Presentation on Report of The Committee to Recommend
Measures for Curbing Mis-selling and Rationalising
Distribution Incentives in Financial Products
-By S.B. Mathur
24th November 2015
1
Mandate of Committee
• To suggest policy measures that do not favour any particular
financial product and prevent mis-selling.
• The study would address issues with regards to hidden costs
and identical financial products across regulators.
• To suggest measures to rationalize incentive structure across
financial products.
Composition of Committee
1-
Retired Union Finance Secretary - Chairman
2-
Retired Chairman, LIC of India
3 & 4 - Officials (Capital market Division)
5 & 6- Academicians
7-
Retired MD SBI – Capital Markets
8-
Investment Expert
9-
Investment Analyst /financial media
Broad Recommendations
• Investment portion and risk portion to be separated in
bundled products.
• Upfront commission not allowed on investment portionallowed on pure insurance products and in insurance portion
of bundled products as these products are difficult to sell.
• Exit should be simple and less expensive.
• For similar products, there should be a similar structure with
regard to service tax, stamp duty and rural and social sector
norms.
• One page disclosure form explaining key benefits and features
to be signed off at point of sale by buyer and seller.
Generic Recommendations
• To bring uniformity and proper oversight -harmonising of
regulators.
• Enforcement to be strengthened to prevent over payment of
commissions.
• Banks tend to oversell. Additional disclosures requirement:– Group company products to be compared with similar products from
other manufacturers.
– Respective regulator to regulate distribution of products by banks.
Generic Recommendations…..contd
• To bring uniformity and proper oversight -harmonising of
regulators.
• Enforcement to be strengthen to prevent over payment of
commissions.
• Banks tend to oversell. Additional disclosures requirement:– Group company products to be compared with similar products from
other manufacturers.
– Respective regulator to regulate distribution of products by banks.
• Tax benefit only on insurance portion and not on saving. Pure
insurance products to be encouraged.
Specific Recommendations
Mutual Funds
• Regulator should consider measures to increase retail participation.
• Regulator should put in a free look policy and define the period for
which it will hold.
• Extra commission in B15 should be removed and a level paying field
created in the country.
• Regulator should lower caps over period of time.
• Trail commission to be disclosed at point of sale
Specific Recommendations …..contd
ULIPS
• Manner of disclosure of mortality costs.
• Cost of surrender value should be reasonable.
• Many suggestions relate to disclosures – asset allocation to be
disclosed on website.
Specific Recommendations …..contd
Traditional Products
• Premium to be split into mortality and savings.
• Lapsation profit ,if any, not to accrue to insurance companies.
• Costs of surrenders to be reasonable.
• Current structure of paying commission on single premium
should be continued.
• No trail commission on single premium policies.
Thank You