaints of mis-selling investment products
Bank customers in the UAE will now receive greater protection against the mis-selling of savings, investment or life insurance policies under the latest regulatory crackdown.
The Central Bank of the UAE issued a circular this month advising banks and finance companies to resolve all outstanding mis-selling complaints “amicably” and within a deadline of just 90 days. It issued the circular in response to “an increasing number of complaints in relation to the savings and investment insurance/takaful products”. The mis-selling complaints all have a common theme, with customers sold policies that are “complex in nature and are not well understood”, according to the circular, seen by The National.
These contractual and fixed-term savings or investment plans have been created by the largest global insurance companies and have been criticised by experts as the most expensive financial products available anywhere in the world. These plans have not been licensed to be sold to consumers for many years now in countries like the United Kingdom.
In the circular, banks and finance companies were criticised for using inadequately trained staff to sell policies.
It stated: “We observed that staff who are marketing the products at the counter are neither well-trained to understand the risk profile of the customer nor have the ability to explain such products to the customers”. It also said that responses to ongoing complaints provided to its consumer protection department were not satisfactory.
The Central Bank now plans to issue a new governance structure on how to market these products, covering issues such as customer profiling and product suitability and transparency.
It may also introduce a mechanism to redress grievances with non-compliance charges for violating guidelines.
Until then, the Central Bank is refusing to approve requests from banks or finance companies to market or sell “savings and investment” and “non-capital guaranteed/protected takaful/insurance products”.
Banks that already have permission to market term life insurance and general insurance products can continue only where the employee has the requisite qualification and uses a system to assess the suitability of products for customers.
Nigel Sillitoe, the chief executive at the research and consultancy firm Insight Discovery, said that the Central Bank’s move “further demonstrates that there is a drive for better consumer protection and higher standards for advisors operating within the onshore financial services market”.
The clock has already started ticking on the 90-day deadline to resolve all outstanding complaints, which dates from the day the circular was issued, on May 11.
This is part of a wider clampdown on questionable sales practices, with the Insurance Authority announcing last month that it was pushing ahead with tough new regulations to offer UAE investors better protection against the mis-selling of these products by financial advisors.
Sam Instone, the chief executive at the financial advisor AES International, said the Central Bank’s clampdown is “fantastic news for UAE consumers” and combined with the Insurance Authority’s, is driving up financial standards.
“It constitutes a major clean-up, and should improve stability and confidence in the marketplace,” he said.
The National has received numerous letters in recent months from readers stung by the high costs of products sold to them via financial advisors. In February, The National gathered leading figures from the financial services industry, including some of the biggest financial advisory firms in the UAE, to garner their thoughts on the effectiveness of the contractual savings plans. It became clear from the discussion that these products are not always the best route for UAE residents to meet their financial goals.
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Published: May 18, 2017 04:00 AM